THIRD
DIVISION
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SPS. NESTOR AND MA. NONA BORROMEO,
Petitioners, - versus
- HONORABLE COURT OF APPEALS and
EQUITABLE SAVINGS BANK , Respondents. |
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G.R. No. 169846 Present: AUSTRIA-MARTINEZ, J., Acting
Chairperson, TINGA,* CHICO-NAZARIO,
NACHURA,
and REYES,
JJ. Promulgated: |
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D
E C I S I O N
CHICO-NAZARIO, J.:
This is a
Petition for Review on Certiorari
under Rule 45 of the Rules of Court, assailing the Decision,[1]
dated 29 April 2005, thereafter, upheld in a Resolution[2]
dated 16 September 2005, both rendered by the Court of Appeals in CA-G.R. SP No. 85114. The Court of Appeals, in its assailed
Decision, reversed the Order dated
Respondent is a domestic savings bank corporation with
principal office and place of business at EPCIB Tower 2,
Petitioners were client-depositors of EPCIB for more than 12
years. Petitioners alleged that sometime
in mid-1999, the branch manager of EPCIB, J.P. Rizal
Branch, offered a loan to the petitioners under its “Own-a-Home Loan
Program.” Petitioners applied for a loan
of P4,000,000.00 and were informed of the approval of their loan
application sometime in October 1999. It
was in the early part of 2000 that petitioners signed blank loan documents
consisting of the Loan Agreement,
Promissory Notes, a Real Estate Mortgage (REM) and Disclosure Statements.[5]
To secure the payment of the loan, petitioners executed an
REM over their land, registered under Transfer Certificate of Title (TCT) No.
N-203923, located at Loyola Grand Villas,
From April 2001 to September 2002, respondent released a
total amount of P3,600,000.00 in four installments, while the balance of
P400,000.00 was not drawn by petitioners.[8] On the other hand, petitioners started to pay
their monthly amortizations on
Petitioners made repeated verbal requests to EPCIB to furnish
them their copies of the loan documents.[10]
On P400,000.00
and stopped paying their loan amortizations to protest EPCIB’s
continued failure to provide them copies of the loan documents and its
imposition of an interest rate higher than that agreed upon. From the time petitioners began paying their
monthly amortizations on P500,000.00.[12]
In reply to the petitioners’ letter dated
In the meantime, on P4,097,261.04, inclusive of interest and other charges. Respondent informed petitioners that failure
to pay their obligation would result in its pursuing legal action against
petitioners, including foreclosure proceedings on their REM.
In a letter dated
Finally, on
|
DATE |
AMOUNT |
INTEREST
RATE |
|
|
P1,200,000.00 |
16% |
|
|
P
800,000.00 |
14.0% |
|
|
P
800,000.00 |
15% |
|
|
P 800,000.00 |
9.0% |
When the petitioners failed to pay for the loan in full by P5,114,601.00.[19] The Extrajudicial Sale was set to take place
on
On
Petitioners sought to prevent the Extrajudicial Sale from
taking place on
The scheduled date for the Extrajudicial Foreclosure, namely,
On
Petitioners reacted by filing with the RTC a Motion for
Reconsideration of its Order dated 5 December 2003, again praying for the
issuance of a TRO and/or preliminary injunction to forestall the extrajudicial
sale of their property scheduled for 14 January 2004.[24]
On P12,000,000.00,
which was more than sufficient to answer for petitioner’s obligation pegged at P4,097,261.00,
and respondent’s REM over said property remained in effect. Moreover, petitioners posted a bond in the
amount of P3,500,000.00 to cover their unpaid liabilities.[25]
In its Order dated
With all the
foregoing disquisitions and finding merit in plaintiffs’ application, the same
[is] hereby GRANTED. Let a writ of
preliminary injunction issue upon plaintiffs’ posting of a bond in the amount
of three million five hundred thousand (P3,500,000.00) pesos.
Respondent
filed a Motion for Reconsideration of the afore-quoted Order, which was denied
for lack of merit by the RTC in an Order dated
Thereafter,
respondent filed on
During the
proceedings before the Court of Appeals, petitioner presented a letter dated
In
reversing the RTC Order dated
WHEREFORE,
in view of the foregoing, the assailed Orders dated
Petitioners
filed a Motion for Reconsideration of the foregoing Decision, which the Court
of Appeals denied in a Resolution dated
Hence, the
present Petition, in which the following issues are raised[31]:
I
WHETHER OR NOT THE PRIVATE RESPONDENT SAVINGS BANK IS THE REAL PARTY-IN-INTEREST.
