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BAR REVIEWER ON LABOR LAW 2014 (2nd) Edition - By Prof. Joselito Guianan Chan

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[G.R No. 147865.June 18, 2001]




Quoted hereunder, for your information, is a resolution of this Court dated JUN 18 2001.

G.R. No. 147865(Philippine Compak Boards, Inc. vs. Court of Appeals and Bank of Philippine Islands.)

This is a petition for review on certiorari of the decision, dated February 1, 2001, of the Court of Appeals which reversed the orders of the Regional Trial Court, Branch 15, Ozamiz City, granting petitioner's application for the issuance of a writ of preliminary injunction, and the appeals court's resolution, dated March 9, 2001, denying petitioner's motion for reconsideration.

It appears that on June 20, 1996, respondent Bank of Philippine Islands (BPI) granted petitioner a one year "revolving promissory note line" (RPNL) for P18,000,000.00, an import letter of credit/trust receipt bills purchase line of P2,000,000.00, and an import letter of credit in the amount of 1,019,500.00 for the purchase of an equipment from Great Britain. In 1997, the RPNL was renewed for another year at a reduced amount of P14,000,000.00 due on June 20, 1998. In September 1997, petitioner opened a letter of credit for US $100,000.00 which was due on December 22, 1998. The loan was secured by another real estate mortgage involving a property in Ozamiz City and covered by O.C.T. No. P-996. When the RPNL of P14,000,000.00 expired on June 20, 1998, respondent BPI did not renew the same in view of the failure of one of the sureties, Eugene Lim, to pay an overdraft. Under its agreement, BPI reserved the right to modify, suspend or cancel the aforesaid credit as may be warranted by its evaluation of the latest financial statement and/or changing market conditions.

On July 27, 1998, when the promissory note of P14,000,000.00 drawn against the RPNL fell due, respondent BPI demanded payment of the same, but petitioner failed to pay the amount. Hence, on September 15, 1998, respondent BPI filed before the Regional Trial Courts of Ozamiz City and Pagadian City an application for the extrajudicial foreclosure of the mortgaged property in Ozamiz City which is covered by O.C.T. No. P-996.

On October 7, 1998, petitioner filed before RTC Branch 15 a complaint for damages with prayer for a temporary restraining order and a writ of preliminary injunction to enjoin the foreclosure proceedings being undertaken by the ex-officio sheriffs of the Regional Trial Courts of Ozamiz City and Pagadian City. Petitioner claimed that on June 19, 1996, respondent BPI approved its application for a commercial letter of credit in the amount of 1,019,500.00 (equivalent of P41,799,500.00 at the exchange rate of P41.00 per British Pound) for the purchase of an equipment from Great Britain. To secure the loan, a real estate mortgage involving a parcel of land located in Pagadian City and covered by T.C.T. No. T-14-234 was executed in favor of respondent BPI. However, petitioner alleged, respondent BPI reduced the approved credit line from P41,799,500.00 to P18,000,000.00 without its knowledge and consent, thereby resulting in a shortage of more than P23,000,000.00 which petitioner was forced to raise from other sources in order to secure the release of the equipment.

Without any notice or hearing, the trial court issued on October 14, 1998 a temporary restraining order enjoining the sheriffs from proceeding with the foreclosure proceedings. Then, after hearing, it issued a writ of preliminary injunction, the dispositive portion of whose order, dated December 5, 1999, reads:

WHEREFORE, as the problem presented requires judicious considerations, vis-a-vis, the prevailing economic conditions, and considering that great and irreparable damage shall be sustained by the plaintiff in the meantime, let a writ of preliminary injunction issue to maintain status quo upon bond of P200,000.00, unless otherwise ordered.


On February 7, 2000, the trial court denied the motion for reconsideration of respondent BPI. However, on certiorari, the Court of Appeals set aside the orders of RTC Branch 15.

Hence, this petition with prayer for temporary restraining order or preliminary injunction. Petitioner contends that respondent BPI acted in a wanton and arbitrary manner when it reduced the credit line from P41,799,500.00 to P18,000,000.00, resulting in business losses to it (petitioner) and that the foreclosure of its mortgage would damage and undermine its credit standing.

The petition has no merit. RTC Branch 15 issued the writ on the ground that petitioner's credit standing with suppliers and dealers as well as with the entire business community would be seriously damaged and undermined if its property was foreclosed. However, as the Court of Appeals noted, the "right to a good credit standing" cannot be affected by the foreclosure of the mortgaged property. If at all, what can affect petitioner's credit standing in the business circle is its failure to comply with its obligations as they fall due.

The writ of preliminary injunction is issued to prevent threaten or continuous irremediable injury to parties before their claims can thoroughly studied and adjudicated. Its sole objective is to preserve the status quo until the merits of the case can be heard fully. It is issued upon proof of (1) the existence of a right to be protected and (2) a which are violative of said right. But it is not designed to protect contingent or future rights (Heirs of Joaquin Asuncion vs. Gervacio, Jr., 304 SCRA 322 (1999)).

In this case, there is no question that petitioner is indebted respondent BPI to which a real estate mortgage on the subject property was constituted in favor of respondent BPI. It appears that petitioner defaulted in the payment of the loan for which reason respondent BPI seeks the extrajudicial foreclosure of the mortgage. If petitioner's credit standing suffers as a result of the foreclosure of the mortgage, the same cannot be helped as this is the necessary consequence of a legal action.

WHEREFORE, the petition is DENIED for lack of showing that the Court of Appeals committed any reversible error.

Very truly yours,

Clerk of Court

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