G.R. No. 220686, March 09, 2020
Icon Development Corporation, Petitioner, vs. National Life Insurance Company of the Philippines, Respondent.

FACTS

Petitioner Icon Development Corporation obtained loans from respondent National Life Insurance Company of the Philippines, secured by mortgages on properties in Makati City and Tayabas, Quezon. Petitioner defaulted on its payments in 2008. On November 25, 2011, respondent filed a Petition for Extrajudicial Foreclosure. On December 27, 2011, petitioner filed a Complaint before the Regional Trial Court (RTC) for Discharge of Obligation/or Determination of Actual Indebtedness, and Declaration of Nullity with Temporary Restraining Order (TRO)/Writ of Preliminary Injunction (WPI) with Damages. Petitioner alleged, among others, that respondent was collecting exorbitant interest; that it had made overpayments; that the officers who secured the loans lacked authority; and that respondent was under conservatorship, so the directors initiating the foreclosure had no authority. The RTC granted the TRO and later the WPI, and subsequently issued an Order suspending proceedings and referring the case to the Insurance Commission based on the doctrine of primary jurisdiction. Respondent filed a Petition for Certiorari before the Court of Appeals (CA). The CA reversed the RTC’s Orders, ruling that the RTC misapplied the doctrine of primary jurisdiction, that the board of directors of a company under conservatorship retains the authority to initiate foreclosure, and that the RTC failed to apply the guidelines in A.M. No. 99-10-05-0 prohibiting injunctive reliefs in extrajudicial foreclosure without compliance with specific conditions. Petitioner’s motion for reconsideration was denied.

ISSUE

1. Whether the board of directors of a company under conservatorship can validly initiate extrajudicial foreclosure proceedings.
2. Whether the Court of Appeals erred in applying A.M. No. 99-10-05-0.
3. Whether there was unjust enrichment on the part of the respondent.
4. Whether the petitioner was in default despite lack of demand by the conservator.

RULING

The Supreme Court denied the petition. On the first and fourth issues, the Court ruled that the appointment of a conservator does not automatically divest the board of directors and corporate officers of their powers. The board continues to exercise its functions, including the collection of debts through foreclosure, unless the conservator expressly revokes or overrules such actions. The conservator’s role is to preserve the company’s assets and restore its viability, which includes overseeing management but not necessarily replacing it entirely. The conservator in this case subsequently manifested his authorization for the foreclosure, confirming the board’s authority. On the second issue, the Court upheld the application of A.M. No. 99-10-05-0, which outlines strict conditions for the issuance of injunctive relief against foreclosure. The petitioner failed to comply with these conditions, such as proving payment of the claimed indebtedness or consigning the amount due. The RTC’s preliminary finding of overpayment was insufficient to justify the injunction without adhering to the procedural requirements. On the third issue, the claim of unjust enrichment and overpayment involves factual determinations that require full trial. The petitioner’s allegations were not substantiated with conclusive evidence at the preliminary injunction stage. The CA correctly found that the RTC committed grave abuse of discretion in issuing the TRO and WPI without following the established guidelines and in referring the case to the Insurance Commission, as the issues involved were legal questions within the competence of the RTC.