GR 153571; (September, 2003) (Digest)
G.R. No. 153571 , September 18, 2003
Benguet Management Corporation, Petitioner, vs. Court of Appeals, Keppel Bank Philippines, Inc., as Trustee for Metropolitan Bank and Trust Company, United Coconut Planters Bank, Rizal Commercial Banking Corporation, Far East Bank and Trust Company and Bank of the Philippine Islands under the Mortgage Trust Indenture, and the Register of Deeds of Calamba, Respondents.
FACTS
Petitioner Benguet Management Corporation (BMC) obtained a syndicated loan from respondent banks, secured by a real estate mortgage. Due to BMC’s failure to pay, Keppel Bank Philippines, Inc. (KBPI), as trustee, applied for the extrajudicial foreclosure of the mortgaged properties in Laguna and Zambales. BMC opposed the foreclosure in Laguna, arguing insufficiency in the application, unauthorized penalties, non-compliance with a grace period, and proposing a dacion en pago. The trial court granted the application for foreclosure.
BMC filed a petition for certiorari with the Court of Appeals, assailing the foreclosure’s validity and seeking injunctive relief. The appellate court denied BMC’s application for a temporary restraining order to enjoin the consolidation of title after the auction sale proceeded with KBPI as the highest bidder. BMC’s motion for reconsideration was also denied.
ISSUE
Whether the Court of Appeals committed grave abuse of discretion in denying BMC’s application for a temporary restraining order to prevent the consolidation of title over the foreclosed properties.
RULING
Yes. The Supreme Court found that the Court of Appeals committed grave abuse of discretion. The appellate court’s denial was based on the premise that the acts sought to be enjoined—the consolidation of title—were positive rights of a buyer in a foreclosure sale, which could only be stopped if BMC proved the sale’s nullity. This reasoning was erroneous.
The Supreme Court clarified that a temporary restraining order or preliminary injunction is a preservative remedy to maintain the status quo pending litigation on the merits. Its purpose is to prevent threatened or continuous irremediable injury to a party before a final adjudication is reached. BMC’s amended supplemental petition raised serious allegations regarding the foreclosure sale’s validity, including gross inadequacy of the bid price and violations of statutory posting and notice requirements under Act No. 3135 . These substantive issues required a hearing on the merits.
By refusing to issue an injunction solely because the sale had been conducted and KBPI had rights as a buyer, the Court of Appeals preemptively resolved the main case without a full hearing. This amounted to a denial of BMC’s opportunity to prove its claims, which, if proven, could indeed nullify the sale. The duty to prevent the consolidation of title is not merely ministerial when the underlying sale is seriously challenged. Therefore, the denial of injunctive relief constituted grave abuse of discretion, warranting the Supreme Court’s reversal to preserve the rights of the parties until a final determination on the merits. The case was remanded to the Court of Appeals for proper proceedings.