003

ROSE PACKING CO. INC., PETITIONER

1. PCIB approved a leter-request by petitioner for the reactivation of its over-draft line of P50k,
discounting line of P100k and a letter of credit-trust receipt line of P550,000 as well as an
application for a loan of p300,000 on fully secured real estate and chattel mortgage and on the
further condition that PCIB appoint its VP, Roberto S. Benedicto as its representative in the Board of
Directors of Rose Packing.
2. National Investment & Development Corp., the wholly owned investment subsidiary of the PNB,
approved a P2.6 M loan application of Rose packing. Pursuant to this, NIDC released to Rose Packing
the amount of P100K.
- Rose Packing purchased 5 parcels of land in Pasig and paid downpayment on it.
- NIDC released another P100K to Rose packing. The total of P200k already released was
applied to the payment of preferred stock which NIDC subscribed in Rose Packing to partially
implement its P1M investment scheme. After that, NIDC refused to make further releases on
the approved loan of Rose Packing
3. Later on, PCIB approved the ff:
- P710,000 loan for the payment of the balance of the purchase price of lots in Pasig.
But only P300,000 of this was released
- P500 ,000 loan for operating capital
Some 300,000 was released for this
- P200,000 loan to be paid directly to petitioners creditors,
- While consolidating all previous accommodations at P1,597,000. All were secured by
Chattel and Real estate mortgages.
4. DBP approved an application by Rose Packing for a loan of P1,840,000 for the purchase of can
making equipment
- Upon approval of said loan, Rose packing notified PCIB of the availability of P800,000 to
partially pay off its account and requested the release of the titles to the Pasig lots for
delivery to DBP.
- PCIB verbally refused, saying that all obligations should be liquidated before releasing the
titles to the Pasig properties.
- Rose Packing purchased another land in Valenzuela, Bulacan with the P800,000 loan from
DBP (with DBPs consent)
5. Jan. 5, 1968: PCIB filed a complaint against Rose packing and Rene Knecht( president for the
collection of Rose packings indebtedness).
6. Jan 22, 1968: PCIB notified Rose that it would cause the REM to be foreclosed at an auction sale.
Sheriff served notice of sheriffs sale
7. Rose packing filed a complaint to enjoin PCIB and the sheriff from proceeding with the foreclosure
sale, to fix a new period for payment of the obligation.
8. Lower court denied application for preliminary injunction and dissolved its restraining order issued
previously.
- MR filed but was denied
9. Petition for certiorari filed before the CA with application for a restraining order and prelim
injunction against the foreclosure sale.
- CA issued a prelim injunction upon filing of bond by Rose packing
- Rose moved for amendment since resolution came too late, instead Rose packing prayed
that the Prelim injunction should now enjoin PCIB + sheriff from proceeding to give effect to
the foreclosure sale; sheriff be restrained from issuing a deed of cert. of sale and from
registering cert. in the registry of deeds; and to stop or toll the running of period of
redemption. This was denied

Upon urgent motion by Rose packing, CA granted 60 days from receipt of the decision within
which to redeem its properties sold, should the said decision be one declaring execution sale
of mortgaged lands valid.
10. Affidavit of ownership executed by Eugenio Unson for and in behalf of PCIB concerning the
mortgaged properties. Old TCT cancelled and new ones issued in the name of PCIB (buyer in
foreclosure sale).
- Rose Packing filed a motion charging PCIB with contempt of court.
Prayed that Deed of sale and consolidation of ownership be declared null and void;
New TCT cancelled, old ones restored/revived and said old TCTs be surrendered and
deposited with CA.
11. CA issued decision denying petition of Rose Packing, declaring valid the foreclosure sale but
consolidation of ownership was prematurely done rendering it void ab initio & Rose packing given
60 days from receipt of decision to redeem property. CA denied Rose Packings MR.
12. Hence this petition for certiorari. SC issued prelim injunction enjoining CA from enforcing or
implementing decision upon posting of P50k bond.
ISSUE/S:
1. WON PCIB have the right to extrajudicial foreclosure sale of Rose Packings properties
before trial on the merits.
1. NO

When the lower court denied the issuance of the writ prayed for and dissolved the
restraining order, it practically adjudicated the case before trial on merits (fact #8). There
were matters that needed the preservation of the status quo between the parties.
Foreclosure was premature
Rose packing was not yet in default
Loans of Rose packing from PCIB were supposed to become due only at the time it
receives from the NIDC and PDCP the proceeds of the approved financing scheme
(P1M investment scheme). But this didnt happen.
NIDC stopped releasing more than the P200,000 it had earlier released which should
have been used as payment of the preferred stock NIDC subscribed in Rose packing
corp. to partially implement the P1M investment scheme. Conditional obligation is
subject to the happening of a future and uncertain event so that if the suspensive
condition does not take place, it is as if the conditional obligation never existed.
For an obligation to become due, there must generally be a demand. In this case, the
lower Court held that demand had been properly made but it is important as well to
determine the cause or consideration of the contract.
Loan agreements are reciprocal obligations, not a unilateral contract. Promise of
petitioner to pay is the consideration for the obligation of PCIB to furnish the loan.
1. PCIB had complete control of the financial affairs and the management of
Rose packing. It even had its VP as a rep in the Board of Directors, as a
condition for the loan. VP was eventually replaced by Edmundo Ledesma and
PCIB appointed more of its people in key positions in Rose Packing which
undermined its financial stability. During Ledesmas management, production
rate dropped.
2. In other words, if ever Rose packing was in financial straits, it can be
attributed to the mismanagement of PCIB through its representatives in Rose
packing.
3. In Filipina Marble corp. v. IAC, the lending institution took over management of
the borrowing corp and led that corp to bankruptcy through mismanagement.
It was held in that case that it was as if the loan was never delivered to the
borrowing corp.
4. PCIB defaulted in fulfilling its obligation when it failed to release the P710,000
which means that Rose packing may either choose specific performance or
rescission with damages in either case. Hence, REM of Rose packing cannot be
entirely foreclosed to satisfy its debt to PCIB

Foreclosure of properties en masse was not valid. Rule of indivisibility of a Real Estate
Mortgage cannot be applied (art. 20891)
Granting that there was consolidation of the entire loan of Rose packing approved by
PCIB, rule of indivisibility of Real estate mortgage cannot apply where there was
failure of consideration of the part of PCIB for the mismanagement of the affairs of
Rose packing and where said bank is in default in complying with its obligation to
release to Rose packing the amount of P710,000. Real estate mortgage becomes
unenforceable.
Although it must be noted that the exact amount of Rose packings total debt is still
unknown.

Held: CA decision (sustaining: denial of Rose packings application for prelim injunction; validity of
foreclosure sale) reversed. Lower court ordered to proceed with the trial on the merits of the main case
and determine the exact amount of Rose packings debt. Prelim injunction still stands.
Digest by:
Justin Benedict A. Moreto

1 Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in
interest of the debtor or the creditor.