Philippine Development and Industrial Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Philippine Development and Industrial Corporation (PDIC) obtained a credit line from Equitable PCI Bank (EPCIB). PDIC executed a Real Estate Mortgage (REM) over a parcel of land (TCT No. 230861) as security. PDIC availed of the clean credit line, but EPCIB deferred granting additional accommodation from the secured credit line due to market conditions. PDIC's drawn amounts became past due. PDIC and EPCIB entered into a Repayment Agreement in June 2000, wherein PDIC acknowledged its indebtedness and agreed to execute REMs over 29 condominium units and a parcel of land in Bulacan (Bulacan property) as security. EPCIB then released the original REM over TCT No. 230861. PDIC defaulted on its obligations under the Repayment Agreement, leading EPCIB to initiate foreclosure proceedings. Procedural History: PDIC filed a complaint for annulment of mortgage and foreclosure sale with an application for TRO and preliminary injunction before the RTC of Manila. The RTC dismissed PDIC's case, declared the foreclosure sale valid, and lifted the preliminary injunction. The Court of Appeals (CA) affirmed the RTC's decision. PDIC filed two petitions before the Supreme Court: one for certiorari (G.R. No. 231545) assailing the CA's denial of its application for TRO and preliminary injunction, and another for review on certiorari (G.R. No. 242868) assailing the CA's decision affirming the RTC's ruling. The Petition: PDIC sought to annul the REMs and the foreclosure sale, arguing that its consent was vitiated by undue influence and machinations of EPCIB. PDIC also questioned the CA's denial of its application for injunctive relief.
Issue(s)
Whether the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying PDIC's application for the issuance of a TRO to restrain EPCIB from consolidating its title over the subject properties. Whether the CA erred in sustaining the Decision dated June 30, 2015 of the RTC Manila finding that the REMs over PDIC's units in the condominium project and the Bulacan property and the subsequent extrajudicial foreclosure sale involving the said properties, are valid.
Ruling
The Supreme Court denied PDIC's petitions. It affirmed the CA's decision, upholding the validity of the Real Estate Mortgages and the foreclosure sale. The Court found no grave abuse of discretion on the part of the CA in denying PDIC's application for injunctive relief.
Ratio Decidendi
On the denial of the TRO and preliminary injunction: The Court held that the CA did not commit grave abuse of discretion in denying PDIC's application for injunctive relief. To be entitled to such a writ, PDIC must show a clear and unmistakable right that is directly threatened, and that the invasion of this right is material and substantial, necessitating urgent action to prevent serious damage. PDIC's contention that its ownership and possession prior to the foreclosure constituted a clear legal right was deemed unwarranted. The Court reiterated that in a REM, the mortgagee has the right to foreclose upon default, and the purchaser in an extrajudicial foreclosure sale is entitled to possession. The pendency of an annulment case does not stay the issuance of a writ of possession. Furthermore, PDIC's failure to exercise its right to redeem the properties within the redemption period resulted in the loss of its rights thereto, making the consolidation of ownership by EPCIB a natural legal consequence that would not cause irreparable injury to PDIC. On the validity of the REMs and the foreclosure sale: The Court found no merit in PDIC's claim that its consent to the REMs was vitiated by undue influence. The Court emphasized that the terms of the Repayment Agreement and the REMs were clear and unambiguous. PDIC acknowledged its indebtedness, requested the deferral of legal action, and voluntarily executed the REMs, which indicated its negotiation and bargaining power. The Court found that PDIC benefited from the Repayment Agreement by obtaining a more manageable payment schedule and delaying legal action. The execution of the REMs was a condition for the release of the original REM over the mother title, a legitimate reason for EPCIB to require substitute collateral. The Court concluded that PDIC's financial distress was not a result of EPCIB's machinations but rather a consequence of PDIC's own contractual obligations. The Court also noted that PDIC never questioned the validity of the Repayment Agreement itself, from which the REMs arose. The foreclosure was a necessary consequence of PDIC's default, and the consolidation of title in EPCIB's name was a natural legal outcome of PDIC's failure to redeem the properties.
Main Doctrine
The pendency of an action assailing the validity of a mortgage does not stay the issuance of a writ of possession, and the purchaser remains entitled to a writ of possession, without prejudice to the eventual outcome of the pending annulment case. Furthermore, the failure to redeem mortgaged properties within the redemption period results in the loss of all rights in the properties.