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G.R. No. 147191 - SPOUSES MANUEL & LUISA TAN LEE v. HON. COURT OF APPEALS, ET AL.

G.R. No. 147191 - SPOUSES MANUEL & LUISA TAN LEE v. HON. COURT OF APPEALS, ET AL.

PHILIPPINE SUPREME COURT DECISIONS

FIRST DIVISION

[G.R. NO. 147191 : July 27, 2006]

SPOUSES MANUEL & LUISA TAN LEE, RENWICK WARREN LEE and JANSSEN THADDEUS LEE, Petitioners, v. HON. COURT OF APPEALS and CHINA BANKING CORPORATION, Respondents.

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, with prayer for the issuance of a Temporary Restraining Order (TRO) or a Preliminary Injunction against the Decision1 of the Court of Appeals promulgated on 24 October 2000 and its Resolution2 dated 19 February 2001, which nullified and set aside the Orders dated 25 March 1999 and 11 May 1999 of Hon. Francisco L. Calingin, Presiding Judge of Branch 22, Regional Trial Court (RTC), Misamis Oriental. In said Orders, Judge Calingin issued a Writ of Preliminary Injunction against respondent China Banking Corporation (CBC) from conducting and proceeding with the extrajudicial foreclosure and public auction sale of the subject mortgaged properties.

The facts as found by the Court of Appeals are as follows:

In 1992, CBC granted the spouses Lee credit facilities in the amount of P5 Million. For this facility, private respondents constituted on February 11, 1992 a real estate mortgage (REM) over the Borja property (Annex "B", Petition).

Against the secured credit accommodation, the spouses Lee initially borrowed P5 Million, the loan covered by promissory note (P/N) #TLS-20 that was to mature [i]n February 1997. While paying their amortization obligation under this note, the spouses Lee were able to secure as they did secure additional loans drawn against the usable/available portion of the credit facility.

Subsequently, to finance a building construction project, the spouses Lee's original credit facility was increased to P20 Million. To secure the increased facility and all loan availments/drawings made or to be made against such facility, the REM over the Borja property was correspondingly amended. The "Amendment to Real Estate Mortgage" (Annex "B-1", Petition), was signed by private respondents and Renwick Warren's wife, Marivic.

Against this facility as increased, CBC, as participant of the Land Bank of the Philippine[s] (LBP)-administered Countryside Loan Fund (CLF) agreed to grant the spouses Lee, via bridge financing, a P20 Million loan to be sourced from its (CBC's) availment under the CLC program. In a letter-notice of June 16, 1997, CBC-Borja Branch manager Ronaldo Uy informed Manuel Lee of the approval by the Bank's Executive committee of his term loan in the amount of P20 Million to be funded out of the LBP-CLF, subject, inter alia, to the following terms/conditions:

"E. Against Real Estate Mortgage (REM) on the three parcels of land described under TCT Nos. 52273, 56321 and 56322 together with the proposed 3-storey commercial building, located at J.R. Borja Street . . . ." (Annex 'F', Petition).

Manuel Lee handwrote his conformity to the conditions aforestated on the letter-notice itself.

On September 22, 1997, Manuel Lee and CBC formalized the P20 Million loan by executing a "LOAN AGREEMENT" (Annex "G", Petition), which thus paved the way for the release of the funds under the LBP-CLF to the former. Under the terms of this agreement, the loan of P20 Million shall be secured by a real estate mortgage over the Borja property. The series of replacements and/or conversion of the promissory notes vis-a-vis the P20 Million drawn down led to the execution of P/N #TLS-228 for P17,260,000.00 and P/N #TLS-229 for P2,740,000.00 (Annex "C", Petition).

Meanwhile, [i]n January 1995, the spouses Lee executed in favor of the Bank REM over the Lumbia property as security for a P2 Million credit facility (Annex "I", Petition). They would later execute the "Amendment to the Real Estate Mortgage" (Annex "I-1") over the land ["described under TCT No. T-23215"] to secure an increased credit facility. From this facility, the spouses Lee obtained a loan of P5 Million as evidenced, after renewal or restructuring, by P/N BDS-2021 and P/N BDS-2125 dated February 13, 1997 and October 31, 1997, respectively, for P2.5 Million each (Annex "D", Petition).

Subsequent events show the spouses Lee defaulting, starting November 1997, on their monthly amortization payments under the two (2) separate secured facilities. Consequently, and owing to the acceleration clause embodied in the covering promissory notes, CBC, thru its Mr. Uy, sent the spouses Lee a letter dated June 22, 1998 demanding a full settlement of account (Annex "J", Petition). Another demand letter dated August 11, 1998 with a threat of foreclosure of mortgage followed (Annex "K", Petition).

In a letter of July 8, 1998, Manuel Lee, responding to the first demand letter, informed Uy that he (Lee) could not, due to cash flow problem, remit the required full payment. Mr. Lee, however, assured payment "as soon as funds would be available" (Annex "L", Petition).

On October 9, 1998, CBC, thru counsel, wrote the spouses Lee, again demanding full liquidation of overdue accounts specifically covered by P/N Nos. TLS-228, TLS-229, BDS-2021 and BDS-2125, this time totaling P24,833,333.34, or face extra-judicial foreclosure of mortgages (Annex "M", Petition). Answering, Mr. Lee, in his letter of October 23, 1998, reiterated his commitment to pay the family's account covered by the aforementioned (4) four promissory notes. He, however, in effect pleaded for the deferment of the foreclosure of their mortgages so as not "to prejudice the negotiations [they] are pursuing ... to produce the funds to pay off our loans with [the] Bank" (Annex "N", Petition).

