GR 161004; (April, 2008) (Digest)
G.R. No. 161004 ; April 14, 2008
TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner, vs. PHILIPPINE NATIONAL BANK, respondent.
FACTS
Petitioner Tecnogas obtained loans from respondent PNB, secured by a Real Estate Mortgage (REM) over its property. The REM authorized PNB to extrajudicially foreclose upon default. Tecnogas repeatedly failed to pay, leading to loan restructurings. Upon final maturity, PNB demanded payment of over P205 million. Tecnogas proposed to settle the obligation via dacion en pago, offering the mortgaged property, but PNB did not accept this proposal. Consequently, PNB initiated extrajudicial foreclosure proceedings.
A day before the scheduled auction, Tecnogas filed a complaint for annulment of the foreclosure sale with an application for a writ of preliminary injunction. The Regional Trial Court (RTC) granted the injunction, enjoining the sale. PNB challenged this via a petition for certiorari before the Court of Appeals.
ISSUE
Did the Court of Appeals err in reversing the RTC and ruling that Tecnogas was not entitled to a writ of preliminary injunction to stop the extrajudicial foreclosure?
RULING
No, the Court of Appeals did not err. The Supreme Court affirmed its decision, holding that the RTC committed grave abuse of discretion in issuing the injunction. A writ of preliminary injunction requires a clear legal right to be protected. Here, Tecnogas failed to establish such a right. Its proposal for dacion en pago did not constitute payment or novation of the obligation because it was not accepted by PNB. Dacion en pago, as a mode of payment, requires the creditor’s consent to the offer of another thing as an equivalent of payment. Without PNB’s acceptance, the original loan and mortgage obligations remained extant and unpaid.
Since Tecnogas was in clear default, PNB had a clear right under the mortgage contract and Act No. 3135 to proceed with the extrajudicial foreclosure. An injunction should not issue to restrain a lawful exercise of a right, especially when the applicant’s claim of a right is unfounded. The Court also noted that the subsequent conduct of the foreclosure sale did not render the petition moot, as the core issue of the propriety of the injunction remained for resolution. The Court of Appeals correctly limited its review to the propriety of the injunctive relief without preempting the merits of the main case for annulment.