Idolor vs. Court of Appeals

A writ of preliminary injunction requires the existence of a clear and positive right in esse that is being violated; it is not designed to protect contingent or future rights. Where the petitioner's right of redemption over foreclosed property has already expired, she has no proprietary right to speak of to entitle her to the issuance of a writ of injunction.

Petitioner Teresita V. Idolor executed a Deed of Real Estate Mortgage in favor of private respondent Gumersindo De Guzman to secure a loan of P520,000.00. The mortgage covered a 200-square meter property with improvements located at 66 Ilocos Sur Street, Barangay Ramon Magsaysay, Quezon City, covered by TCT No. 25659. The mortgage agreement included a right of extra-judicial foreclosure upon failure to redeem the mortgage on or before September 20, 1994.

On March 21, 1994, petitioner Teresita V. Idolor executed a Deed of Real Estate Mortgage in favor of private respondent Gumersindo De Guzman to secure a loan of P520,000.00, with the right of extra-judicial foreclosure upon failure to redeem the mortgage on or before September 20, 1994. The mortgaged property was a 200-square meter property with improvements located at 66 Ilocos Sur Street, Barangay Ramon Magsaysay, Quezon City, covered by TCT No. 25659.

On September 21, 1996, private respondent Iluminada de Guzman, wife of Gumersindo, filed a complaint against petitioner before the Office of the Barangay Captain of Barangay Ramon Magsaysay, Quezon City, which resulted in a "Kasunduang Pag-aayos." In that agreement, petitioner acknowledged having borrowed P520,000.00 on September 20, 1994, secured by TCT No. 25659, and requested a 90-day grace period to settle the amount. The agreement stated that failure to settle the account on or before December 21, 1996 would require petitioner to execute a deed of sale with the agreement to repurchase without interest within one year. The total amount due was P1,233,288.23 inclusive of interest.

Petitioner failed to comply with her undertaking, and private respondent Gumersindo filed a motion for execution before the Office of the Barangay Captain, who subsequently issued a certification to file action. On March 21, 1997, Gumersindo filed an extra-judicial foreclosure of the real estate mortgage pursuant to the parties' agreement. On May 23, 1997, the mortgaged property was sold in a public auction to Gumersindo as the highest bidder, and the Sheriff's Certificate of Sale was registered with the Registry of Deeds of Quezon City on June 23, 1997.

On June 25, 1998, petitioner filed with the Regional Trial Court of Quezon City, Branch 220, a complaint for annulment of Sheriff's Certificate of Sale with prayer for a temporary restraining order and a writ of preliminary injunction, alleging irregularity and lack of notice in the extra-judicial foreclosure proceedings. A temporary restraining order was issued, and on July 28, 1998, the trial court issued a writ of preliminary injunction enjoining private respondents, the Deputy Sheriffs, and the Registry of Deeds from causing the issuance of a final deed of sale and consolidation of ownership in favor of the De Guzman spouses. The trial court denied the motion for reconsideration filed by the De Guzman spouses.

Spouses De Guzman filed a petition for certiorari with the Court of Appeals seeking annulment of the trial court's order granting the preliminary injunction. On September 28, 1999, the Court of Appeals granted the petition and annulled the assailed writ of preliminary injunction. Petitioner's motion for reconsideration was denied on February 4, 2000, prompting the petition for review on certiorari before the Supreme Court.

• Proprietary Right: Petitioner claimed that her proprietary right over the subject parcel of land was not yet lost since her right to redeem the land for a period of one year had neither lapsed nor run, as the sheriff's certificate of sale was null and void.
• Lack of Notice: Petitioner argued that she and the general public had not been validly notified of the auction sale conducted by respondent sheriffs, and that the newspaper utilized in the publication of the notice of sale was not a newspaper of general circulation.
• Novation: Petitioner contended that the execution of the "Kasunduang Pag-aayos" showed the express and unequivocal intention of the parties to novate or modify the real estate mortgage, as the two agreements were irreconcilably incompatible — the first involving P520,000.00 payable within six months, and the second involving P1,233,288.23 payable within 90 days with a deed of sale with right to repurchase within one year.
• Effect of Kasunduan: Petitioner insisted that the "Kasunduang Pag-aayos" was not a mere promissory note, as it was entered before the Lupon Tagapamayapa, which has the effect of a final judgment.

