G.R. No. 140835 - Gonzales vs. Narvasa

Petitioner Asset Pool A (SPV-AMC), Inc. (Asset Pool) is the assignee of Bank of the Philippine Islands (BPI), which had merged with Far East Bank and Trust Company (FEBTC), the original creditor.
Respondents are spouses Buenafrido and Felisa Berris (spouses Berris), debtors under various loan agreements and promissory notes (PNs) with FEBTC.

On November 15, 1995, FEBTC and B. Berris Merchandising (BBM, owned by Buenafrido) executed a Loan Agreement for P5,000,000 with interest at prevailing market rates, payable via 18 quarterly amortizations over five years, secured by:

Real estate mortgage on parcels covered by Transfer Certificates of Title (TCT) Nos. 129163 and 74496;
Chattel mortgage on rice mill;
Comprehensive Surety Agreement.

Discounting Line was partially secured by a real estate mortgage on TCT Nos. 129163, 74496, 27852, 31079, and 296868, and a chattel mortgage on the rice mill.

PN No. 104-961106/TLS dated April 15, 1996 for P5,000,000, due April 16, 2001, interest 14.5% per annum; quarterly amortizations and conditions matched Loan Agreement terms.

PN No. 2-104-980259/bdc dated January 23, 1998 for P4,000,000, due July 22, 1998, 26% interest;
PN No. 2-104-980296/bdc dated January 27, 1998 for P2,500,000, due July 24, 1998, 27% interest;
PN No. 2-104-980975 BD/C dated April 15, 1998 for P3,000,000, due July 31, 1998, 22% interest;
PN No. 2-104-981149/BDC dated May 13, 1998 for P750,000, due July 31, 1998, 21.95% interest.

All PNs under the Discounting Line included attorney’s fees of 25% and liquidated damages of 1% per 30 days on default.

Spouses Berris failed to pay their obligations.
FEBTC demanded payment through letters on August 5 and December 15, 1998, and a Final Demand Letter dated February 3, 1999 for P21,055,555.54 (exclusive of interests and charges).

August 19, 1999: FEBTC filed an extrajudicial foreclosure petition on TCT Nos. 129163 and 74496 relating to PN Nos. 2-104-980258 BDC and 2-104-980888 BDC (both under Discounting Line).
August 30, 1999: FEBTC filed a collection suit (Civil Case No. 99-1572, RTC Makati) against the spouses for amounts due on five PNs: the TLS PN under Loan Agreement and four BDC PNs under the Discounting Line.
October 23, 2000: Spouses Berris filed complaint assailing the extrajudicial foreclosure (RTC Calamba).
BPI merged with FEBTC in 2000; BPI assigned loans to Asset Pool in 2006, which substituted FEBTC in the collection suit.
Motion practice and delays ensued; spouses Berris were eventually declared in default in 2007.

The trial court ruled in favor of Asset Pool ordering the spouses Berris to pay P17,422,072.51 plus interest, liquidated damages, attorney’s fees, litigation expenses, and costs of suit.
The court found the spouses Berris breached the PNs.

The CA reversed the RTC decision, dismissing the collection suit.
Held that the prior extrajudicial foreclosure barred the collection suit due to prohibition on splitting a single cause of action.
Ruled that the obligations under the five PNs are single and indivisible, secured by the same mortgage.
Clarified that the mortgagee may file a collection suit for any deficiency only after foreclosure proceedings are terminated.
Asset Pool’s motion for reconsideration denied in August 2012.

Asset Pool filed the petition challenging the CA ruling, raising issues on application of precedent, classification of obligations, effect of foreclosure on collection, and rule against unjust enrichment.

Whether the CA gravely erred in applying the ruling in Bank of the Philippine Islands v. Coscolluela.
Whether the CA erred in failing to consider that there were five mortgaged properties, only two of which were foreclosed, relating to two of the seven loan obligations.
Whether the CA erred in ruling that extrajudicial foreclosure barred a personal action for collection of debts by the spouses Berris.
Whether the CA erred in ignoring that the principle against unjust enrichment should prevail over the procedural rule prohibiting splitting of cause of action.