Marquez v. Development Bank of the Philippines
REITERATIONFacts
The Antecedents: Marcial M. Marquez was an incorporator and officer of Lucena Entrepreneur and Agri-Industrial Development Corporation (LEAD). LEAD obtained an agricultural loan from the Development Bank of the Philippines (DBP) for PhP 2,105,000.00 to finance the construction of a fishing vessel. Marquez and other principals were held jointly and severally liable, and some principals executed a Real Estate Mortgage (REM) over two properties. Trigon Engineering and Shipbuilding Corporation (Trigon) won the bid for boat construction. Problems arose, including DBP withholding loan releases due to non-compliance with capitalization requirements and defects in construction by Trigon, delaying the vessel's completion. A tripartite conference led to an agreement for LEAD to take the vessel as is, with DBP granting an additional loan of PhP 714,600.00, secured by an additional REM on Marquez's property. The fishing vessel, 'F/B LEAD 1', was completed and launched but later sank during a typhoon. DBP applied the insurance proceeds of PhP 1,186,145.00 to LEAD's outstanding loan. DBP demanded settlement of the outstanding loan, and upon non-payment, filed an application for foreclosure sale of the REMs. Procedural History: On September 3, 1992, the Provincial Sheriff issued a Notice of Extra-Judicial Sale for October 6, 1992. Marquez filed a civil case for Damages, Cancellation of Mortgage and Certiorari with Prayer for Issuance of a Writ of Preliminary Injunction and/or Restraining Order to prevent the foreclosure of his property. On October 6, 1992, the RTC issued a TRO. On October 29, 1992, the RTC denied the prayer for a preliminary injunction. Marquez filed a Motion for Reconsideration. On November 24, 1992, DBP applied for another extra-judicial foreclosure sale of Marquez's property, scheduled for December 28, 1992. On December 23, 1992, the RTC denied Marquez's Motion for Reconsideration and Urgent Motion to Restrain. Marquez's property was sold to DBP on December 28, 1992. Marquez filed a Petition for Certiorari with the Court of Appeals (CA), which issued a TRO. On November 5, 1998, the CA affirmed the RTC Orders. On January 31, 2000, the CA denied Marquez's Motion for Reconsideration. The Petition: The heirs of Marcial M. Marquez filed a Petition for Review on Certiorari, assailing the CA Decision and Resolution. The core issue is the propriety of the denial of the writ of preliminary injunction, raising questions on the applicability of P.D. 385, denial of due process, and the extent of the loan covered by the REM.
Issue(s)
Whether the trial court's refusal to grant an injunction against the threatened extra-judicial foreclosure sale by DBP constitutes grave abuse of judicial discretion amounting to lack or excess of jurisdiction, and whether P.D. 385 is applicable in the instant case. Whether Marquez was denied due process. Whether the extent of the loan covered by the REM constituted on petitioners' realty under TCT No. T-24506 was properly determined, including the argument that the property was a family home. Whether Marquez failed to demonstrate a clear and unmistakable right that required protection, considering the strict construction of applications for injunctive relief.
Ruling
The petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED.
Ratio Decidendi
On the propriety of the denial of the injunction and the applicability of P.D. 385: The Court held that the requisites for the issuance of a writ of preliminary injunction were not met. The applicant must show a clear and unmistakable right, a material and substantial invasion of that right, an urgent need to prevent irreparable injury, and the absence of other adequate remedies. In this case, Marquez failed to establish these requisites. Furthermore, Presidential Decree No. 385, which mandates government financial institutions to foreclose collaterals for defaulted loans when arrearages reach at least 20% of the total obligation, was found to be applicable. The decree explicitly prohibits the issuance of restraining orders or injunctions against such actions, except under specific conditions not met by the petitioner. The Court noted that LEAD had significant arrearages, and there was no showing that the required 20% of the arrearages had been paid. The Court distinguished the case from Filipinas Marble Corporation v. Court of Appeals, where an injunction was granted because the main issue of misappropriation of loan proceeds was still under litigation, which was not the situation in the present case. The Court emphasized that P.D. 385 was not intended to shield officials who mismanage corporations and then use the decree to avoid consequences. On the denial of due process: The Court found no denial of due process. Marquez was present at the hearing on October 14, 1992, and was able to argue his case. The trial court's decision to dispense with Marquez's testimony was justified because it involved the merits of the main case, which should not be delved into during a hearing for an ancillary remedy like a preliminary injunction. Due process requires an opportunity to be heard, which Marquez had. The evidence presented during the hearing for the injunctive writ was intended only to give the court an idea of the justification for the writ, not to resolve the main case. On the mortgage of the family home and the extent of the loan: The Court dismissed the argument that the property was a family home and not corporate property. It was established that the REM was a second mortgage and that the Marquez spouses were solidarily liable with LEAD for the loans. DBP was therefore within its rights to pursue the foreclosure of the property covered by TCT No. T-24506 to satisfy the outstanding loan obligation. On the failure to show a right in esse and the strict construction of applications for injunctive relief: The Court affirmed the findings of the lower courts that Marquez failed to demonstrate a clear and unmistakable right that required protection. The loan and REM documents, which were notarized and showed Marquez's solidary liability and voluntary mortgage of his property, appeared to be valid. The Court noted that Marquez delayed in asserting his rights until the foreclosure sale was imminent, despite the loan being granted in 1977 and the additional loan in 1981. The acknowledgment of the loan and REM contracts before a notary public indicated that the dealings were at arm's length, and no bad faith or malice on DBP's part was evident. The Court reiterated that applications for injunctive relief are construed strictly against the pleader. Marquez's allegations of a partnership agreement were contradicted by the loan and mortgage documents he signed. The courts below relied on these documents over Marquez's bare averments. The trial court and the CA were not convinced that Marquez presented a strong basis for the grant of the injunctive writ based on the pleadings and evidence presented during the hearing for the injunctive writ.
Main Doctrine
The mandatory foreclosure provisions of P.D. 385, which proscribes the issuance of injunctive writs against government financial institutions absent specific conditions, applies when a borrower defaults on loan obligations, and the borrower fails to demonstrate a clear and unmistakable right to be protected or has not paid the required percentage of arrearages.