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[ G.R. No. 93538. February 17, 1999]
STARLIGHT INDUSTRIAL CO. INC. vs. CA, et al.
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated FEB 17, 1999.
G.R. No. 93538 (Starlight Industrial Company Incorporated, vs. The Court of Appeals (Former Seventh Division) and Associated Bank.)
At bar is a Petition for Certiorari seeking to nullify the Decision1 [As per the Decision of the Court of Appeals, Former Seventh Division, with J. Serafin E. Camilon as ponente and JJ. Segundino G. Chua and Justo P. Torres., as members.] of the Court of Appeals dated November 23, 1989, and its Order dated May 10, 1990, denying petitioner's motion for reconsideration, in CA GR SP No. 17719.
On December 5, 1988, the petitioner herein filed a complaint for Annulment of Mortgage and Damages with Application for Preliminary Injunction and/or Temporary Restraining Order against the Associated Bank, docketed as Civil Case No. Q-88-1306 before Branch 90 of the Regional Trial Court of Quezon City.
The said Complaint alleged, among others, that;
"xxx 5. In the course of its business, Starlight applied for, and
was granted by defendant bank, loans and other credit accommodations totaling
some P4 million as of end-December 1982.
6. On or about 12 March 1981, Starlight was made to execute in favor of the Bank a Deed of Real Estate Mortgage over a parcel of land situated in Balintawak, Quezon City, with an area of approximately 2,339 square meters, and covered by Transfer Certificate of Title (TCT) No. 101394 of the Registry of Deeds for Quezon City issued in the name of Starlight.xxx
7. From 1983 to 1984, Starlight made regular payments to the Bank. During that period, Starlight was also able to obtain from the Bank a restructuring of payment of interest on Starlight's outstanding loan obligations.
8. On several occasions, to check Starlight's records against the Bank's Starlight requested the bank for updated statements of account, but the Bank did not pay attention to such requests.
9. Starlight was surprised to receive sometime in May 1988 a demand
from the Bank to settle its loan obligations allegedly with a principal balance
of about P4.3 million, exclusive of interest and other charges.
Thereupon, Starlight requested the Bank for a reconciliation of its records
with Starlight's since Starlight's records showed a much lower amount of
indebtedness to the Bank. The Bank, however, did not respondent.
10. In November 1988, Starlight came to know that the Bank filed a
petition to extrajudicially foreclose the real estate mortgage covering
Starlight's Balintawak property to satisfy Starlight's alleged mortgage
indebtedness amounting to P15,622,716.25 as of 31 May 1988. The
Sheriff's sale was sent on 6 December 1988 at 10:00 o'clock in the morning at
the main entrance of the Quezon City Hall.
11. The scheduled extrajudicial foreclosure and sale should be restrained and enjoined on factual, legal and equitable considerations.
12. By Starlight's own calculation, its outstanding obligation to the
Bank could not reach P15,662,716.25 considering Starlight's record of
payments and the restructuring of interest on the principal amount.
13. The real estate Mortgage xxx on which the Bank is scheduled to foreclose is null and void in that:
a) The Real Estate Mortgage contains elements of a pactum commissorium. Paragraph 11 2 ["11. Effective upon the breach of any condition of this mortgage, and in addition to the remedies herein stipulated, the Mortgage, is hereby appointed attorney-in-fact if the Mortgagor with full powers and authority by the use of force, if necessary to take actual possession of the mortgage properties, without the necessity of judicial order or any other permission or power; to remove, sell or dispose of the mortgaged properties or any building or improvements in, or attached to it belonging to the Mortgagor, or take any other legal action that may be deemed necessary, to lease any of the mortgaged properties and collect rents therefor, to execute bills of sale, leases or agreements that maybe deemed convenient; to make repairs or improvements on the mortgaged properties and pay the same and perform any other act which the Mortgagee may deem convenient for the proper administration of the mortgaged properties. xxx"] thereof authorizes the mortgagees to take possession of the mortgaged property, by the use of force, if necessary, and sell or dispose the same immediately upon an event of default by the mortgagor, thereby granting to the bank the right to appropriate the mortgaged property.
b) The Real Estate Mortgage is contrary to law and public policy. Paragraph 5 thereof deprives the mortgagor of its statutory right to redeem the property within the period provided by law.