Towards the end of 1998, CBC sent a fourth demand letter dated December 21, 1998. In their reply-letter of January 6, 1999, the spouses Lee acknowledged receipt of the December 21, 1998 letter and requested that they be given up to March 1999 to settle. In the same breath, they ask that the Bank make "representation with [its] Manila Lawyer, to hold in abeyance whatever legal action they wish to take" (Annex "P", Petition).

Unbeknownst to CBC while it was earnestly demanding payment, the spouses Lee, joined by their sons, filed on December 28, 1998 a suit with the Regional Trial Court at Cagayan de Oro City against the Bank for specific performance and cancellation of real estate mortgage. There, they contended that the real estate mortgage on the Borja property had been effectively terminated, the same having been constituted to secure a loan of P5 Million under P/N #TLS-20 which had already been paid. Docketed as Civil Case No. 98-765, the complaint was raffled to Branch 22 of the Court presided by the respondent judge.

In reaction to what it presently describes as a "con job done on it by the private respondent," CBC set in motion the deferred extrajudicial foreclosure proceedings and scheduled, per Notice of Auction Sale by Notary Public Virgilio Cabanlet dated January 18, 1999 (Annex "Q", Petition), the auction sale of the Borja and the Lumbia properties on February 15, 1999. Thereupon, the Lees filed an Ex parte motion for injunctive relief, alleging that the foreclosure, if not restrained, will cause irreparable injury to them and would prejudice their rights before the trial court.

On February 12, 1999, the respondent judge issued a temporary restraining order (TRO) enjoining CBC, et al., from proceeding with the scheduled auction and set hearing dates on the application for preliminary injunction. Due to this development, CBC reset the foreclosure sale to March 29, 1999, or after the effectivity of the TRO thus issued. Reacting, the Lees interposed a motion to cite CBC, et al., in contempt of court for violating the anti-forum shopping rule, with a prayer to restrain those concerned from proceeding with the March 29, 1999 auction sale.

In the hearing on the issuance of the injunction, Manuel Lee in essence testified that he and the rest of his family signed the "Amendment to Real Estate Mortgage" (Annex "B-1", supra) in blank, thinking that it covered the Lumbia property. He also alleged that the only obligation, represented by P/N #TLS-20 for P5 Million, secured by the mortgage on the Borja Property dated February 11, 1992 (Annex "B", supra), had already been paid. On this premise, he added, there was hardly any necessity to amend the said mortgage document.

CBC, for its part, adduced testimonial evidence to traverse the Lees' claim respecting the signing of aforementioned deed in blank and about the alleged settlement of their loan. It also presented documentary evidence inter alia consisting of the demand letters adverted to earlier, the fifty-five (55) promissory notes the spouses Lee had executed in the Bank's favor, the June 16, 1998 letter of Uy to Manuel Lee, supra, and a copy of the "Loan Agreement" (Annex "G," supra).

After the conclusion of the March 19, 1999 setting, another hearing was scheduled for March 29, 1999.

On March 25, 1999, however, respondent judge issued the first assailed order (Annex "A", Petition), granting private respondents' motion for the issuance of preliminary injunction with the following proferred justification:

"Based on plaintiffs evidence presented and because of another purported extra judicial foreclosure on March 29, 1999, which this Court finds to be an utter disregard of the proceeding which is still ongoing and there being bad faith on the part of the defendants in pursuing the same. . . this Court finds enough reason for the issuance of the writ of preliminary injunction . . . so as . . . to prevent any irreparable damages or injuries to plaintiffs, and likewise to prevent the claim of plaintiffs which is still to be investigated, heard and adjudicated, from becoming moot and academic."

On May 11, 1999, the respondent judge issued his second assailed order denying CBC's motion for reconsideration, as amended (Annex "A-2", Petition).3

On 19 July 1999, CBC filed a Petition for Certiorari against petitioners and Judge Calingin with the Court of Appeals, praying for the annulment of the Orders rendered on 25 March 1999 and 11 May 1999.

On 19 August 1999, the Court of Appeals dismissed the Petition for having been belatedly filed. Upon motion for reconsideration filed by respondent CBC, the Court of Appeals reinstated the petition on 10 January 2000.

On 24 October 2000, the Court of Appeals issued the assailed Decision, disposing of the case as follows:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed orders of the respondent judge dated March 25, 1999 and May 11, 1999, are hereby NULLIFIED and SET ASIDE.4

On 14 November 2000, petitioners filed a motion for reconsideration with prayer for the Issuance of a Temporary Restraining Order or Preliminary Injunction to stop the sale of the subject properties. The Court of Appeals issued a TRO on 12 December 2000.

Respondent CBC, nonetheless, proceeded with the conduct of the public auction sale on 14 December 2000. Subsequently, the Court of Appeals denied petitioners' motion for reconsideration in its assailed Resolution dated 19 February 2001.

Hence, this petition where petitioners bring before this Court the following assignment of errors:

1. THAT THE PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RENDERING THE DECISION DATED OCTOBER 24, 2000 WHEN IT BASED THE ALLEGATIONS OF FACTS ENTIRELY FROM [THE] "STATEMENT OF FACTS PROPOUNDED BY THE PUBLIC RESPONDENT CBC IN ITS PETITION FOR CERTIORARI IN CA-G.R. SP NO. 53789 WHICH ARE NOT THE FACTS ESTABLISHED OR PROVEN IN THE HEARING FOR THE PURPOSE OF DETERMINING THE PROPRIETY OF THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE TRIAL COURT ON MARCH 25, 1999 AND RE-AFFIRMED ON MAY 11, 1999 IN CIVIL CASE NO. 98-765.

2. THAT, PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN FINDING THAT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE TRIAL COURT WHEN IT MEASURED AND DETERMINED THE ACTUATIONS OF THE SAID COURT BASED UPON THE FACTS NOT PRESENTED AND ESTABLISHED, AS YET IN THE TRIAL COURT, THE FACT BEING THAT, TRIAL ON THE MERIT IN CIVIL CASE NO. 98-765 HAS NOT YET STARTED BEFORE THE SAID COURT.

