SONIO PALANCA, PRIMO PALANCA, CARLOS PALANCA, DEHE PALANCA, QUINTIN GARCIA, PABLO PALANCA, BARTOLOME PALANCA, CHU TIONG, ADRIANO GALEOS, LUISA PALANCA AND ALFREDO SEVILLE, PETIT…

This is an original action for certiorari to annul two (2) orders issued by Hon. Vicente Cusi, Jr., as Judge of the Court of First Instance of Davao, in Civil Case No.4716 thereof.  Petitioners prayed, also, for the issuance of
a writ of preliminary injunction restraining respondents Manufacturers Bank and
Trust Company and Sancho Canoy,
as Deputy Sheriff of Davao,
from proceeding with the extrajudicial foreclosure and sale of the properties
involved in said case, which writ We issued upon the posting of a bond in the
sum of P50,000.

On May 25, 1964, petitioners herein, namely, Sonio
Palanca, Primo Palanca,
Carlos Palanca, Dehe Palanca, Quintin Garcia, Pablo Palanca, Bartolome Palanca, Chu Tiong,
Adrian Galeos, Luisa Palanca
and Alfredo Seville – who (except Chu Tiong, who is related by affinity to the Palancas, and Quintin Garcia) are
officers and/or stockholders of Davao Ricorn, Inc. – executed a special power of attorney, Annex
A, whereby they appointed Marcelino E. Calinawan, Jr. – who was the Chairman of the Board of
Directors and President of the Davao Ricorn, Inc. – their attorney-in-fact, for them and in
their “names, place and stead, x x x“:

“To make, execute, sign and deliver mortgages of real estate
for the purpose of securing the payment of any loan, indebtedness or obligation
which our Attorney-In-Fact may obtain or contract personally or in behalf of
the DAVAO RICORN, INC., with the MANUFACTURERS BANK & TRUST COMPANY of Manila,
its renewal, extension of payment of the whole or any part thereof x x x“

and authorizing him “to transfer and
convey, by way of mortgage, “eight (8) parcels of registered lands
described in said Annex A. Soon later, or on May 28, 1964, Calinawan
executed, on behalf of petitioners herein, in favor of the Manufacturers Bank
and Trust Company, hereinafter referred to as the Bank, a deed of real estate
mortgage (Annex B) on said eight (8) parcels of land, to secure the payment
“of certain loans, overdrafts and other credit accommodations
obtained” by Davao Ricorn,
Inc. – hereinafter referred to as Ricorn – and
“those that may” thereafter “be obtained” – “the
principal of all of which” was “fixed at FOUR HUNDRED SIXTY THOUSAND
ONLY Pesos (P460, 000.00) ” – as well as “those that the Mortgagee
may extend to the Mortgagor, including interest and expenses or any other
obligation owing to the mortgagee, x x x.”

Presently, or on June 3, 1964, Calinawan,
acting once more on behalf of petitioners herein, executed, in favor of the
same Bank, deed, Annex C, constituting a real estate mortgage on other six (6)
parcels of land belonging to said petitioners, to guarantee the payment of
“loans, overdrafts, and other credit accommodations obtained” from
the Bank by the Ricorn – the “principal of all
of which” was fixed at P120,000 – as well as those that the
“Mortgagee” may extend to the “Mortgagor”.  This instrument was acknowledged at Manila
before Notary Public Jose A. Ortiz and entered as “Doc. No. 511, Page 29,
Book. XVIII” of his Notarial Register, Series of
1964.  Three (3) days later, or on June
6, 1964, petitioners executed in favor of Calinawan
the special power of attorney, Annex D, granting him the authority mortgage the
aforementioned six (6) parcels of land to the Bank as security for the payment
“of any loan, indebtedness or obligation” which he “may obtain or contract
personally or in behalf of the DAVAO Ricorn,
INC.,” and “ratifying and confirming all that our said attorney (his
delegates or substitutes) shall lawfully do or cause to be done
particularly” the aforementioned “REAL ESTATE MORTGAGE executed”
by him in favor of the Bank “on June 3, 1964, as evidenced by a public
document denominated as ‘Doc. No. 511,’ entered on ‘Page 29, Book XVIII, Series
of 1964,’ of the Notarial Register of Notary Public
JOSE A. ORTIZ of Manila x x x.”

