DIGEST/LINALYN BATION/RAFAEL R. MARTELINO, BARCHELECHU S. MORALES, ROSELYN S. CACHAPERO, REYNALDO R. EVANGELISTA, CESAR B. YAPE, LEONORA R. PARAS, SEGUNDINA I. IBARRA, RAQUEL G. HALNIN, ZAMORA I. DIAZ, and ARTHUR L. VEGA vs NATIONAL HOME MORTGAGE FINANCE CORPORATION and HOME DEVELOPMENT MUTUAL FUND

 

[G.R. NO. 160208 : June 30, 2008]

RAFAEL R. MARTELINO, BARCHELECHU S. MORALES, ROSELYN S. CACHAPERO, REYNALDO R. EVANGELISTA, CESAR B. YAPE, LEONORA R. PARAS, SEGUNDINA I. IBARRA, RAQUEL G. HALNIN, ZAMORA I. DIAZ, and ARTHUR L. VEGA, Petitioners, v. NATIONAL HOME MORTGAGE FINANCE CORPORATION and HOME DEVELOPMENT MUTUAL FUND, Respondents.

 

FACTS:

    A petition for declaratory relief and prohibition with urgent prayer for the issuance of a temporary restraining order and/or preliminary injunction was filed by petitioners against the National Home Mortgage Finance Corporation (NHMFC) and the Home Development Mutual Fund (HDMF, and Sheriff Alberto A. Castillo.

    Petitioners alleged that they obtained housing loans from respondents who directly released the proceeds thereof to the subdivision developer, Shelter Philippines, Inc. (Shelter).

    However, Shelter failed to complete the subdivision according to its representations and the subdivision plan. Respondents, on the other hand, failed to ensure Shelter's completion of the subdivision. Instead, respondents ignored their right to suspend amortization payments for Shelter's failure to complete the subdivision, charged interests and penalties on their outstanding loans, threatened to foreclose their mortgages and initiated foreclosure proceedings against petitioner Rafael Martelino. Hence, they prayed that respondents be restrained from foreclosing their mortgages.

    Moreover, petitioners specifically sought a declaration from the RTC (1) that their right as house and lot buyers to suspend payment to Shelter for its failure to fully develop the subdivision also applied to respondents who released their loans directly to Shelter; and (2) that during the suspension of payment, respondents should not assess them accrued interests and penalties. Petitioners further prayed that they be allowed to pay their housing loans without interest and penalties.

    RTC set the preliminary injunction hearing, but said order, including the summons and petition, were served only on the NHMFC and Sheriff Castillo. Despite notice, the NHMFC failed to attend the preliminary injunction hearing. The RTC ordered that a writ of preliminary injunction be issued restraining the respondents from foreclosing the mortgages on petitioners' houses.

    The NHMFC filed a Manifestation and Motion to Dismiss the Petition on the ground that the RTC had no jurisdiction over its person or over the subject matter of the case. HDMF also moved to set aside the preliminary injunction order on the ground that it was not notified of the hearing. The HDMF also stated that the petition should have been filed with the Housing and Land Use Regulatory Board (HLURB) as the case involved the developer's failure to complete the subdivision. The HDMF alleged that the RTC had no jurisdiction over the case or even to implead the HDMF which only financed petitioners' housing loans.

    RTC dismissed the case, ruling that the issue of non-completion of the subdivision should be brought before the HLURB. It also ruled that no judicial declaration can be made because the petition is vague.

    CA affirmed the RTC order.

 

ISSUE:

(1)   Whether or not the preliminary injunction order against the HDMF was valid;

(2)   Whether or not the petition for declaratory relief and prohibition was properly dismissed

 

RULING:

(1)   No. Section 5, Rule 58 of the Rules of Court expressly states that "[n]o preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined." Here, petitioners even admit that the HDMF was not notified of the preliminary injunction hearing. In fact, petitioners do not contest the lower courts' ruling that order cannot apply to the HDMF. They merely contend and insist that the HDMF voluntarily submitted to the RTC's jurisdiction. Unfortunately, such contention is immaterial. The issue involves the validity of the preliminary injunction order absent a notice of hearing for its issuance to the HDMF, and not the HDMF's voluntary submission to the RTC's jurisdiction.

 

(2)   No. The Supreme Court did not agree with the RTC's ruling that the vagueness of the petition furnished additional justification for its dismissal. If the petition for declaratory relief and prohibition was vague, dismissal is not proper because the respondents may ask for more particulars.

Under Section 1, Rule 63, a person must file a petition for declaratory relief before breach or violation of a deed, will, contract, other written instrument, statute, executive order, regulation, ordinance or any other governmental regulation. Unfortunately, the petitioners’ actual suspension of payments defeated the purpose of the action to secure an authoritative declaration of their supposed right to suspend payment

Assuming that the Court can also treat the Petition for Declaratory Relief and Prohibition as an action for prohibition, prohibition is still improper. Prohibition is a remedy against proceedings that are without or in excess of jurisdiction, or with grave abuse of discretion, there being no appeal or other plain, speedy adequate remedy in the ordinary course of law. But here, the petition did not even impute lack of jurisdiction or grave abuse of discretion committed by respondents and Sheriff Castillo regarding the foreclosure proceedings. Foreclosure of mortgage is also the mortgagee's right in case of non-payment of a debt secured by mortgage. The mortgagee can sell the encumbered property to satisfy the outstanding debt. Hence, the HDMF cannot be faulted for exercising its right to foreclose the mortgages, under the provisions of Act No. 3135 as amended by Act No. 4118.