Case Digest (G.R. No. 173036)
Facts:
The case involves Agoo Rice Mill Corporation (ARMC), represented by its President Kam Biak Y. Chan, Jr., as the petitioner, and the Land Bank of the Philippines (LBP) as the respondent. The events leading to the case began when ARMC obtained a Term Loan (TL) of P2,000,000.00 and two Short-Term Loan Lines (STLLs) totaling P15,000,000.00 from LBP between October 1993 and October 1996. These loans were secured by a Real and Chattel Mortgage over ARMC's four commercial lots, including improvements and rice mill machinery. The TL was due on October 29, 1996, while the STLLs had payment deadlines of April 28, 1996, and April 8, 1997. Due to financial difficulties exacerbated by government rice importation policies and the El Niño phenomenon, ARMC struggled to meet its payment obligations.
On January 6, 1997, ARMC requested an extension to pay its obligations until February 28, 1997. LBP reminded ARMC of this commitment on February 25, 1997. Anticipating further difficulties, ...
Case Digest (G.R. No. 173036)
Facts:
Background of the Loan Agreements
- From October 1993 to October 1996, Agoo Rice Mill Corporation (ARMC) obtained a Term Loan (TL) of P2,000,000.00 and two Short-Term Loan Lines (STLLs) totaling P15,000,000.00 from Land Bank of the Philippines (LBP). These loans were secured by a Real and Chattel Mortgage over ARMC’s commercial lots, improvements, rice mill machineries, and generator.
Payment Issues and Requests for Extension
- ARMC faced financial difficulties due to liquidity problems, the negative impact of government rice importation in 1996, and the El Niño phenomenon affecting rice production. As a result, ARMC made partial payments but failed to fully settle its obligations on time.
- On January 6, 1997, ARMC requested an extension to pay its obligations, proposing a deadline of February 28, 1997. LBP reminded ARMC of this commitment on February 25, 1997.
- On February 27, 1997, ARMC requested the renewal of its P15,000,000.00 STLLs, but LBP advised restructuring instead. ARMC then proposed restructuring the STLLs with payments of P5,000,000.00 every six months.
LBP’s Conditions and ARMC’s Non-Compliance
- LBP deferred ARMC’s restructuring proposal, requiring ARMC to secure a waiver of penalty charges and offer additional collateral. ARMC failed to comply with these conditions.
- On November 3, 1997, LBP informed ARMC that additional collateral was required, and failure to comply would result in legal action. ARMC requested a reappraisal of its properties, but LBP denied the request.
Foreclosure Proceedings
- On July 8, 1998, LBP filed an application for extrajudicial foreclosure of ARMC’s mortgaged properties, citing ARMC’s failure to pay its overdue obligations totaling P23,473,320.83 (principal, interest, and penalties).
- ARMC filed a complaint for injunction on August 24, 1998, alleging that the foreclosure was premature and violated its contractual rights, as loan restructuring negotiations were ongoing. ARMC also claimed inconsistencies in LBP’s foreclosure petition.
Temporary Restraining Order and Writ of Preliminary Injunction
- The RTC issued a Temporary Restraining Order (TRO) and later a writ of preliminary injunction, suspending the foreclosure sale. However, the RTC ultimately denied ARMC’s complaint, ruling that LBP had the right to foreclose under Presidential Decree No. 385 (P.D. 385).
Issue:
- Whether ARMC was entitled to an injunctive remedy to stop LBP’s foreclosure of its mortgaged properties.
- Whether LBP acted in bad faith by filing for foreclosure while loan restructuring negotiations were allegedly ongoing.
- Whether the stipulated interest rates and penalty charges imposed by LBP were excessive and unconscionable.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)