Case Summary (G.R. No. L-46405)
Factual Background
The petitioner had a credit line with the PCIB backed by two real estate mortgages executed on March 23, 1960, and August 25, 1961. As of December 24, 1968, the outstanding credit accommodation from PCIB to La Campana amounted to P526,632.67. The petitioner obtained a foreign loan of $1,400,000.00 from Intercontinental Monetary Corporation, which was to be guaranteed by the Development Bank of the Philippines (DBP). DBP agreed to guarantee the loan contingent upon the petitioner depositing the loan proceeds with DBP to cover its obligations to local financial institutions.
DBP Mortgage and Conditions
In a letter from DBP dated September 23, 1968, the bank informed PCIB of its guarantee and requested the transfer of the certificates of title for the mortgaged properties to register its mortgage. PCIB consented to the registration under the condition that it would receive immediate full payment of the petitioner's outstanding obligations before releasing its mortgage. On November 11, 1968, DBP registered its mortgage on the properties.
Foreclosure Proceedings
Despite a partial payment of P140,000.00 made by DBP on May 16, 1969, no further payments were made on the remaining balance owed to PCIB. Subsequently, on June 28, 1971, PCIB initiated foreclosure proceedings against the mortgaged properties, and the sheriff scheduled an auction sale for July 30, 1971.
Petition for Injunctive Relief
In response, on July 26, 1971, the petitioner filed a suit for certiorari, mandamus, and prohibition with a request for a preliminary injunction, contending that PCIB had lost its right to foreclose due to allowing DBP to assume the obligations and by accepting partial payment. The lower court issued a temporary restraining order against the auction pending the resolution of the injunctive petition.
Court Decisions
The lower court ultimately dismissed the petition on July 25, 1975, concluding that while novation had occurred with DBP as the new guarantor for the loan, the mortgage remained enforceable as full payment had not been met. The court noted that consent for such a loan assumption by PCIB was conditional on full payment and that the mere registration of DBP’s mortgage did not extinguish the original loan obligations.
Legal Principles and Analysis
The court relied on doctrines related to novation, determining that for a novation to occur, the original debtor must be released from liability, and that nothing in the agreements indicated such
...continue readingCase Syllabus (G.R. No. L-46405)
Case Overview
- The case is an appeal to the then Court of Appeals (now Intermediate Appellate Court) from a judgment of the Court of First Instance of Rizal.
- The petitioner, La Campana Food Products, Inc. (hereinafter referred to as "petitioner"), sought certiorari, mandamus, and prohibition with preliminary injunction against the Philippine Commercial and Industrial Bank (PCIB) and the City Sheriff of Quezon City.
- The appeal involved pure questions of law regarding mortgage obligations and foreclosure proceedings.
Factual Antecedents
- Petitioner had a credit line with PCIB secured by two real estate mortgages executed on March 23, 1960, and August 25, 1961.
- As of December 24, 1968, the outstanding credit accommodation from PCIB to the petitioner was P526,632.67.
- Petitioner negotiated a foreign loan of $1,400,000.00 with Intercontinental Monetary Corporation of New York, guaranteed by the Development Bank of the Philippines (DBP).
- DBP agreed to guarantee the loan under the condition that the loan proceeds would be deposited with it for payment of local obligations and working capital.
Interaction Between DBP and PCIB
- On September 23, 1968, DBP informed PCIB about the guarantee and requested the loan's mortgage titles for registration.
- PCIB consented to the registration of DBP's mortgage on the condition that it would receive full payment of petitioner's outstanding obligations.
- On November 11, 1968, DBP registered