Philippine Supreme Court Jurisprudence > Year 2000 > February 2000 Decisions > G.R. No. 107943 February 3, 2000 - REPUBLIC OF THE PHIL. v. COURT OF APPEALS, ET AL.:

ASSET PRIVATIZATION TRUST (APT), an entity created pursuant to Proclamation No. 50, 1 is mandated to "take title to and possession of, conserve, provisionally manage and dispose of assets" 2 that have been identified for privatization or disposition, while private respondent Domestic Satellite Philippines, Inc. (DOMSAT), is a domestic corporation engaged in satellite-based telecommunications and satellite broadcast network. In 1977 DOMSAT was granted foreign loans totaling US$16,537,724.00 by Marubeni Corporation of Tokyo to finance the establishment and operation of a nationwide satellite communications network. To secure the foreign loans DOMSAT executed two (2) credit agreements with the Philippine National Bank (PNB) for the opening of letters of credit. The first credit agreement was made on 21 April 1977 whereby PNB granted DOMSAT letters of credit for US$16.5 Million subject to the condition that the payment of the obligations under the letters of credit be secured by the following: (a) First mortgage on electronic equipment and all equipment and chattels to be purchased from Marubeni Corporation; (b) Assets to be acquired by DOMSAT consisting of land site, office equipment, vehicles, etc.; and, (c) Mortgage/assignment of franchise to operate a domestic satellite facility. 3 Also on the same date, 21 April 1977, simultaneously with the credit agreement for US$16.5 Million worth of letters of credit, DOMSAT executed a Deed of Promise to Mortgage the electronic equipment and shelter to be purchased from Marubeni Corporation as well as the assets to be acquired with the proceeds of the letters of credit. 4

On 22 September 1983 DOMSAT entered into a second credit agreement with PNB in the amount of P2,802,888.00 for the purpose of paying its tax obligations. In addition, PNB released funds for the purchase of lands in various parts of the country and the construction of buildings and improvements to house the equipment for the satellite communications facility. 5

Meanwhile, on 25 January 1980 DOMSAT constituted a real estate mortgage in favor of PNB in the total amount of P123,387,958.76 covering fourteen (14) separate parcels of realty used as sites for earth stations, "together with all the buildings and improvements now existing or which may thereafter be erected or constructed thereon." 6

On the same date DOMSAT also executed a chattel mortgage in favor of PNB. Annexed thereto was a detailed list of (a) office equipment in DOMSAT’s Makati office; (b) eleven (11) Toyota Land Cruisers; and, (c) all the electronic, electrical, mechanical and other satellite communications equipment, machinery, systems, sub-systems, components, etc., that DOMSAT had imported from Japan in seventeen (17) separate shipments over a three (3)-year period (1977-1979) for its nationwide network consisting of one (1) Master Earth Station located in Antipolo, Rizal, and ten (10) remote earth stations spread out over the Philippine archipelago. 7

On 8 December 1986 then President Corazon C. Aquino issued Proclamation No. 50 establishing the APT and mandating the transfer to APT, as trustee of the National Government, of certain non-performing assets held by government financial institutions like the PNB. Among the non-performing assets transferred to APT were the accounts receivable of DOMSAT which at the time of transfer allegedly reached more than One (1) Billion Pesos including interests and penalties. Since 1980 DOMSAT defaulted and failed to meet the progress payments due PNB and despite repeated demands no single payment was made in favor of the bank.chanrobles virtual lawlibrary

Since negotiations for the settlement of DOMSAT’s obligations with APT proved futile, the latter moved to foreclose on DOMSAT’s mortgaged properties. On 5 January 1990 APT filed with the Ex Officio Sheriff of Antipolo, Rizal, a Petition for the Extra-Judicial Foreclosure Sale of DOMSAT’s mortgaged properties under Acts 1508 and 3135, as amended. Similar petitions were filed in Cebu on 23 May 1990 and in Tacloban on 14 June 1990.chanrobles.com : law library

