SOLID BUILDERS INC. AND MEDINA FOODS INDUSTRIES, INC.

V. CHINA BANKING CORPORATION

G.R. No. 179665, April 3, 2013
Prepared by:
FLORO, Alphonso
GAMAYON, Jeanne
GOCUAN, Phoenix
HONORIDEZ, Kyvn
IBANEZ, Tanya
IBARRA, Camille
LIM, Roceli
LOPEZ, Ian
MAKINANO, Marein
MEJICA, Mysa
MONTERO, Joy
MORENO, Raisa
NAVARRO, Clarisse
NIVERA, Rolly, Jr.
NUNEZ, Alyssa

Group 2
EH 403
9:00-11:00, Saturday
UNIVERSITY OF SAN CARLOS
School of Law and Governance

SOLID BUILDERS INC. AND MEDINA FOODS INDUSTRIES, INC.

V. CHINA BANKING CORPORATION
G.R. No. 179665, April 3, 2013
1. Did the decision of the Court of Appeals in the Petition for Certiorari docketed as
CA-G.R. SP No. 81968 granting the petition of CBC and ordering the lifting of the
writ of preliminary injunction effectively dispose of the main case, Civil Case No.
68105 without trial on the merits? Did it render moot and academic the case as it
enabled CBC to foreclose on the mortgages despite the usurious, exorbitant and
confiscatory interest rates?
No, the decision by the Court of Appeals to lift the writ of preliminary injunction did not dispose
of the main case, Civil Case No. 81968, since it was merely a decision on whether the
petitioners have sufficiently shown that they are entitled to the issuance of the writ of
preliminary injunction. This cannot be considered as having rendered moot and academic the
case filed since the issuance of a writ of preliminary injunction only serves to protect the rights
of a party prior to the judgment or final order.
In the case, SBI and MFII were not able to fully establish their entitlement to the writ. As no
clear right that warrants the extraordinary protection of an injunctive writ has been shown by
SBI and MFII to exist in their favour, the first requirement for the grant of a preliminary
injunction was not satisfied. Where the facts are shown to be wanting in bringing the matter
within the conditions for the issuance, the ancillary writ of injunction must be struck down.
2. Did SBI and MFII have a right to prevent CBC from foreclosing on the mortgage
properties simply on the basis of alleged usurious, exorbitant and confiscatory
rate of interest?
No. SBI and MFII did not have the right to prevent CBC from foreclosing on the mortgaged
properties merely on the basis of usurious, exorbitant, and confiscatory rate of interest.
First, even if the interest is indeed usurious as SBI and MFII, it cannot be the basis of
stopping CBC from exercising their right as creditors to foreclose the property since the nullity
of the stipulation of a usurious interest will not affect the lenders right to recover the principal
loan through foreclosure. In a usurious loan with mortgage, the right to foreclose remains.
Foreclosure is but a necessary consequence for non-payment of mortgage-indebtedness.
Second, a case still has to be heard on the alleged lack of fairness of the increase in interests
and penalties and the right SBI and MFII was seeking is still controversial or disputable. A
determination is still needed whether there is indeed usury. The right being claimed cannot
be considered clear, actual and subsisting. Therefore without a clear right, the court cannot
grant an injunctive writ.

Lastly, even if SBI and MFII are correct in claiming their right, their default to pay the
mortgage indebtedness disqualifies them from availing of the equitable relief of injunctive
writ. Such failure constitutes a breach of contractual obligation which tainted their hands and
disqualified them from availing of said relief.
3. Were plaintiffs (SBI and MFII) able to show that they had the clear right and
urgency to ask for injunction?
No. SBI and MFII were not able to show that they had the clear right and urgency to warrant
the issuance of an extraordinary protection of an injunctive writ.
It is the creditors right to foreclose the mortgaged property upon failure of debtor to pay the
debt when it falls due. The basis of the right claimed by SBI and MFII still remains to be
disputable and thus it is unclear. It definitely does not satisfy the requirement that the
plaintiffs have shown proof of a clear and subsisting right for the granting of the Writ of
Injunction. Thus the RTC was in grave abuse of discretion when it issued such writ.
Also, there was no showing of urgent and paramount necessity for the writ to prevent serious
damage/injury. Where there is a valid cause to foreclose on the mortgages, it cannot be
correctly claimed that the irreparable damage sought to be prevented by the application for
preliminary injunction is the loss of the mortgaged properties to auction sale. The alleged
entitlement of SBI and MFII to the "protection of their properties put up as collateral for the
loans" they procured from CBC is not the kind of irreparable injury contemplated by law.
Foreclosure of mortgaged property is not an irreparable damage that will merit for the debtormortgagor the extraordinary provisional remedy of preliminary injunction. The relevant
circumstances in this case show that there was failure to satisfy the requisites for the issuance
of a writ of preliminary injunction. The injunctive writ issued by the trial court should therefore
be lifted and dissolved.
4. Explain the dictum that injunction is referred to as the Strong Arm of Equity.
Injunction is referred to at times as the Strong Arm of Equity. It means that the issuance of
an injunction is a power so delicate which calls for great circumspection. It should only be
extended in cases of great injury where courts of law cannot afford an adequate or
commensurate remedy in damages; in cases of extreme urgency where the right is very
clear, where considerations of relative inconvenience bear strongly in complainants favour,
where there is a wilful and unlawful invasion of plaintiffs right against his protest and
remonstrance, the injury being a continuing one, and where the effect of the mandatory
injunction is rather to re-establish and maintain a pre-existing continuing relation between
the parties, recently and arbitrarily interrupted by defendant, than to establish a new relation.

5. When is a writ of preliminary injunction issued to preserve the status quo ante?
A writ of preliminary injunction is issued to preserve the status quo ante, upon the applicants
showing of two important requisite conditions, namely:
a) The right to be protected exists prima facie, and
b) The acts sought to be enjoined are violative of that right.
It must be proven that the violation sought to be prevented would cause an irreparable injury.
6. Was MFII entitled to the issuance of a writ of preliminary injunction?
No. As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The
accessory follows the principal. The accessory obligation of MFII as accommodation
mortgagor and surety is tied to SBIs principal obligation to CBC and arises only in the event
of SBIs default. Thus, MFIIs interest in the issuance of the writ of preliminary injunction is
necessarily prejudiced by SBIs wrongful conduct and breach of contract.
7. Will En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in Extrajudicial or
Judicial Foreclosure of Real Estate Mortgages, issued on February 20, 2007, or
some two months before the Court of Appeals promulgated its decision apply to
favor SBI and MFII?
No. En Banc Resolution in A.M. No. 99-10-05-0The cannot apply to favor SBI and MFII. In
fact, said Resolution further stacks the odds against them.
The resolution embodies the additional guidelines intended to aid courts in foreclosure
proceedings, specifically limiting the instances, and citing the conditions, when a writ against
foreclosure of a mortgage may be issued. The resolution provided that:
No temporary restraining order or writ of preliminary injunction against the
extrajudicial foreclosure of real estate mortgage shall be issued on the allegation
that the interest on the loan is unconscionable, unless the debtor pays the
mortgagee at least twelve percent per annum interest on the principal obligation as
stated in the application for foreclosure sale, which shall be updated monthly while
the case is pending.
The guidelines speak of strict exceptions and conditions. To reinstate the writ of preliminary
injunction will be to allow SBI and MFII to circumvent the guidelines and conditions provided
by the En Banc Resolution in A.M. No. 99-10-05-0 thus preventing CBC from foreclosing on
the mortgaged properties based simply on the allegation that the interest on the loan is
unconscionable. What cannot be done directly cannot be done indirectly.