3. THAT, THE PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT NULLIFIED AND SET ASIDE THE MARCH 25, 1999 AND MAY 11, 1999 ORDERS OF THE TRIAL COURT IN CIVIL CASE NO. 98-765 THEREBY VIOLATED THE CONSTITUTIONAL RIGHT OF THE HEREIN PETITIONERS TO DUE PROCESS IN THEIR COMPLAINT AGAINST PRIVATE RESPONDENT BECAUSE IT RENDERED THE ISSUES IN SAID CASE TO BECOME MOOT AND ACADEMIC, AND, PREJUDICIAL TO THE PROPRIETARY RIGHTS OF PETITIONERS, THAT WOULD CAUSE IRREPARABLE DAMAGE TO THEM IF NOT TIMELY RECALLED OR REVERSED BY THE ISSUANCE OF THIS HONORABLE SUPREME COURT OF A TRO/PRELIMINARY INJUNCTION; FURTHER, THE CIVIL CASE BEFORE RTC, BRANCH 22, CAGAYAN DE ORO CITY, WOULD RESULT IN ITS DISMISSAL BY THE IMPLEMENTATION OF THE OCTOBER 24, 2000 DECISION OF THE PUBLIC RESPONDENT COURT OF APPEALS.

4. THAT, THE PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NULLIFYING THE MARCH 25, 1999 AND MAY 11, 1999 INTERLOCUTORY ORDERS OF THE TRIAL COURT IN CIVIL CASE NO. 98-765 BY DISREGARDING THE TIME-HONORED AND JUDICIALLY MANDATED PRINCIPLE THAT "THE ASSESSMENTS AND EVALUATION OF FACTS IN THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION, INVOLVES FACTUAL FINDINGS, ORDINARILY LEFT TO THE TRIAL COURT FOR ITS CONCLUSION AND DETERMINATION"; HENCE, THERE IS NO ABUSE, MUCH LESS GRAVE ABUSE, OF DISCRETION HERE (LOPEZ V. COURT OF APPEALS, 322 SCRA 686, 693 [2000]; REYES V. COURT OF APPEALS, 321 SCRA 368, 374 [1999]; SAULOG V. COURT OF APPEALS, 262 SCRA 51, 59 [1996]; INTER-ASIA SERVICES CORP. [INTERNATIONAL] V. COURT OF APPEALS, 263 SCRA 408, 415 [1996]).

5, THAT, THE ALLEGED AUCTION SALE CONDUCTED BY PRIVATE RESPONDENT THRU ITS AGENT NOTARY PUBLIC, ATTY. VIRGILIO CABANLET ON THE REAL ESTATE PROPERTIES OF PETITIONERS SUBJECT TO THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE TRIAL COURT IN CIVIL CASE NO. 98-765 ON DECEMBER 14, 2000, IS NULL AND VOID.

6. THAT, THE PUBLIC RESPONDENT ERRED IN TAKING JURISDICTION OVER THE PETITION FOR CERTIORARI FILED BY PRIVATE RESPONDENT IN CA-G.R. SP. NO. 53789 AFTER IT FOUND THE PETITION TO HAVE BEEN FILED OUT OF TIME.5

THE INSTANT PETITION IS NOT RENDERED MOOT BY THE AUCTION SALE HELD ON 14 DECEMBER 2000

Since respondent CBC alleges that the issue as to the propriety of a Writ of Preliminary Injunction is mooted by the sale of the subject properties at public auction, it is but proper to resolve this issue first.

Petitioners claim that the alleged auction sale conducted on 14 December 2000 was illegally conducted for two reasons: (1) the alleged public auction sale was not conducted in accordance with the Resolution of this Court in Administrative Matter No. 99-10-05-0 issued on 14 December 1999; and (2) the Court of Appeals issued a TRO dated 12 December 2000 restraining and enjoining CBC and its agent, notary public Virgilio J. Cabanlet, from selling the subject property on 14 December 2000.6

In Administrative Matter No. 99-10-05-0, this Court laid down the procedure for an extra-judicial foreclosure of a mortgage. The same provides in part that:

[N]o auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be postponed to another date. If on the new date set for the sale there shall not be at least two (2) bidders, the sale shall then proceed. The names of the bidders shall be reported by the sheriff or the notary public who conducted the sale to the Clerk of Court before the issuance of the certificate of sale.

Petitioners claim Cabanlet never made any report to the Clerk of Court of Executive Judge of the RTC of Cagayan de Oro City on the fact of the presence of at least two bidders present in the auction sale of 14 December 2000. Petitioners further claim that they were present during the public auction and revealed that the only bidder present was respondent CBC.7

As further proof of the irregularity of the conduct of the 14 December 2000 auction sale, petitioners disclose an alleged discrepancy in the amount claimed to be the bid of respondent CBC and that contained in the certificate of sale executed by Cabanlet. The Certificate of Sale showed the highest bid by respondent CBC was P32,400,000.00,8 while in the 21 May 2000 letter of respondent CBC through its counsel, the highest bid was stated as P48,900,000.00.9

According to respondent CBC, there was no discrepancy as petitioners had mortgaged two properties - the Borja property and the Lumbia property - which were covered by different Transfer Certificates of Title. It explained that in the same public auction, the Borja property was sold for P32,400,000.00 per the Certificate of Sale mentioned above, while the Lumbia property was, in turn, sold for P16,500,000.00 as evidenced by another Cerificate of Sale.10 Hence, the total amount of P48,900,000.00 was stated as the proceeds of the auction sale.11

On the claim that Administrative Matter No. 99-10-05-0 had not been complied with, respondent CBC points to the fact that the Certificates of Sale contain a Certification executed by Clerk of Court Atty. Beverly S. Beja and Executive Judge Noli T. Catli affiriming compliance with the above-cited administrative matter, viz:

THIS IS TO CERTIFY that the foregoing foreclosure was done in accordance with Administrative Order No. 99-10-05-0 of the Supreme Court dated December 14,1999 and all pertinent laws on the matter.

