G.R. No. 171374 ; April 8, 2008
TEOFILA ILAGAN-MENDOZA and ROSARIO ILAGAN URCIA, petitioners, vs. HON. COURT OF APPEALS, CALATAGAN RURAL BANK, INC., GEMINIANO T. NOCHE, as President of Calatagan Rural Bank, and REMEDIOS DE CLARO and EDMUNDO RODRIGUEZ, as Sheriffs, respondents. Spouses ALBERTO URCIA and ROSARIO ILAGAN URCIA, petitioners, vs. HON. COURT OF APPEALS, CALATAGAN RURAL BANK, INC., GEMINIANO T. NOCHE, as President of Calatagan Rural Bank, and REMEDIOS DE CLARO and EDMUNDO RODRIGUEZ, as Sheriffs, respondents.

FACTS

Petitioners Teofila Ilagan-Mendoza and Rosario Ilagan-Urcia, daughters of the late Estanislao Ilagan, and spouses Alberto and Rosario Urcia, filed separate petitions for injunction and damages (Special Civil Actions Nos. 1701 and 1702) to restrain the extrajudicial foreclosure of mortgaged properties by respondent Calatagan Rural Bank, Inc. (CRBI). They alleged that loans secured by the mortgages, originally obtained by Estanislao and later by Alberto with Teofila as co-maker, had been fully paid through proceeds from sugar produce assigned to the bank. They contended that CRBI refused to provide an accounting and filed the foreclosure applications in retaliation for their administrative complaint with the Central Bank.
The Regional Trial Court (RTC) initially issued a temporary restraining order (TRO), but after its lapse, the sheriff proceeded with the auction sale on September 17, 1986. The mortgaged properties were sold to CRBI as the highest bidder. The RTC eventually dismissed the consolidated petitions for lack of merit, a decision affirmed by the Court of Appeals. Petitioners elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

The core issue is whether the Court of Appeals erred in affirming the RTC’s dismissal of the petitions for injunction, thereby upholding the validity of the extrajudicial foreclosure conducted by CRBI.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ rulings. The legal logic rests on the nature of extrajudicial foreclosure under Act No. 3135 and the failure of petitioners to establish a clear legal right to the injunctive relief sought. An injunction is a preservative remedy, not to determine property rights but to maintain the status quo. For it to issue, the petitioner must show a clear and unmistakable right to be protected.
The Court found petitioners failed to prove such a right. Regarding the estate loans, the evidence, including promissory notes and bank statements, demonstrated outstanding obligations, not overpayment. Petitioners’ claim of full payment relied on unsubstantiated allegations and the supposed existence of sugar quedans, which were not formally offered in evidence. For Alberto Urcia’s loan, the foreclosure was validly initiated upon the maturity and default of one of two distinct loans secured by the same mortgage. The act of foreclosure for the matured obligation did not preclude the bank’s right to collect on the separate, unmatured loan later. Consequently, petitioners could not enjoin a foreclosure proceeding that was legally instituted due to a valid default. The auction sale was thus regular, and the injunctive suits were properly dismissed.