On 22 June 1990 DOMSAT filed a petition before the Sandiganbayan alleging, among others, that its petition was "being filed pursuant to the ruling of the Supreme Court in Bataan Shipyard v. PCGG, 8 and PCGG v. Pena, 9 holding that ‘all incidents arising from, incidental to, or related to the ill-gotten wealth cases shall be heard and tried in the Sandiganbayan,’ and praying that ‘after due hearing, judgment be rendered ordering the PCGG to withdraw its objection to the settlement agreed upon between DOMSAT and APT, the PCGG having no legal right to interpose an objection thereto . . ." ‘ As an ancillary measure, DOMSAT prayed that pending hearing on the petition, a temporary restraining order be issued enjoining APT to defer its intended foreclosure of the assets of DOMSAT. 10

In December 1990, after several postponements of the scheduled foreclosure at the request of DOMSAT, APT moved to foreclose on DOMSAT’s Antipolo station. Antipolo Sheriff-in-Charge Nicanor D. Blanco issued a Notice of Sheriff’s Sale under Act 1508 and PD 385 and setting for public auction on 28 January 1991 the satellite communications equipment and facilities comprising DOMSAT’s Antipolo earth station, which according to the notice, had been mortgaged under Act 1508 by DOMSAT. A list of the "chattels" to be sold, consisting of parabolic antennae, high power amplifiers, radio frequency equipment and other satellite communications equipment and facilities was attached to the said notice. In the ensuing public auction held on 28 January 1991, APT was the highest bidder at P42,725,000.00. The corresponding Certificate of Sale was issued by the Sheriff on the same day.chanroblesvirtual|awlibrary

On 30 January 1991 DOMSAT filed a complaint with the Regional Trial Court of Antipolo, which it amended on 11 February 1991, for Annulment of Sheriff’s Sale and Chattel Mortgage; Injunction with Prayer for Preliminary Injunction and Temporary Restraining Order and Damages, against APT and PNB, as well as Pio E. Martinez as Ex-Officio Sheriff for RTC, Antipolo, and Nicanor D. Blanco, Sheriff-in-Charge, and docketed as Civil Case No. 91-1951. 11 The damages sought from APT amounted to P1,100,000.00.chanrobles.com : chanrobles.com.ph

On 4 February 1991 the trial court issued a temporary restraining order enjoining APT and the Antipolo Sheriff "to refrain or desist from executing the certificate of sale, or some other instrument formally conveying to the defendant APT, the plaintiff’s properties which were sold at public auction sale on 28 January 1991." On 18 February 1991 APT filed a Motion to Dismiss with Opposition to the Application for Injunction on the following grounds: (a) lack of jurisdiction of the lower court because of DOMSAT’s failure to comply with Sec. 2 of PD 385 and to pay the correct docket fees; (b) action was within the exclusive jurisdiction of the Sandiganbayan; (c) pendency of Civil Case No. 0106 before the Sandiganbayan which involved the same cause; (d) forum shopping on the part of DOMSAT; and, (e) restraining order or injunction prayed for was barred by Sec. 31 of Proclamation No. 50-A. 12

After several hearings, the trial court issued the controversial Order dated 25 February 1991 holding in abeyance the resolution of APT’s motion to dismiss until DOMSAT would have rested in its main case and granting the writ of preliminary injunction prayed for upon the filing by DOMSAT of a bond of P2,000,000 00. On the issue of nonpayment of the prescribed docket fees, the trial court pursuant to Sun Insurance Office Ltd. v. Asuncion allowed the payment of additional docket fees considering the willingness of DOMSAT to do so. 13

On 2 April 1991 the trial court issued the impugned Writ of Preliminary Injunction "ordering the defendants, their agents . . . to refrain or desist from executing the certificate of sale . . . or some other instrument formally conveying to the defendant APT the plaintiff’s properties which were sold at public auction on January 28, 1991." 14

Subsequently, acting on APT’s Motion for Reconsideration of the 25 February 1991 Order and of DOMSAT’s Motion to Clarify the Terms of the Injunctive Writ, the trial court issued its Order of 21 June 1991 which (a) denied APT’s motion for reconsideration of the 25 February 1991 Order "for lack of merit;" and (b) amended the writ of preliminary injunction "further directing the defendants Sheriff and . . . APT to cease and desist from further pursuing any other action or actions relative to such foreclosure." 15

