G.R. No. 73610 - Philippine Commercial International Bank vs. Intermediate Appellate Court

A complaint for recovery of a sum of money was filed on May 8, 1978 by Philippine Commercial and Industrial Corporation (PCIB) against Spouses Salgado, docketed as Civil Case No. 29392.
The complaint sought enforcement of a P1.3 million promissory note allegedly executed by the spouses in favor of PCIB.
To support the application for a writ of preliminary attachment, PCIB alleged that the note was unsecured and that the spouses were in the process of disposing, concealing, or removing their properties with intent to defraud creditors.
An affidavit executed by Helen Osias, PCIB’s Credit Division Manager, attested to the insufficiency of security provided.

On May 9, 1978, a writ of preliminary attachment was granted after PCIB filed a bond of P1,500,905.00.
The deputy sheriff levied attachment on fifteen parcels of land registered in the names of the spouses.
The spouses Salgado filed an answer alleging that the note was, in fact, secured by several real estate mortgages and claimed that PCIB had consented to a restructuring of the loan by allowing the servicing of their accounts with future sugar proceeds.
On September 15, 1978, the spouses moved to quash the writ on grounds that PCIB fraudulently misrepresented the note by deleting the words “REM” (indicating a real estate mortgage) from a xerox copy attached to the complaint, thereby rendering it apparently unsecured.
The motion to quash was granted, and the writ was lifted on January 31, 1979, although PCIB’s motion for reconsideration was subsequently denied at that level.

PCIB instituted a petition for extra-judicial foreclosure of four real estate mortgages executed in its favor on May 11, 1978 before the provincial sheriff of Negros Occidental and conducted an auction sale in which it emerged as the highest bidder for P2,325,819.60.
Meanwhile, the trial court in the main civil case rendered a decision on July 15, 1981, dismissing the complaint and awarding damages against PCIB, affirming that the note was sufficiently secured by a real estate mortgage and not yet due for collection given the parties’ agreement to restructure.
On reconsideration, however, the trial court reversed its initial decision, ruling that there existed a due and demandable debt of P1,300,000.00, and reinstated the writ of preliminary attachment.
The spouses appealed these decisions and eventually sought certiorari before the Supreme Court based on earlier findings concerning the irregular issuance of the writ.

The appellate court reinstated the writ of attachment upon a motion for reconsideration, a decision later set aside by the Supreme Court in G.R. No. 55381, which declared the issuance of the writ irregular due to the false affidavit.
Following this, the spouses filed a claim for damages for the alleged wrongful attachment on November 28, 1984, which was assigned trial in the Regional Trial Court.
The trial court, during the damages proceedings, found that while claims for actual damages were inadequately supported by evidence, the spouses were entitled to moral, exemplary damages, and attorney’s fees.

PCIB argued that by filing a separate civil suit to enforce the P1.3 million promissory note and subsequently initiating foreclosure proceedings, it had effectively waived the mortgage—asserting that the mortgage could not support two simultaneous or successive actions.
Citing prior jurisprudence, the contention was made that a creditor may pursue either a personal action for debt or a real action to foreclose the mortgage, but not both, as this would result in splitting a single cause of action.
PCIB also contended that the rule on the application of payments under Article 1252 of the New Civil Code did not allow the debtor to dictate the use of foreclosure proceeds for its separate, outstanding obligation.
Furthermore, PCIB argued that the absence of an express ruling on bad faith regarding the issuance of the writ of attachment in G.R. No. 55381 precluded any imputation of malice or bad faith on its part in obtaining the writ.

The appellate court eventually modified the trial court’s award in the claim for damages, adjusting the amounts for moral damages, exemplary damages, and attorney’s fees.
Despite some awards for damages being supported (notably moral and exemplary damages), the award for actual damages was struck down for lack of competent evidence.
The Supreme Court, while affirming the core findings on the wrongful issuance of the writ, reduced the excessive award granted by the appellate court, particularly revising the monetary amounts for moral damages, exemplary damages, and attorney’s fees to more modest sums.
In its final judgment, the Supreme Court ordered PCIB to pay the spouses an aggregate sum combining revised awards for moral damages, exemplary damages, and attorney’s fees.

Whether a bank creditor, by instituting a civil suit to enforce a promissory note secured by real estate mortgages and subsequently initiating foreclosure proceedings for the same obligation, has improperly split a single cause of action.
Whether such a dual approach results in vexation and oppression against the debtor and is contrary to established jurisprudence, which mandates that the creditor may choose only one remedy.

Whether the proceeds from the extrajudicial foreclosure of the real estate mortgage may be applied as payment for a debt arising from a separate obligation with the same creditor.
The determination of whether such application constitutes an act of payment under Article 1252 of the New Civil Code.

Whether the bank’s issuance of a writ of attachment on the basis of a false affidavit—specifically, the deletion of “REM” from the promissory note—constitutes an act of bad faith or malice.
Whether, absent express findings in prior decisions, the bank should still be held liable for damages resulting from the wrongful attachment.