(SGD.) ATTY. BEVERLY S. BEJA
:       Clerk of Court

Approved:

(SGD.) NOLI T. CATLI
      Executive Judge12

Respondent CBC claims that the presumptions that official duty has been regularly performed and that the law has been obeyed find application herein. Thus, it maintains that there is no necessity for the pertinent Certificate of Sale or the Certification issued by the Clerk of Court to state with particularity that at least two bidders were present at the public auction held on 14 December 2000.13

On this point, it bears to emphasize that the requirement under Administrative Matter No. 99-10-05-0 was for the sheriff or the notary public to report the names of the bidders to the Clerk of Court before the issuance of the Certificate of Sale. Such requirement cannot be expanded to include a statement in the Certificate of Sale mentioning the names of the bidders or even the fact that at least two bidders were present. The presumption of regularity in the performance of official duties furthermore gives petitioners the burden to prove the irregularities they allege attended the proceedings in the public auction of the subject properties. This bare assertions will not suffice to overturn such presumption, and hence, petitioners' first ground for the nullity of the 14 December 2000 auction sale (violation of Administrative Matter No. 99-10-05-0) must fail.

We now go to the alleged illegal holding of the auction sale on 14 December 2000 despite the issuance of a TRO by the Court of Appeals restraining and enjoining respondent CBC and its agent, notary public Virgilio J. Cabanlet, from auctioning the subject property.

The Court of Appeals issued on 12 December 2000 a TRO providing as follows:

Pending resolution of private respondents' Motion for Reconsideration relative to this Court's decision of October 24, 2000, and it being alleged in the same Motion that petitioner has scheduled the auction sale of the properties subject hereof to December 14, 2000, a temporary restraining order is hereby issued enjoining petitioner and those acting for and in its behalf or under its supervision, direction and control from proceeding with the scheduled auction sale on December 14, 2000 or at any other date until further orders from this court.

Meanwhile, petitioner is hereby required, within ten (10) days from notice hereof, to file its comment to respondents' aforementioned Motion for Reconsideration and their subsequent URGENT MOTION FOR ORAL ARGUMENT ON MOTION FOR RECONSIDERATION.14

Petitioners claim that the TRO issued on 12 December 2000 was served to respondent CBC through Cabanlet, who received a machine copy of the same on 13 December 2000. They further claim that the "original duplicate copy" thereof was shown to Cabanlet and CBC Branch Manager Romualdo Uy on 14 December 2000 at 10 a.m. at the entrance of the City Hall of Cagayan de Oro City, but Cabanlet and Uy were advised by respondent CBC's counsel to disregard said notice.15

Respondent CBC maintains that Cabanlet is not their counsel of record in the instant action, and therefore service to him cannot be considered as service on the bank. Petitioners, however, claim that, as a general rule, "whatever is sufficient to put a prudent person on inquiry amounts to notice, provided that inquiry would lead to the discovery of the requisite fact by the exercise of diligence and understanding."16 Petitioners further claim that Cabanlet is the locally retained lawyer of respondent CBC for its Cagayan de Oro City branches.17

Respondent CBC has not denied actual knowledge on the part of its officers regarding the TRO, stubbornly parrying all of petitioners' allegations with their argument that Cabanlet is not their counsel of record in the instant action.

In general, one cannot be punished for violating an injunction or an order for an injunction unless it is shown that such injunction or order was served on him personally or that he had notice of the issuance or making of such injunction or order. Where, however, a party has actual notice of an injunction, clearly informing him from what he must abstain, he is bound by the injunction from that time, and will be punished for a violation thereof, even though it may not have served, or may have been served on him defectively.18

It is altogether immaterial how defendant acquires information of the existence of the injunction; when once he has been apprised of the fact he is legally bound to desist from what he is restrained and inhibited from doing. Persons who are parties to a proceeding for an injunction only by representation, and are not served personally with notice of the injunction, may be found guilty of contempt for violating the injunction where it is shown that they must have known of the injunction and its contents.19

In Verzosa v. Court of Appeals,20 petitioner Wilfredo Verzosa sought to have the property mortgaged by respondent Fe Uson foreclosed. Respondent Uson filed an amended21 complaint for annulment of mortgage with prayer for the issuance of a writ of preliminary injunction. Five days later, the foreclosure sale proceeded and the property was sold to respondent Verzosa as the highest bidder. Upon Uson's application for a preliminary injunction embodied in a second amended complaint, the trial court issued an order directing the subsequent buyer of the property to cease and desist from entering, making constructions, and performing any act of possession or ownership upon the land in question. Petitioner assailed the order as it allegedly grants an injunction to restrain consummated acts. This Court, speaking through then Associate Justice Artemio Panganiban (now Chief Justice), held:

Where the acts have been performed prior to the filing of the injunction suit, the general rule is that the consummated acts can no longer be restrained by injunction. However, "where the acts are performed after the injunction suit is brought, a defendant may not as [a matter] of right proceed to perform the acts sought to be restrained and then be heard to assert in the suit that the injunction will not lie because he has performed these acts before final hearing has been had, but after the beginning of the action. A defendant thus acts at his peril." It has been held that "[t]he general rule of law is that, where a defendant completes, after the beginning of an action, the act thereby sought to be restrained, and before the issue of any final order or decree, the court has the power to, and may, compel, by a mandatory injunction, the restoration of the former condition of things and thereby prevent the giving of an advantage by reason of the wrongful act. And where a defendant does not act thus sought to be restrained, he proceeds at his peril, and the court in which the action is pending may compel a restoration of the former status or grant to the plaintiff such relief as may be proper."