14. Moreover, there is no proof that respondents have complied with the requirements of notice under Act No. 3135, as amended, more particularly, the posting of notices of the Sheriff's sale for no less than 20 days in at least three (3) public places of the city where the property is situated, nor proof that Times Record where the notice of sale was allegedly published is a newspaper of general circulation in Quezon City.
15. Assuming arguendo that the mortgage is valid, the property covered
by the real estate mortgage has a fair market value of about P20 million
and its sale on foreclosure is unjust and unconscionable."
3
[Complaint, pp. 2-5, Rollo, pp. 52-55.]
On December 23, 1988, the trial court a quo issued an Order granting the prayer for preliminary injunction, ruling, thus:
"In sum, after a study of the allegations in the complaint, the affidavit in support of the prayer for a writ of preliminary injunction, the opposition thereto and the reply, as well as the brief arguments of both counsels, the court is of the considered opinion that the interest of justice will be best served if the status quo is maintained.
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ACCORDINGLY, the application for preliminary injunction of plaintiff is hereby granted.
Let a writ of preliminary injunction issue upon filing by plaintiff of
a bond of seven million (P7,000,000.00) xxx"
4
[Annex E, Rollo, p. 67.]
On January 19, 1989, the same court denied Associated Bank's motion for reconsideration, dated December 29, 1988, stating that "the interest of justice will be served if the status quo is maintained."
On May 31, 1989, Associated Bank went to the Court of Appeals on a petition for certiorari and injunction, praying to set aside, as null and void, the Orders, dated December 23, 1988, January 19, 1989 and April 25, 1989, respectively.
On November 23, 1989, the Court of Appeals came out with its decision under attack, setting aside and vacating the writ of preliminary injunction issued below. On May 10, 1990, Starlight moved to reconsider the same but to no avail. Respondent court denied subject motion for reconsideration.
With the denial of its motion for reconsideration, Starlight found its way to this Court via the present petition; contending, that:
"RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN DISSOLVING THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE LOWER COURT IN CIVIL CASE NO. Q-88-1906 IN THAT --
1. RESPONDENT COURT, IN EXCESS OF JURISDICTION, DECIDED PREMATURELY ON THE MERITS OF THE CASE AND NOT ON THE ISSUES OF LAW AS DEFINED BY THE PARTIES.
2. RESPONDENT COURT ACTED CONTRARY TO ESTABLISHED DICTUM THAT POSSESSION OF REAL PROPERTY WILL NOT BE TRANSFERRED PENDENTE LITE TO SOMEONE WHOSE TITLE OR RIGHT OF POSSESSION IS NOT CLEARLY ESTABLISHED.
3. RESPONDENT COURT, WITHOUT REASONABLE CAUSE TYHEREFORE, INTERFERRED WITH THE DISCRETION OF THE LOWER COURT IN ISSUING INJUNCTION." 5 [Petition, pp. 14-15, Rollo, pp. 15-16.]
On December 20, 1993, the trial court decided Civil Case No. Q-88-1906 on the merits; disposing, as follows:
"ACCORDINGLY, the complaint is hereby dismissed.
The order of this Court dated January 25, 1990 enjoining Atty, Manuel F. Lorenzo, Office of the Ex-officio Sheriff, and Deputy Sheriff Silverio P. Bernas from proceeding with the extrajudicial foreclosure of the subject property is hereby lifted. Said officers are hereby ordered to issue anew a notice of Sheriff's sale, the same to be republished and posted anew in accordance with the provisions of Act No. 3135.
Plaintiff is hereby ordered to pay defendant Associated Bank the sum
of P100,000.00 as attorney's fees and costs of this suit."
6
[Associated Bank's Manifestation Annex A, Rollo, p.
737.]
