Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 70144 March 26, 1990

ACTIVE WOOD PRODUCTS, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and STATE INVESTMENT HOUSE, INC.,
respondents,

Sotto & Sotto Law Offices for petitioner.

Jardeleza, Sobrevinas, Diaz, Hayudini & Bodegon for respondent SIHI

GUTIERREZ, JR., J.:

The issue raised in this petition for review is the legality of the trial court's order
nullifying an extrajudicial foreclosure sale which proceeded as scheduled despite
its order for the issuance of a writ of preliminary injunction to enjoin the sale on
auction upon the filing of P1,000,000.00 bond by the petitioner within fifteen (15)
days from notice.

On June 7, 1982, petitioner Active Wood Products, Co., Inc., filed an action for
injunction against private respondent State Investment House, Inc., with the
Court of First Instance of Malolos, Bulacan, alleging, among others that it had
mortgaged two parcels of land in favor of the private respondent to secure an
indebtedness of P6,420,490.00, that the private respondent had been charging
usurious interests on the loan, and refused to adjust them to reasonable levels
despite demands by the petitioner, that instead, the respondent poised to
extrajudicially foreclose the mortgaged properties. It prayed that pending trial on
the merits, a restraining order be issued ordering the respondent to refrain from
proceeding with the foreclosure sale.

On June 9, 1982, the lower court issued the restraining order and set the hearing
on the application for a writ of preliminary injunction.

On August 24, 1982, the private respondent filed a motion to lift the restraining
order and an opposition to the issuance of a preliminary prohibitory injunction.
On November 10, 1982, the lower court denied the motion to lift the restraining
order but ordered the petitioner to post, within ten (10) days from notice a bond in
the amount of P6,000,000.00.

On December 16, 1982, the petitioner prayed again for a clear-cut temporary
restraining order to enjoin the government agents from enforcing writs of
execution issued by government entities such as the Ministry of Labor, military
courts and other trial courts to the end that the properties of the then plaintiff
under the custody of the court would be preserved. This order was issued by the
Court on December 17, 1982. Thereafter, the petitioner moved for the reduction of
the amount of the bond. This was granted by the Court on January 14, 1983 in the
amount of P 3 million.

On March 10, 1983, the respondent moved for relief from the burden of the
restraining order considering the provisions of B.P. 224 on the lifetime of
restraining orders and the unexplained failure of the petitioner to put up the
required bond.

On June 23, 1983, the respondent filed a manifestation notifying the court that it
would proceed with the foreclosure sale inasmuch as the June 9, 1982 restraining
order had ceased to have any force and effect.

The respondent then filed on June 28, 1983 a petition for extrajudicial foreclosure
with the office of the Provincial Sheriff of Bulacan.

An urgent ex-parte motion was filed by the petitioner on July 2, 1983 for a special
temporary restraining order to restrain the sheriff and the clerk of court of
Malolos, Bulacan from proceeding with the foreclosure sale of the properties
subject matter of the case and to maintain the status quo until further court
orders.

On July 28, 1983, the sheriff issued a Notice of Sheriff's sale setting the public
auction sale of the properties on August 24, 1983.

On August 3, 1983, the lower court relieved the respondent of the burden of the
restraining order dated June 9, 1982 and denied the petitioner's motion for the
issuance of a special temporary restraining order.

On August 19, 1983, the petitioner filed with the then Intermediate Appellate Court
a petition for certiorari and prohibition questioning the August 3, 1983 order of
the lower court and praying for a further reduction of the bond, the annulment of
the Notice of Sheriffs Sale, the fixing of the period to file the bond, and the
enjoining of the sheriff from proceeding with the foreclosure sale.

Thereafter, the petitioner filed several motions for reduction of the injunction
bond in the lower court. Meanwhile, the private respondent, on September 13,
1983 requested the sheriff to sell the foreclosed properties and the latter
scheduled the auction sale for October 3, 1983.

On motion of the petitioner, the lower court, however, ordered the sheriff on
September 29, 1983 to defer the auction sale. The private respondent moved for
reconsideration of the order.

On October 7, 1983, the petitioner withdrew its petition for certiorari from the
Intermediate Appellate Court.

On November 3, 1983, the lower court lifted and set aside its order of September
29, 1983. It ordered the striking out of the petitioner's motions to reduce the bond
and to restore the restraining order.

On November 4, 1983, the sheriff set the date of the auction sale on November 29,
1983 and notified the parties.

On November 28, 1983, the lower court, on motion of the petitioner issued the
following order:

WHEREFORE, the Orders dated August 3, 1983 and November 3,

1983, are hereby reconsidered and set aside. Upon the filing of an
injunction bond of Pl,000,000.00 by the plaintiff, let corresponding
Writ of Preliminary Injunction issue and for this purpose, plaintiff is
given a period of fifteen (15) days from receipt hereof to file the
injunction bond for the approval of the Court. (Rollo, p. 28)

However, on November 29, 1983, the sheriff proceeded with the auction sale and
the properties were sold to the private respondent as the highest bidder in the
amount of P7.5 million.

