Union Bank of the Philippines v. Court of Appeals
REITERATIONFacts
The Antecedents: Spouses Leopoldo and Jessica Dario executed a real estate mortgage in favor of Union Bank of the Philippines (UNIONBANK) to secure a P3 million loan. For non-payment, UNIONBANK extrajudicially foreclosed the mortgaged property and was the highest bidder. One week before the one-year redemption period expired, private respondents filed a complaint for annulment of sale and mortgage, reconveyance, and for a restraining notice of lis pendens. A Temporary Restraining Order (TRO) was issued, enjoining the redemption and consolidation of the property. UNIONBANK moved for dismissal due to the absence of a certification of non-forum shopping, which the RTC granted. Procedural History: Private respondents moved for reconsideration and to amend their complaint to comply with the certification requirement. The RTC allowed the amendment. Meanwhile, UNIONBANK consolidated its title over the property, cancelled the original title, and obtained a new one in its name. Private respondents filed an amended complaint, alleging they were the true owners and that the mortgage and foreclosure were invalid due to fraud in the acquisition of the title by the mortgagor. UNIONBANK filed an answer ad cautelam, asserting its status as an innocent mortgagee for value and that the action was moot due to consolidation. The RTC later held some defendants in default and sustained UNIONBANK's contention that the act sought to be enjoined had been consummated, rendering the application for preliminary injunction moot. The RTC denied a motion for reconsideration, but suggested amending the application from prohibitory to mandatory injunction. When private respondents failed to amend, their motion for reconsideration and indirect contempt were denied. The Court of Appeals (CA) nullified the consolidation of ownership, ordered the cancellation of UNIONBANK's title, and the reinstatement of the original title with the lis pendens annotation. The CA also set aside the RTC's declaration that the prayer for injunction was moot. The Petition: UNIONBANK appealed to the Supreme Court, arguing it was a mortgagee in good faith and for value with a right to consolidate ownership after the redemption period expired without redemption. It contended the TRO dissolved upon dismissal of the complaint, rendering further injunction proceedings moot. It also argued that the alleged fraudulent mortgage was due to private respondents' negligence, and that due process was observed as they had filed several pleadings.
Issue(s)
Whether the consolidation of title in UNIONBANK's name was proper. Whether the dismissal of the application for preliminary prohibitory injunction was valid.
Ruling
The Supreme Court reversed and set aside the decision of the Court of Appeals, reinstating the trial court's order declaring UNIONBANK's prayer for a writ of preliminary injunction moot and academic. The case was remanded to the Regional Trial Court for trial on the merits.
Ratio Decidendi
On the propriety of the consolidation of title: The Supreme Court held that UNIONBANK's consolidation of title was proper, though precipitate. It clarified that UNIONBANK violated no standing court order because the TRO, which halted the tolling of the redemption period, became functus officio upon the dismissal of the original complaint for failure to append a certification of non-forum shopping. Consequently, the tolling of the redemption period recommenced and expired on October 24, 1994, the date of the disputed consolidation. The Court cited Santiago v. Vasquez and Golez v. Leonidas for the principle that the dismissal of an action in which a restraining order or TRO has been granted operates as a dissolution of such order, regardless of pending motions for reconsideration or appeals. Therefore, consolidation of title became a matter of right for UNIONBANK upon the expiration of the redemption period without redemption, and no further notice to the mortgagors or private respondents was necessary. On the validity of the dismissal of the application for preliminary prohibitory injunction: The Court found no error in the denial of the private respondents' application for preliminary prohibitory injunction. It reasoned that injunctive relief is meant to prevent threatened or continuous irremediable injury, and it is impossible to restrain the performance of consummated acts. Since the consolidation of ownership had already occurred, hearing the application for preliminary injunction would be an exercise in futility. Furthermore, the Court reiterated that to be entitled to an injunction, the movant must show a right that is directly threatened and an urgent necessity to prevent serious damage. In this case, the consolidation of ownership and issuance of a new title would not cause irreparable injury to the private respondents because UNIONBANK, as a purchaser at a public auction, merely steps into the shoes of the mortgagors. The judgment in the main action for reconveyance would not be rendered ineffectual. Crucially, the notice of lis pendens, which remained annotated on UNIONBANK's title despite the consolidation, sufficiently protected the private respondents' interest over the property, as any subsequent transaction would be subject to the outcome of the litigation. The Court cited J.P. Peilicer & Co., Inc. v. Phil. Realty Corp. in support of this principle.
Main Doctrine
The dismissal of a complaint, even if pending motion for reconsideration or appeal, operates to dissolve a temporary restraining order (TRO) issued in connection therewith, thereby causing the recommencement and eventual expiration of the redemption period. Consolidation of title thereafter is a matter of right, and the issuance of a new title is ministerial. The existence of a notice of lis pendens sufficiently protects the interest of the private respondents in the main action for reconveyance.