C & C COMMERCIAL CORPORATION AND CLARA REYES PASTOR AND OTHER STOCKHOLDERS OF C & C COMMERCIAL CORPORATION SIMILARLY SITUATED, PETITIONERS, VS. PHILIPPINE NATIONAL BANK, NATIONA…

The applicability to the case at bar of Presidential Decree No.
385, dated January 31, 1974, prohibiting the issuance of injunctions against
foreclosure sales sought by government financial institutions is the principal
problem that needs to be resolved in the instant special civil action for certiorari.

The controversy now before this Court traces its roots to the
period between February 27, 1957 and December 20, 1960 when petitioner C &
C Commercial Corporation (now Asbestos Cements Products Phil. Inc., hereinafter
referred to as ACPPI) opened seven letters of credit with the respondent
Philippine National Bank (hereinafter referred to as PNB) to import machines
and equipment for its plant.  Since
petitioner’s obligations under the said letters of credit totalling
five million four hundred fifty-one thousand eight hundred fifty-one pesos and
eighty-three centavos (P5,451,851.83) as of January 31, 1968 were not paid, PNB
instituted on March 13, 1968 a collection suit with a prayer for preliminary
attachment against ACPPI, impleading Clara Reyes
Pastor as party defendant in her capacity as joint and solidary
debtor and controlling stockholder.

However, instead of proceeding with the collection suit, PNB
agreed, at the behest of Mrs. Pastor, as majority stockholder of ACPPI, to
enter into a Voting Trust Agreement on March
5, 1969 to protect PNB’s interests in
ACPPI.  The collection suit was therefore
dismissed without prejudice.  Private
respondents, PNB and its subsidiary or affiliate, the National Investment
Development Corporation (hereinafter referred to as NIDC), as the trustees
named under the said agreement, immediately proceeded to take over the
management of ACPPI pursuant to the agreement which granted them “full
authority, subject only to the limitations set by law and the other conditions
set forth herein, to manage the affairs and the accounts and properties of C
& C Commercial Corporation, Inc.; to choose its directors and key officers;
to safeguard its interest and those of its creditors; and in general, to
exercise all such powers and discharge such functions as inherently pertain to
the ownership and/or management of such corporation” for a period of five
(5) years from the date of its execution or up to March 1974 [Rollo, pp. 32-40.]

During the time that the Voting Trust Agreement was in force,
ACPPI executed a chattel mortgage dated September 6, 1971 over its personal
properties in favor of NIDC as security for the loan of seven hundred thousand
pesos (P700,000.00) granted by the latter to the former to finance the
production of asbestos cement products and their exportation to Brunei and to
repair/rehabilitate its plant building which had been damaged by typhoon “Yoling“.

On August 27, 1973,
the accounting firm of Sycip, Gorres
and Velayo, after examining the management and
operations of ACPPI for the first three years under the Voting Trust Agreement,
submitted a report finding that the PNB/NIDC management of ACPPI was a complete
and disastrous failure.  In view of this
report, petitioners ACPPI (then C & C Commercial Corporation), Clara Reyes
Pastor and other stockholders of ACPPI similarly situated filed a complaint on
October 16, 1973 in the Quezon City Branch of the
Court of First Instance of Rizal for the termination
of the Voting Trust Agreement with a prayer for and award of damages in the sum
of about twenty–seven million pesos (P27 M) alleging, inter alia, that by reason of the grossly negligent or
incompetent management of ACPPI by private respondents, the corporation
suffered huge losses.  In the aforesaid
case, which was docketed as Civil Case No. Q-18176, ACPPI also sought as an
ancillary remedy the appointment of a receiver.

On November 27, 1973, the respondents PNB and NIDC filed their
answer to the complaint denying the charge of mismanagement and alleging that ACPPI’s indebtedness to PNB had reached an amount of eleven
million five hundred thirty-eight thousand twenty-nine pesos and sixty-three
centavos (P11,538,029.63) as of August 31, 1973 excluding daily interest, and
to NIDC, one million two hundred nineteen thousand nine hundred eighty-two
pesos (P1,219,982.00) as of April 15, 1973 excluding daily interest.

