TRO on DBP acquisition of mortgaged property stays

MANILA – The Development Bank of the Philippines (DBP) lost its petition to lift a temporary restraining order that stopped it from taking over a mortgaged property that had been the subject of a foreclosure proceeding.

In a nine-page decision, the Court of Appeals (CA) Special Sixth Division denied DBP’s petition against the Santiago City Regional Trial Court (RTC) Branch 35, noting that the RTC “did not act arbitrarily, capriciously or whimsically”.

“(I)t cannot be concluded that the court, in granting the TRO to momentarily stop the DBP from obtaining possession of the foreclosed property acted with grave abuse of discretion that amounted to an excess of jurisdiction”.

The lower court issued the TRO in favor of New Wishing Star Co. and its president, Jacky Ching, after default on payments on a PHP30-million credit line obtained from DBP in 2010.

The company offered two parcels of land as collateral.

After DBP instituted foreclosure proceedings, the public auction sale was conducted on August 28, 2012 and the properties were sold to DBP as the lone bidder.

New Wishing Star, through Ching, then filed a petition for declaration of nullity of sheriff’s certificate of sale, damages, and sought a temporary restraining order against DBP.

New Wishing Star’s main allegation was that it was not yet in default of its obligation to DBP when the properties were foreclosed. It also claimed not receiving any notice regarding the foreclosure proceedings.

The Santiago court, the CA said “did not abuse its discretion when, acknowledging that the issue of the validity of the foreclosure sale was still pending before it, determined it imperative to restrain the petitioner DBP from obtaining possession of the foreclosed property, to prevent its judgment or decision from being rendered ineffective.”