In this case, an action was brought to enjoin Petitioner Verzosa from proceeding with the mortgage sale, yet he proceeded to do so while the action was still pending. Such conduct is reprehensible. "If one in the face of a pending suit for injunction, does the thing sought to be enjoined, he cannot thus outwit equity and the court, but must restore the status quo. x x x Even where an injunction has not been issued, if the suit is one for injunction, the defendant, if he does the thing sought to be enjoined does so at his peril. Hence, in proceeding with the mortgage sale and subsequently selling the property to Pilar Martinez, Petitioner Verzosa was acting at his peril."22 (Emphases supplied.)

Furthermore, notwithstanding the stand of both parties, the fact remains that the Decision of the Court of Appeals annulling the grant of preliminary injunction in favor of petitioners has not yet become final on 14 December 2000. In fact, such Decision has not yet become final and executory even on the very date of this Decision, in view of petitioners' appeal with us under Rule 45 of the 1997 Rules of Civil Procedure. The preliminary injunction, therefore, issued by the trial court remains valid until the Decision of the Court of Appeals annulling the same attains finality, and violation thereof constitutes indirect contempt23 which, however, requires either a formal charge or a verified petition.24

The willful disobedience of an injunction order may constitute a criminal, as well as a civil, contempt. However, it has been held that the violation of an injunction is not direct criminal contempt within the contemplation of a statute pertaining to conduct summarily punishable as direct criminal contempt. Such violation is an indirect contempt where it does not occur in the immediate presence of the court or so close as to interrupt or disturb court proceedings.25

An injunction or restraining order which is not void must be obeyed while it remains in full force and effect, and has not been overturned, that is, in general, until the injunction or restraining order has been set aside, vacated, or modified by the court which granted it, or until the order or decree awarding it has been reversed on appeal or error. The injunction must be obeyed irrespective of the ultimate validity of the order, and no matter how unreasonable and unjust the injunction may be in its terms. Defendant cannot avoid compliance with the commands, or excuse his violation, of the injunction by simply moving to dissolve it, or by the pendency of a motion to modify it.26 The fact that an injunction or restraining order has been dissolved or terminated, or has expired, does not necessarily protect a person in a proceeding against him for a violation of the injunction or order while it was in force, as by acts between granting of the injunction and its termination, at least where the proceeding is one to punish for a criminal contempt.27

Respondent CBC seemed so eager and anxious to render moot the petition for cancellation of real estate mortgage contract, taking advantage for that matter of a perceived gap between a preliminary injunction and a TRO to proceed with the contested public auction. Their actuations emulate those of the respondent in the case of National Power Corporation v. Province of Lanao del Sur,28 where we held:

The fact that the telegraphic temporary restraining order issued by this Court was received by the respondent governor of Lanao del Sur at 2:30 p.m. and by respondent provincial treasurer at 3:00 p.m. of January 22, 1991, or an hour and an hour and a half, respectively, after the registration of the sale with the Register of Deeds of the province, and several hours after the close of the auction sale, is of no moment. Ordinarily, this Court would have been overjoyed to hear about said Register of Deeds (or any government functionary for that matter) moving with blinding speed, except that in this case, it is more than patent that such precipitate action was prompted not in the least by respondents' anticipation that this Court was about to act on petitioner's application for a writ of preliminary injunction and/or temporary restraining order. The respondents' all-too-obvious attempt at rendering nugatory and inutile any injunctive relief this Court may grant is useless and brings them only rebuke and condemnation. Clearly, legally and equitably rooted in and proceeding from the foregoing discussion is the ineludible conclusion that the auction sale and registration of subject properties are totally bereft of any legal basis and therefore null and void, and cannot vest title over the said real properties nor over the hydroelectric power plant complex built upon them, in favor of respondent province.

Courts, however, have a limited inherent power to void acts done in violation of an injunction. Transfers in violation of an injunction are invalid as to the person seeking the injunction or those claiming under that person, and may be set aside if attacked in a proper manner.29

However, because an injunction operates in personam, an act done in violation of an injunction is not a nullity as to third persons. If an injunction prohibits the defendant from transferring property, but the defendant transfers the property to an innocent third person, the transferee obtains good title and the injunction does not affect the transferee's right.30

Based on the foregoing, we have two possible courses of action: (1) if the subject property has not been alienated to a third person, to declare the auction sale on 14 December 2000 as void; or (2) if the subject property has been alienated to a third person not a party to this petition, to enjoin acts similar to those enjoined in Verzosa, depending on the status of the main case and of the subject property. Since we are, as of the moment, unaware of such developments, it is sufficient to say for the meantime that the issue regarding the validity of the preliminary injunction issued by the trial court has not yet become moot.

THE COURT OF APPEALS CORRECTLY GAVE DUE COURSE TO RESPONDENT CBC'S PETITION FOR CERTIORARI

As stated above, it was on 19 July 1999 when respondent CBC filed a Petition for Certiorari against petitioners and Judge Calingin with the Court of Appeals, praying for the annulment of the Orders of the trial court rendered on 25 March 1999 and 11 May 1999. Respondent CBC received notice of the 25 March 1999 and 11 May 1999 Orders on 29 March 1999 and 18 May 1999, respectively. 19 July 1999 is thus 112 days and 62 days from said Orders, respectively.

Section 4, Rule 65 of the 1997 Rules of Civil Procedure originally provides:

SEC. 4. Where petition filed. - The petition may be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, x x x.