On January 22, 1974,
the lower court issued an order appointing Bayani Barzaga as receiver. 
But subsequently, in an order dated November 13, 1974 — pursuant to an
agreement reached between ACPPI, PNB and NIDC to provide a mutually acceptable
mechanism for management of ACPPI pending the settlement negotiations between
them — the court a quo converted the one-man receivership of Barzaga into a joint receivership, with PNB-NIDC nominee
Atty. Ricardo L. Sadac and ACPPI nominee Atty.
Roberto L. Bautista assuming office as joint receivers together with Barzaga.

In the meantime, on December 19, 1973, Development Bank of the
Philippines (hereinafter referred to as DBP) executed a deed of assignment in
favor of PNB whereby the former assigned to the latter its rights and interests
under the promissory notes and deeds of real estate mortgages executed on May
16, 1960 and May 8, 1961 by ACPPI in favor of DBP for the principal amounts of
four hundred ninety thousand pesos (P490,000.00) and seven hundred ninety-six
thousand pesos (P796,000.00), respectively.

On March 11, 1974,
PNB filed with the Provincial Sheriff of Rizal a
“PETITION FOR SALE UNDER ACT 3135 AS AMENDED”.  The foreclosure sale initiated by PNB was not
only to recover on the allegedly defaulted secured loans of four hundred
ninety thousand pesos (P490,000.00) and seven hundred ninety-six thousand pesos
(P796,000.00) assigned by DBP to PNB but also for:  1) the unsecured advances granted by
PNB to ACPPI relating to the letters of credit opened sometime between 1957 and
1960:  2) the unsecured advances
from PNB during the five-year period of the Voting Trust Agreement; and, 3) the
interests, penalties and charges computed thereon during the same five-year
period when PNB controlled and managed ACPPI. 
A foreclosure sale was thus sought to satisfy ACPPI’s
total indebtedness to PNB in the amount of fourteen million five hundred
seventy-one thousand seven hundred thirty-six pesos and eighty-seven centavos
(P14,571,736.87) as of January 31,1974.

ACPPI wrote a letter to the Board of Directors of PNB expressing
its opposition to the contemplated extrajudicial foreclosure sale.  In reply, PNB sent a letter agreeing to meet
with ACPPI in settlement negotiations. 
However, ACPPI’s proposals for the settlement
of its accounts with PNB were rejected for not being economically feasible and
so, PNB made a final demand for payment with a warning that unless full payment
or other satisfactory arrangement was made, PNB would proceed with the
scheduled auction sale if the mortgaged properties on September 30, 1975.

On September 22, 1975, Civil Case No. 22047, a suit for
nullification of the extrajudicial foreclosure proceedings with prayer for a
writ of injunction, was filed by ACPPI against PNB and the Provincial Sheriff
of Rizal in the Pasig
Branch of the Court of First Instance of Rizal,
contesting PNB’s foreclosure of the mortgage and the
auction sale scheduled for September 30, 1975. 
Said court subsequently issued an order dated September 30, 1975 restraining the scheduled
foreclosure sale and directing the maintenance of the status quo
until further orders of the court.

Meanwhile, NIDC foreclosed the chattel mortgage executed by ACPPI
on September 6, 1971 and filed with the Sheriff of the City of Manila a
petition for the auction sale of “all the finished products in inventory
located at the MORTGAGOR’s (ACPPI) plant at Barrio Napindan, Taguig, Rizal . . .” [Rollo, p. 165]
in order to satisfy an alleged total indebtedness of ACPPI to NIDC amounting to
one million eight hundred forty-five thousand one hundred nine pesos and
twenty-two centavos (P1,845,109.22).  On October 3, 1975, ACPPI instituted
with the same Pasig Branch of the Court of First
Instance of Rizal Civil Case No. 22133 for the
nullification of the extrajudicial foreclosure proceedings sought by NIDC
scheduled for October 16, 1975.  The lower court also granted a temporary
restraining order in the latter case.