Both deeds of mortgage authorized the Bank, should the “Mortgagor
x x fail or refuse to pay any of the sums of money
secured” by the mortgage “or any part thereof” or “fail to
perform any of the conditions stipulated” therein, to foreclose the
mortgage extra-judicially, and to this end, the President of the Bank or his
substitute was “appointed attorney-in-fact of the Mortgagor, with full
power of substitution, to enter upon and take possession, of the mortgaged
properties without the order of any court or any authority other than that
granted” therein “and to sell and dispose of the same x x x in accordance with the
provisions of Act No. 3135 of the Philippine Legislature.  x x x.”

It appears that on or about April 7, 1965, the Bank filed, with the Office of the
Sheriff of Davao, a petition (Annex 1) for the extrajudicial
foreclosure of said mortgages to satisfy an indebtedness of Davao
Ricom, Inc., allegedly aggregating P574,401.08, as of
March 15, 1965.  Thereupon, the sheriff caused to be given and
published the corresponding notice of extrajudicial sale of the fourteen (14)
lots aforementioned to take place on June
17, 1965.^[1]
Hence, on June 15, 1965,
herein petitioners filed Civil Case No. 4716 of the Court of First Instance of Davao against the Bank and Sancho
Canoy, as Deputy Sheriff of Davao.  Alleging that, although “the obligation
to pay the mortgage debt aforementioned does not fix a period, x x x from the nature and
circumstances it can be inferred that a period was intended,” petitioners
prayed in their complaint, Annex 2, that judgment be rendered.  “fixing a period within which” they
“should comply with their obligation to pay the” Bank and declaring
that such obligation is “not yet due and demandable,” and that,
meanwhile, a writ of preliminary injunction issue restraining the Bank and the
sheriff “from proceeding with the extrajudicial foreclosure and the sale
of the mortgaged properties.” Thereupon, or on June 16, 1965, said court –
then presided over by Hon. Vicente Bullecer – issued ex
parte the auxiliary writ prayed for.  On June
25, 1965, the Bank moved to dissolve said writ, but the lower court
denied it.^[2]
Meanwhile, petitioners had amended the complaint and prayed therein for a
declaration of extinction of the guaranty and discharge of the mortgage, upon
the theory that the Bank had granted the Ricorn extensions
of time for the payment of its debt, without petitioners’ consent.

On January 25, 1966, petitioners filed a second amended complaint
in which they averred, inter alia, that
the deeds of mortgage Annexes B and C are null and void, because of the provisions
therein renouncing the right of redemption, in the event of foreclosure, and
constituting the Bank, in case of default in the payment of the obligation, as
petitioners’ attorney-in-fact, with authority to take possession of the
mortgaged properties and to sell and dispose of the same, which were allegedly
beyond the powers of Marcelino E. Calinawan,
Jr., as petitioners’ attorney-in-fact, and that, when they made him their
attorney-in-fact, petitioners agreed that they would “only be bound as guarantors
and not as solidary debtors and x x
x were assured by x x Calinawan, Jr. and the x x x Bank that, in case of default, the properties of the
principal debtor would be exhausted first before proceeding with the
foreclosure x x x,”
and praying that judgment be rendered declaring that the real estate mortgages
in question are “null and void for having been made beyond the scope of
the agent’s authority”; that the relation of the petitioners with the Bank
is “that of guarantors”; that “the guaranty is already
extinguished, or in the remote hypothesis that it is not” that “the
projected extrajudicial foreclosure” is “illegal,” because
“said real estate mortgages are null and void and/or that”
petitioners “as guarantors have in their favor the benefit of excussion” and/or that petitioners “had not yet
been in default.”1

