G.R. No. 142731 ; June 8, 2006
BANK OF THE PHILIPPINE ISLANDS (formerly FAR EAST BANK AND TRUST COMPANY), Petitioner, vs. COURT OF APPEALS and JIMMY T. GO, Respondents.

FACTS

Petitioner Bank of the Philippine Islands (BPI) granted eight loans to Noah’s Ark Merchandising, a single proprietorship owned by Albert Looyuko. The loans were evidenced by promissory notes signed by Looyuko, respondent Jimmy Go, and Wilson Go, and were secured by a real estate mortgage over a property registered in the names of Looyuko and Go. Claiming default, BPI initiated the extrajudicial foreclosure of the mortgage. Prior to the scheduled auction sale, Go filed a complaint for damages with an application for a temporary restraining order (TRO) and preliminary injunction to enjoin the foreclosure.
The trial court issued a TRO and, after a hearing, granted a writ of preliminary injunction upon Go’s posting of a bond. The trial court, in denying BPI’s motion for reconsideration, found the foreclosure premature as to four promissory notes that had not yet matured. BPI filed a petition for certiorari with the Court of Appeals, which partially denied the petition, upholding the injunction but increasing the bond amount. BPI elevated the case to the Supreme Court via a petition for review on certiorari.

ISSUE

Whether the Court of Appeals erred in upholding the trial court’s issuance of the writ of preliminary injunction.

RULING

The Supreme Court granted the petition and dissolved the writ of preliminary injunction. The legal logic centered on the propriety of issuing an injunction to enjoin a foreclosure sale based on a claim of prematurity. The Court held that a writ of preliminary injunction is a preservative remedy to maintain the status quo pending litigation on the merits. For its issuance, the applicant must establish a clear and unmistakable right to be protected.
The Court found that Go failed to establish such a right. The maturity of the four promissory notes was irrelevant because the mortgage contract contained an acceleration clause. This clause stipulated that the entire obligation would become due upon default on any one note. Since BPI had declared a default on the other matured notes, the acceleration clause was properly invoked, making the entire obligation, including those covered by the unmatured notes, immediately due and demandable. Consequently, the foreclosure was not premature. The trial court’s finding to the contrary was a grave abuse of discretion, as it misapplied the law on acceleration clauses. The injunction was improperly issued because there was no clear legal right to prevent the foreclosure. The Court, however, retained the appellate court’s modification increasing the injunctive bond, had the injunction been validly issued.