Case Digest (G.R. No. 173036)
Facts:
Agoo Rice Mill Corporation (represented by its President, Kam Biak Y. Chan, Jr.) v. Land Bank of the Philippines, G.R. No. 173036, September 26, 2012, Supreme Court Second Division, Brion, J., writing for the Court.The petitioner, Agoo Rice Mill Corporation (ARMC), obtained from respondent Land Bank of the Philippines (LBP) a Term Loan of P2,000,000.00 and two Short-Term Loan Lines (STLLs) totaling P15,000,000.00 between October 1993 and October 1996, evidenced by promissory notes and secured by a Real and Chattel Mortgage over four commercial lots and rice-mill chattels. Payment dates for the loans fell between April 1996 and April 1997; ARMC made partial interest payments but ran into liquidity problems due to market and weather conditions.
ARMC sought extensions and, beginning January 1997, requested renewal or restructuring of the STLLs; LBP advised restructuring and later conditioned any restructuring on additional collateral and waiver of penalties. Between 1997 and 1998 LBP repeatedly demanded compliance, gave deadlines for additional collateral and warned of legal action. On July 8, 1998, LBP filed an application for extrajudicial foreclosure with the ex officio sheriff, stating ARMC’s unpaid obligations (as of that date) totaled P23,473,320.83, and scheduled a public auction for August 26, 1998.
On August 24, 1998 ARMC filed in the Regional Trial Court (RTC), Branch 30, San Fernando City, La Union, a complaint for injunction with application for a temporary restraining order (TRO) and preliminary injunction to enjoin the foreclosure, alleging the foreclosure was premature because restructuring negotiations were ongoing, that LBP acted in bad faith and by promissory estoppel induced ARMC’s reliance, that LBP included already-settled obligations and altered mortgage terms, and that charges and interest were unconscionable. The RTC issued a 72‑hour TRO, later extended, and on March 18, 1999 issued a writ of preliminary injunction upon ARMC’s posting of a P4,000,000.00 bond.
The RTC, however, in a decision dated August 5, 2004, denied ARMC’s complaint on the merits, finding there was no agreement to restructure because ARMC failed to provide the requested additional collateral; that the Real and Chattel Mortgage was indivisible and therefore not discharged by payment of the term loan; and that injunction cannot restrain the exercise of a valid right of foreclosure by a creditor. The RTC also held that LBP’s foreclosure complied with the mandatory foreclosure policy under P.D. 385 and that courts may not issue injunctions against government financial institutions complying with that decree unless certain conditions are met. The RTC denied reconsideration on February 2, 2005.
ARMC appealed to the Court of Appeals (CA). While the appeal was pending, the ex officio sheriff conducted the extrajudicial sale in June 2005 in which LBP became the winning bidder. ARMC sought injunctive relief from the CA to stop the sale but the CA denied the application. In a decision dated March 28, 2006, the CA (Dacudao, J.) affirmed the RTC, ruling that LBP did not promise to approve ARMC’s...(Subscriber-Only)
Issues:
- Did ARMC establish a clear and existing right in esse to justify injunctive relief against LBP’s extrajudicial foreclosure?
- Does P.D. 385 bar courts from issuing restraining orders or injunctions against mandatory foreclosures by government financial institutions like LBP?
- Is ARMC’s petition for review moot and academic because the foreclosure sale was already consummated?
- (Subsidiary) Did LBP act in bad faith or engage in promissory estoppel by allegedly leading ARMC to expect loan restructuring, and are the stip...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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