On December 13, 1983, the petitioner moved to cite the sheriff in contempt of
court and to nullify the auction sale. Later, the petitioner prayed for a reduction of
the injunction bond and an extension of the period granted for its filing.

On February 27, 1984, the lower court dismissed the motion to cite the sheriff in
contempt but declared the auction sale void for having been conducted within the
15-day period granted for posting the bond. A motion for reconsideration was
filed but the same was denied. On April 17, 1984, a writ of preliminary injunction
was issued to enjoin the sheriff from proceeding with the foreclosure sale.

Thereafter, the private respondent filed a petition for certiorari before the
respondent appellate court alleging grave abuse of discretion on the part of the
lower court in nullifying the foreclosure sale of November 29, 1983 and the
corresponding certificate of sale. It contended that no restraining order or
preliminary injunction had been issued to enjoin ex-oficio Provincial Sheriff of
Bulacan, Victorino P. Evangelista from proceeding with the sale.

The respondent appellate court on October 2, 1984 ruled in favor of the private
respondent stating that since Section 4, Rule 58 of the Rules of Court provides
that a writ of preliminary injunction can be issued only when the bond is filed (a
condition sine qua non, citing San Miguel v. Elbinias, 127 SCRA 312 [1984] and
Commodity Finance, Inc. v. Jimenez, 91 SCRA 57 [1979]), the writ becomes
effective only after its issuance and not before. Furthermore, the lower court's
order denying the motion petition to cite ex-oficio Provincial Sheriff Evangelista
in contempt of court for lack of an express order to stop the sale was noted. The
respondent appellate court argues: "If the sheriff who conducted the sale could
not be held in contempt of court because there was no order for him not to
proceed with the sale, how could the sale made in the absence of a stop order be
invalid?"

Hence, this petition questioning the nullification of the sale. We initially denied
the petition in a resolution dated May 8, 1985 but acting upon a motion for
reconsideration, gave it due course.

The petitioner contends that the decision of the respondent appellate court
"reduced the proceedings for issuance of a writ of preliminary injunction into a
footrace, a game wherein the fruits of victory belong to the fleetest," and has
"encouraged the adverse parties to beat the writ of the Court and to perform fully
the acts sought to be enjoined, with the hope that at the hearing, they will just
inform the Court that there is nothing more to enjoin." (Rollo, p. 16)

For its part, the private respondent adopts the reasoning of the respondent
appellate court that the foreclosure sale was valid because there was no valid
restraining order nor a writ issued to enjoin the sheriff as there was not a single
bond posted by the petitioner since the commencement of the latter's civil action
in 1982. It alleges that the order merely granted a fifteen-day period to file the
bond and nothing more. Moreover, the private respondent relies on the
proposition that the mortgagee has the right to foreclose a mortgage upon the
mortgagor's failure to pay the amount demandable. It also asserts that the ground
relied upon by the trial court to nullify the sale is not among those sanctioned by
Act 3135 on extrajudicial foreclosure of mortgage. Under Act 3135, the sale may
be declared void if there are irregularities in the proceedings.

A review of the factual circumstances of the case fully convinces this Court that
the nullification is valid and proper.

It is not disputed that the ex-oficio Provincial Sheriff Victorino P. Evangelista,

who is also the Clerk of Court of Branch 6 of the Regional Trial Court of Malolos,
had immediate personal notice of the November 28, 1983 order ordering the
issuance of a writ of preliminary injunction upon the filing of a bond within fifteen
(15) days from petitioner's receipt of the same order (Rollo, pp. 14-15,30; Regional
Trial Court Order dated April 17, 1984). He, therefore, disregarded a court order of
which he had notice substituting his personal judgment on the applicable law for
that of the court. Despite the notice had one day before the auction sale on
November 29, 1983, and within the 15-day period given to the applicant to post a
bond, the sheriff proceeded with the foreclosure sale.

This Court has ruled that injunction lies only when there exists a right to be
protected and a violation of said right which is threatened or impending (Sales v.
Securities and Exchange Commission, G.R. No. 54330, January 13, 1989; Buayan
Cattle Co., Inc. v. Quintilla, 128 SCRA 276 [1984]). The petitioner has shown that it
had legitimate grounds in applying for a writ of preliminary injunction, i.e., to
preserve the status quo so that it will not be stripped of its rights of ownership
and dominion over its properties pending the final determination of whether a
permanent injunction could be had.

