Case Summary (G.R. No. 171169)
Background of the Credit Arrangement
In 1999, Equitable PCI Bank provided a credit line of P30 million to Camden Industries, Inc. (CII), enabling CII to obtain numerous loans under promissory notes and engage in purchasing trust receipts. To ensure effective debt collection, CII executed a "hold-out" agreement authorizing the bank to withdraw due amounts directly from its savings account. To secure CII's loans, GC Dalton Industries, Inc., as a third-party guarantor, mortgaged its properties in Quezon City and Malolos, Bulacan as collateral.
Foreclosure Proceedings
Despite multiple demands from Equitable PCI Bank, CII failed to satisfy its loan obligations, accumulating an unpaid balance reaching P68,149,132.40 by 2003. As a result, the bank initiated extrajudicial foreclosure proceedings against the Bulacan properties of GC Dalton Industries, which culminated in a public auction held on August 3, 2004. The bank emerged as the highest bidder, and a certificate of sale was issued, leading to the eventual registration of the mortgage properties under the bank's name.
Litigation and Court Orders
Following the foreclosure, CII filed an action for specific performance and damages against Equitable PCI Bank in the Regional Trial Court (RTC) of Pasig on August 4, 2004. CII alleged that it had fully paid its obligations and sought to demonstrate that the foreclosure was carried out fraudulently. On March 30, 2005, the Pasig RTC ruled in favor of CII, ordering the bank to return overpayments and granting damages. Equitable PCI Bank's notice of appeal was dismissed for failing to pay docket fees, and the RTC found it had engaged in forum shopping by seeking a writ of possession in a different court.
Opposition to Writ of Possession
In January 2005, the bank filed an ex parte motion for a writ of possession in the Bulacan RTC. GC Dalton Industries opposed this motion, arguing that the bank acted fraudulently and that the court had not yet resolved the issues related to CII's payments. Despite these arguments, the Bulacan RTC issued a writ of possession in December 2005, leading GC Dalton Industries to file a certiorari petition challenging the order.
Judicial Review and Constitutional Implications
The Court of Appeals dismissed the certiorari petition, ruling that the writ of possession issuance is not subject to the requirements of Section 14, Article VIII of the 1987 Philippine Constitution, which mandates that decisions articulate clear factual and legal bases. GC Dalton Industries subsequently elevated the case, asserting that the Bulacan RTC's order lacked sufficient legal foundation and conflicted with the earlier Pasig RTC decision.
Legal Principles Regarding Writ of Possession
The Supreme Court reiterated that the issuance of a writ of possession post-foreclosure is a ministerial action, not discretionary. The mortgagor forfeits interest in the foreclosed property once the redemption period lapses, as defined by Section 47 of the General Banking Law. Due to the r
...continue readingCase Syllabus (G.R. No. 171169)
Case Background
- In 1999, Equitable PCI Bank granted a P30-million credit line to Camden Industries, Inc. (CII), enabling the company to secure multiple loans and trust receipts.
- CII executed a "hold-out" agreement permitting the bank to deduct amounts due from its savings account.
- GC Dalton Industries, Inc. provided a third-party mortgage on its properties in Quezon City and Malolos, Bulacan to secure CII's obligations.
- CII failed to settle its debts, leading to an outstanding amount of P68,149,132.40 by 2003.
Foreclosure Proceedings
- On May 7, 2004, Equitable PCI Bank filed for extrajudicial foreclosure of the mortgaged properties in the Bulacan Regional Trial Court (RTC).
- The properties were auctioned on August 3, 2004, with the bank as the highest bidder, leading to a certificate of sale issued the same day.
- The bank registered the certificate of sale and an affidavit of consolidation of ownership on September 13, 2004, thereby cancelling the titles of the properties and issuing new ones in its name.
Legal Actions by CII
- On August 4, 2004, CII initiated a lawsuit for specific performance and damages against Equitable PCI Bank in the Pasig RTC, claiming full payment of its obligations to the bank.
- CII accused the bank of fraudulent foreclosure and sought an accounting to substantiate its claim.
- The Pasig RTC issued a decision on March 30, 2005, determining CII's past due obligation was only P14,426,485.66 as of November 30, 2002, while th