On 22 January 1992 APT elevated its plaint to the Court of Appeals through a Petition for Certiorari to annul the questioned Orders dated 25 February 1991, 2 April 1991 and 21 June 1991, as well as the Writ of Preliminary Injunction issued in Civil Case No. 91-1951-A. APT contended inter alia that (a) the Antipolo Regional Trial Court acted without or in excess of its jurisdiction and gravely abused its discretion when it issued the questioned Orders and Writ considering that Sec. 31 of Proclamation No. 50-A strictly prohibited the issuance of restraining orders against APT; (b) the Sandiganbayan has exclusive jurisdiction to hear and decide the complaint filed in Civil Case No. 91-1951-A, the properties of DOMSAT being sequestered assets; thus the pendency of Civil Case No. 0106 before the Sandiganbayan bars the filing of Civil Case No. 91-1951-A with the Antipolo RTC on the ground of litis pendencia; and, (c) DOMSAT failed to pay the proper docket fees pursuant to SC Circular No. 7 and the amendment to Rule 141 on legal fees. 16

In its assailed Decision of 13 July 1992 the Court of Appeals dismissed the petition. 17 Ascribing grave abuse of discretion to the appellate court, APT is before us raising the same principal issues and praying that a temporary restraining order be issued commanding respondents to refrain from enforcing the challenged Decision and from allowing the continuation of proceedings in Civil Case No. 91-9151-A before the Antipolo trial court.chanrobles virtuallawlibrary

We deny the petition.chanroblesvirtuallawlibrary

Petitioner APT questions the holding by the appellate court that there is no privity between Civil Case No. 0106 filed in the Sandiganbayan and Civil Case No. 19-1951-A pending with the trial court. It insists that jurisdiction over the complaint for annulment of sheriff’s sale and the chattel mortgage properly pertains to the Sandiganbayan since what are involved are sequestered assets of DOMSAT.

As correctly pointed out by the appellate court the subject matter, issues and relief prayed for in the two (2) cases are vastly different. On one hand, the Sandiganbayan case involves the sequestered shares constituting 20% of the outstanding stock of DOMSAT which belong to or are controlled by Roberto S. Benedicto, Jose L Africa, Victor A. Africa and Alfredo A. Africa. It is important to note that what was sequestered was not DOMSAT itself or the business of the company, but rather the shares of the aforementioned persons in the complaint. Considering that the PCGG had interposed its objections to the negotiated settlement or rehabilitation plan entered into between DOMSAT and APT for the settlement of the former’s obligations, DOMSAT sought relief in the Sandiganbayan praying for an order which would require the PCGG to withdraw its objections to the negotiated, settlement. On the other hand, in Civil Case No. 91-1951-A DOMSAT sought to invalidate the public auction sale held on 28 January 1991 covering its mortgaged properties in Antipolo and to annul the chattel mortgage dated 25 January 1980 at least insofar as it allegedly affected what were actually immovable properties. Consequently, the defense of litis pendencia invoked by APT is unavailing.chanroblesvirtual|awlibrary

There is likewise no merit in APT’s submission that since the procedure laid down in Sec. 2 of PD 385 was not complied with, the Antipolo trial court had no jurisdiction to issue a restraining order or a temporary or permanent injunction.

Sections; 1 and 2 of PD 385 respectively provide:chanrob1es virtual 1aw library

SECTION 1. It shall be mandatory for government financial institutions, after the lapse of sixty (60) days from the issuance of this Decree, to foreclose the collaterals and/or securities for any loan, credit accommodation, and/or guarantees granted by them whenever the arrearages on such account, including accrued interest and other charges, amount to at least twenty per cent (20%) of the total outstanding obligations, including interest and other charges, as appearing in the book of accounts and/or related records of the financial institution concerned. This shall be without prejudice to the exercise by the government financial institution of such rights and/or remedies available to them under their respective contracts with their debtors, including the right to foreclose on loans, credits, accommodations, and/or guarantees on which the arrearages are less than twenty percent (20%).

SECTION 2. No restraining order, temporary or permanent injunction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties, except after due hearing in which it is established by the borrower and admitted by the government financial institution concerned that twenty (20%) of the outstanding arrearages has been paid after the filing of foreclosure proceedings . . .

