G.R. No. 171169 - GC Dalton Industries, Inc. vs. Equitable PCI Bank

In 1999, Equitable PCI Bank (respondent) extended a credit line of P30 million to Camden Industries, Inc. (CII), allowing it to secure several loans evidenced by promissory notes and to purchase trust receipts.
To facilitate collection of payments on these loans, CII executed a “hold-out” agreement authorizing the bank to deduct amounts due directly from its savings account.
To guarantee CII’s obligations, GC Dalton Industries, Inc. (petitioner) executed a third-party mortgage over its real properties located in Quezon City and Malolos, Bulacan.

CII defaulted on its obligations, resulting in a substantial outstanding balance that reached P68,149,132.40 by 2003.
In response, on May 7, 2004, respondent initiated extrajudicial foreclosure proceedings in the Bulacan Regional Trial Court (RTC) by filing a petition for the foreclosure of petitioner’s mortgaged properties covering the Bulacan lot(s).
The foreclosed properties were sold at a public auction on August 3, 2004, where the respondent emerged as the highest bidder, and a certificate of sale was issued in its favor.

On September 13, 2004, respondent submitted the certificate of sale along with an affidavit of consolidation of ownership to the Register of Deeds of Bulacan pursuant to Section 47 of the General Banking Law.
As a result of this filing, petitioner’s Transfer Certificates of Title (TCTs) covering the Bulacan properties were cancelled, and new titles were issued in the respondent’s name, effecting the consolidation of title.

Prior to the foreclosure proceedings in Bulacan, on August 4, 2004, CII had initiated an action in the Pasig RTC for specific performance and damages, asserting that it had fully paid its obligations and alleging that respondent had foreclosed fraudulently.
In a decision rendered on March 30, 2005, the Pasig RTC found that CII’s past-due obligation amounted to only P14,426,485.66 (as of November 30, 2002), whereas respondent had deducted a total of P108,563,388.06 from CII’s account.
Consequently, the Pasig RTC ordered respondent to:

Return the “overpayment” with legal interest at 12% per annum, amounting to P94,136,902.40;
Pay compensation for lost profits at P2,000,000 per month (with 12% interest per annum) starting August 2004 until full payment; and
Return the TCTs covering the foreclosed properties to petitioner.

Additional awards included moral and exemplary damages and attorney’s fees, and respondent’s notice of appeal was later dismissed for non-payment of the appellate docket fees, with the court also finding respondent guilty of forum-shopping.

Despite the pending specific performance case in the Pasig RTC, respondent sought the immediate issuance of a writ of possession in the Bulacan RTC by filing an ex parte motion on January 10, 2005.
Petitioner opposed this motion, alleging that respondent had committed fraud and forum-shopping, and further contended that the foreclosure was premature since the Pasig RTC had not determined the status of CII’s obligations definitively.
Notwithstanding petitioner’s opposition, the Bulacan RTC, on December 10, 2005, granted the ex parte motion, and a writ of possession was issued on December 19, 2005.

Petitioner assailed the December 10, 2005 order through a petition for certiorari before the Court of Appeals (CA), arguing that the decision lacked a clearly stated factual and legal basis, in violation of Section 14, Article VIII of the Constitution.
The CA, in a resolution dated January 13, 2006, dismissed the petition on the ground that an order for the issuance of a writ of possession is merely ministerial and not a judgment on the merits and therefore does not trigger the constitutional requirement of explicit factual and legal disclosures.
Petitioner elevated the matter to the Supreme Court, asserting that the writ order was void and inconsistent with the prior Pasig RTC decision that had already ordered the return of the documents of title in favor of petitioner, thereby questioning the validity of consolidating title in respondent’s name.
The Supreme Court ultimately denied the petition, clarifying that once the certificate of sale and the affidavit of consolidation were filed, the redemption period expired and the foreclosure sale became final and executory. Additionally, petitioner had not availed the remedial option under Section 8 of Act 3135 within the prescribed 30-day period after possession was given.

Whether the issuance of a writ of possession in an extrajudicial foreclosure constitutes a decision on the merits that must expressly state its factual and legal bases in accordance with Section 14, Article VIII of the Constitution.
Whether the challenge based on alleged overpayment (as determined in the specific performance and damages case) and the contention of fraudulent foreclosure are valid grounds to enjoin the issuance of the writ of possession.
Whether the pending specific performance and damages action in the Pasig RTC has any bearing on the validity of the writ of possession issued by the Bulacan RTC.
Whether petitioner’s failure to invoke the remedial remedy provided under Section 8 of Act 3135 within the prescribed period affects its ability to contest the consolidating effect of the foreclosure sale.