In its answer to the second amended complaint,2
the Bank alleged that Calinawan had not in fact
waived the mortgagor’s right of redemption, and that the power of attorney
given to Calinawan, Jr. included, inter alia, renewals and extensions of payment; and denied
the alleged agreement either to make the petitioners mere guarantors or to
grant them the right of excussion.  By way of special defenses, the Bank averred
that petitioners have no cause of action; that the extra-judicial foreclosure
in question is in accordance with Act No. 3135 as amended by Act No. 4118; that
the alleged nullity of the waiver of petitioners’ right of redemption does not
affect the validity of the mortgage as security for the payment of the
principal obligation; that the right of excussion is
not available when a mortgage is constituted as special security for the
payment of a principal obligation; that petitioners have acted in bad faith in
not including Marcelino E. Calinawan,
Jr., whose acts are being contested in this case, as a party therein; and that
the loan constituting the principal obligation was obtained through
petitioners’ own corporation, the Ricorn, of which
they are all the principal stockholders and directors.  The Bank, likewise, set up a counterclaim for
damages, attorney’s fees and actual expenses.

On July 21, 1966,
the Bank asked once again that the writ of preliminary injunction issued on June 16, 1965, be lifted.3
After considering petitioners’ opposition thereto, and the evidence introduced
at the trial on the merits, which was held on July 19, 1966, the lower court,
presided over by respondent Judge, issued, on August 3, 1966, an order1
dissolving said writ.  A reconsideration
of this order having been denied, on August 27,2 petitioners commenced the present
action, on September 5, 1966.  Prior thereto, or on August 31, 1966, respondent Judge had, however,
rendered a decision3
on the merits of Case No. 4716, dismissing petitioners’ complaint therein,
subject to the qualification that they have the right of redemption granted by
law to mortgagors whose properties are foreclosed extrajudicially.  Notice of said decision was, on September 2,
1966, served upon petitioners’ counsel, who filed, on September 20, 1966, their
notice of appeal, appeal bond and record on appeal, the approval of which has
been, however, held in abeyance owing to the pendency
of the case at bar (?).4

Petitioners maintain that, in issuing said order of August 3, 1966 and refusing to
reconsider the same, “respondent Judge committed a grave abuse of
discretion amounting to lack of jurisdiction,” because:

a.  Calinawan
had exceeded his authority in waiving petitioners’ right to redeem their
properties in the event of extra-judicial foreclosure thereof; in appointing
the president of respondent Bank as petitioners’ attorney-in-fact, with full
power of substitution, and the authority to enter upon and take possession of
the mortgaged properties without the order of any court or any authority other
than that granted in the deeds of mortgage, as well as to sell and dispose of
said properties to the highest bidder; and in stipulating in paragraph 12 of
said deeds of mortgage that:

“All correspondence relative to this mortgage, including
demand letters, summonses, subpoenas, or notifications of any judicial or
extra-judicial action shall be sent to the Mortgagor at 167 Monteverde,
Sta. Ana, Davao City, or at the address that may
hereafter be given in writing by the Mortgagor to the Mortgagee.  The mere act of sending any correspondence by
mail or by personal delivery to the said address shall be valid and effective
notice to the Mortgagor for all legal purposes, and the fact that any
communication is not actually received by the Mortgagor or that it has been
returned unclaimed to the Mortgagee, or that no person was found at the address
given or that the address is fictitious or cannot be located, shall not excuse
or relieve the Mortgagor from the effects of such notice.”

b.     
When they signed the special powers of attorney
in favor of Calinawan, petitioners “were assured
by the latter and two representatives of respondent Bank” that they
(petitioners) “were merely acting as personal guarantors for the Davao Ricorn, Inc. and that,
before the respondent Bank could proceed against them, it has to exhaust first
the properties of the principal debtor”;

c.     
The extra-judicial foreclosure during the pendency of Case No. 4716, tends to render the same moot
and academic;

d.     
It is not true that, in view of petitioners’
right of redemption, the sale of the properties would not cause them
irreparable injury;

e.     
Whatever damages the Bank may suffer by reason
of the injunction would be amply compensated by the fact that the properties in
litigation are worth more than P2,500,000.