II
WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE RELIEF DEMANDED, THAT THE FORECLOSURE AND PUBLIC AUCTION OF THE PROPERTY BELONGING TO PETITIONERS DURING THE LITIGATION PROCEEDINGS IN THE LOWER COURT WOULD PROBABLY WORK INJUSTICE TO THEM SUCH THAT THE JUDGMENT WHICH MAY BE ISSUED BY THE SAID COURT WILL BE RENDERED INEFFECTUAL BY SUCH FORECLOSURE AND PUBLIC AUCTION OF SAID PROPERTY.
III
WHETHER OR NOT
THE
The petition is meritorious.
The only issue that needs to be
determined in this case is whether or not a writ of preliminary injunction
should be issued to enjoin the foreclosure and public auction of petitioner’s
property during the proceedings and pending determination of the main cause of
action for annulment of the REM on said property. By no means is this a final determination of
the merits of the main case still before the RTC.[32]
Section 3, Rule 58 of the Rules of
Court provides that:
SEC. 3. Grounds for issuance of preliminary injunctions.—A preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.
As such, a writ of preliminary
injunction may be issued only upon clear showing of an actual existing right to
be protected during the pendency of the principal
action. The twin requirements of a valid
injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ,
the right to be protected and the violation against that right must be shown.[33]
In this case, petitioners’ rights to
their property is restricted by the REM they executed over it. Upon their default on the mortgage debt, the
right to foreclose the property would be vested upon the creditor-mortgagee.[34] Nevertheless, the right of foreclosure cannot
be exercised against the petitioners by any person other than the
creditor-mortgagee or its assigns.
According to the pertinent provisions of the Civil Code:
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (Emphasis ours.)
An extrajudicial foreclosure
instituted by a third party to the Loan Agreement and the REM would, therefore,
be a violation of petitioners’ rights over their property.
It is clear that under Article 1311
of the Civil Code, contracts take effect only between the parties who execute
them.[35] Where there is no privity
of contract, there is likewise no obligation or liability to speak about.[36] The civil law principle of relativity of
contracts provides that contracts can only bind the parties who entered into
it, and it cannot favor or prejudice a third person, even if he is aware of
such contract and has acted with knowledge thereof.[37] Since a contract may be violated only by the
parties thereto as against each other, a party who has not taken part in it
cannot sue for performance, unless he shows that he has a real interest
affected thereby.[38]
In
the instant case, petitioners assert that their creditor-mortgagee is EPCIB and
not respondent. While ESB claims that
petitioners have had transactions with it, particularly the five check payments
made in the name of ESB, it fails to categorically state that ESB and not EPCIB
is the real creditor-mortgagor in this loan and mortgage transaction. This Court finds the position taken by the
petitioners to be more credible. The
four Promissory Notes designate EPCIB as the “lender.”[39] In a letter dated
Respondent, although a
wholly-owned subsidiary of EPCIB, has an independent and separate juridical
personality from its parent company. The
fact that a corporation owns all of the stocks of another corporation, taken
alone, is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a
subsidiary’s separate existence shall be respected, and the liability of the
parent corporation, as well as the subsidiary, shall be confined to those
arising from their respective businesses.
A corporation has a separate personality distinct from its stockholders
and other corporations to which it may be conducted.[44] Any claim or suit of the parent corporation
cannot be pursued by the subsidiary based solely on the reason that the former
owns the majority or even the entire stock of the latter.
From a perusal of the records,
petitioners did not enter into a Loan Agreement and REM with respondent. Respondent, therefore, has no right to
foreclose the subject property even after default, since this right can only be
claimed by the creditor-mortgagor, EPCIB; and, consequently, the extrajudicial
foreclosure of the REM by respondent would be in violation of petitioners’
property rights.
This Court takes note of the fact
that in several cases[45]
the Court denied the application for a Writ of Preliminary Injunction that
would enjoin an extrajudicial foreclosure of a mortgage, and declared that
foreclosure is proper when the debtors are in default of the payment of their
obligation. Where the parties stipulated
in their credit agreements, mortgage contracts and promissory notes that the
mortgagee is authorized to foreclose the mortgaged properties in case of
default by the mortgagors, the mortgagee has a clear right to foreclosure in
case of default, making the issuance of a Writ of Preliminary Injunction
improper. However, the doctrine in these
cases is not applicable to the case at bar where the identity of the creditor-mortgagor
is highly disputable.