The petitioner also had the right to pursue its claims against the private
respondent and not be hampered by the extrajudicial foreclosure sale of the
properties involved in this case. The trial court was correct in finding that the
petitioner satisfied the substantial requirements for granting an injunction. The
injunction bond, which is a formal requirement for the issuance of the writ was
yet to be filed.

A plain reading of the November 28, 1983 order of the lower court reveals no
other possible interpretation than that the actions sought to be stopped or
suspended must be stopped. The sheriff cannot take it upon himself to give an
absurd or strained interpretation or having understood it, to ignore it altogether.
The order says that the orders lifting the previous restraining order are
"reconsidered and set aside." The words, "let a corresponding writ of preliminary
injunction issue" clearly mean that the lower court, in the exercise of its
discretionary powers, ordered that the foreclosure sale be enjoined. The manner
in which the order was worded is as ordinary and usual as in other orders
granting writs. It is a normal procedure for a court to require the applicant to post
a bond first to support a writ which is ordered to be issued.

The contention of the private respondent that no injunction is effective while no

bond is filed is without merit. Precisely, the petitioner was given fifteen (15) days
to file the bond and have it approved by the court. The clear import of the words
in the order of the trial court manifest the intention to postpone or stop all further
acts against the petitioner's ownership of the properties involved in this case.
Only after fifteen (15) days and disapproval of the bond or the failure to file it
could the sheriff move. The respondent could have the order set aside but he
cannot defy or render it inutile. The Court finds that the ruling San Miguel v.
Elbinias, supra and Commodity Finance, Inc. v. Jimenez, supra, cited by the
respondents is not applicable. In those cases, what was disputed was the
reasonableness of the exercise of discretion by the trial court in fixing the
amount of the injunction bond at an alleged exorbitant price. What we are
concerned with in the instant case is whether an injunction was already granted
and whether the trial court thereafter validly nullified the act sought to be
enjoined.

In stating that the posting of a bond is a condition sine qua non to the issuance of
the writ, and that the purpose of the bond is to secure the adverse party of
damages that may be suffered in case of wrongful issuance, the Court in the San
Miguel case merely emphasized the significance of the bond, the amount of
which can be fixed by the judge. The Court did not in any manner suggest that
the injunction may be disregarded since it becomes effective only after the bond
ordered to be filed is actually filed. Otherwise, as in this case, the sheriff and the
respondent would race with the petitioner and the bonding company trying to sell
the properties before the bond can be filed with the court.

It is our ruling, therefore, not only for reasons of propriety but more significantly
for an orderly administration of justice that the auction sale should have been
stayed, at least in the meantime, in obedience to the order granting the writ.

It is very apparent from the records that the trial court was already in possession
of certain data and had already considered relevant factors when it ruled in favor
of the petitioner's application for the writ. To proceed with the sale, though
previously set, would be to frustrate and contradict the lower court's resolve,
after careful consideration, to enjoin the same. However, since the trial court
decided not to cite the sheriff for contempt, we respect its exercise of discretion
and decide not to reverse its ruling on the contempt charge. But we have to
remind sheriffs that it is precisely precipitate acts such as that displayed in this
case which make them the weakest link in the efforts to maintain our people's
faith and confidence in the justice system. Sheriffs must at all times show a high
degree of professionalism in the performance of their duties.

The nullification of the foreclosure sale has restored the orderly disposition of the
case. The alleged failure of the petitioner to file the injunction bond became a
moot issue when the trial court finally allowed the filing of the injunction bond
thus completing the conditions for the grant of the writ. The contention that the
nullification of the sale is disallowed by Article 3135 is likewise without merit.

The Court concludes that the trial court was justified in nullifying the foreclosure
sale conducted by the sheriff because the order dated November 28, 1983 was
already effective to enjoin it.

The petitioner adds, in its memorandum, this additional issue for our
consideration: whether or not the extrajudicial foreclosure of the mortgage was
premature or invalid since the certification made by the petitioner's accountant
(Rollo, pp. 185-186) shows that the substantial amount of P8,561,395.40 was
already paid prior to the commencement of the extrajudicial proceedings.
The Court rules that this issue calls for a determination of facts which is not
properly within our jurisdiction. Contrary to the averment of the petitioner, the
issue is not legal but factual which, as we have held, "only the trial court has the
jurisdiction to resolve because it is beyond the function of this court to make its
own findings of essential or important facts different from those of the trial court,
especially in the presence of conflicting claims of the parties and without the
evidence being properly presented before it." (Celebre v. Zaragoza, G.R. No.
75866, February 23, 1989).

WHEREFORE, CONSIDERING ALL THE FOREGOING, the decision of the then

Intermediate Appellate Court is REVERSED and SET ASIDE. The orders of the
court a quo dated February 27, 1984 and April 17, 1984 are hereby REINSTATED.

Fernan, C.J. (Chairman), Feliciano, Bidin and Cortes, JJ., concur.