The said court ratiocinated and concluded, thus:
"The present suit is clearly one for injunction grounded upon an alleged invalidity of a contract the enforcement of which is threatened by defendant Bank, and not one for annulment of the contract as the complaint is denominated by plaintiff, it being evident that the basis of plaintiff's cause of action is not among those which render a contract voidable (Article 1390, Civil Code) and, therefore, proper subject of annulment. xxx
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In its bid to stop defendant Bank from foreclosing upon the subject contract of mortgage, plaintiff raises the nullity of the said contract. xxx
Defendant Bank claims otherwise, and adds that plaintiff is barred by estoppel from assailing the validity of the subject real estate mortgage as well as the validity and justification of the foreclosure thereof and that plaintiff is guilty of laches for assailing the validity and enforceability of the mortgage contract only after the lapse of more than fifteen (15) years from its execution. xxx
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In simpler terms, what is outlawed is for the debtor to authorize, at the time of the execution of the mortgage, the creditor to appropriate the property mortgaged as the latter's own in payment of the debt, the latter automatically becoming the owner just because the debtor does not pay his debt. xxx
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Guided by the cited declarations, this Court cannot hold as a pactum commissorium stipulation the provisions of par. 11 of the subject real estate mortgage. xxx
xxx But, possessions is not to be equated with appropriation in ownership. Besides paragraph 11 is expressly qualified to be in addition to the other remedies provided for in the mortgage contract. It must therefore be read in relation to paragraph 5 and be considered subject to the restrictions and limitations of the latter. xxx
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Similarly, there is no question on the validity of the waiver of the right to redeem the mortgaged property after the sale on foreclosure thereof as set forth in paragraph 5 of the subject real estate mortgage. xxx
xxx. While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added special provision aforequoted, which renders the mortgagor's right to redeem defeasible at the election of the mortgagees. There is nothing illegal or immoral in this.
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According to plaintiff, by its own calculation, its outstanding
obligation to defendant Bank could not reach P15,622,716.25 considering
its records of payments and restructuring of interest on the principal amount.
xxx
xxx. Certainly, the bare assertion of plaintiff that is has been granted a restructuring of its obligation by defendant Bank, or that such restructuring had been agreed upon by the parties, cannot be taken on its face value, the same being self-serving and highly improbable considering that the same had not been put into writing or is not embodied in any document which is expected to have been done in view of the amount involved in the transaction between plaintiff and defendant Bank, and both of them being entities engaged in business. xxx
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The afore-quoted stipulation or clause would, therefore, justify the application made by defendant Bank of any of the payments made by plaintiff. Hence, Senior Assistant manager of defendant Bank applied plaintiff's payments xxx, which, notably, is more favorable to the plaintiff for had all the payments previous to January 1984 been applied to the payment of the amortizations on Promissory Note No. TL-9170-82, the balance outstanding on Promissory Note No. TL-9167-82 would not have stood at the amount shown in said statement of application of payments and plaintiff would have been more seriously in arrears thereon. And, in said case even if the payments made previous to January 1984 had been so applied and, therefore, diminished plaintiff's account under Promissory Note No. TL-9170-82, the accumulation of substantial interests and penalty at the stipulated rate on Promissory Note No. TL-9167-82 would have easily offset the decreased balance of plaintiff's obligation under Promissory Note No. TL-9170-82.
Plaintiff claims that "there is no proof that (defendants) have complied with the requirements of notice under Act No. 3135, as amended, more particularly, the posting of notices of the sheriff's sale for not less than twenty (20) days in at least three (3) public places of the city where the property is situated, nor proof that the Times Record where the notice of sale was allegedly published in a newspaper of general circulation in Quezon City.
This, however, is totally belied by the evidence, both testimonial and documentary, adduced by defendant Bank on the matter.
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At any rate, defendant Bank has manifested its intention to seek the issuance of a new notice of sheriff's sale and to have the same republished and reposted anew for purpose of finally foreclosing the subject mortgages xxx (Emphasis Ours)" 7 [Rollo, pp. 721-735.]
On March 30, 1994, the same court of origin denied Starlight's motion for reconsideration, dated February 3, 1994; holding:
"xxx��� xxx����� xxx
"The Court finds merit in the position taken by the counsels for defendant Bank regarding the requirements of the Rules of Court on notices of hearings of motions and holds that the notice of hearing contained in the motion under consideration is fatally defective.
Any motion that does not comply with Secs. 4, 5, and 6, Rule 15, Rules of Court, is a mere scarp of paper and is not entitled to judicial cognizance. Where the motion is directed to the Clerk of Court, not to parties and merely states that the same is submitted "for resolution of the Court upon receipt thereof," said motion is fatally defective. xxx" 8 [Associated Bank's manifestation, Annex 2, Rollo, pp. 738-739.]
On April 28, 1994, Starlight went on a Petition for Certiorari with prayer for Temporary Restraining Order/Writ of Preliminary Injunction to the Court of Appeals. Docketed as CA GR No. 33958, the Petition sought to nullify the trial court's Decision of December 20, 1993 and Order of March 30, 1994.
