DIGEST/ HANNAH GRACE REFUGIO/ NORLINDA S. MARILAG v MARCELINO B. MARTINEZ

 

NORLINDA S. MARILAG v MARCELINO B. MARTINEZ

G.R. No. 201892 

July 22, 2015

 

FACTS

Rafael Martinez, respondent's father, obtained from petitioner a loan. The loan was secured by a real estate mortgage over a parcel of land covered. Rafael failed to settle his obligation upon maturity and espite repeated demands, prompting petitioner to file a Complaint for Judicial Foreclosure of Real Estate Mortgage before the RTC of Imus, Cavite. RTC-Imus issued a Decision dated January 30, 1998. Records do not show that this Decision had already attained finality. Meanwhile, prior to Rafael's notice of the above decision, respondent agreed to pay Rafael's obligation to petitioner. After making a total payment of P400,000.00, he executed a promissory note. After learning of the January 30, 1998 Decision, respondent refused to pay the amount covered by the subject PN despite demands, prompting petitioner to file a complaint for sum of money and damages before the court. In a Decision dated August 28, 2003, the court a quo denied recovery on the subject PN. It found that the consideration for its execution was Rafael's indebtedness to petitioner, the extinguishment of which necessarily results in the consequent extinguishment of the cause therefor. However, the court a quo granted petitioner's motion for reconsideration, and recalled and set aside its August 28, 2003 Decision. It declared that the causes of action in the collection and foreclosure cases are distinct. CA recalled and set aside the court a quo's November 3, 2003 and January14, 2004 Orders, and reinstated the August 28, 2003 Decision. It held that the doctrine of res judicata finds application in the instant case.

 

ISSUE

Whether or not the dismissal of the collection case by the CA is proper.

 

RULING

The Supreme Court ruled no res judicata but barred by litis pendentia.

After a punctilious review of the records, the Court finds the principle of res judicata to be inapplicable to the present case. This is because the records are bereft of any indication that the August 28, 2003 decision in the judicial foreclosure case had already attained finality.  This notwithstanding, the Court holds that petitioner’s prosecution of the collection case was barred instead, by the principle of litis pendentia in view of the substantial identity of parties and singularity of the causes of action in the foreclosure and collection cases, such that the prior foreclosure case barred petitioner’s recourse to the subsequent collection case.

Petitioner cannot split her cause of action  on Rafael's unpaid loan obligation by filing a petition for the judicial foreclosure of the real estate mortgage covering the said loan, and, thereafter, a personal action for the collection of the unpaid balance of said obligation not comprising a deficiency arising from foreclosure, without violating the proscription against splitting a single cause of action, where the ground for dismissal is either res judicata or litis pendentia.

In loan contracts secured by a real estate mortgage, the rule is that the creditor-mortgagee has a single cause of action against the debtor-mortgagor, i.e., to recover the debt, through the filing of a personal action for collection of sum of money or the institution of a real action to foreclose on the mortgage security. The two remedies are alternative, not cumulative or successive, and each remedy is complete by itself. Thus, if the creditor-mortgagee opts to foreclose the real estate mortgage, he waives the action for the collection of the unpaid debt, except only for the recovery of whatever deficiency may remain in the outstanding obligation of the debtor-mortgagor after deducting the bid price in the public auction sale of the mortgaged properties. Accordingly, a deficiency judgment shall only issue after it is established that the mortgaged property was sold at public auction for an amount less than the outstanding obligation.

In the present case, records show that petitioner, as creditor-mortgagee, instituted an action for judicial foreclosure pursuant to the provisions of Rule 68 of the Rules of Court in order to recover on Rafael’s debt. In light of the foregoing discussion, the availment of such remedy thus bars recourse to the subsequent filing of a personal action for collection of the same debt, in this case, under the principle of litis pendentia, considering that the foreclosure case only remains pending as it was not shown to have attained finality.