On 19 August 1999, the Court of Appeals dismissed the petition for having been belatedly filed. Upon motion for reconsideration filed by respondent CBC on 22 September 1999, the Court of Appeals reinstated the petition on 10 January 2000.31 The Court of Appeals stated that it did so "(i)n the interest of substantial justice, and in line with the ruling that rules of procedure are not to be applied with severity or rigidity."32

Petitioners claim that such reinstatement of the petition constitutes a reversible error on the part of the Court of Appeals, as the latter had allegedly lost jurisdiction to entertain a petition questioning the 25 March 1999 and 18 May 1999 Orders, as the same has already become "final and unappealable."33

Petitioners' claim is devoid of merit.

As regards the 11 May 1999 Order, the Court of Appeals had clearly not yet lost jurisdiction to entertain respondent CBC's Petition for Certiorari questioning the same, as the petition should be considered to have been filed within the 60-day period. The 60th day from the notice of denial of respondent CBC's Motion for Reconsideration or 17 July 1999, falls on a Saturday, and therefore the last day of the 60-day period should be considered to be that of the next working day.34

As regards the 25 March 1999 Order, it can be gleaned from respondent CBC's Motion for Reconsideration35 and Amended/Supplemental Motion for Reconsideration36 that they believed in good faith that they had complied with Section 4, Rule 65 of the 1997 Rules of Civil Procedure. Respondent CBC argued in said motions that the then Section 4, Rule 65 should be interpreted in the light of the requirement under Section 1 of the same Rule that a Petition for Certiorari may be availed of only when there is no other adequate remedy available in the ordinary course of law. And since a Motion for Reconsideration, is an adequate remedy which should be availed of, it asserts that the 60-day period should be counted from the notice of the denial of the same, in the absence of a provision, similar to that in Section 3, Rule 41,37 providing for the mere interruption of the period.

Section 4, Rule 65 was, in fact, amended and is now worded according to how respondent CBC perceived it to be:

SEC. 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.

Following, therefore, the mandate contained in Section 6, Rule 1 of the 1997 Rules of Civil Procedure,38 we have held that, when the higher consideration of justice so demands, technical rules may be relaxed to stay the dismissal of an appeal or like recourse on mere technicalities. This ideal becomes all the more imperative when non-compliance is not intended for delay.39

THERE WAS GRAVE ABUSE OF DISCRETION ON THE PART OF THE TRIAL COURT

Having brushed aside all the collateral issues in this petition, we finally go into the merits of petitioners' claim that the Regional Trial Court had not gravely abused its discretion in granting a writ of preliminary injunction in favor of petitioners. As intimated by respondents, such determination involves an analysis of the Order alleged to be a product of grave abuse of discretion.40 Such Order provides in full the following:

This is a verified complaint for specific performance and cancellation of real estate mortgage contract with damages filed by plaintiffs over parcels of land covered by Transfer Certificate of Titles Nos. T-56322, T-52273, T-56321, and T-23215. Before filing their answer defendants filed an extrajudicial foreclosure of the above-described properties, and consequently for the auction sale of the properties by a Notary Public, which was scheduled on February 15, 1999. Plaintiffs, through counsel, in a separate verified petition dated February 1, 1999, prayed for the issuance of a writ of preliminary injunction enjoining Notary Public Virgilio J. Cabanlet from conducting the extrajudicial foreclosure and auction sale on the date above-mentioned of the aforesaid parcels of land. On February 12, 1999 after summary hearing, the Court issued a temporary restraining order, thereby enjoining said Notary Public Virgilio J. Cabanlet from conducting the extrajudicial foreclosure and auction sale on February 15, 1999. The life span of the TRO is only for twenty (20) days, and in the meantime, the hearing on the propriety for the issuance of preliminary injunction is still ongoing and the next schedule is on March 29, 1999 for the reception of evidence for the defendants herein. However, this Court is duly informed that another extrajudicial foreclosure and auction sale of aforementioned mortgaged parcels of land is scheduled on March 29, 1999 by defendants, again through Notary Public Virgilio J. Cabanlet, prompting plaintiffs to ask the Court to enjoin the purported extrajudicial foreclosure and sale at public auction.

Based on plaintiffs' evidence already presented and because of another purported extrajudicial foreclosure on March 29, 1999, which this Court finds to be an utter disregard of the proceeding which is still ongoing and there being bad faith on the part of defendants in pursuing the same despite pendency of this case, this Court finds enough reason for the issuance of the writ of preliminary injunction prayed for so as to preserve the status quo, to prevent any irreparable damages or injuries to plaintiffs, and likewise to prevent the claim of plaintiffs which is still to be investigated, heard and adjudicated, from becoming moot and academic.

WHEREFORE, let a writ of preliminary injunction be issued forthwith in this case, ordering defendants herein China Banking Corporation, Romualdo I. Uy, and Bernardo T. Moradas, and Notary Public Virgilio J. Cabanlet or any of their representative, agent, or person acting on their behalf, to cease and desist from conducting and proceeding with the extrajudicial foreclosure and public auction sale on March 29, 1999 on the mortgaged properties described and mentioned in the notice of auction sale by Notary Public Virgilio J. Cabanlet, dated March 4, 1999. This writ of preliminary injunction shall continue to be enforced until the final determination of the main issue of this case or until further orders from this Court and upon filing of the bond by plaintiffs as provided for in the rules in the amount of ONE MILLION PESOS (P1,000,000.00)41

In brief, the Court of Appeals nullified the above order on the ground of grave abuse of discretion, sustaining respondent CBC's claim that there was an absence of legal basis or requisites to justify the issuance of the writ of preliminary injunction, and that Judge Calingin issued the writ despite the admitted defaults incurred by the spouses Lee in the payment of their loans juxtaposed with the validity and continued effectivity of the mortgages on the Borja and Lumbia properties. The Court of Appeals further ruled:

Private respondents' posture that they were duped into signing in blank what turned out to be the amendment to the original real estate mortgage (Annex "B-1") over the Borja property thinking that the document covered the smaller Lumbia property may be given plausibility if all of them are unlettered, which they do no[t] appear to be. Significantly, private respondents, along with respondent Renwick Warren's wife, Marivic, signed Annex "B-1." It should be noted, however, that the Lumbia property is registered in the name of the spouses Lee only. The fact, however, that Janssen Thaddeus and Renwick Warren both signed Annex "B-1," when only the spouses Lee's signature thereon is necessary if the intention was to mortgage the Lumbia lot, shatters their posture about being duped.