• No Novation: Respondents argued that the "Kasunduang Pag-aayos" merely gave life to the March 21, 1994 mortgage contract, which was then more than two years overdue, and that it was executed to facilitate easy compliance by the mortgagor with her mortgage obligation.
• Compatibility of Agreements: Respondents maintained that the September 21, 1996 agreement was not incompatible with and could stand together with the mortgage contract of March 21, 1994, citing Rillo vs. Court of Appeals for the proposition that a compromise agreement clarifying the total sum owned does not novate the original contract.
• Inapplicability of Local Government Code: Respondents argued that reliance on Section 417 of the New Local Government Code of 1991, requiring the lapse of six months before the amicable settlement may be enforced, was misplaced because the case deals with extra-judicial foreclosure governed by Act No. 3135 as amended.

• Proprietary Right to Injunction: Whether the respondent Court of Appeals erred in ruling that petitioner has no more proprietary right to the issuance of the writ of injunction.
• Novation: Whether the respondent Court of Appeals erred in ruling that the "Kasunduang Pag-aayos" did not ipso facto result in innovation of the real estate mortgage.
• Nature of the Kasunduan: Whether the respondent Court of Appeals erred in ruling that the "Kasunduang Pag-aayos" is merely a promissory note of petitioner to private respondent spouses.
• Grave Abuse of Discretion: Whether the respondent Court of Appeals erred in ruling that the questioned writ of preliminary injunction was issued with grave abuse of discretion.

• Proprietary Right to Injunction: No. Petitioner had no more proprietary right over the foreclosed property because her one-year redemption period from the registration of the sheriff's sale on June 23, 1997 expired on June 23, 1998, two days before she filed her complaint for annulment of sheriff's sale.
• Novation: No. The "Kasunduang Pag-aayos" did not novate the real estate mortgage because the will to novate did not appear by express agreement of the parties, and the old and new contracts were not incompatible in all points.
• Nature of the Kasunduan: No. The "Kasunduang Pag-aayos" was not a mere promissory note, but it also did not novate the original mortgage; it merely gave life to the old obligation by recognizing its continuing existence and validity.
• Grave Abuse of Discretion: No. The trial court committed grave abuse of discretion in issuing the writ of preliminary injunction because petitioner failed to establish the existence of a clear and positive right to be protected.

• Proprietary Right to Injunction: Injunction is a preservative remedy aimed at protecting substantive rights and interests. Before an injunction can be issued, two requisites must be present: (1) there must be a right in esse or the existence of a right to be protected; and (2) the act against which the injunction is to be directed is a violation of such right. The existence of a right violated is a prerequisite to the granting of an injunction. Injunction is not designed to protect contingent or future rights. In this case, the mortgaged property was sold in a public auction on May 23, 1997, and the sheriff's certificate of sale was registered on June 23, 1997. Petitioner had one year from the registration of the sheriff's sale to redeem the property, but she failed to exercise her right on or before June 23, 1998. When she filed her complaint on June 25, 1998, her right of redemption had already expired two days earlier. It is always a ground for denying injunction that the party seeking it has insufficient title or interest to sustain it. The possibility of irreparable damage without proof of actual existing right is not a ground for an injunction. Petitioner's allegation regarding the invalidity of the sheriff's sale dwells on the merits of the case, which should be resolved during the trial on the merits.

• Novation: Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates it, either by changing its objects or principal conditions, or by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Under the law, novation is never presumed; the parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. A review of the "Kasunduang Pag-aayos" does not support petitioner's contention that it novated the real estate mortgage, since the will to novate did not appear by express agreement of the parties, nor were the old and new contracts incompatible in all points. Petitioner expressly recognized in the Kasunduan the existence and validity of the old obligation, acknowledging her long overdue account since September 20, 1994, which was secured by a real estate mortgage, and asked for a 90-day grace period to settle her obligation. Where the parties to the new obligation expressly recognize the continuing existence and validity of the old one, there can be no novation.

• Nature of the Kasunduan: The Court of Appeals correctly observed that the September 21, 1996 agreement merely gave life to the March 21, 1994 mortgage contract, which was then more than two years overdue. Petitioner acknowledged her total indebtedness of P1,233,288.23 including interests, which she promised to liquidate within 90 days, failing which she agreed to execute a deed of sale of the mortgaged property without interest. The agreement was executed to facilitate easy compliance by the mortgagor with her mortgage obligation and is not incompatible with the mortgage contract. A compromise agreement clarifying the total sum owned does not novate the original contract. The provision in the Kasunduan regarding the execution of a deed of sale with right to repurchase within one year would have the same effect as the extra-judicial foreclosure of the real estate mortgage, wherein petitioner was given one year from the registration of the sheriff's sale to redeem the property. It is not proper to consider an obligation novated by unimportant modifications which do not alter its essence.

