FIRST DIVISION
|
POLYSTYRENE MANUFACTURING
COMPANY, INC., Petitioner, - versus - PRIVATIZATION
AND MANAGEMENT OFFICE, Respondent. |
G.R. No. 171336
Present: PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ,
AZCUNA, and
GARCIA, JJ. Promulgated: |
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D E C I S I O N
GARCIA, J.:
Via this petition for
review under Rule 45 of the Rules of Court, petitioner Polystyrene
Manufacturing Company, Inc. (PMCI, for short) seeks to nullify and set aside
the Decision[1]
dated August 31, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 76211, entitled “Polystyrene
Manufacturing Company, Inc. v. Privatization and Management Office,” as
effectively reiterated in its Resolution[2] of January 20, 2006.
As
borne by the records, the undisputed facts are:
In 1973, PMCI obtained a
loan of US$1,100,000.00 from Mitsubishi International Corporation (MIC) payable
in eight (8) years with interest at the rate of 8% per annum. Signing as guarantor for the loan was the Development
Bank of the
Subsequently,
MIC ceded all its rights and claims arising from the aforesaid loan
accommodation to the Bank of Tokyo. On
[PMCI] shall
provide insurance coverage on all insurance amounts mortgaged to the DBP
equivalent to at least the outstanding balance of the total accommodations to
cover such risks and in such amounts … as may be required by the DBP, the
insurance to be placed by DBP.
Following a conflagration
which burned down PMCI’s insured polystyrene plant, DBP, as insurance
beneficiary, collected on the policy. It turned out, however, that the insurance
proceeds were insufficient to cover PMCI’s alleged loan obligations. Soon
enough, DBP served notice of its intention to foreclose extrajudicially the
mortgage on PMCI’s assets to satisfy what was still owing to DBP which, per its
records and computation, amounted to P43,602,245.51.
PMCI interposed an opposition, claiming that the figure did not reflect the
true and accurate amount of its obligation. Accordingly, PMCI demanded and DBP
acceded to the suspension of the foreclosure until a reconciliation of the
accounts shall have been arrived at. As a quid
pro quo, however, DBP required and secured the issuance by PMCI of six (6)
postdated checks in the total amount of P3,000,000.00, subject to the result of the reconciliation.
Of the checks thus issued, three (3) for P1.5 million were eventually
encashed, after which PMCI issued a stop-payment order on the remaining checks,
believing that it had overpaid DBP.
On
By
Order[4] dated November 5, 1985,
the trial court, finding
PMCI’s case to be outside
the ambit of P.D. No. 385, and on
the postulate that a “significant and
tremendous” discrepancy obtains between the PMCI’s and DBP’s respective
accounting records and taking note of the payments thus far made by
PMCI which indicated over-payment, issued the desired writ of preliminary
injunction in PMCI’s favor, disposing as follows:
WHEREFORE,
premises considered, let a writ of preliminary injunction be issued prohibiting
and enjoining the defendant [DBP] from proceeding with the foreclosure of the
mortgaged properties of the plaintiff [PMCI] upon the latter’s filing and
approval of a bond in the amount of P300,000.00 ….
(Words in bracket added).
After the denial of its
motion for reconsideration, DBP went to the CA
on a petition for certiorari under Rule 65 of the Rules of
Court, docketed as CA-G.R. No. 09201-SP. At about this time, DBP had assigned
its rights and interest over non-performing assets to the National Government
which, in turn, constituted
the Asset and Privatization Trust (APT) as trustee of the
transferred accounts. Respondent Privatization Management Office (PMO) would
later be created to assume the powers, duties, records, properties and
obligations of the now defunct APT.
Eventually, the CA
rendered judgment setting aside the assailed
Therefrom, PMCI appealed to this
Court in G.R. No. 77631, entitled Polystyrene Manufacturing Co., Inc. v. Courts of Appeals and DBP. In
a Decision[5]
dated
WHEREFORE, the assailed decision and resolution of respondent Court
of Appeals are hereby ANNULLED and SET ASIDE. The Regional Trial Court, Branch
149 of the National Capital Judicial Region at Makati,
Metro Manila, or to which Civil Case No. 11819 is presently assigned, is hereby
DIRECTED to expediently conduct another hearing in accordance with the procedure
set forth in Section 2 of Presidential Decree No. 385, as explained in this
decision, to determine the propriety of the issuance of a [TRO] or a writ of
preliminary injunction, and thereafter to forthwith proceed with the trial and
adjudication of the case on the merits with appropriate dispatch.
