Facts:

This case involves a Petition for Review on Certiorari under Rule 45 of the Rules of Court, with Active Wood Products Co., Inc., represented by its President Chua Tiong Sio, as the petitioner and State Investment House, Inc. (SIHI) as the respondent. The case was decided on October 14, 2020, by the Philippine Supreme Court. The dispute arises from an ongoing litigation concerning an extrajudicial foreclosure initiated by SIHI against AWP regarding a real estate mortgage executed in favor of SIHI as security for credit accommodations amounting to ₱6,420,490.00.

On June 7, 1982, AWP filed a Complaint for Injunction with a request for a Temporary Restraining Order (TRO) against SIHI to prevent the foreclosure of the mortgaged properties. AWP contended that its obligation was fully paid and that any terms in the original contracts were novated due to SIHI allowing payment of interest and charges post-maturity dates. SIHI, in its counterclaim, argued that AWP defaulted on its obligat

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Facts:

Procedural Background and Initiation

• Active Wood Products Co., Inc. (AWP) filed a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside decisions rendered by the Regional Trial Court (RTC) and the Court of Appeals (CA).
• The RTC, located in Malolos City, Bulacan, initially handled AWP's complaint for an injunction with a prayer for a Temporary Restraining Order (TRO) and a writ of preliminary injunction aimed at stopping the extrajudicial foreclosure by State Investment House, Inc. (SIHI) of the real estate mortgage executed in favor of SIHI.
• The complaint centered on alleged novation, wherein AWP argued that SIHI’s acceptance of post-maturity payments altered the original terms, thereby precluding SIHI’s reliance on the acceleration clause contained in its mortgage contracts and promissory notes.

Key Facts and Transactional History

• Mortgage and Loan Details
• AWP executed several real estate mortgage contracts, purportedly given as security for credit accommodations totaling approximately P6,420,490.00.
• SIHI countered that a parcel of land in Bigaa, Bulacan, was mortgaged securing credit accommodations amounting to around P5,612,398.80 and further detailed various financing agreements that imposed additional interest and penalties.
• Restructuring and Defaults
• AWP’s obligation underwent multiple restructurings, including renegotiated and extended payment terms, with additional financing documents executed in 1979 and 1981.
• Despite the adjustments, AWP continued to pay only the interest and related charges after the maturity dates, and eventually defaulted on its payment obligations.
• SIHI maintained that, despite restructuring, the original debt was never fully extinguished.

Extrajudicial Foreclosure and Subsequent Proceedings

• Initiation of Foreclosure
• SIHI filed a Petition for Extrajudicial Foreclosure on June 28, 1983.
• Despite an RTC-issued TRO and injunction orders, the ex-officio Provincial Sheriff proceeded with the foreclosure sale on November 29, 1983, selling the property to SIHI as the highest bidder.
• Litigation on the Foreclosure Sale
• AWP challenged the auction sale by filing an omnibus motion and a subsequent motion citing contempt of court against Sheriff Evangelista.
• The RTC, in separate orders (notably dated February 27 and April 17, 1984), nullified the auction sale and issued a writ of preliminary injunction in favor of AWP.
• These RTC orders were later reversed by the Intermediate Appellate Court, only to be reinstated on certiorari by the Supreme Court.

Amended Pleadings, Appeals, and Intervention

• Further Pleadings and Amendments
• AWP subsequently amended its complaint, contending that the real estate mortgage was null and void, framing the matter as an assignment of receivables rather than a secured loan.
• AWP also filed a Motion to Admit a Supplemental Complaint, which was dismissed regarding the inclusion of Sheriff Evangelista as a defendant.
• Appeal Proceedings and Notice Issues
• AWP’s appeal was filed on February 22, 2017 and contested the RTC’s denial of its omnibus motion.
• SIHI later filed an Amended Memorandum, though belatedly, to answer AWP’s appeal – a point later scrutinized as one of the issues.
• Intervention by Third Parties
• Deogenes O. Rodriguez intervened by filing a Motion for Leave to Intervene based on his claim of ownership and possession of the foreclosed properties.
• His motion was denied by the RTC, and his subsequent appeal was dismissed by the CA for non-compliance with requirements (e.g., filing of a memorandum).

RTC and CA Final Rulings

• RTC Joint Decision (September 5, 2016)
• The RTC held that the ten-year prescriptive period for mortgage actions had not lapsed.
• It found that AWP had defaulted on its obligations both before and after the nullified foreclosure sale.
• The RTC allowed SIHI to proceed with extrajudicial foreclosure despite nullification of portions of the prior foreclosure sale proceedings.
• The RTC ordered the dismissal of both AWP’s main action for an injunction and the respective claims for damages and attorney’s fees.
• CA Decision (January 30, 2018)
• The CA denied both AWP’s and Rodriguez’s appeals.
• It rejected the contention that AWP’s appeal should be dismissed due to failure to furnish a copy of the Notice of Appeal, noting that AWP had sent it via private courier.
• The CA also found that SIHI sufficiently explained its reasons for the filing and later amending its memorandum.
• Most crucially, the CA upheld the RTC’s findings that SIHI’s right to foreclose was not barred by prescription due to the interruption of the prescriptive period arising from AWP’s filing of the injunction suit.

Issue:

Admission of SIHI’s Amended Memorandum

• Whether the CA committed grave error in admitting the belated filing of SIHI’s Amended Memorandum which allegedly was filed outside the prescribed period.

Prescription of Foreclosure Rights

• Whether the CA erred in finding that SIHI’s right to foreclose had not prescribed, notwithstanding AWP’s argument that the extrajudicial foreclosure did not interrupt the prescriptive period.

Extinguishment of AWP’s Mortgage Obligation

• Whether the CA erred in concluding that AWP’s obligation to SIHI was not fully discharged or extinguished, in view of AWP’s contention of full payment with claims of overpayment.

Affirmation of Preliminary Injunction

• Whether the CA erred in its handling and the subsequent rulings regarding the injunction previously issued in favor of AWP.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)