G.R. No. 170038; July 11, 2012
China Banking Corporation, Petitioner, vs. Sps. Harry Ciriaco and Esther Ciriaco, Respondents.

FACTS

Spouses Ciriaco obtained a loan from China Bank secured by a real estate mortgage. Upon default, the bank extrajudicially foreclosed the property and emerged as the highest bidder at the auction. A day before the redemption period expired, the spouses filed an injunction suit questioning the redemption price. This was dismissed as moot after the bank consolidated its title. The spouses then filed a new complaint for Cancellation of Consolidation, Specific Performance, and Damages, again contesting the redemption price. Subsequently, they filed an Omnibus Motion to amend their complaint to allege fraud in the consolidation and to seek a preliminary injunction/TRO to prevent the bank from disposing of the property. The RTC held hearings on the omnibus motion, allowing both parties to submit pleadings.
The RTC, in an order, admitted the amended complaint and granted the application for a preliminary injunction, finding the spouses entitled to prove their claims of fraud and unwarranted bank charges. The bank filed a petition for certiorari with the CA, arguing the RTC granted the injunction without a dedicated hearing on that specific application. The CA denied the petition, ruling the RTC did not gravely abuse its discretion as the bank was heard during the omnibus motion hearings and on its motion for reconsideration.

ISSUE

Whether the Court of Appeals erred in finding that the Regional Trial Court did not commit grave abuse of discretion in granting the application for a writ of preliminary injunction.

RULING

The Supreme Court granted the petition, reversing the CA. The Court emphasized that a preliminary injunction is an extraordinary remedy that must be granted only after strict procedural requirements are met. Under Sections 3 and 5, Rule 58 of the Rules of Court, the issuance of a preliminary injunction mandates a hearing where the parties can present evidence and argue their case. This hearing is mandatory, not discretionary. The Court found that the RTC’s hearings were specifically for the omnibus motion concerning the amendment of the complaint, not for the injunction application itself. The injunction was granted based solely on the pleadings and arguments related to the propriety of amending the complaint. Consequently, the bank was deprived of its right to a full and separate hearing to contest the factual and legal bases for the injunctive relief, such as the existence of a clear and unmistakable right, a material and substantial invasion of that right, and the inadequacy of other remedies. By granting the injunction without the requisite hearing, the RTC acted with grave abuse of discretion equivalent to lack of jurisdiction. The writ of preliminary injunction was therefore declared void and set aside.