On December 17, 1975, on separate motions to dismiss filed by the
respondents PNB and NIDC in Civil Cases Nos. 22047 and 22133, respectively, the
Court of First Instance dismissed said civil cases in separate decisions but on
the common ground that these cases violate the procedural rule against
splitting a single cause of action and also, that ACPPI, being under
receivership, was without legal capacity to contest the foreclosures.

On January 5, 1976,
ACPPI moved for leave to file a supplemental complaint with a prayer for the
issuance of a writ of preliminary injunction in Civil Case No. Q-18176, the
action for termination of the Voting Trust Agreement, in order to submit for
adjudication in the same proceeding and before said court the renewed threats
by PNB and NIDC to effect the sale at public auction of the foreclosed
properties.

The lower court in an Order dated January 15, 1976 admitted the
supplemental complaint but denied the application for injunction on account of
the provision of Presidential Decree No. 385 prohibiting the issuance of
restraining orders and temporary or permanent injunctions against any
government financial institution in any action taken by such institution in
compliance with the mandatory foreclosure provided in said decree.

Petitioners filed a motion for reconsideration of the order but
the motion was denied.  Hence,
petitioners’ recourse to this Court by way of a special civil action for certiorari
with injunction, alleging grave abuse of discretion on the part of respondent
Judge Augusto Valencia, Presiding Judge of the Court
of First Instance of Rizal, Quezon
City Branch XXXI, in issuing the aforementioned orders.

In a resolution dated January 20, 1976, this Court resolved to
issue a temporary restraining order to enjoin the sale by PNB and NIDC of the
foreclosed properties scheduled on January 21 and 30, 1976.

On October 7, 1976,
petitioner-movant Clara Reyes Pastor filed in the
instant case a Motion for Termination of Receivership with Alternative Motion
for Substitution of Receiver.

This Court however finds no legal basis for granting said motion
as the receivership of ACPPI is not at all an issue in the instant case.  Time and again, this Court has acknowledged
that it possesses no authority to rule upon non-jurisdictional issues in a certiorari
proceeding.  Thus, “it is settled to
the point of being elementary that the only question involved in certiorari
is jurisdiction, either want of jurisdiction or excess thereof. . .  .” [F.S. Divinagracia
Agro-Commercial Inc. v. Court of Appeals, G.R. No. L-47350, April 21, 1981, 104 SCRA 180. 191.]

Besides, the said motion was premature.  It must be noted that on September 25, 1975, petitioner ACPPI filed before
the lower court an omnibus motion to annul the joint receivership, to which
motion respondents filed their joint opposition on October 2, 1975. 
On October 8, 1975,
the lower court issued an order denying petitioner’s aforementioned omnibus
motion.  Petitioner moved to reconsider
the said order and this motion is still awaiting resolution by the trial
court.  In view of the pendency of the aforesaid motion for reconsideration, it
would be premature for this Court to act on the motion for termination of
receivership filed before it. 
Petitioners should await resolution by the lower court of their omnibus
motion to annul joint receivership before resorting to this Court.

The crucial problem to be dealt with in this petition is whether
the trial court’s refusal to grant an injunction against the threatened
foreclosure sales by PNB and NIDC constitutes grave abuse of judicial
discretion amounting to lack or excess of jurisdiction.

The court a quo‘s basis for denying the injunction
sought by ACPPI is P.D. 385 which makes it “mandatory for government
financial institutions . . . to foreclose the collaterals and/or securities for
any loan, credit, accommodation 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,
including interests and other charges, as appearing in the books of account
and/or related records of the financial institution concerned”.  [Section 1, P.D. 385.]

Pursuant to the aforesaid law:

Sec. 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
had been paid after the filing of foreclosure proceedings. . . [Underscoring
supplied.]