With the view We take of this case, private respondents are latching their case on this proposition: that they had settled all their accountabilities with the Bank, and, therefore, allowing the latter to foreclose on the mortgage heretofore constituted to secure their loans would cause them irreparable injury.

We are not the least persuaded. Based on the entire showing from both sides during the hearing for injunction, respondents Manuel Lee and Luisa Lee have not paid their overdue loans and other availments granted them under the credit facilities in question to warrant the cancellation of the mortgages put up to secure the credit accommodations. On the other hand, petitioner has clearly established its status as unpaid mortgagor-creditor entitled to foreclose the mortgages, a remedy provided by law (Caltex v. IAC, 176 SCRA 741), and the mortgage contract itself. In short, the minimum legal requisites for a preliminary injunction to issue have not been satisfied. The assailed issuance, therefore, by the respondent judge of the writ of injunction is unjustified.

Contrary to what the respondent judge wrote, there was no urgent necessity to issue the writ to protect the rights and interest of private respondents over either the Borja or the Lumbia property during the pendency of Civil Case No. 98-765. Assuming for argument that private respondents' rights over said property need legal protection, an annotation of lis pendens would, as petitioner pointed out below, have been an adequate protection. And besides, they could participate in the foreclosure sale and get their properties unencumbered by paying the obligations that they admit in the first place owing.

Significantly, respondent judge issued the writ of injunction on the finding that petitioner acted in bad faith in scheduling a foreclosure sale "despite [the] pendency of this case." We view the perceived bad faith of the petitioner to be of little moment. For, the bona fides of the author of the act against which the injunction is directed is not, in the strict legal viewpoint, a recognized requisite to justify the issuance of an injunction.42

Petitioners assail the Court of Appeals Decision primarily on the ground that it based its findings of facts on evidence not formally offered and submitted to the trial court during the hearing on the propriety of the issuance of the Writ of Preliminary Injunction.43

Respondent CBC counters that, although it was allowed to begin presentation of its evidence before the trial court, it was not given by said court with the opportunity to conclude its presentation and to formally rest its case. Respondent CBC was still in the middle of presenting its evidence when the trial court issued the questioned 25 March 1999 Order.44 Respondent CBC thus claims that it should not be faulted for its supposed failure to formally offer its evidence, which it would certainly have made if the trial court had not terminated the hearings.

Petitioner maintains that it was respondent CBC's fault why they were not able to finish presenting their evidence, quoting the trial court's Order denying respondent CBC's motion for reconsideration:

Moreover, the preliminary injunction in question was issued after due hearing, wherein the parties are given a chance to present evidence in support of their respective case. In that hearing, it was very apparent that defendants employed tactics which have delayed the proceedings in order that the Temporary Restraining Order (TRO) earlier issued by the Court, which has a lifetime of only twenty (20) days, will expire and so that they could proceed again with the extrajudicial foreclosure and sale at public auction of the properties involved in this case, thinking that the Court cannot issue a second TRO during the pendency of the hearing of the application for a preliminary injunction.

Defendants, during the hearing, presented voluminous documents which are no longer relevant to the issue which was the propriety for issuance of a preliminary injunction but which dealt mostly on matters involved in the main case. In the meantime, after the expiration of the TRO, defendants filed again a Petition for Extrajudicial Foreclosure and scheduled the Sale at Public Auction of the property on March 29, 1999. It was at this juncture that the Court, finding that there is bad faith on the part of the defendants and taking into account that plaintiffs will suffer great and irreparable damage, and the case will be rendered moot and academic, issued the preliminary injunction. There is no truth to the allegation of defendants that there was an understanding between the parties and the Court that the public auction sale of the properties was to be rescheduled after the expiration of the TRO and even before the termination of the hearing.45 (Underscoring supplied by petitioners.)

We find that there was, indeed, grave abuse of discretion on the part of Judge Calingin. While we agree with petitioners that "the assessment and evaluation of evidence in the issuance of the writ of preliminary injunction involves findings of facts ordinarily left to the trial court for conclusive determination,"46 and that the Court of Appeals had been in error when it sought to determine the facts based on evidence not presented or offered in evidence in the trial court, we would still find grave abuse of discretion on the part of the trial court even if the facts contested by petitioners are determined in their favor. Section 5, Rule 58 of the 1997 Rules on Civil Procedure provides:

Sec.5. Preliminary injunction not granted without notice; exception. - No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue ex parte a temporary restraining order to be effective only for a period of twenty (20) days from service on the party or person sought to be enjoined, except as herein provided. Within the said twenty-day period, the court must order said party or person to show cause, at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the preliminary injunction shall be granted, and accordingly issue the corresponding order. (Emphases supplied.)

The trial court failed to comply with the above provision when it failed to let respondent CBC finish its presentation of its evidence proving why injunction should not be granted.

Hearings on the application for preliminary injunction were held on 25 February 1999, 2 March 1999, 16 March 1999, and 19 March 1999. As pointed out by respondent CBC, the hearing on 19 March 1999 was adjourned upon motion of petitioners' counsel and over the objections of counsel for respondent CBC and despite the fact that there was ample time left for further proceedings on that day. The application was also set for hearing on 18 March 1999; however, said hearing was canceled at the instance of petitioners' counsel.

On the hearing held on 19 March 1999, respondent CBC's counsel tried to have the continuation of the hearings set before 29 March 1999, the date at which the extra-judicial foreclosure sale of the subject property was re-scheduled; to no avail.

