G.R. No. 35125 - Bank of the Philippine Islands vs. Green

Title: Bank of the Philippine Islands vs. Green

Case: G.R. No. 35125

Decision Date: Dec 12, 1932

Bank sought foreclosure on mortgaged Rizal properties; prior Manila court ruling barred second action. Res judicata applied; procedural errors noted. Case dismissed.

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Case Digest (G.R. No. 35125)
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Facts:

Background and Mortgage Execution

On April 19, 1921, defendant B. A. Green executed and delivered to the Bank of the Philippine Islands a mortgage covering eight parcels of land—one in the City of Manila and seven in the Province of Rizal—with Torrens titles, to secure an overdraft credit not exceeding P50,000.

On August 9, 1921, Green further delivered two promissory notes (one for P15,300 and the other for P42,600) to the bank, which were purported to satisfy the overdraft debt.

On August 25, 1921, Green executed another mortgage in favor of S. W. O’Brien (administrator of the estate of C. W. O’Brien) covering the same lands, registered on November 12, 1921, as security for a debt amounting to P35,175.02.

First Suit and Foreclosure in Manila

On June 14, 1923, the bank initiated civil case No. 24594 in the Court of First Instance of Manila against Green, seeking judgment on the two promissory notes and the foreclosure of the April 19, 1921, mortgage.

Although the bank had actual and constructive knowledge of the mortgage executed in favor of O’Brien, it did not join O’Brien as a party in the suit, as required by Section 255 of the Code of Civil Procedure.

The litigation proceeded in the Manila court, with the bank obtaining a personal judgment against Green and a decree of foreclosure for both the lot in Manila and the seven lots in Rizal.

The foreclosed lot in Manila was subsequently sold under the decree, with the bank bidding P25,000, which was then credited against the judgment.

Initiation of the Rizal Suit

On February 13, 1929, the Bank of the Philippine Islands filed a new petition in the Court of First Instance of Rizal. This suit sought:

A personal judgment against Green for the remaining balance of the unpaid amount from the Manila judgment, specifically P68,616.46 with interest at 9% from January 16, 1929.

The foreclosure of the mortgage, but limited only to the lands situated in the Province of Rizal.

A declaration that any right or interest of the defendants O’Brien, as second mortgagees, would be extinguished if they did not exercise their right of redemption.

The defendants O’Brien were made parties to this suit on the basis that they held a second mortgage covering the same lands.

Judicial Proceedings in the Rizal Case

The case was initially heard by Judge Enage, who rendered a judgment for the defendants on April 25, 1930.

A motion for a new trial was filed and subsequently denied on May 31, 1930, by Judge Zandueta.

On June 10, 1930, the plaintiff bank filed a second motion for a new trial, which Judge Lukban granted on July 1, 1930.

After the presentation of additional evidence by the bank, Judge Lukban reversed the earlier decisions and, on October 28, 1930, rendered a judgment in favor of the bank against Green for the sum of P68,616.45, including interests, attorneys’ fees, and costs; the judgment also ordered a public sale of the Rizal lands if the debt was not satisfied within 90 days.

All relief sought against the defendants O’Brien was denied in the trial court.

Appeals and Assignments of Error

Both defendant Green and the defendants O’Brien filed exceptions and motions for new trial, which were denied; appeals were thereafter filed in the Supreme Court.

The appellants O’Brien raised several assignments of error, including:

Errors in holding that the indebtedness of P68,616.43 was secured by the mortgage, asserting that the obligation had been paid and that the mortgage was extinguished.

The improper maintenance of a second foreclosure suit, thereby arguing that the bank lost its right to bring a second action.

The issue of res judicata given that the matter had already been decided in case No. 24594 in Manila.

Errors arising from the granting of the plaintiff’s motion for a new trial and the reopening of the case to admit additional evidence.

The trial court’s denial of the O’Brien’s motion for a new trial and its failure to render judgment as prayed in their amended answers.

The bank did not raise any exception to the decision that denied relief to the O’Brien defendants in the Rizal suit.

Issue:

Whether a second suit for foreclosure on the same mortgage, already foreclosed in the Manila court, can be maintained in the Court of First Instance of Rizal.

Specifically, the issue centers on whether the bank is entitled to a second judgment and foreclosure upon the same mortgage despite a prior adjudication.

Whether the defenses raised by Green and the O’Brien defendants—alleging full payment or liquidation of the debt by way of promissory notes, and the claim of mortgage satisfaction—are valid.

This includes the contention that the overdraft was fully satisfied and the mortgage therefore extinguished.

Whether errors were made concerning the motions for new trial and the subsequent reopening of the case to allow additional evidence.

In particular, whether reopening the case adversely affected procedural finality and the rights of the parties involved.

Whether the proper procedure was followed in handling the omission of the O’Brien mortgagee in the Manila suit, and if their subsequent inclusion in the Rizal suit was legally appropriate.

This involves examining if a supplemental action in the Manila court should have been pursued instead of instituting a separate suit in Rizal.

Ruling:

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Ratio:

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Doctrine:

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