*           *           *

Since the arrearages on the PNB and NIDC loans cover the entire
amount of the indebtedness, thus more than satisfying the 20% arrearages requirement
under the law, it would seem that this case falls within the purview of the
general rule laid down in P.D. 385. 
Injunction will not be granted except upon payment of twenty percent
(20%) of the outstanding arrearages after filing of the foreclosure
proceedings.  This has not been done
here.  Nevertheless, the Court believes
that, in view of the peculiar factual circumstances obtaining in the case, P.D.
385 should not have been applied peremptorily by the respondent trial judge.

I. THE PNB FORECLOSURE SALE:

The extrajudicial foreclosure sale sought by PNB is based on two
deeds of real estate mortgage executed on May 16, 1960 and May 8, 1961,
respectively, by ACPPI in favor of DBP to secure promissory notes for the
principal amounts of four hundred ninety thousand pesos (P490,000.00) and seven
hundred ninety-six thousand pesos (P796,000.00), respectively.  PNB acquired all the rights and interests
under the aforementioned deeds of mortgage by virtue of a deed of assignment
executed by DBP in its favor on December
19, 1973.

But the PNB foreclosure sale seeks to satisfy not only the
amounts stated in the secured promissory notes but also the unsecured advances
amounting to some five million four hundred thousand pesos (P5.4 M) granted by
PNB on account of the opening of letters of credit by ACPPI sometime between
1957 and 1960 before DBP assigned the mortgages to PNB in 1973.  The Court’s inquiry is thus centered on
whether the foreclosure sale pursuant to the DBP-assigned mortgage should
proceed as ordered by the respondent trial judge considering that the sale also
seeks to satisfy previously incurred unsecured obligations.

A. As to the DBP-assigned credits, there is no doubt that
foreclosure can proceed as these were secured by appropriate mortgages.  Moreover, contrary to petitioner’s
pretensions, the validity of the assignment of the mortgage credit by DBP to
PNB is beyond question.  Article 1624 of
the Civil Code provides that “an assignment of credits and other
incorporeal rights shall be perfected in accordance with the provisions of
Article 1475” which in turn states that “the contract of sale is
perfected at the moment there is a meeting of the minds upon the thing which is
the object of the contract and upon the price.” The meeting of the minds
contemplated here is that between the assignor of the credit and his assignee,
there being no necessity for the consent of the debtor, contrary to
petitioner’s claim.  It is sufficient
that the assignment be brought to his knowledge in order to be binding upon
him.  This may be inferred from Article
1626 of the Civil Code which declares that “the debtor who, before having
knowledge of the assignment, pays his creditor shall be released from the
obligation.” This view of Manresa
was already quoted with approval by this Tribunal.  Thus:

*           *           *

The above-mentioned article (Article 1527 of the Old Civil Code)
states that a debtor who, before having knowledge of the assignment, should pay
the creditor shall be released from the obligation.

In the first place, the necessity for the notice to the debtor in
order that the assignment may fully produce its legal effects may be inferred
from the above.  It refers to
a notice and not to a petition
for the consent which is not necessary.  We say that the notice is not necessary in
order that the legal effects may be fully produced, because if it should be
omitted, such omission will not imply that the assignment will not exist
legally, but that its effects will be limited to the parties thereto; at least,
they will not reach the debtor [Sison v. Yap Tico, 37 Phil. 584, 587 (1918); Underscoring supplied.]

As the petitioner does not claim absence of any notice of the
assignment but only lack of its consent thereto, the validity of DBP’s assignment of the mortgage credit as well as the
right of PNB as assignee, to foreclose the assigned mortgage, cannot be
doubted.

