Case Summary (G.R. No. 142896)
Case Origin and Initial Relief Sought
On July 15, 1999, Caneland Sugar Corporation filed a complaint before the Regional Trial Court (RTC) of Silay City, Branch 40, praying for a temporary restraining order (TRO) to enjoin the foreclosure sale, nullity of any foreclosure sale, nullity of the mortgage, and damages. The RTC initially held the auction sale scheduled for July 23, 1999, in abeyance upon agreement of the parties but allowed the foreclosure sale to proceed on November 15, 1999, pursuant to a subsequent order citing mandatory foreclosure under Presidential Decree (P.D.) No. 385.
RTC’s Justification Under P.D. No. 385
The RTC referenced P.D. No. 385, which mandates government financial institutions to foreclose collaterals securing loans when arrearages, including interest and charges, reach at least twenty percent (20%) of the total outstanding obligation. Importantly, Section 2 of this decree prohibits courts from issuing restraining orders or injunctions against such foreclosures by government financial institutions, making the foreclosure sale on November 15, 1999, authorized and lawful.
Procedural History and CA’s Ruling
The petitioner’s motion for reconsideration of the RTC order was denied, prompting a petition for certiorari and prohibition with injunction before the Court of Appeals (CA). The CA unanimously dismissed the petition for lack of merit, ruling that the RTC did not commit grave abuse of discretion in allowing the foreclosure sale to proceed. Reconsideration was also denied by the CA.
Principal Issue Before the Supreme Court
The main issue on appeal was whether the CA erred in affirming the RTC’s refusal to enjoin the extrajudicial foreclosure sale. The petitioner argued that the foreclosure authorization was prejudgment on the validity of the mortgage and relied chiefly on alleged improper application of P.D. No. 385, claiming it was not applicable given the respondent’s control over petitioner’s operations.
Mootness Due to Foreclosure Sale Completion
The Supreme Court held that the foreclosure sale had already been conducted by the Sheriff, evidenced by the issuance of a Certificate of Sale dated June 26, 2000. Consequently, the issuance of injunctive relief became moot and academic since the act sought to be enjoined had become a fait accompli. Thus, the Court found no actual case or controversy remained concerning the injunction.
Consideration of Merits Despite Mootness
Despite mootness, the Court addressed the merits for the future guidance of the bench and bar, citing the "capable of repetition, yet evading review" doctrine. The Court noted that petitioner did not deny its loan liability but questioned only whether the promissory notes were covered by the security documents. The Court regarded such vague denials as negative pregnants, implicitly admitting the substantial facts including the mortgage’s validity.
Legal Doctrine on Injunctive Relief and Mortgage Foreclosure
It was emphasized that a temporary injunction requires at least a prima facie right to the main relief, which petitioner failed to establish. Under non-payment of a secured loan, the mortgaged property is subject to foreclosure sale. This aligns with the principle that injunction is a provisional remedy ancillary to the main action.
Mandatory Foreclosure Under P.D. No. 385
The Court reaffirmed P.D. No. 385’s mandatory nature requiring government financial institutions to foreclose upon arrearages of 20% or more and simultaneously prohibiting courts from issuing injunctions against such foreclosure proceedings. The petitioner failed to show any compliance with the limited exception allowing injunction if 20% of arrearages was paid after foreclosure proceedings commenced.
Distinction from Filipinas Marble Corporation Case
The petitioner’s reliance on Filipinas Marble Corporation v. Intermediate Appellate Court was rejected. In Filipinas Marble, the government financial institution’s imposition of management caused the borrower's ruin through mismanagement and misappropriation, justifying injunction. In contrast,
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Factual Background and Procedural History
- On July 15, 1999, Caneland Sugar Corporation (petitioner) filed a complaint for damages, injunction, and nullity of mortgage against the Land Bank of the Philippines and Sheriff Eric B. de Vera before the Regional Trial Court (RTC) of Silay City, Branch 40, docketed as Civil Case No. 2067-40.
- The petitioner sought issuance of a temporary restraining order enjoining the foreclosure sale of its mortgaged property covered by TCT No. T-11292, nullification of the mortgage and foreclosure sale, and damages.
- Initially, the RTC held the auction sale scheduled on July 23, 1999, in abeyance by mutual agreement of the parties.
- A subsequent foreclosure sale was set on October 15, 1999, but was again held in abeyance by RTC order dated October 14, 1999, and rescheduled for November 15, 1999.
- The RTC authorized the Land Bank and Sheriff to proceed with the extrajudicial foreclosure sale on November 15, 1999, citing mandatory foreclosure provisions under Presidential Decree No. 385.
- Petitioner moved for reconsideration of this authorization, which the RTC denied on November 8, 1999.
- Petitioner elevated the matter to the Court of Appeals (CA) via a Petition for Certiorari and Prohibition with Injunction, docketed as CA-G.R. SP No. 56137.
- The CA denied the petition on March 22, 2000, ruling that the RTC did not commit grave abuse of discretion.
- Reconsideration was denied on April 17, 2000.
- The petitioner filed the present Petition for Review on Certiorari under Rule 45 of the Rules of Court.
Issues Presented
- Whether the CA erred in ruling that the RTC did not commit grave abuse of discretion in refusing to enjoin the extrajudicial foreclosure sale.
- Whether the RTC’s authorization of the foreclosure sale constituted prejudgment on the validity of the mortgage.
- Applicability of Presidential Decree No. 385 regarding mandatory foreclosure and prohibition on injunctive relief against government financial institutions.
- Whether petitioner’s allegations about the Land Bank’s alleged control over petitioner’s operations exempt the application of P.D. No. 385.
Legal Framework: Presidential Decree No. 385
- Section 1 mandates government financial institutions (GFIs) must foreclose collaterals securing loans when arrearages, including interest and charges, reach at least 20% of the total outstanding obligation.
- Section 2 prohibits courts from issuing restraining orders, temporary or permanent injunctions against GFIs in foreclosure actions in compliance with the mandatory foreclosure provision, except after due hearing establishing that 20% of arrearages have been paid subsequent to the foreclosure proceedings’ filing.
- This decree aims to enforce mandatory foreclosure by government financial institutions and to limit judicial interference in such proceedings.
Court’s Findings on Fait Accompli and Mootness
- The Court held that injuncti