• Grave Abuse of Discretion: The period to pay the total amount of petitioner's indebtedness expired on December 21, 1996, and petitioner failed to execute a deed of sale with right to repurchase on the said date up to the time private respondents filed their petition for extra-judicial foreclosure. The failure of petitioner to comply with her undertaking in the Kasunduan to settle her obligation effectively delayed private respondents' right to extra-judicially foreclose the real estate mortgage, which right accrued as far back as 1994. Thus, petitioner has not shown that she is entitled to the equitable relief of injunction.

• Requisites for Preliminary Injunction — Before an injunction can be issued, two requisites must be present: (1) there must be a right in esse or the existence of a right to be protected; and (2) the act against which the injunction is to be directed is a violation of such right. Injunction is not designed to protect contingent or future rights. In this case, the Court applied this doctrine to deny the injunction because petitioner's right of redemption had already expired before she filed her complaint.

• Novation is Never Presumed — Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one. Under the law, novation is never presumed; the parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. Where the parties to the new obligation expressly recognize the continuing existence and validity of the old one, there can be no novation. The Court applied this doctrine to hold that the "Kasunduang Pag-aayos" did not novate the real estate mortgage.

• Incompatibility of Old and New Contracts — For novation to occur, the old and new contracts must be incompatible in all points. Where the new agreement was intended to give life to the old one, no novation of a contract had occurred. The Court applied this doctrine in finding that the Kasunduan expressly recognized the existence and validity of the old obligation and was not incompatible with the mortgage contract.

• "Injunction is a preservative remedy aimed at protecting substantive rights and interests. Before an injunction can be issued, it is essential that the following requisites be present: 1) there must be a right in esse or the existence of a right to be protected; 2) the act against which the injunction is to be directed is a violation of such right." — This passage states the canonical formulation of the requisites for a writ of preliminary injunction, which is the controlling doctrine in this case.

• "Where the parties to the new obligation expressly recognize the continuing existence and validity of the old one, where, in other words, the parties expressly negated the lapsing of the old obligation, there can be no novation." — This passage articulates the rule on when novation cannot be found, which is central to the Court's rejection of petitioner's novation argument.

• "It is always a ground for denying injunction that the party seeking it has insufficient title or interest to sustain it, and no claim to the ultimate relief sought - in other words, that she shows no equity." — This passage establishes the principle that insufficient title or interest is a ground for denying an injunction, which the Court applied to petitioner's expired right of redemption.

• Heirs of Joaquin Asuncion vs. Gervacio, Jr., 304 SCRA 322 — Cited as controlling authority for the requisites of a preliminary injunction and the principle that the possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.
• Sales vs. SEC, 169 SCRA 109 — Cited in support of the requisites for the issuance of an injunction.
• S & A Gaisano Incorporated vs. Hidalgo, 192 SCRA 224 — Cited for the proposition that failure to establish either the existence of a clear and positive right or that the defendant committed an act endangering said right is a sufficient ground for denying the injunction.
• Del Rosario vs. CA, 255 SCRA 152 — Cited for the principle that the controlling reason for the judicial power to issue the writ is to prevent a threatened or continuous irremediable injury before claims can be thoroughly investigated.
• Angela Estate, Inc. vs. CFI of Negros Occidental, 24 SCRA 500 — Cited for the rule that insufficient title or interest to sustain the injunction is always a ground for denying it.
• Cochingyan, Jr. vs. R&B Surety and Insurance Co., Inc., 151 SCRA 339 — Cited for the definition of novation as the extinguishment of an obligation by substitution or change.
• Huibonhua vs. CA, 320 SCRA 625 — Cited for the rule that novation is never presumed and that no novation occurs when the new agreement was intended to give life to the old one.
• Rillo vs. Court of Appeals, 274 SCRA 461 — Cited for the proposition that a compromise agreement clarifying the total sum owned does not novate the original contract.

• Section 416, RA 7160 (New Local Government Code of 1991) — Provides that amicable settlements and arbitration awards should have the force and effect of the final judgment of a court. The Court acknowledged this provision but noted that the case deals with extra-judicial foreclosure governed by Act No. 3135 as amended.
• Section 417, RA 7160 (New Local Government Code of 1991) — Provides that the amicable settlement or arbitration award may be enforced by execution by the lupon within six months from the date of settlement. The Court held that reliance on this provision was misplaced because the case involves extra-judicial foreclosure governed by Act No. 3135.
• Act No. 3135, as amended — Governs extra-judicial foreclosure of real estate mortgages. The Court applied this law in determining the validity of the foreclosure proceedings and the petitioner's right of redemption.

Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concurred.