SO ORDERED.
Apparently, in view of the
adverted appeal taken to this Court in G.R.
No. 77631, the trial court had the main case – Civil Case No. 11819 – archived.
Some
nine (9) years after this Court’s Decision in G.R. No. 77631 achieved finality,[6]
DBP filed an Omnibus Motion
dated
What transpired
next is summarized by the CA in its herein assailed decision, as follows:
On
On
[PMCI] filed a motion …
that DBP be dropped as one of the defendants in the case. In an Order dated
In a Motion for Reconsideration …, [PMCI] prayed to set aside
the November 6, 2001 Order and to set the case for hearing as directed by
the Supreme Court ….
In an Order
dated
[PMCI] filed a
petition for certiorari [with the] CA …. assailing the
January 31, 2002 Order. This was, however, dismissed ….
Finally, in an
Order dated
From
the trial court’s
On
August 31, 2005, the appellate court issued the herein assailed decision[8] affirming the appealed June
18, 2002 Order of the trial court, as reiterated in its subsequent Order of September
5, 2002, and accordingly dismissed PMCI’s appeal. PMCI’s motion for reconsideration was denied by the
appellate court in its resolution[9] of
Hence,
this recourse of petitioner PMCI on the submission that the CA erred in ruling
that petitioner:
1. xxx had failed to
exert any effort to execute the
2. xxx had failed to establish
its right to the issuance of a writ of preliminary injunction.
On
the main, petitioner argues that the onus on setting the case for hearing in compliance
with this Court’s directives as embodied in its Decision in G.R. No. 77631 rested on the trial
court.
In its Comment,[10]
respondent PMO, on the other hand, alleges that the trial court – and
necessarily the CA – acted judiciously in decreeing the dismissal of the main case
for failure to prosecute and non-appearance at the scheduled pre-trial. It added the observation that the real reason
behind such failure to prosecute lies in the negligence of the petitioner’s
former counsel who failed to turn over the case records to the petitioner.
We
GRANT the petition.
Looming
large in the resolution of this petition is P.D. No. 385[11] which provides a mandatory mechanism to enable
government financial institutions (GFIs) to effectively
collect delinquent loan accounts unhampered by distracting legal niceties and
technicalities usually invoked by borrowers in foreclosure cases.[12] As couched, Section 2, in relation to the
preceding Section 1,[13] of the decree, at once
requires GFIs, such as DBP, to initiate foreclosure proceedings once a borrower is in arrears to the level of at
least twenty percent (20%) of the total
principal obligation and, at the same time, stays the injunctive hand
of court in such foreclosure
proceedings, except upon a showing by
the borrower that he has paid at least
twenty percent (20%) of the outstanding arrearages following the institution of
foreclosure proceedings against him. What we said in our Decision in G.R.
No. 77631 contextually captured the thrust of P.D. No. 385, and its limiting effect on the discretionary power of the court
to grant injunctive relief, thus:
The relevant
portion of [P.D.] No. 385 reads:
“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 percent (20%) of the outstanding arrearages has been paid after the
filing of the foreclosure proceedings.”
xxx xxx xxx
The provision,
therefore, contemplates the instance where the borrower has sought a writ of
injunction, in a principal action therefor or as an
ancillary remedy in another case or proceeding, to enjoin the foreclosure of
its properties by the [GFI] concerned. Consistent with the procedural
requirements set forth therein, a hearing should first be had to determine
whether or not 20% of the outstanding arrearages has
been paid, as a prerequisite for the issuance of a [TRO] or a writ of
preliminary injunction.
This cannot,
however, be logically and plausibly arrived unless the court, on the basis of
the evidence then in its possession, makes a determination itself,
provisionally at the very least, on the matter of the actual existence of
arrearages and the amount thereof on which 20% shall be computed or reckoned.
