Case Summary (G.R. No. 142731)
Key Dates
- April 8, 1998: Complaint for damages filed by Go seeking TRO against scheduled auction sale
- April 14–15, 1998: Initial TRO issued and extended, total of 20 days
- May 7, 1998: Preliminary injunction granted upon P200,000 bond
- July 30, 1998: Motion for reconsideration denied
- August 26, 1999: Court of Appeals decision partially denying certiorari, increasing bond to P5,000,000
- April 3, 2000: CA resolution denying reconsideration
- June 8, 2006: Supreme Court decision
Applicable Law
- 1987 Constitution (post-1990 case)
- Rules of Court, Rule 58 (TRO and preliminary injunction), Rule 22 (computation of time)
- Civil Code Articles 1169 (default), 1278–1279 (legal compensation)
Trial Court Proceedings and Injunctive Orders
Judge Urbano C. Victorio, Sr. issued a TRO on April 14, 1998, preventing the auction of the mortgaged property, and extended it by order of April 15, 1998, to total twenty days. After hearing on May 7, 1998, a preliminary injunction was granted upon posting of a P200,000 bond. Go filed the required bond. A motion for reconsideration by petitioner was denied on July 30, 1998, holding that foreclosure of four of the eight notes was premature and setting the case for pretrial.
Court of Appeals Ruling
FEBTC’s certiorari petition before the Court of Appeals challenged the May 7 and July 30 orders. The CA found that injunctive relief was warranted to preserve the status quo and resolve whether a valid demand had been made and whether default existed. Relying on precedents, the CA held that:
- Default cannot be assumed without proper demand on the debtor.
- The P200,000 bond was insufficient to cover petitioner’s damages.
Under Section 7, Rule 58, the CA ordered Go to post a P5,000,000 bond but otherwise denied certiorari. A motion for reconsideration was denied April 3, 2000.
Issues Before the Supreme Court
- Whether the CA could decide the sufficiency of demand on co-signors.
- Whether Jimmy T. Go was entitled to TRO and preliminary injunction.
- Whether the injunction matter was moot and academic.
Supreme Court Analysis and Holdings
Entitlement to Injunctive Relief
- Rule 58, Section 3 requires (a) entitlement to relief, (b) probable injustice without injunction, or (c) threat to rights.
- Co-signors expressly waived demand and the notes contained an acceleration clause, rendering demand unnecessary. Default occurred by waiver of demand.
- FEBTC’s withholding of lease payments constituted legal compensation by operation of law, not novation or waiver of default. No authority impeded foreclosure.
- No bad faith by FEBTC in enforcing its contractual rights.
Procedural Regula
Case Syllabus (G.R. No. 142731)
Facts
- Petitioning bank (formerly Far East Bank and Trust Company, now Bank of the Philippine Islands) granted eight (8) loans to Noah’s Ark Merchandising, a sole proprietorship of Albert T. Looyuko, evidenced by identical promissory notes.
- Promissory notes were signed by Looyuko, private respondent Jimmy T. Go, and one Wilson Go, and secured by real estate mortgage over the parcel covered by Transfer Certificate of Title No. 160277 in the names of Looyuko and Go.
- After Noah’s Ark defaulted, the bank extrajudicially foreclosed the mortgage and set an auction sale for 14 April 1998.
- On 8 April 1998, respondent Go filed a complaint for damages with prayer for issuance of a temporary restraining order (TRO) and writ of preliminary injunction (PI) to enjoin the auction sale.
- On 14 April 1998, Judge Urbano C. Victorio, Sr. issued a TRO; on 15 April 1998, he extended it for a total of twenty (20) days.
- On 7 May 1998, the trial court granted PI effective upon posting of a P200,000.00 bond. Go filed the required bond.
- The bank’s motion for reconsideration (denying foreclosure was premature as to four notes) was denied on 30 July 1998, and the case was set for pre-trial.
Procedural History
- July 1998: Bank’s motion for reconsideration denied by the trial court.
- August 1998: Bank filed petition for certiorari with the Court of Appeals to annul the 7 May and 30 July 1998 orders, dissolve the injunction, and proceed with sale.
- 26 August 1999: Court of Appeals partially denied the petition for certiorari, upheld PI but increased the bond to Five Million Pesos (P5,000,000.00).
- 3 April 2000: Court of Appeals denied the bank’s motion for reconsideration of its decision.
- April 2000: Ban