Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 171336 October 4, 2007
POLYSTYRENE MANUFACTURING COMPANY, INC., petitioner,
vs.
PRIVATIZATION AND MANAGEMENT OFFICE, respondent.
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 Decision1 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 Resolution2 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 Philippines (DBP). In compliance with a prerequisite for the granting of such guarantee, PMCI executed in favor of DBP a Deed of Mortgage on its polystyrene plant as security for any and all obligations that the latter may incur under or by virtue of the issuance of the guarantee.
Subsequently, MIC ceded all its rights and claims arising from the aforesaid loan accommodation to the Bank of Tokyo. On December 17, 1973, DBP informed the Bank of Tokyo that it is guaranteeing the payment of PMCI’s principal loan obligation and the interests thereon, subject, inter alia, to the following condition:
[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 September 27, 1985, in the Regional Trial Court (RTC) of Makati, PMCI filed a suit for injunction to enjoin DBP, as defendant therein, from proceeding with the foreclosure proceedings. Docketed as Civil Case No. 11819, the complaint was raffled to Branch 60 of the court. Answering, DBP alleged that it initiated the foreclosure proceedings pursuant to Presidential Decree (P.D.) No. 3853 and that PMCI had not paid 20% of the outstanding arrearages, as required by the same P.D. No. 385. DBP likewise alleged that the issue raised by PMCI in its complaint is only one of accounting.
By Order4 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 November 5, 1985 Order of the RTC.
Therefrom, PMCI appealed to this Court in G.R. No. 77631, entitled Polystyrene Manufacturing Co., Inc. v. Courts of Appeals and DBP. In a Decision5 dated May 9, 1999, the Court set aside that of the appellate court and directed the trial court to conduct another hearing in accordance with the procedure set forth in P.D. No. 385 to determine the propriety of the issuance of a temporary restraining order (TRO) or a writ of preliminary injunction. Dispositively, the Decision reads:
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 June 22, 1999 where it prayed the trial court to retrieve Civil Case No. 11819 from the archives, to revive and then dismiss the same for PMCI’s failure to prosecute. On April 7, 2000, the trial court denied the prayer for dismissal. It ordered, however, the reinstatement of the case and for the joinder of APT as party-defendant.
What transpired next is summarized by the CA in its herein assailed decision, as follows:
On June 21, 2000, APT filed its Answer … [followed by its] Manifestation … that its term of existence will expire on December 31, 2000 …. On January 29, 2001, … Privatization and Management Office (PMO) filed a Manifestation and Motion with entry of appearance …. The trial court allowed the substitution of PMO as party defendant in the case.
On February 6, 2001, PMO filed a Manifestation and Motion … for the dismissal of the case for failure to prosecute. This motion was denied by the trial court in an Order dated June 28, 2001.
[PMCI] filed a motion … that DBP be dropped as one of the defendants in the case. In an Order dated November 6, 2001, the trial court ruled that there is no basis for [PMCI] to insist on PMO’s filing of a separate Answer where it is clear that PMO is successor agency of APT. Thereafter, the trial court set the case for pre-trial.
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 January 31, 2002, the trial court denied [PMCI’s] November 22, 2001 motion for reconsideration xxx. [and] … stated that after it resolved to proceed with the pre-trial, it is again faced with the motion … that another hearing be conducted in accordance with the procedure set forth in Section 2 of P.D. 385. Thus, it resolved to deny [PMCI’s] motion … to allow the parties to proceed to pre-trial …to simplify the issues … and in the process obtain a reconciliation of accounts.
[PMCI] filed a petition for certiorari [with the] CA …. assailing the January 31, 2002 Order. This was, however, dismissed ….
Finally, in an Order dated June 18, 2002, the trial court dismissed [Civil Case No. 11819] with prejudice due to [PMCI’s] failure to prosecute for an unreasonable length of time and to appear at the scheduled pre-trial. In another Order dated September 5, 2002, the trial court likewise denied [PMCI’s] motion for …reconsideration.7 (Words in brackets and emphasis added.)
From the trial court’s June 18, 2002 order of dismissal immediately referred to above, PMCI appealed to the CA in CA-G.R. CV No. 76211, interposing the argument that the trial court’s order directing the parties to go into pre-trial completely ignored the May 9, 1999 Decision of this Court in G.R. No. 77631 which enjoined it to conduct a hearing, in accordance with the procedure set forth in Section 2 of P.D. No. 385, for the purpose of determining whether a TRO or a preliminary injunction writ should issue.
On August 31, 2005, the appellate court issued the herein assailed decision8 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 resolution9 of January 20, 2006.
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 May 9, 1990 decision of this Court, nor to press for the issuance of a [TRO] or a writ of preliminary injunction;
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. 38511 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 August 31, 2005 of the CA in CA-G.R. CV No. 76211, as reiterated in its Resolution of January 20, 2006, is hereby REVERSED and SET ASIDE. Let this case be REMANDED to the trial court for compliance with what has been enunciated and directed by this Court in its Decision of May 9, 1999 in G.R. No. 77631.
No pronouncement as to cost.
SO ORDERED.
Puno, Sandoval-Gutierrez, Corona, Azcuna, JJ., concur.
Footnotes
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 Id. at 45-46.
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 Id. at 72 et seq.
6 Entry of Judgment was made on June 21 1990; id. at 70.
7 Id. at 2-38.
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, Sept. 9, 2005, 256 SCRA 515.
15 37 Phil. 921 (1918).
16 Director of Lands v. Court of Appeals, G.R. No. L-45168, January 27, 1981, 102 SCRA 370.
17 Canson v. Garchitorena, G.R. No. SB-99, July 28, 1999, 311 SCRA 268.
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