Case Summary (G.R. No. 45350)
Facts and Procedural History
Esteban Icarangal, jointly with Jacinto Figueroa, executed in favor of Bachrach Motor Co., Inc. a promissory note amounting to PHP 1,614, secured by a real estate mortgage on a parcel in Pangil, Laguna, which was duly registered. After default on payment, the plaintiff sued for collection of the note before the Court of First Instance of Manila and secured a personal judgment. The sheriff levied on defendant's properties, including the mortgaged land. Oriental Commercial Co., Inc. interposed a third-party claim asserting ownership of the property due to prior acquisition at a public auction pursuant to a writ of execution from a different municipal case. Because of this claim, the sheriff halted the sale of the mortgaged property, and the plaintiff’s personal judgment could not be satisfied. Plaintiff then instituted an action to foreclose the mortgage, which was dismissed by the trial court, prompting the present appeal.
Legal Issue
Whether a mortgage creditor is barred from foreclosing a real estate mortgage after having elected to sue and obtained a personal judgment for the underlying debt secured by the mortgage.
Supreme Court’s Holding and Rationale
The Court ruled that, in the absence of express statutory provisions to the contrary, a mortgagee must elect between either pursuing a personal action for the indebtedness secured by the mortgage or instituting a foreclosure action against the mortgaged property. The election of one remedy waives the other. Specifically:
- The Court cited Hijos de I. de la Rama vs. Sajo, emphasizing the principle that the mortgage creditor may waive the right to foreclose and maintain a personal action to recover the debt. This waiver is binding and bars subsequent foreclosure action.
- The Court rejected the plaintiff’s attempt to split one single cause of action into two separate suits (one for personal collection and another for mortgage foreclosure). This runs counter to procedural rules against splitting causes of action, which are intended to avoid multiple suits on the same breach and to protect defendants from vexation and excessive litigation.
- Although the underlying debt and mortgage appear as distinct agreements, they represent a single obligation with the mortgage as security. Therefore, only one cause of action arises from the non-payment of the debt.
- The Court acknowledged that in some American jurisdictions with specific statutes, such concurrent or successive actions may be permitted. However, Philippine procedure lacks such provisions and instead adheres to the principle of election of remedies.
- The Court also noted that the creditor’s remedy under either course of action is complete and sufficient, whether through recovery of the debt personally (with attachment of properties if necessary) or foreclosure of the mortgage with possible deficiency judgment against other properties afterward.
- Allowing both suits would amount to multiple redresses for one breach, resulting in increased costs and vexation.
- The judgment of dismissal of the foreclosure suit was therefore affirmed, with costs against the appellant.
Dissenting Opinion (Justice Imperial, Joined by Justice Laurel and Diaz, J. Concurring in Part)
Justice Imperial dissented, arguing that:
- The cited Hijos de I. de la Rama case did not hold that instituting a personal action estops the mortgagee from later pursuing foreclosure. Rather, it affirmed the mortgagee’s right to waive foreclosure or maintain a personal suit; it did not rule out pursuing both actions successively if the debt remains unpaid.
- The principle that a contract of real estate mortgage comprises two separate contracts—a principal obligation (the loan) and an accessory contract (the mortgage)—gives rise to two separate causes of action, allowing both personal and real actions to be brought, though satisfaction may be achieved only once.
- The case of Matienzo vs. San Jose, a binding precedent, held that an unsatisfied personal judgment is not a bar to foreclosure of the mortgage. This decision should not be lightly disregarded as it was rendered by a Supreme Court division and is supported by legal reasoning consistent with civil law principles.
- The principle against splitting causes of action applies only to situations where there is truly a single cause of action, which is not the case here given the dual contractual nature of the mortgage agreement.
- The Court's majority erroneously applied procedural doctrines and relied on foreign jurisprudence that is dependent on statutes absent in the Philippines.
- Permitting both actions does not necessarily produce vexation or oppression, especially where the debt remains unpaid and efforts to satisfy a personal judgment are unsuccessful due to claims against the mortgaged property.
- Thus, in the absence of statutory prohibition, the mortgagee should be allowed to pursue cumulative remedies: personal action for the debt and foreclosure of the mortgage.
Legal Principles Established
- A mortgage creditor must elect between pursuing a personal action for the debt or instituting fo
Case Syllabus (G.R. No. 45350)
Facts of the Case
- On June 11, 1930, Esteban Icarangal and Jacinto Figueroa executed a promissory note in favor of Bachrach Motor Co., Inc. for the amount of P1,614.
- To secure payment, Esteban Icarangal executed a real estate mortgage on a parcel of land in Pangil, Laguna.
- The mortgage was duly registered in the registry of deeds on August 5, 1931.
- The promissors defaulted on the agreed monthly installment payments.
- Bachrach Motor Co., Inc. filed an action for collection before the Court of First Instance of Manila.
- Judgment was rendered in favor of the plaintiff, and a writ of execution was issued.
- The provincial sheriff of Laguna levied on properties of the defendants, including the mortgaged property.
- Oriental Commercial Co., Inc. filed a third-party claim, asserting it had acquired the mortgaged property through a prior public auction under a writ of execution.
- The sheriff desisted from selling the mortgaged property following this claim, leaving the judgment unsatisfied.
- Plaintiff then filed an action to foreclose the mortgage; however, the trial court dismissed the complaint, prompting the present appeal.
Legal Issue Presented
- Whether the plaintiff-appellant is barred from foreclosing the real estate mortgage after having elected to sue and obtained a personal judgment against the defendant-appellee on the promissory note secured by the mortgage.
Majority Decision and Rationale
- The Supreme Court held that in the absence of statutory provisions, a mortgage creditor must elect between pursuing a personal action for the debt or a real action to foreclose the mortgage, but cannot pursue both remedies successively or simultaneously.
- Citing the doctrine in Hijos de I. de la Rama vs. Sajo, the Court reiterated that:
- The mortgagee may waive the foreclosure suit and maintain a personal action for the indebtedness secured by the mortgage.
- Such waiver bars him from subsequently foreclosing the mortgage.
- The Court rejected the reasoning in Matienzo vs. San Jose, which allowed successive actions, stating it did not overrule De la Rama and emphasizing procedural simplicity.
- Rationalized under principles of judicial economy and the rule against splitting a single cause of action, the Court emphasized:
- A note secured by mortgage creates a single cause of action comprising demands for payment of the debt and foreclosure of the mortgage as security for the debt.
- Although the note (principal obligation) and mortgage (security) are separate agreements, they arise from one obligation.
- Consequently, splitting actions to recover the debt and foreclose the mortgage would allow multiple redresses for a single breach, causing vexation to debtors and unnecessary court costs.
- The Court upheld the rule against multiple suits on the same cause of action to avoid repeated litigation and protect defendants from harassment.
- It clarified that election of remedies does not impair the cause of action; either remedy is complete and provides full redress.
- A personal action judgmen