GR 160113; (April, 2008) (Digest)
G.R. No. 160113. April 30, 2008. CHINA BANKING CORPORATION, petitioner, vs. TAFA INDUSTRIES, INC., J & H INDUSTRIES, INC., and JEAN LONG INDUSTRIES, INC., respondents.
FACTS
China Banking Corporation (petitioner) extended loans to Ta Fa Industries, Inc., secured by real estate mortgages executed by the respondents. Upon the respondents’ default on their quarterly amortizations, the bank initiated extrajudicial foreclosure proceedings. The auction sale was scheduled for November 22, 2001. Days before the sale, respondents filed a complaint for Accounting, Specific Performance, and Injunction with Damages before the RTC of Pasig. The RTC issued a temporary restraining order and later a writ of preliminary injunction, halting the foreclosure sale. The trial court based its injunction on a finding that the petitioner allegedly failed to remit the full loan proceeds, creating a need to preserve the status quo and prevent irreparable injury.
The petitioner challenged the injunction via a petition for certiorari before the Court of Appeals, arguing the RTC committed grave abuse of discretion. The CA dismissed the petition, affirming the RTC’s finding that the bank did not sufficiently refute the claim of incomplete loan release. The CA held the RTC did not act capriciously. Petitioner’s motion for reconsideration was denied.
ISSUE
Whether the Court of Appeals erred in affirming the trial court’s grant of the writ of preliminary injunction.
RULING
Yes, the Supreme Court granted the petition and reversed the CA. The grant of a preliminary injunction requires clear proof of a right to be protected. The RTC’s finding that the loan proceeds were not fully released was based on a misapprehension of evidence, constituting grave abuse of discretion. The records showed that a specific amount questioned by respondents was, per a credit memorandum, applied to offset Ta Fa’s prior obligations—a right explicitly granted to the bank under the loan documents’ stipulation allowing the application of deposits to outstanding debts. Respondents failed to present clear and convincing evidence of a clear legal right to restrain the foreclosure. The injunction was improperly issued as it prematurely adjudicated the main case on the merits without a full trial. The CA erred in upholding the RTC’s capricious exercise of judgment. Consequently, the writ of preliminary injunction was ordered dissolved.