B. However, petitioners question the inclusion of the unsecured
obligations of ACPPI in the foreclosure sale. 
In this regard, petitioner advances the following proposition:  The unsecured advances by PNB to ACPPI
relating to the opening of letters of credit in 1957 cannot be tacked on to the
mortgage loans acquired by PNB through assignment from DBP which are now being
foreclosed.  To do so would be to allow
an originally unsecured loan to be covered by a mortgage securing another loan
without the consent of the mortgagor. 
Since the foreclosure sale sought by PNB includes such unsecured
obligations, petitioners argue that the same should be enjoined [Rollo, p. 25.]

PNB sought to justify its inclusion of the unsecured obligations
in the aggregate amount of indebtedness secured by the mortgages to be
foreclosed by citing a provision in the assigned DBP Mortgage Contract which
states:

Now, therefore, for and in consideration of the premises and as
security for the payment of the note or notes approved in order and/or the
interest there and/or other obligation arising thereunder or hereunder, the mortgagor
does hereby transfer and convey by way of first mortgage, unto the Mortgagee,
its successors and assigns, the real and /or personal properties described in
the list appearing on the back of this document . . . [Rollo,
p. 388.]

However, the aforequoted terms of the
mortgage contract do not support PNB’s
conclusions.  The mortgage contract
clearly secures only the amount of the promissory note executed by ACPPI and
the interest thereon and other obligations which may arise under
the promissory note (hence, the word “thereunder“)
and under the mortgage contract (hence, the word “hereunder”).  Certainly, the previously incurred
debt of ACPPI cannot be embraced within the terms of the DBP mortgage contract
which merely extends security to future*, but not past obligations.  PNB also argues in vain that the inclusion of
the unsecured obligations in the contemplated foreclosure proceedings finds
support in the law which states that “(i)t shall
be mandatory . . . to foreclose the collaterals and/or securities for any loan,
credit accommodation and/or guarantees granted by them whenever the arrearages
on such account, including accrued interest and other charges, amount to at
least twenty percent of the total outstanding obligations, including interest
and other charges, as appearing in the books
of accounts and/or related records of the
government financial institution concerned. . . .” (Section 1, P.D. 385.)
PNB maintains that the phrase “related records” may be interpreted to
mean such records evidencing the mortgage credit assigned and other records of
another government financial institution which are related to the assigned
obligation.  PNB’s
stand is that the credits appearing in the records of the mortgagor or any
other government financial institution, whether secured or unsecured must
necessarily be included as long as they are related to the mortgage being
foreclosed.

This argument must be rejected. 
The law, in authorizing a mandatory foreclosure by government financial
institutions, contemplates secured obligations appearing in the books of
accounts and/or related records of the government financial institution
concerned.  The clear terms of the law
indicate that foreclosure shall be made on the “collaterals and/or
securities for any loan, credit accommodation
and/or guarantees granted by them” [Section 1, P.D. 385.]
Since the original advances by PNB were not secured by any mortgage, these
cannot be included in the foreclosure proceedings sought by PNB for the simple
reason that foreclosure of mortgage presupposes an unpaid obligation secured by
the mortgage.  In addition, the rule is
well settled that an action to foreclose a mortgage must be limited to the
amount mentioned in the mortgage except in mortgage contracts securing future
advancements [Lim Julian v. Lutero, 49 Phil. 703
(1926).]

In view of the fact that an unsecured obligation is being
included among the obligations of ACPPI sought to be satisfied by the PNB
foreclosure sale, the lower court’s blanket application of P.D. 385 and the
consequent denial of ACPPI’s application for injunction
against the threatened foreclosure by PNB constitute grave abuse of
discretion.  P.D. 385, in laying down the
prohibition on the issuance of an injunction, did not intend to make the
debtor’s mortgaged property answer for an unsecured obligation.

Since the petition for the PNB foreclosure sale was materially
defective in that it included in the amount of the total indebtedness to be
satisfied by the sale previously incurred unsecured obligations, the assailed
order of the respondent judge denying ACPPI’s motion
for the issuance of a preliminary injunction must accordingly be set aside and
the extrajudicial foreclosure sale sought by PNB should be enjoined.  This is without prejudice however to the
right of PNB to petition for an extrajudicial foreclosure sale to satisfy the
obligations specifically secured by the DBP-assigned mortgage after due
publication of an appropriate notice of sale.