This Court emphasizes that the
determination of who is the creditor-mortgagee is only for purposes of
determining the propriety of issuing a writ of preliminary injunction, based on
the evidence presented before the hearing for the issuance of a preliminary
injunction. It will not bar the RTC from
making its own determination as to who is the true creditor-mortgagee after
trial and presentation of evidence on the main case. To establish the essential requisites for a preliminary injunction, the
evidence submitted by the plaintiff need not be conclusive and complete. The plaintiffs are only required to show that
they have an ostensible right to the final relief prayed for in their
complaint.[46] In Urbanes, Jr. v. Court
of Appeals, this Court expounded that:
A writ of preliminary injunction is generally based solely on initial and incomplete evidence. The evidence submitted during the hearing on an application for a writ of preliminary injunction is not conclusive or complete for only a sampling is needed to give the trial court an idea of the justification for the preliminary injunction pending the decision of the case on the merits. As such, the findings of fact and opinion of a court when issuing the writ of preliminary injunction are interlocutory in nature and made even before the trial on the merits is commenced or terminated. There are vital facts that have yet to be presented during the trial which may not be obtained or presented during the hearing on the application for the injunctive writ. The trial court needs to conduct substantial proceedings in order to put the main controversy to rest. It does not necessarily proceed that when a writ of preliminary injunction is issued, a final injunction will follow.[47] (Emphasis provided.)
The extrajudicial foreclosure of the
petitioners’ property pending the final determination by the RTC of their
complaint for annulment of the REM and claim for damages would result in an
injustice to the petitioners. If the RTC
would subsequently declare that respondent was entitled to have petitioners’
property foreclosed, it may still foreclose the subject property which is
valued at P12,000,000.00,[48]
to answer for the debt which is estimated at P5,000,000.00, and further
claim the P3,500,000.00 surety bond posted by petitioners with the
RTC. On the other hand, if the RTC later
finds that respondent is not the creditor-mortgagee and, therefore, the
foreclosure of the property is invalid, petitioners would be placed in an
oppressively unjust situation where they will be tied up in litigation for the
recovery of their property while their debt to the real creditor-mortgagee,
EPCIB, would remain unpaid and continue to accrue interest and other
charges.
The sole object of a preliminary
injunction is to maintain the status quo until the merits can be heard. A preliminary injunction is an order granted
at any stage of an action prior to judgment of final order, requiring a party,
court, agency, or person to refrain from a particular act or acts. It is a preservative remedy to ensure the
protection of a party’s substantive rights or interests pending the final
judgment on the principal action. A plea
for an injunctive writ lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided for, otherwise, the outcome of
a litigation would be useless as far as the party applying for the writ is
concerned.[49]
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. This Court REVERSES the assailed Decision dated
SO ORDERED.
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|
MINITA V. CHICO-NAZARIO
Associate Justice |
WE CONCUR:
MA. ALICIA AUSTRIA-MARTINEZ
Associate
Justice
Acting Chairperson
Associate Justice Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Acting Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Acting Chairperson’s Attestation, it is
hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
* Per
Special Order No. 497, dated
[1] Penned
by Associate Justice Rodrigo V. Cosico, with
Associate Justices Eliezer R. de Los
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26] Id
at 61.
[27]
[28]
[29]
[30]
[31]
[32] Philippine National Bank v. RJ Ventures Realty and Development Corporation, G.R. No. 164548, 27 September 2006, 503 SCRA 639, 658.
[33] Lim v. Court of Appeals, G.R. No.
134617,
[34] Article
2087 of the Civil Code states that:
Art. 2087. It
is also the essence of these contracts that when the principal obligation
becomes due, the things in which the pledge or mortgage consist may be
alienated for the payment to the creditor.
[35] ` Narra Integraged
Corporation v. Court of Appeals, 398 Phil. 733, 745 (2000).
[36] Chan v. Maceda,
Jr., 450 Phil. 416, 429 (2003); Josefa v. Zhandong Trading Corporation, 462 Phil. 751, 760
(2003).
[37] Integrated Packaging Corporation v. Court of
Appeals, 388 Phil. 835, 845 (2000).
[38] Sustiguer v. Tamayo,
G.R. No. 29341,
[39] Rollo, pp.
125-140.
[40]
[41]
[42]
[43]
[44] Nisce v. Equitable PCI Bank, Inc., G.R. No.
167434,
[45] Bank of the Philippine Islands v. Court of
Appeals, G.R. No. 142731, 8 June 2006, 490 SCRA 168; Selegna
Management and Development Corporation v. United Coconut Planters Bank,
G.R. No. 165662, 3 May 2006, 489 SCRA 125; Lim
v. Court of Appeals, supra note 33; Philippine
National Bank v. Ritratto Group, Inc., 414 Phil.
494 (2001).
[46] Nisce v. Equitable PCI Bank, Inc., supra note 44 at 254.
[47] Urbanes Jr. v. Court of Appeals, 407 Phil. 856,
867 (2001).
[48] Rollo, p. 61.
[49] Philippine National Bank v. RJ Ventures
Realty and Development Corporation, supra note 32 at 658-659.