In the case at bar,
we note that the above-mentioned
procedure was not followed. In fact, the trial court only went so far as to
find that there was a significant discrepancy between the financial records of
petitioner [PMCI] and private respondent [DBP] and concluded on the basis
thereof that [P.D.] No. 385 was not applicable. There is no showing whatsoever
that the trial court attempted to resolve the discrepancy by ascertaining the
factual existence of any arrearage and the amount thereof if there really was
such a default.
Although
respondent court held that there was no evidence presented to show that
petitioner [PMCI] had paid at least 20% of the alleged arrearages, it does not
appear that a hearing had been held in the court a quo for such purpose.
The finding that there was no allegation in the complaint to the same effect
flies in the face of petitioner's allegation that it even overpaid private
respondent. In such a situation, the court must perforce conduct a hearing to
determine the primal requirement, that is, the existence of arrearages, if any,
and thereafter whether or not 20% thereof has been paid. Such facts must be ascertained not only for purposes of the formulistic
allegations in the complaint for injunction, but because these are contemplated
or required by the decree itself as the bases sine qua non for the issuance of
the writ. (Emphasis and words in
bracket supplied)
In
the light of the foregoing pronouncement, it was highly inappropriate, if not
altogether wrong, for the trial court to
have proceeded with the pre-trial of the case until a preliminary hearing is conducted,
as P.D. No. 385, as simplified by the Court – has mandated. For, assuming that,
at the end of trial, the trial court makes a final determination that less than
twenty percent (20%) of the petitioner’s total arrearages were paid after
foreclosure proceedings were initiated, then it would have already defeated the
very purpose for which it existed in the first place: to decide its cases with
alacrity. Its dismissal of petitioner’s case based on such determination – after
a likely protracted trial – that petitioner has not paid at least 20% of its
outstanding arrearages – would have been too late in the day, and would have
cost it precious court time and resources that should otherwise have been
devoted to its other cases. Worse still, it would precisely have been a
procedure taken in direct contravention of Sec. 2 of P.D. No. 385.
Hypothetically
assuming, on the other hand, that the trial court peremptorily determines,
after trial on the merits, that at least twenty percent (20%), or even more, of
the petitioner’s total arrearages were paid after foreclosure proceedings had
been initiated, then – just the same – such determination would
no longer be of any value, as the
propriety of issuing either a writ of preliminary injunction or TRO may already
have become moot and academic. Foreclosure proceedings could very well have already
been terminated, and the petitioner could have been unduly deprived of its
property.
Simply
put, therefore, the trial court veritably ignored Sec. 2 of P.D. No. 385 and
effectively diluted and substantially departed from the interpretative judgment
of this Court in G.R. No. 77631 which
contained certain unequivocal
directives addressed to the trial court. Again, we reproduce the fallo of our Decision in G.R. No. 77631:
WHEREFORE, the
assailed decision and resolution of respondent Court of Appeals are hereby
ANNULLED and SET ASIDE. The [RTC], Branch 149 of … Makati,
Metro Manila, or to which Civil Case No. 11819 is presently assigned, is hereby
DIRECTED to expediently conduct another
hearing in accordance with the
procedure set forth in Section 2 of [P.D.] No. 385, as explained in this
decision, to determine the propriety of the issuance of a temporary restraining
order or a writ of preliminary injunction, and thereafter to forthwith proceed with the trial and adjudication of
the case on the merits with appropriate dispatch.
SO ORDERED. (Emphasis/italics
and words in brackets supplied.)
In
fine, the trial court, by scheduling and
ordering the conduct of pre-trial proceedings instead of a preliminary hearing
for the determination of the propriety of issuing a TRO or writ of preliminary
injunction, as this Court thus directed, virtually rendered the governing Decision in G.R. No. 77631 nugatory; it also ran afoul of the very law which
should have governed the conduct of the proceedings in Civil Case No. 11819,
and which law must dictate the manner by which the case should be disposed of.