We note that the writ of preliminary injunction issued on June
16, 1965, was dissolved by an order of August 3, 1966, or two (2) weeks after
Civil Case No. 4716 had been heard on the merits, on July 19, 1966, and that,
in issuing said order, respondent Judge had taken into consideration the
evidence then introduced – as well as the Bank’s motion for the dissolution of
the writ and petitioners’ opposition thereto.  In fact, four (4) weeks later, or on August
31, 1966, respondent Judge rendered his decision dismissing petitioners’
complaint in Case No. 4716 – with the qualification already adverted to – upon
the ground, in effect, of lack of cause of action on the part of petitioners
herein, inasmuch as:

1.     
The deeds of mortgage executed by Marcelino E. Calinawan, Jr. on
behalf and in the name of petitioners herein are valid and binding upon
them.  The waiver of their right of
redemption, even if it were illegal did not affect the validity of the mortgage
constituted in favor of the Bank, not being an essential element thereof, apart
from the fact that, despite said waiver, petitioners’ right of redemption is
acknowledged by the Bank.  Moreover, the
alleged lack of authority of Calinawan, Jr. to agree
on some other minor stipulations in said at mortgage was cured by the
power-of-attorney, Annex D, ratifying the deed of mortgage, Annex C,
which, insofar as the afore mentioned waiver and stipulations are concerned, is
identical to the first deed of mortgage, Annex B.

2.     
The testimonial evidence for the petitioners,
concerning the alleged “personal” character of their guaranty and the
right of excussion they claim to have, are unworthy
of credence, because: (a) they are inconsistent with the clear tenor and the
nature of the deeds of mortgage Annexes B and C; (b) petitioners’ contention is
based upon assurances allegedly given by Calinawan,
who did not represent the Bank, and by mere appraisers of the latter, who could
neither give such assurances nor bind the Bank thereby; (c) had petitioners
really labored under the impression that they were no more than personal
guarantors who were entitled to excussion, they would
have said so in their original complaint and their first amended complaint,
instead of merely asking that a period be fixed for the payment of their
obligation under said deeds of mortgage, thereby admitting impliedly, but
necessarily, that the Bank had a real right over the mortgaged properties and
was not bound to make said excussion; (d) failure to
include Calinawan among the defendants in Case No.
4716 is strongly indicative of the infirmity of petitioners’ theory; and (e)
the principal obligation guaranteed by the mortgage inured to the benefit of Ricorn, a corporation of which petitioners – except Quintin Garcia, and Chu Tiong, who is, however, related by affinity to the other
petitioners – are stockholders and some are even directors.

Considering that the decision in Case No. 4716 is not before this
Court for review on appeal; that the records before Us do not show, and
petitioners herein do not even claim, that the foregoing findings contained in
said decision are not substantially supported by the evidence; that said
findings amply justify the dissolution of the writ of preliminary injunction,
issued on June 16, 1965; and that, although they could not be and were not
explicitly made in the order of August 3,1966, lifting the injunction – those
findings being proper for a decision on the merits, which was promulgated four
(4) weeks later – the tenor of the order clearly indicates that, in issuing the
same, respondent judge had the aforementioned findings in mind, We are of the
opinion and so hold that the dissolution of the injunction was not attended by
a grave abuse of discretion amounting to lack or excess of jurisdiction, and
that, patently, petitioners herein are not entitled to the relief prayed for.

WHEREFORE, the petition in this case must be, as it is
hereby, dismissed and the writ of preliminary injunction issued therein,
accordingly, set aside, with costs against the petitioners.  Writ denied.

IT IS SO ORDERED.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Ruiz
Castro, Fernando, Teehankee, Barredo,
Villamor, and Makasiar, JJ., concur.

^[1]
See Annex 1-A.

^[2]
Annexes 3 and G.

1
Annex E, pp. 26-43, Rollo.

2
Annex F.

3
Annex H.

1
Annex J.

2
Annexes K, N and O.

3
Annex 7, pp. 217-228, Rollo.

4
Pp. 242, 247-250, Rollo.