II.  THE NIDC FORECLOSURE SALE:

ACPPI challenges the right of NIDC to foreclose the chattel
mortgage in its favor on the grounds that (1) part of the principal loan
secured by the NIDC mortgage was not expended for the purposes for which it was
intended; and (2) the subsequent advances granted by NIDC during the time that
the Voting Trust Agreement was in force are merely “fictitious”
amounts and therefore, do not constitute valid and demandable obligations;
hence, the mortgage securing the same is likewise void [Petition, p. 21; Rollo, p. 24.]

In this case, NIDC sought to include certain advances granted to
ACPPI during the lifetime of the Voting Trust Agreement in the total amount of
the mortgage indebtedness secured by the chattel mortgage.  Such action was based on an all–embracing
clause in the mortgage contract allowing said mortgage to “stand as
security for said obligations and any and all other obligations of the
MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such
obligations have been contracted before, during or after the constitution of
this mortgage” [Rollo, p. 226.]

Without passing upon the validity of this clause, the Court rules
that in view of the dictum laid down in Filipinas Marble Corporation
v. Court of Appeals [G.R. No. 68010, May 30, 1986,
142 SCRA 180], the foreclosure sale sought by NIDC should have been
enjoined.  The rationale for enjoining a
foreclosure sale sought by a government financial institution charged with
mismanagement and misappropriation of the proceeds of the loan secured by its
mortgage, as aptly expressed in the aforementioned decision penned by Mr.
Justice Gutierrez finds relevance in the instant case.  Thus:

*           *           *

Presidential Decree No. 385 was issued primarily to see to it that
government financial institutions are not denied substantial cash inflows,
which are necessary to finance development projects all over the country, by
large borrowers, who when they become delinquent, resort to court actions in
order to prevent or delay the government’s collection of their debts and loans.

The government however is bound by basic principles of fairness and
decency under the due process clause of the Bill of Rights.  P.D. 385 was never
meant to protect officials of government
lending institutions who take over the
management of a borrower corporation, lead
that corporation to bankruptcy through mismanagement
or misappropriation of its funds, and
who, after ruining it, use the mandatory
provisions of the decree to avoid the
consequences of their misdeeds.

The designated officers of the government financing institution cannot
simply walk away and then state that since the loans were obtained in the
corporation’s name, then P.D. 385 must be peremptorily applied and that there
is no way the borrower corporation can prevent the automatic foreclosure of the
mortgage on its properties once the arrearages reach twenty percent (20%) of
the total obligation no matter who was responsible.  [At 188-189; Underscoring supplied.]

*           *           *

In the Filipinas Marble case, petitioner Filipinas
Marble Corporation (FMC) applied for a loan in the amount of five million
dollars ($5 M) with respondent Development Bank of the Philippines (DBP) which
was granted subject to the conditions, inter alia,
that petitioner shall have to enter into a management contract with respondent Bancom Systems Control, Inc. (Bancom)
and that the key officers/executives to be chosen by Bancom
for the corporation shall be appointed only with DBP’s
prior approval and made directly responsible to DBP.  Pursuant to these conditions, FMC entered
into a management contract with Bancom whereby the
latter agreed to manage the company for a period of three years.

Subsequently, FMC filed a complaint seeking annulment of the
deeds of mortgage and deed of assignment which it executed in favor of DBP in
order to secure the five million dollars ($5 M) loan, averring failure of
consideration with regard to the execution of the said deeds and claiming that
the respondents and their directors/officers mismanaged and misspent the loan,
leaving the petitioner “desolate and devastated”.  It charged respondents DBP and Bancom of abandoning the petitioner’s project for which the
approved loan was intended.