As early as 16 March 1999 and before the hearing of 19 March 1999, petitioners and the presiding judge of the trial court were aware of the public auction set on 29 March 1999. At the hearing held on 19 March 1999, petitioners could, therefore, have joined respondent CBC in the latter's efforts to have the hearings continued on a date prior to 29 March 1999. Instead of doing so, petitioners' counsel, however, informed the court that he did not have any available date in his calendar for that week.

Section 5, Rule 135 of the 1997 Rules of Civil Procedure provides:

Sec. 5. Inherent powers of courts. - Every court shall have the power: x x x (b) to enforce order in proceedings before it, or before a person or persons empowered to conduct a judicial investigation under its authority; x x x (d) to control, in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a case before it, in every manner appertaining thereto; x x x

By means of its inherent powers stated in the above provision, the trial court should have forced respondent CBC, under pain of contempt, to finish presenting its evidence within the scheduled hearings, and to focus only on the most important evidence. It should have proceeded with marathon hearings if necessary, which would seldom be the case because of its power to limit the same in accordance with the summary nature of such proceeding. But the trial court cannot issue a writ of preliminary injunction based solely on plaintiff's evidence, as was expressly stated in the Order itself.47 The trial court cannot, without gravely abusing its discretion, issue such writ prior to the termination of the presentation of evidence by the party against whom the injunction shall be issued. The order to show cause (why the injunction should not be granted) stated in Section 5, Rule 58, is precisely directed on such party, and not on the party asking for the injunction, and therefore it was an error for the trial court to have given priority to petitioners' presentation of evidence.

WHEREFORE, the Decision and Resolution, dated 24 October 2000 and 19 February 2001, respectively, of the Court of Appeals are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Panganiban, C.J., Ynares-Santiago, Austria-Martinez, Callejo, Sr., JJ., concur.

Endnotes:


1 CA-G.R. SP No. 53789. Penned by Associate Justice (now Supreme Court Associate Justice) Cancio C. Garcia with Associate Justices Romeo A. Brawner and Andres B. Reyes, Jr., concurring. CA rollo, pp. 307-322.

2 CA rollo, p. 416.

3 Rollo, pp. 47-53.

4 Id. at 61.

5 Id. at 408-410.

6 Id. at 422.

7 Id. at 424-425.

8 Id. at 344-346.

9 Id. at 374-378.

10 Id. at 477-479.

11 Id. at 472.

12 Id. at 473.

13 Id. at 473.

14 CA rollo, p. 356.

15 Id. at 423.

16 Security First National Bank v. Sartori, 34 Cal App 2d 408, 93 P2d 863.

17 Rollo, p. 426.

18 43A C.J.S., Injunctions, Sec. 288.

19 Id.

20 359 Phil. 425 (1998).

21 The original complaint filed earlier was dismissed on the ground that it was not properly verified.

22 Verzosa v. Court of Appeals, supra note 18 at 438-439.

23 "SEC.3. Indirect contempt to be punished after charge and hearing. - After a charge in writing has been filed, and an opportunity given to the respondent to comment thereon within such period as may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the following acts may be punished for indirect contempt:

x x x

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including the act of a person who, after being dispossessed or ejected from any real property by the judgment or process of any court of competent jurisdiction, enters or attempts or induces another to enter into or upon such real property, for the purpose of executing acts of ownership or possession, or in any manner disturbs the possession given to the person adjudged to be entitled thereto; x x x" (Rules of Court, Rule 71.)

24 "SEC. 4. How proceedings commenced. - Proceedings for indirect contempt may be initiated motu proprio by the court against which the contempt was committed by an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt.

In all other cases, charges for indirect contempt shall be commenced by a verified petition with supporting particulars and certified true copies of documents or papers involved therein, and upon full compliance with the requirements for filing initiatory pleadings for civil actions in the court concerned. If the contempt charges arose out of or are related to the principal action pending in the court, the petition for contempt shall allege that fact but said petition shall be docketed, heard and decided separately, unless the court in its discretion orders the consolidation of the contempt charge and the principal action for joint hearing and decision." (Rules of Court, Rule 71.)

25 43A C.J.S., Injunctions, Sec. 285.

26 Id., Sec. 286.

27 Id.

28 264 SCRA 271 (1996).

29 42 Am Jur 2d, Sec. 317.

30 Id.

31 CA rollo, p. 253.

32 Id.

33 Rollo, p. 428.

34 Section 1, Rule 22: "SEC. 1. How to compute time. - In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day."

35 CA rollo, pp. 205-212.

36 Id. at 220-230.

37 Section 3. "x x x The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed." (Rules of Court, Rule 41.)

38 Section 6, Rule 1: "SEC. 6. Construction. - These Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action or proceeding."

39 Soriano v. Court of Appeals, G.R. No. 100525, 25 May 1993, 222 SCRA 545, 553.

40 Rollo, pp. 56-57.

41 Id. at 90-91.

42 Id. at 58-60.

43 Id. at 411.

44 Id. at 448.

45 CA rollo, p. 51.

46 Lopez v. Court of Appeals, G.R. No. 110929, 20 January 2000, 322 SCRA 686, 693.

47 Based on plaintiffs' evidence already presented and because of another purported extrajudicial foreclosure on March 29, 1999, which this Court finds to be an utter disregard of the proceeding which is still ongoing and there being bad faith on the part of defendants in pursuing the same despite pendency of this case, this Court finds enough reason for the issuance of the writ of preliminary injunction prayed for so as to preserve the status quo, to prevent any irreparable damages or injuries to plaintiffs, and likewise to prevent the claim of plaintiffs which is still to be investigated, heard and adjudicated, from becoming moot and academic. (CA rollo, p. 43.)

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