Worse,
it was clear error for the trial court to have dismissed Civil Case No. 11819
for petitioner’s alleged failure to prosecute. As against the petitioner, its
order of dismissal has to be struck down as null and void. A void judgment is no judgment
at all. It cannot be the source
of any right nor the creator of any obligation. All
acts performed pursuant to it and all claims emanating from it have no legal
effect. [14] Hence, it can never become final and any writ
of execution based on it is void. And to borrow from Banco Espanol-Filipino v. Palanca,[15]
a void judgment may be likened to a lawless thing which can be treated as an
outlaw and slain at sight, or ignored wherever and whenever it rears its head.
The
appellate court’s conclusion about the petitioner’s failure to exert any effort
to execute this Court’s Decision in G.R.
No. 77631 or press for a preliminary injunctive relief having amounted to
undue inaction which, by the passage of time, rendered the grounds for their
possible issuance virtually lost, hardly commends itself for concurrence. For,
as long as the threat of foreclosure hangs over the petitioner’s head, so to
speak, so should the remedy of injunction be made available to it under P.D.
No. 385.
Equally
untenable is the CA’s insistence that the execution of what the Court directed
in G.R. No. 77631 rested upon
petitioner’s initiative alone, and that, by its failure to seek its
enforcement, petitioner must be considered to have “slept on its rights.” For
perspective, what this Court directed in said case was for the trial court to
conduct another hearing in accordance with the procedure set forth in Section 2
of P.D. No. 385, in order to determine the propriety of a TRO or a writ of
preliminary injunction, and thereafter to forthwith proceed with the trial and
adjudication of the case on the merits, with appropriate dispatch. At bottom,
then, it was
not up for the petitioner to decide whether or not to conduct a hearing as the
law or this Court has directed. Jurisdiction
over the subject matter is conferred only by the Constitution or law. It cannot
be fixed by will of the parties; it cannot be acquired through, or waived,
enlarged or diminished by, any act or omission of the parties; neither is it
conferred by acquiescence of the court.[16]
The
Court’s dispositive directives in its Decision in G.R. No. 77631 were uncomplicated. And
it was clear as to whom those directives were addressed. It was for the trial
court handling Civil Case No. 11819 to settle a pending incident, before any
other incidents or stage of the case should take place or be commenced. As it
were, the directives embodied in this Court’s Decision in G.R. No. 77631 hardly gave the trial court an option which it could
exercise of its own choosing.
Needless
to stress, it behooves inferior courts to substantially comply with reasonable
dispatch with the directives and take their bearings from decisions of this
Court. Anything less may constitute a ground for administrative sanction
against the erring magistrate.[17]
WHEREFORE,
the Decision dated
No
pronouncement as to cost.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
WE
CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
|
ANGELINA SANDOVAL-GUTIERREZ Associate Justice |
RENATO C. CORONA Associate Justice |
ADOLFO S. AZCUNA
Associate Justice
C E R T I F
I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, I certify that the conclusions
in the above decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Penned by Associate Justice Magdangal M. De Leon, with Associate Justices Salvador J. Valdez (now retired) and Mariano C. Del Castillo, concurring; rollo, pp. 31-43.
[2]
[3] Requiring Government Financial Institutions To Foreclose Mandatorily All Loans With Arrearages, Including Interest And Charges Amounting To At Least Twenty (20%) Percent Of The Total Outstanding Obligation.
[4] Rollo, pp. 63 et seq.
[5]
[6] Entry of Judgment was made on
[7]
[8] Supra note 1.
[9] Supra note 2.
[10] Rollo, pp. 133 et seq.
[11] Suprate note 3.
[12] Eleventh perambulatory clause.
[13] Section 1. It shall be mandatory for [GFIs], after the lapse of sixty (60) days from the issuance of this Decree, to foreclose the collaterals and/or securities for any loan …and/or guarantees granted by them whenever the arrearages on such account, including accrued interest and other charges, amount to at least twenty percent (20%) of the total outstanding obligations … as appearing in the books of account and/or related records of the [GFIs] concerned. xxx
[14] Leonor
v. Court of Appeals, G.R. No. 112597, April 2, 1996, 256 SCRA 69, cited in Lopez v. CA, G.R. No. 146035,
[15] 37 Phil. 921 (1918).
[16] Director of Lands v. Court of Appeals,
G.R. No. L-45168,
[17] Canson v. Garchitorena, G.R.
No. SB-99,