Title
Marquez vs. Sanchez
Case
G.R. No. 141849
Decision Date
Feb 13, 2007
DBP foreclosed Marquez's property after LEAD defaulted on a loan secured by REMs. SC upheld denial of injunction, citing P.D. No. 385, no due process violation, and valid foreclosure of family home.

Case Summary (A.M. No. RTJ-24-071)

Petitioners and Respondents

Petitioners are the substituted heirs of Marcial M. Marquez, who had been an incorporator and officer of LEAD and a principal solidarily liable for LEAD’s loans. Respondents include the trial court judge who denied injunctive relief, the DBP which initiated extra-judicial foreclosure to satisfy loan arrearages, and the provincial sheriff who scheduled the foreclosure sale.

Key Dates

LEAD incorporated: November 26, 1975. DBP initial loan granted: November 9, 1977. Boat-building contract (LEAD–Trigon): June 2, 1978. Additional loan granted: July 29, 1981; fully released February 8, 1982. F/B LEAD 1 sank: nights of June 21–22, 1985. GSIS insurance proceeds applied by DBP: December 9, 1986. DBP demand for payment: July 21, 1992. DBP filed application for extra-judicial foreclosure: August 25, 1992; Notice of Extra-Judicial Sale issued September 3, 1992 for sale on October 6, 1992. TRO issued to maintain status quo: October 6, 1992. Hearing for injunction: October 14, 1992. RTC denial of preliminary injunction: October 29, 1992; Motion for Reconsideration denied December 23, 1992. Property sold December 28, 1992 (certificate of sale not issued due to CA TRO). CA decision affirming RTC: November 5, 1998; CA denial of reconsideration: January 31, 2000. Supreme Court decision: February 13, 2007.

Applicable Law and Legal Standards

Primary statutory and procedural sources relied upon by the courts: P.D. No. 385 (mandatory foreclosure rules applicable to government financial institutions), Section 3, Rule 58 of the 1997 Revised Rules of Civil Procedure (grounds and requisites for a writ of preliminary injunction). The courts applied established requisites for injunctive relief: (1) existence of a clear and unmistakable right (right in esse); (2) material and substantial invasion of such right; (3) urgent need to prevent irreparable injury; and (4) absence of other ordinary, speedy and adequate remedies. The courts also invoked precedents cited in the record concerning the exercise of judicial discretion in granting injunctions and the strict construction of injunctive applications.

Factual Background and Transactions

LEAD, formed to engage in commercial deep-sea (“purse seine”) fishing, obtained from DBP an agricultural loan of PhP 2,105,000 (1977) and an additional loan of PhP 714,600 (1981) to complete construction and equipment of the fishing vessel. DBP required LEAD principals, including Marcial Marquez, to be jointly and severally liable; several principals executed real estate mortgages securing the loans. Construction delays, defects and increased costs led to a tripartite agreement whereby LEAD accepted the vessel in its then state and DBP consolidated the additional loan; Marquez and his wife executed a second mortgage over TCT No. T‑24506 to secure the additional loan. The vessel sank in 1985; DBP collected GSIS insurance proceeds of PhP 1,186,145 and applied them to the loan account on December 9, 1986. By September 3, 1992, the outstanding indebtedness (after application of insurance proceeds) was PhP 4,595,450, and DBP initiated extra‑judicial foreclosure proceedings.

Procedural History

When DBP scheduled extra‑judicial sale of TCT No. T‑24506, Marcial Marquez filed Civil Case No. 92‑150 in the Lucena RTC seeking damages, cancellation of mortgage and certiorari with a prayer for a writ of preliminary injunction to enjoin the foreclosure sale. The trial court initially issued a temporary restraining order to preserve the status quo and held a hearing on October 14, 1992. The trial court denied the preliminary injunction on October 29, 1992 and denied reconsideration on December 23, 1992. Although the property was sold on December 28, 1992, the certificate of sale was not issued because the Court of Appeals granted a TRO in a Rule 65 petition. The Court of Appeals later affirmed the trial court’s orders on November 5, 1998; its denial of reconsideration was resolved on January 31, 2000. The petitioners’ Rule 45 petition for review on certiorari culminated in the Supreme Court decision of February 13, 2007 denying the petition and affirming the lower courts.

Issue Presented

The principal issue was whether the trial court’s denial of a preliminary injunction to restrain DBP’s extra‑judicial foreclosure sale constituted grave abuse of discretion amounting to lack or excess of jurisdiction. Secondary issues raised by petitioners included the applicability of P.D. 385, denial of due process in the preliminary injunction hearing, and whether the mortgaged property constituted a family home or otherwise fell outside DBP’s foreclosure rights.

Requisites for Issuance of a Preliminary Injunction

The Supreme Court reiterated the essential requisites under Section 3, Rule 58: that the applicant be entitled to the relief sought; that continuance of the complained acts would probably work injustice; or that a threatened act tends to render a future judgment ineffectual. It also restated the classic four-part test: clear and unmistakable right in esse, material and substantial invasion, urgent need to prevent irreparable injury, and lack of other adequate remedies. The Court emphasized that the writ is extraordinary, must be exercised with extreme caution, and rests on the existence of a cause of action and probability of irreparable injury.

Trial Court and Court of Appeals Findings

Both the trial court and the Court of Appeals found petitioners failed to establish the requisites for preliminary injunctive relief. They concluded there was no manifest or grave abuse of discretion in denying the writ. The appellate court specifically applied P.D. 385 and determined that absent proof of payment of at least twenty percent (20%) of the arrearages after the filing of foreclosure proceedings, courts are proscribed from issuing restraining orders against government financial institutions exercising mandatory foreclosure powers under the decree.

Applicability and Effect of P.D. 385

The Court affirmed that P.D. 385 applied. The statute bars courts from issuing restraining orders, temporary or permanent injunctions against government financial institutions in actions taken to effectuate mandatory foreclosure when arrearages reach twenty percent (20%) of the total outstanding obligations as shown in the institution’s books, unless after a due hearing the borrower establishes and the institution admits that at least twenty percent of the arrearages have been paid after foreclosure proceedings were filed. The factual record showed undisputed loans to LEAD (PhP 2,105,000 and PhP 714,600), the solidary liability of Marquez and spouse, and a second mortgage on TCT No. T‑24506 securing the additional loan. As of the relevant date, the outstanding indebtedness was PhP 4,595,450. Petitioners did not show they complied with the 20% payment requirement; consequently P.D. 385 barred injunctive relief.

Petitioners’ Reliance on FMC and Distinguishing Analysis

Petitioners invoked Filipinas Marble Corporation (FMC) v. Court of Appeals. The Court distinguished FMC: FMC involved allegations of mismanagement and misappropriation under a DBP‑imposed management arrangement, raising a substantive contest over whether DBP itself bore responsibility for misuse of loan proceeds — a factual situation warranting restraint of foreclosure pending full trial. By contrast, in the present case LEAD had contracted with Trigon and the loan disbursements and contractual relations were documented; there was no comparable a

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