Starlight theorized, that:
A
"THE RESPONDENT COURT ACTED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN ISSUING THE DISPUTED ORDER IN THAT:
i THE DEFECT IN THE NOTICE OF THE HEARING CONTAINED IN THE MOTION FOR RECONSIDERATION WAS CURED WHEN THE RESPONDENT BANK WAS FURNISHED A COPY THEREOF AND FILED ITS COMMENT/ OPPOSITION THERETO
ii PETITIONER'S FAILURE TO SET THE MOTION FOR RECONSIDERATION FOR HEARING WAS NOT FATAL TO ITS CAUSE OF ACTION.
B
THE RESPONDENT COURT ERRED IN HOLDING THAT THE PROVISIONS OF PARAGRAPH 11 OF THE SUBJECT REAL ESTATE MORTGAGE DO NOT CONSTITUTE A PACTUM COMMISSORIUM STIPULATION.
C
THE RESPONDENT COURT ERRED IN HOLDING THAT THE WAIVER OF PETITIONER'S RIGHT OF REDEMPTION IS VALID.
D
THE RESPONDENT COURT ERRED IN HOLDING THAT THE RESTRUCTURING OF INTEREST WAS NOT SUFFICIENTLY ESTALISHED.
E
THE RESPONDENT COURT ERRED IN HOLDING THAT INTEREST SHALL ACCRUE UPON THE EXECUTION OFHTE REAL ESTATE MORTGAGE.
F
THE
RESPONDENT COURT ERRED IN AWARDING ATTORNEY'S FEES IN THE AMOUNT OF P100,000.00
TO THE RESPONDENT BANK"
9
[Starlight's Counter-
Manifestation, Annex A, Rollo, pp. 756-757.]
On June 28, 1994, while the present petition was pending before this Court, Associated Bank contended that the issue posited in the Petition has become moot and academic because:
"xxx (ii)There is no longer any writ of preliminary injunction issued by the Trial Court to speak if which may be restored to full force and effect; and
(iii) There can no longer be a trial on the merits in the Regional Trial Court, as the same has been terminated and a final decision therein has been rendered." 10 [Rollo, p. 789.]
Respondent bank is right. The petition has truly become moot and academic.
In the case of Golangco v. Court of Appeals, 283 SCRA 493 [1997], citing Bactalan v. Court of Appeals, 175 SCRA 764 [1989]; Calo, et al. v. Roldan, et al., 76 Phil 445 [1946]; Commissioner of Customs v. Cloribel, et al., 19 SCRA 234[1967] and Bengzon v. Court of Appeals, 161 SCRA 745 [1988] preliminary injunction was defined as:
"xxx an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or a person to refrain from a particular act or acts. xxx
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'A writ of preliminary injunction, as an ancillary or preventive remedy, may only be resorted to by a litigant to protect or preserve his rights or interest and for no other purpose during the pendency of the principal action. xxx'"
Clearly, a writ of preliminary injunction is an ancillary remedy. When the trial court decided on the merits the case for annulment of mortgage, Civil Case No. Q-88-1306, on December 20, 1993, the Petition under consideration had become moot and academic.
"xxx It is axiomatic in this jurisdiction that, where a decision on the merits in a case is rendered and the same has become final and executory, the action on the procedural matters or issues becomes moot and academic." 11 [Flores v. Court of Appeals, 259 SCRA 618.]
So, also, in the case of Gancho-on v. Secretary of Labor and Employment, 271 SCRA 204, it was held that:
"It is a rule of universal application almost, that courts of justice constituted to pass upon substantial rights will not consider questions in which no actual interests are involved; they decline jurisdiction of moot and cases."
Assuming argumenti ex gratia, we find the following disquisition by the Associated Bank, persuasive.
"3.2 xxx The Court of Appeals' Decision dated 23 November 1989 and Order dated 10 May 1990, whose enforecement is sought to be restrained, pertain to vacating and setting aside a writ of preliminary injunction issued by the Regional Trial Court. However, the Regional Trial Court had already set aside said writ of preliminary injunction. Said writ of preliminary injunction is a provisional remedy, and the order directing its issuance is a mere interlocutory order which may be set aside by the Trial Court later on." 12 [Reply to Counter-Manifestation, pp. 3-4, Rollo, pp. 787-788.]
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WHEREFORE, the Petition is DISMISSED on the ground that it has become moot and academic. No pronouncement as to costs.
SO ORDERED."
Very truly yours,
(Sgd.) JULIETA Y. CARREON
Clerk of Court
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