Title
Casent Realty and Development Corp. vs. Premiere Development Bank
Case
G.R. No. 163902
Decision Date
Jan 27, 2006
Casent Realty disputed Premiere Bank's foreclosure over unpaid loans; RTC allowed pre-trial without an independent auditor, upheld by SC, reversing CA's ruling.

Case Summary (G.R. No. 163902)

Overview of Loan Arrangements

On December 28, 1994, Casent Realty entered into a loan agreement with Premiere Bank amounting to Php40,000,000.00, secured by a Promissory Note and a real estate mortgage on a specific parcel of land. Casent made a significant balloon payment on the principal, reducing the outstanding amount but later struggled with meeting its loan repayments, leading to additional loans to cover accrued interests and penalties.

Initial Foreclosure Actions

In January 2001, demand letters were issued by Premiere Bank to Casent Realty regarding repayment. As Casent intended to settle its debt through the sale of other properties and proposed a dacion en pago arrangement, negotiations ensued from March to July 2001. Despite numerous discussions, an acceptable settlement was not reached, leading to Premiere Bank’s filing of an extrajudicial foreclosure application on August 28, 2001.

Legal Proceedings Initiated by Casent Realty

In response to the foreclosure notice, Casent Realty filed an injunction complaint against Premiere Bank on October 4, 2001, which resulted in temporary relief from foreclosure through a restraining order issued by the Regional Trial Court. The court ruled against the premature foreclosure due to uncertainties regarding the total unpaid obligation.

Settlement Negotiations and Court Involvement

Subsequent pre-trial conferences revealed further disagreements over settling the debt. Premiere Bank had calculated the amounts due, offering a waiver on penalties but faced disputes over its computation. The trial court ordered the appointment of an independent auditor to review the accounts, leading to Casent Realty requesting a clarification on the auditor’s role.

Regional Trial Court’s Orders and Decisions

On July 21, 2003, the Regional Trial Court denied Casent Realty’s bid to limit the auditor's role, asserting that both parties had agreed to the auditor’s engagement. Premiere Bank contested this order through a motion for reconsideration, which was subsequently denied.

Appeal and Court of Appeals Decision

Premiere Bank then filed a petition for certiorari to the Court of Appeals, arguing that the trial court had abused its discretion regarding the independent auditor’s involvement. The appellate court sided with Premiere Bank, claiming Casent Realty had effectively agreed to the auditor’s inclusion by proposing a list of auditors.

Casent Realty's Motion for Reconsideration

Casent Realty filed a motion for reconsideration against the Court of Appeals' ruling, asserting no binding agreement had been established regarding the auditor’s scope. However, this motion was denied, with the Court of Appeals reiterating that the prior court's allowance for flexibility in the auditor’s engagement was justified.

Supreme Court Decision

Following the denial of its motion for reconsideration, Casent Realty escalated the matter to the Supreme Court via a petition for review on certiorari. The Supreme Court found in favor of Casent Realty, determining that the Court of Appeals had erred in granting certiorari on the grounds of a supposed agreement for an independent auditor's appointment, which had not been clearly

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