Case Summary (A.C. No. 10231)
Background Facts
From October 1993 to October 1996, ARMC secured loans from LBP, backed by real and chattel mortgages on its properties and machinery. Upon the loans' due dates, ARMC faced financial difficulties exacerbated by external factors such as increased rice imports and adverse weather conditions affecting production. Despite partial payments, ARMC struggled to meet its obligations and sought extensions and restructuring of its loans with LBP.
Application for Extrajudicial Foreclosure
In July 1998, LBP filed for extrajudicial foreclosure on ARMC’s properties due to ARMC's failure to comply with payment demands. They indicated that the total unpaid obligation exceeded P23 million, prompting ARMC to file a complaint for injunction two days prior to the foreclosure auction.
Complaint for Injunction
ARMC's complaint asserted that the forthcoming foreclosure was premature and unlawfully executed while negotiations for loan restructuring were ongoing. ARMC alleged it had fulfilled its obligations on one of the previous loans and argued the foreclosure petition contained inaccuracies and contractual violations.
Temporary Restraining Order and Hearing
A Temporary Restraining Order (TRO) was initially granted, halting foreclosure proceedings. The court subsequently extended the TRO, but negotiations failed to yield resolution, leading to a hearing on a preliminary injunction.
RTC Ruling
On August 5, 2004, the Regional Trial Court (RTC) ruled against ARMC, determining LBP had acted within its rights to foreclose due to ARMC’s default. The RTC noted that no binding restructuring agreement existed because ARMC failed to meet collateral requirements. It cited Presidential Decree No. 385, mandating government financial institutions to enforce foreclosure under certain conditions.
CA Ruling
ARMC's appeal to the Court of Appeals (CA) was similarly denied. The CA upheld the RTC's findings, emphasizing that LBP had not committed to restructuring ARMC’s loans. Additionally, the court found that ARMC had no established right to prevent the foreclosure.
The Court's Ruling on Injunctive Relief
The Supreme Court addressed whether ARMC had a clear right warranting injunctive relief. It affirmed that ARMC failed to demonstrate such a right, as no agreement on loan restructuring exist
...continue readingCase Syllabus (A.C. No. 10231)
Case Background
- This case involves a petition for review on certiorari concerning the March 28, 2006 decision and the June 6, 2006 resolution of the Court of Appeals (CA) in CA-G.R. CV No. 84458.
- The CA affirmed the decision of the Regional Trial Court (RTC), Branch 30, San Fernando City, La Union, in Civil Case No. 6255, which denied Agoo Rice Mill Corporation's (ARMC) complaint for injunction against the Land Bank of the Philippines (LBP).
- The CA also denied ARMC's subsequent motion for reconsideration.
Loan Background and Financial Difficulties
- From October 1993 to October 1996, ARMC secured a Term Loan (TL) of P2,000,000.00 and two Short-Term Loan Lines (STLLs) totaling P15,000,000.00 from LBP, evidenced by promissory notes.
- These loans were secured by a Real and Chattel Mortgage over ARMC's four commercial lots, including improvements, and rice mill machinery and generator.
- ARMC faced financial challenges due to liquidity issues, adverse effects of government rice importation in 1996, and problems caused by the El Niño phenomenon affecting rice production.
Requests for Loan Restructuring
- On January 6, 1997, ARMC requested an extension to settle its loan obligations until February 28, 1997.
- LBP reminded ARMC of its payment commitment on February 25, 1997.
- ARMC sought to renew its loans on February 27, 1997, but LBP advised restructuring instead.
- ARMC proposed a restructuring plan on March 12, 1997, suggesting a payment arrangement of P5,000,000.00 every six months.
- LBP deferred the proposal, requiring additional collateral from ARMC before considering restructuring.
Collateral and Foreclosure Proceedings
- On November 3, 1997, LBP communicated the need for additional collateral