G.R. No. 107943 February 3, 2000
Republic of the Philippines thru the Asset Privatization Trust, petitioner, vs. Court of Appeals, Hon. Felix S. Caballes, and Domestic Satellite Philippines, Inc., respondents.

FACTS

Private respondent Domestic Satellite Philippines, Inc. (DOMSAT) obtained foreign loans secured by credit agreements and mortgages with the Philippine National Bank (PNB). The mortgages covered real properties, buildings, and extensive satellite communications equipment. DOMSAT defaulted on its obligations. Pursuant to Proclamation No. 50, these non-performing assets were transferred to petitioner Asset Privatization Trust (APT) as trustee for the government. After failed settlement negotiations, APT initiated extra-judicial foreclosure proceedings on DOMSAT’s mortgaged properties, including the satellite equipment at its Antipolo earth station. APT emerged as the highest bidder at the resulting auction sale.
DOMSAT filed a complaint with the Regional Trial Court (RTC) of Antipolo seeking to annul the sheriff’s sale and the chattel mortgage, with a prayer for injunction and damages. The RTC issued a temporary restraining order. APT moved to dismiss the case, arguing that under Section 31 of Proclamation No. 50-A, no court could issue an injunction against the Trust in connection with the disposition of assets. The RTC denied the motion to dismiss. APT’s petition for certiorari with the Court of Appeals was dismissed, prompting the petition to the Supreme Court.

ISSUE

Whether the Regional Trial Court has jurisdiction to entertain DOMSAT’s complaint for annulment of foreclosure sale and to issue injunctive relief against the Asset Privatization Trust.

RULING

Yes, the RTC has jurisdiction. The Supreme Court affirmed the Court of Appeals’ decision. The prohibition in Section 31 of Proclamation No. 50-A against injunctions is not absolute. It applies to prevent courts from interfering with or restraining the Trust’s exercise of its administrative functions, such as the act of foreclosing and selling assets. However, it does not divest courts of their judicial power to adjudicate questions on the validity of the foreclosure proceedings themselves. DOMSAT’s action is a judicial challenge questioning the very validity and legality of the foreclosure sale based on alleged violations of agreement and procedure. Such an action, which seeks to nullify the sale, falls within the regular jurisdiction of the courts. The trial court, in taking cognizance of the complaint for annulment, is not enjoining an administrative act but is exercising its constitutional duty to resolve the issue of whether the sale was void. Therefore, the RTC acted within its jurisdiction in denying the motion to dismiss and proceeding to hear the case on its merits.