This Court ruled that it cannot make any conclusions as to
whether DBP and Bancom actually misappropriated and
misspent the five million dollars ($5 M) loan as this matter should rightfully
be litigated below in the main action. 
It thus held that

.  .  . (p)ending the outcome of such litigation,
P.D. 385 cannot automatically be applied for if it is really proven that
respondent DBP is responsible for the misappropriation of the loan, even if
only in part, then the foreclosure of the petitioners’ properties under the
provisions of P.D. 385 to satisfy the whole amount of the loan would be a gross
mistake.  It would unduly prejudice the
petitioner, its employees and their families.

Only after trial on the merits of the case can the true amount of
the loan which was applied wisely or not, for the benefit of the petitioner, be
determined.  Consequently, the extent of
the loan where there was no failure of consideration and which may be properly
satisfied by foreclosure proceedings under P.D. 385 will have to await the
presentation of evidence in a trial on the merits .  .  .  . [Id.
at 189-190.]

In fine, since the issue of misappropriation of the proceeds of
the loan is still being litigated, the liability of FMC for the loan which was
the basis of the mortgage being foreclosed was not yet settled; hence, the
Court’s allowance of an injunction against the foreclosure sale.

In the instant controversy, the liability of ACPPI for the loans
secured by the NIDC chattel mortgage is likewise still in dispute in the
proceedings below inasmuch as petitioners are seeking nullification of said
loans for failure or lack of consideration in the pending action before the
court a quo.  Petitioners
contend that the portion of the principal NIDC loan supposed to be used to fund
the repairs on the ACPPI plant building had not been expended for such intended
purpose.  Also, they challenge the
adequacy of consideration of the additional advances allegedly granted by NIDC
to ACPPI for the payment of the various services availed of or utilized by
NIDC/PNB which petitioners claim to be fictitious.

Thus, although initially, the issue before the lower court was
limited to whether petitioners herein are entitled to a termination of the
Voting Trust Agreement, additional issues concerning the validity of the NIDC
loans were raised in the supplemental complaint filed before said court [See
Rollo, p. 179, et seq.] In line with
the Filipinas Marble ruling, pending determination by the lower
court of these issues involving the misappropriation and/or mismanagement of
the proceeds of the NIDC loans and the larger issue of failure of
consideration, the sale at public auction of the foreclosed chattels should be
enjoined, P.D. 385 notwithstanding.

IN VIEW OF THE FOREGOING, the instant petition for certiorari
is hereby GRANTED and the questioned order of the respondent trial judge dated January 15, 1976 denying petitioners’
application for a writ of preliminary injunction is hereby SET ASIDE.  The respondent sheriffs are hereby ordered to
DESIST from carrying out the extra­judicial foreclosure sales sought by PNB and
NIDC in the petitions dated March 11,
1974 and September 25,
1975, respectively.  The
temporary restraining order issued by the Court dated January 20, 1976 is
accordingly made PERMANENT, subject to the qualifications stated in the
following paragraph.

This judgment is without prejudice to the right of PNB, after due
publication of an appropriate notice of sale specifying the amount of the
secured obligations, to cause the foreclosure sale on the DBP-assigned real
estate mortgages dated May 6, 1960 and May 8, 1961.  On the other hand, the NIDC foreclosure sale,
upon filing of a bond in such amount as the trial court may deem adequate, from
an indubitably solvent bonding company, shall be enjoined until the final
resolution by the court a quo of Civil Case No. Q-18176.

Finally, as stated at the outset, petitioner Clara Reyes Pastor’s
“Motion for Termination of Receivership with Alternative Motions” is
DENIED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., and Bidin, JJ., concur.

Feliciano, J., in the result.

*
Thus, the DBP mortgage also provides that “(i)n
the event that the mortgagor execute subsequent promissory note or notes
either as a renewal of the former note, as extension thereof, or as a new loan,
this mortgage shall stand as security for the payment of said note or notes
without the necessity of executing a new contract and this mortgage shall have
the same force and effect as if the said promissory note or notes were existing
on the date hereof” [Rollo, pp. 388-389;
Underscoring supplied.]