Bank of the Philippine Islands Family Savings Bank, Inc. v. Coscolluela
REITERATIONFacts
The Antecedents Respondent Margarita Coscolluela and her deceased husband obtained an agricultural sugar crop loan from Far East Bank & Trust Co. (FEBTC), later merged with petitioner BPI Family Savings Bank, Inc. The loan was evidenced by 67 promissory notes totaling P13,592,492.00, with varying maturity dates. To secure the loan, the spouses executed a real estate mortgage over a parcel of land in Bacolod City. Upon failure to settle the outstanding obligation, FEBTC sent a demand letter. Subsequently, FEBTC initiated proceedings for the extrajudicial foreclosure of the mortgaged property for a portion of the debt and filed a separate civil complaint for the collection of the remaining balance. Procedural History FEBTC filed a petition for extrajudicial foreclosure of the mortgaged property with the Ex-Oficio Provincial Sheriff and a separate complaint for collection with the Regional Trial Court (RTC) of Makati City. The respondent, in her answer to the collection complaint, raised defenses including litis pendentia and splitting of causes of action. After the petitioner rested its case, the respondent filed a demurrer to evidence, which the RTC denied. The respondent then filed a petition for certiorari with the Court of Appeals (CA), assailing the RTC's denial of the demurrer. The CA granted the petition, setting aside the RTC's orders. The petitioner's motion for reconsideration was denied, leading to the present petition for review on certiorari before the Supreme Court. The Petition Petitioner BPI Family Savings Bank, Inc. seeks review of the CA's decision, arguing that the CA erred in granting the petition for certiorari. Petitioner contends that the RTC did not commit grave abuse of discretion in denying the demurrer to evidence, asserting that it did not split its cause of action by filing separate foreclosure and collection actions. Petitioner maintains that each promissory note constituted a separate contract and that the real estate mortgage secured only a portion of the total loan, allowing for separate actions. The petition raises two main issues: (1) whether the petition for certiorari was the proper remedy to assail the RTC's interlocutory order, and (2) whether the CA erred in finding grave abuse of discretion by the RTC.
Issue(s)
Whether the Court of Appeals erred in granting the petition for certiorari on the ground of grave abuse of discretion, specifically regarding the denial of the demurrer to evidence. Whether the petitioner committed forum shopping or split its cause of action by filing both an extrajudicial foreclosure proceeding and a personal action for collection. Whether the real estate mortgage secured only the P7,000,000.00 principal or all future advancements. Whether the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying the respondent's demurrer to evidence, considering the principles against splitting causes of action and the nature of remedies available to a mortgage creditor.
Ruling
The petition is denied for lack of merit. The Court of Appeals did not err in granting the petition for certiorari. The Supreme Court affirmed the CA's ruling that the RTC committed grave abuse of discretion amounting to excess or lack of jurisdiction in denying the respondent's demurrer to evidence. The Court held that a mortgage creditor has only one cause of action arising from the non-payment of the debt, which consists of the recovery of the credit with the execution of the security. The petitioner was proscribed from splitting its single cause of action by filing an extrajudicial foreclosure for some promissory notes and a personal collection case for others. By instituting the extrajudicial foreclosure proceedings, the petitioner waived its personal action to recover the debt covered by all the promissory notes.
Ratio Decidendi
On the propriety of certiorari: The Court affirmed that while an order denying a demurrer to evidence is generally interlocutory, a petition for certiorari under Rule 65 is a proper remedy when such denial is tainted with grave abuse of discretion amounting to excess or lack of jurisdiction. This is to prevent unnecessary litigation, expense, and vexation to the parties. The CA correctly found that the RTC's denial of the demurrer, in light of established jurisprudence on splitting causes of action, constituted such grave abuse. On splitting of cause of action: The Court reiterated the rule that a party may not institute more than one suit for a single cause of action. In mortgage credit transactions, the creditor has a single cause of action arising from the debtor's non-payment, which encompasses both the recovery of the credit and the execution of the security. The remedies of personal action for collection and real action to foreclose the mortgage are alternative, not cumulative. By electing to foreclose the mortgage, the creditor waives the personal action for collection, and vice versa. Pursuing both simultaneously or successively constitutes a prohibited splitting of a single cause of action. The petitioner filed an extrajudicial foreclosure for 31 promissory notes and a collection case for the remaining 36 promissory notes. Since all the loan obligations had become due by the time the foreclosure was initiated, the petitioner should have pursued the foreclosure for the entire obligation or waived the foreclosure and pursued a personal action for all the debts. By filing the foreclosure for only a portion of the debt, the petitioner waived its right to pursue a personal action for the entire indebtedness, including the amounts covered by the collection case. On the scope of the real estate mortgage: The Court found that the real estate mortgage, by its terms and the testimony of the bank's witness, served as a continuing security for all loans obtained by the mortgagors, including future advancements, not just the P7,000,000.00 principal. This "dragnet clause" meant the mortgage covered all outstanding obligations. Therefore, the petitioner could not selectively foreclose on only a portion of the loans secured by the mortgage while pursuing a separate collection action for the rest. On the nature of the remedies and grave abuse of discretion: The Court emphasized that a mortgage creditor has two alternative remedies: a personal action for debt or a real action to foreclose the mortgage. Each remedy is complete in itself. An election to pursue one remedy generally bars the pursuit of the other. Allowing both would lead to multiplicity of suits and subject the debtor to undue vexation and oppression, contrary to principles of justice and equity. The CA correctly found that the RTC's denial of the demurrer, in light of established jurisprudence on splitting causes of action, constituted such grave abuse.
Main Doctrine
A mortgage creditor cannot simultaneously or successively pursue both a personal action for the collection of the debt and a real action to foreclose the mortgage; the election of one remedy generally waives the other, as pursuing both constitutes a splitting of a single cause of action.