Industrial Finance Corporation v. Apostol
REITERATIONFacts
The Antecedents: Spouses Joaquin and Socorro Padilla purchased three Isuzu trucks on credit from Industrial Transport and Equipment, Inc. They executed a promissory note for the balance of the purchase price, securing it with a chattel mortgage on the trucks and a real estate mortgage on their property. The seller assigned the promissory note and the real estate mortgage to petitioner Industrial Finance Corporation (IFC). Procedural History: IFC sued Joaquin Padilla for the recovery of the unpaid balance on the promissory note, obtaining a favorable judgment which was affirmed on appeal, except for a reduction in attorney's fees. Meanwhile, private respondents Juan and Honorata Delmendo, transferees of the Padillas' mortgaged property, filed a complaint against IFC and the Padillas. The Delmendos sought the cancellation of the mortgage lien annotated on their title, alleging that IFC had waived its mortgage rights by instituting a personal action against the Padillas. The trial court granted the Delmendos' motion for summary judgment, ordering the cancellation of the mortgage and the surrender of the owner's duplicate title. The Petition: IFC appealed the summary judgment, raising the issue of whether filing a personal action for debt constitutes an ipso jure abandonment of its mortgage lien.
Issue(s)
Whether filing a personal action for the recovery of a debt secured by a real estate mortgage constitutes an abandonment, ipso jure, of the mortgage lien. Whether the Delmendos, as transferees of the mortgaged property, are entitled to the cancellation of the mortgage lien.
Ruling
The Supreme Court affirmed the summary judgment of the trial court. It held that by instituting a personal action for the recovery of the unpaid balance on the promissory note and obtaining a judgment in its favor, petitioner IFC is deemed to have abandoned its mortgage lien on the subject property. Consequently, the real estate mortgage is discharged, and the Delmendos, as purchasers of the property, have the right to have the title delivered to them free from the encumbrance.
Ratio Decidendi
On the issue of waiver of mortgage lien by filing a personal action: The Court reiterated the settled rule that a mortgage creditor has a single cause of action arising from the non-payment of the debt, which consists of the recovery of the credit and the execution of the security. The creditor may elect to waive the security and bring an ordinary action to recover the indebtedness, with the right to execute the judgment on all the debtor's properties, including the mortgaged property. However, if the creditor fails in the elected remedy, they cannot pursue the waived remedy. This principle was established in numerous cases, including Danao v. Court of Appeals, Manila Trading and Supply Co. v. Co Kim and So Tek, and Bachrach Motor Co., Inc. v. Icarangal and Oriental Commercial Co., Inc. The Court emphasized that the creditor cannot split their single cause of action by filing two separate complaints, one for foreclosure and another for collection, as this would lead to plural redress for a single breach of contract. By electing to pursue a personal action and obtaining a judgment, the creditor waives the right to enforce the mortgage securing the debt, as held in Movido v. RFC and the Provincial Sheriff of Samar. On the entitlement of the Delmendos to cancellation of the mortgage lien: As a consequence of IFC's waiver of its mortgage lien, the real estate mortgage is deemed discharged. The Delmendos, having purchased the mortgaged property, automatically step into the shoes of the original mortgagors. They possess every right to have the title delivered to them free from the encumbrance, as the mortgage lien no longer subsists against the property they acquired.
Main Doctrine
A mortgage creditor who institutes a personal action for the recovery of the debt secured by a real estate mortgage is deemed to have waived its mortgage lien on the property.