Cerna v. Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns a loan of P17,500.00 obtained by Celerino Delgado from Conrad Leviste, evidenced by a promissory note dated October 16, 1972. To secure this loan, Delgado executed a chattel mortgage over his own Willy's jeep and, acting as attorney-in-fact for Manolo P. Cerna, also mortgaged Cerna's 'Taunus' car. Delgado failed to repay the loan when it became due. 2. Procedural History: Leviste initiated a collection suit against both Delgado and Cerna as solidary debtors. Cerna filed a motion to dismiss, arguing lack of cause of action, the death of Delgado necessitating claims against his estate, and that Leviste's collection suit barred foreclosure. This motion was denied. Cerna then filed a special civil action for certiorari, mandamus, and prohibition with the Court of Appeals, which was also denied due to insufficient proof of Delgado's death and the alleged forgery of the special power of attorney. A second motion to dismiss, raising similar grounds, was filed and subsequently denied. Cerna again petitioned the Court of Appeals for certiorari and prohibition, which dismissed the petition concerning Cerna but granted it regarding Delgado, ordering the complaint against Delgado dismissed. The instant petition for review was then filed. 3. The Petition: This is a Petition for Review on Certiorari seeking to overturn the Court of Appeals' decision that held petitioner Manolo P. Cerna solidarily liable for the loan. The core of Cerna's argument is that he was not a signatory to the promissory note and therefore not a debtor under the loan agreement. He contends that his liability, if any, stemmed from a chattel mortgage, and that Leviste's election to file a collection suit, rather than foreclose the mortgage, constituted an abandonment of the security. Cerna argues that this choice of remedy bars recourse against him, especially given the death of the principal debtor, Delgado, and the procedural rules governing claims against estates. The Court of Appeals, in its decision under review, had initially held Cerna solidarily liable, but the Supreme Court ultimately disagreed with this finding.
Issue(s)
Whether a third-party mortgagor who secures the debt of another is solidarily liable for the principal loan. Whether the filing of a collection suit bars the creditor from foreclosing on the mortgaged property. Whether the current petition is barred by the principle of res judicata due to the finality of the first certiorari proceeding.
Ruling
The petition is granted. The decision of the Court of Appeals holding petitioner solidarily liable is reversed. The collection suit against petitioner is dismissed.
Ratio Decidendi
On Issue 1: No, a third-party mortgagor is not solidarily liable with the principal debtor. The Court held that under Article 1207 of the Civil Code, solidarity is never presumed; it exists only when the obligation expressly states it, or when the law or the nature of the obligation requires it. Here, the promissory note for the loan was signed only by Delgado, and Cerna was not a party to that contract. Although Cerna's car was mortgaged via an SPA, this was merely an accessory contract to secure Delgado’s debt. There is no legal provision that makes a third person who mortgages his own property to secure another’s debt solidarily bound with the principal obligor. Consequently, Cerna's liability was limited to the value of the mortgaged property and did not extend to the principal obligation of the loan itself. On Issue 2: Yes, the filing of a collection suit bars the foreclosure of the mortgage. The Court reiterated that a mortgagee who files a suit for collection manifests a lack of interest in the mortgaged property as security and is deemed to have abandoned the remedy of foreclosure. These two remedies—collection and foreclosure—are alternative, not cumulative. Choosing one remedy results in the waiver of the other. This is particularly relevant under Rule 86, Section 7 of the Rules of Court, which provides specific options for creditors holding claims against a deceased person. Since Leviste chose to pursue a collection suit (a money claim) rather than a foreclosure, he could no longer proceed against Cerna's car, which served as the abandoned security. On Issue 3: Yes, the petition is barred by the principle of res judicata. While the petitioner's substantive arguments regarding non-solidarity and abandonment of security were meritorious, the Court found that the procedural history was fatal to his case. The petitioner had already challenged the denial of his first motion to dismiss through a petition for certiorari (CA G.R. No. 03088), which the Court of Appeals denied in a decision that subsequently became final. The second motion to dismiss was based on the exact same grounds as the first. The Court ruled that filing a second motion to dismiss and a subsequent petition for certiorari was an attempt to circumvent the finality of the previous CA decision. Therefore, the action was barred by res judicata, as the petitioner should have proceeded to trial rather than burdening the courts with redundant motions and petitions.
Main Doctrine
A third-party mortgagor who secures another's obligation by mortgaging their property is not solidarily liable with the principal debtor unless the obligation expressly states so, or the law or nature of the obligation requires it. Furthermore, the filing of a collection suit by the creditor is deemed an abandonment of the remedy of foreclosure of the chattel mortgage.