Palanca v. Cusi
REITERATIONFacts
The Antecedents: Petitioners, officers and/or stockholders of Davao Ricorn, Inc. (Ricorn), executed special powers of attorney authorizing Marcelino E. Calinawan, Jr. to mortgage eight (8) parcels of land to Manufacturers Bank and Trust Company (Bank) to secure loans obtained by Ricorn. Subsequently, Calinawan executed a deed of real estate mortgage on these properties. Later, petitioners executed another special power of attorney authorizing Calinawan to mortgage six (6) additional parcels of land to the Bank as security for Ricorn's obligations, and ratified a prior mortgage deed executed by Calinawan on June 3, 1964, for these six parcels. Procedural History: The Bank initiated extrajudicial foreclosure proceedings for an alleged indebtedness of Ricorn. Petitioners filed Civil Case No. 4716 in the Court of First Instance (CFI) of Davao, seeking to fix a period for their obligation and to declare it not yet due and demandable, praying for a writ of preliminary injunction to stop the foreclosure. The CFI issued the injunction ex parte, but later denied the Bank's motion to dissolve it. Petitioners amended their complaint, alleging the nullity of the mortgages due to waivers of redemption rights and stipulations granting the Bank extensive powers, and asserting their status as mere guarantors entitled to the benefit of excussion. The Bank, in its answer, denied these allegations and counterclaimed for damages. After trial on the merits, the CFI, presided over by respondent Judge, issued an order dissolving the writ of preliminary injunction. Petitioners moved for reconsideration, which was denied. Subsequently, the CFI rendered a decision dismissing petitioners' complaint, subject to their right of redemption. Petitioners filed a notice of appeal, but its approval was held in abeyance due to the present case. The Petition: Petitioners filed an original action for certiorari with the Supreme Court, seeking to annul the CFI's orders dissolving the writ of preliminary injunction and denying reconsideration. They alleged that the respondent Judge committed grave abuse of discretion amounting to lack of jurisdiction. Their main arguments were that Calinawan exceeded his authority in waiving redemption rights, appointing the Bank's president as attorney-in-fact with broad powers, and stipulating on notice of correspondence; that they were assured they were merely guarantors and that the principal debtor's properties would be exhausted first; that the extrajudicial foreclosure would render their case moot; and that the dissolution of the injunction would cause irreparable injury.
Issue(s)
Whether the respondent Judge committed a grave abuse of discretion amounting to lack of jurisdiction in dissolving the writ of preliminary injunction. Whether the deeds of mortgage executed by Marcelino E. Calinawan, Jr. on behalf of the petitioners are valid and binding. Whether the petitioners are entitled to the benefit of excussion as mere guarantors. Whether the extrajudicial foreclosure proceedings render the main case moot and academic.
Ruling
The Supreme Court dismissed the petition and set aside the writ of preliminary injunction. The Court held that the dissolution of the injunction was not attended by grave abuse of discretion and that the petitioners were not entitled to the relief prayed for. The Court affirmed the validity of the mortgages and rejected the petitioners' claims regarding their status as mere guarantors and the alleged lack of authority of their attorney-in-fact.
Ratio Decidendi
On Whether the respondent Judge committed a grave abuse of discretion amounting to lack of jurisdiction in dissolving the writ of preliminary injunction: The Court found that the dissolution of the writ of preliminary injunction was not a grave abuse of discretion. The order dissolving the writ was issued after the case had been heard on the merits, and the respondent Judge had considered the evidence introduced. Furthermore, the subsequent decision on the merits, which dismissed the petitioners' complaint, provided a basis for the dissolution of the injunction. The Court noted that the findings in the decision, though not explicitly made in the order lifting the injunction, were implicitly considered, justifying the dissolution. The Court emphasized that the dissolution was based on the finding of lack of cause of action on the part of the petitioners. On Whether the deeds of mortgage executed by Marcelino E. Calinawan, Jr. on behalf of the petitioners are valid and binding: The Court ruled that the deeds of mortgage were valid and binding upon the petitioners. It held that the waiver of the right of redemption, even if considered illegal, did not affect the validity of the mortgage itself, as it is not an essential element thereof. The Court also noted that the Bank acknowledged the petitioners' right of redemption despite the stipulation. Moreover, any alleged lack of authority of Calinawan, Jr. to agree on certain stipulations was cured by the subsequent power of attorney (Annex D) that ratified the mortgage deed (Annex C), which contained similar stipulations as the first deed (Annex B). On Whether the petitioners are entitled to the benefit of excussion as mere guarantors: The Court found the petitioners' claim of being mere guarantors entitled to the benefit of excussion to be unworthy of credence. This conclusion was based on several factors: the testimonial evidence was inconsistent with the clear tenor and nature of the deeds of mortgage; the alleged assurances were given by Calinawan, who did not represent the Bank, and by mere appraisers who could not bind the Bank; the petitioners' initial complaints, which merely asked for a period to be fixed for payment, impliedly admitted the Bank's real right over the properties and negated the claim of excussion; the failure to implead Calinawan as a defendant further weakened their theory; and the principal obligation benefited Ricorn, a corporation in which the petitioners were stockholders and directors. On Whether the extrajudicial foreclosure proceedings render the main case moot and academic: The Court implicitly addressed this by upholding the validity of the foreclosure proceedings and the dissolution of the injunction. The dismissal of the petitioners' complaint on the merits indicated that the foreclosure was proceeding on a legally sound basis. The Court's affirmation of the lower court's decision, which allowed the foreclosure subject to the right of redemption, meant that the main case was not rendered moot by the foreclosure itself, but rather its outcome was determined by the legal validity of the mortgage and the obligation it secured.
Main Doctrine
The Supreme Court held that the validity of a real estate mortgage, constituted to secure a principal obligation, is not undermined by stipulations within the mortgage deed that might be considered illegal or beyond the scope of the attorney-in-fact's authority, especially if the mortgagor's right of redemption is acknowledged. Moreover, the dissolution of a writ of preliminary injunction, issued ex parte, is not considered a grave abuse of discretion if the lower court, after hearing on the merits, finds no sufficient cause of action, even if the formal decision on the merits is promulgated subsequent to the order dissolving the injunction.