PD 385 was issued primarily to ensure that government financial institutions are not denied substantial cash inflows necessary to finance development projects in the country by large borrowers who, when they become delinquent, resort to court actions to prevent or delay the government’s collection of their debts and loans. But the seemingly peremptory application of PD 385 must always be tempered with the basic principles of fairness and decency under the due process clause of the Bill of Rights. In other words, PD 385, for all its good intentions, does not provide the government with blanket authority to unqualifiedly impose the mandatory provisions of the Decree. 18 In fine, APT cannot insist that PD 385 be applied and the foreclosure of DOMSAT’s chattel mortgage be not stopped by injunction when precisely the very propriety of said foreclosure is in serious doubt.chanroblesvirtuallawlibrary

The Court is deeply concerned over the finding of the appellate court that when APT foreclosed as chattels under Act 1508 what were then obviously immovable assets and did so under a chattel mortgage of which such assets were not even the subject matter, it ran roughshod over the constitutional rights of DOMSAT and rightfully removed itself from the protective mantle of PD 385. For pursuant to the terms and conditions of the chattel mortgage executed by DOMSAT in favor of PNB, the subject matter covered only the" (v)arious equipment (electronic, office, etc.) and motor vehicles located at Ayala Avenue, Makati, Metro Manila," notwithstanding the listing of equipment attached thereto. Yet the record shows that the assets foreclosed on 28 January 1991 were those found at the Antipolo Earth Station, including pieces of movable equipment which have been supposedly immobilized by attachment, in obvious contravention of the agreement thus rendering the foreclosure null and void ab initio and together with it the certificate of sale issued by the Sheriff.chanrobles virtua| |aw |ibrary

Finally, APT reiterates its proposition that DOMSAT failed to pay the correct amount of docket fees before the Antipolo trial court, claiming that DOMSAT initially paid only P5,604.00 representing the docket fees based on the original complaint. But as held by the appellate court this matter has been settled with the payment by DOMSAT on 1 April 1991 to the Clerk of Court of an additional. P4,672.39, the sum needed to complete the amount due as docket fees. At any rate, judgment awards which may be proved during trial would still be subject to additional filing fees which shall constitute a lien on the judgment. It is the responsibility of the Clerk of Court of the Antipolo Regional Trial Court to enforce the lien and assess and collect the additional fees. 19

WHEREFORE, the petition is DENIED for lack of merit. The Regional Trial Court of Antipolo is ordered to proceed with the trial on the merits of the main case and to resolve the same with dispatch. No pronouncement as to costs.

SO ORDERED.chanroblesvirtuallawlibrary

Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.

Endnotes:

---

1. Proclaiming and Launching a Program for the Expeditious Disposition and Privatization of Certain Government Corporations and/or the Assets Thereof, and Creating the Committee on Privatization and the Asset Privatization Trust; 82 O.G. No. 51, pp. 5954-5966.

2. Id., Sec. 9, Art. III.

3. CA Rollo, pp. 199-205.

4. Id., pp. 225-226.

5. Id., pp. 211-223.

6. Id., pp. 228-236.

7. Rollo, pp. 310-373.

8. G.R. No. 57885, 27 May 1987.

9. G.R. No. 77663, 12 April 1989.

10. Civil Case No. 0106; CA Rollo, pp. 93-98.

11. Assigned to Br. 71 with Judge Felix S. Caballes presiding. The amended complaint impleaded PNB as defendant and included the chattel mortgage as additional cause of action; Rollo, pp. 108 and 124.

12. Modifying Proclamation No. 50, 83 O.G. No. 1, p. 1. Sec. 31 was amended to read: SECTION 31. No injunction. — No court or administrative agency shall issue any restraining order or injunction against the Trust in connection with the acquisition, sale or disposition of assets transferred to it pursuant to this Proclamation. Nor shall such order or injunction be issued against any purchaser of assets sold by the Trust to prevent such purchaser from taking possession of any asset purchased by him.

13. CA Rollo, pp. 34-37.

14. Id., p. 38.

15. Id., pp. 39-43.

16. Petition in CA-G.R. SP No. 27103; Rollo, pp. 1-33.

17. Penned by Justice Ynares-Santiago, with Justices De Pano, Jr. and Gonzaga-Reyes concurring; id., pp. 372-380.

18. Filipinas Marble Corporation v. Intermediate Appellate Court, G.R. No. 68010, 30 May 1986, 142 SCRA 180, 188.

19. Asta Moskowsky v. Court of Appeals, G.R. No. 122860, 30 April 1999.