Marilag v. Martinez
CLARIFICATIONFacts
The Antecedents: On July 30, 1992, Rafael Martinez (Rafael), respondent Marcelino B. Martinez's (respondent) father, obtained a loan of P160,000.00 from petitioner Norlinda S. Marilag (petitioner) with a stipulated monthly interest of five percent (5%), secured by a real estate mortgage. Rafael failed to pay upon maturity. Prior to Rafael's notice of the RTC-Imus decision, respondent agreed to pay Rafael's obligation, pegged at P689,000.00, and made total payments of P400,000.00. On February 20, 1998, respondent executed a promissory note (PN) for P289,000.00, representing the balance of his father's agreed financial obligation. Procedural History: On November 10, 1995, petitioner filed a Complaint for Judicial Foreclosure of Real Estate Mortgage (Civil Case No. 1208-95) before the Regional Trial Court (RTC) of Imus, Cavite, Branch 90 (RTC-Imus). On January 30, 1998, the RTC-Imus issued a Decision, declaring the 5% monthly interest usurious and reducing it to 12% per annum (p.a.), ordering Rafael to pay P229,200.00. After learning of this decision, respondent refused to pay the amount covered by the subject PN. On July 2, 1998, petitioner filed a complaint for sum of money and damages (Civil Case No. 98-0156) before the RTC of Las Piñas City, Branch 202 (court a quo). Respondent filed an answer, contending full settlement and mistake in overpayment, interposing a compulsory counterclaim for the return of excess payment. On August 28, 2003, the court a quo denied recovery on the PN, found solutio indebiti, and directed petitioner to return P171,000.00 plus 6% interest. On November 3, 2003, the court a quo granted petitioner's motion for reconsideration, recalled its August 28, 2003 Decision, and ordered respondent to pay P289,000.00. Respondent's motion for reconsideration was denied on January 14, 2004. The Court of Appeals (CA), in a Decision dated November 4, 2011, recalled and set aside the court a quo's November 3, 2003 and January 14, 2004 Orders, and reinstated the August 28, 2003 Decision, holding that res judicata applied. Petitioner's motion for reconsideration was denied by the CA on May 14, 2012. The Petition: Petitioner filed a petition for review on certiorari before the Supreme Court, assailing the CA's Decision and Resolution. The essential issue raised was whether the CA committed reversible error in upholding the dismissal of the collection case, implicitly arguing that the collection case was distinct from the foreclosure case and not barred by res judicata or litis pendentia.
Issue(s)
Whether the Court of Appeals committed reversible error in upholding the dismissal of the collection case; and whether the stipulated interest rate was excessive, warranting a return of excess payment.
Ruling
The petition is DENIED. The Decision dated November 4, 2011 and the Resolution dated May 14, 2012 of the Court of Appeals in CA-G.R. CV No. 81258 reinstating the court a quo's Decision dated August 28, 2003 in Civil Case No. 98-0156 are hereby AFFIRMED with the MODIFICATIONS: (a) directing petitioner Norlinda S. Marilag to return to respondent Marcelino B. Martinez the latter's excess payments in the total amount of P134,400.00, plus legal interest at the rate of 6% p.a. from the filing of the Answer on August 6, 1998 until full satisfaction; and (b) deleting the award of attorney's fees.
Ratio Decidendi
On Whether the Court of Appeals committed reversible error in upholding the dismissal of the collection case; and whether the stipulated interest rate was excessive, warranting a return of excess payment: The Supreme Court found the principle of res judicata inapplicable. However, the Court held that petitioner's prosecution of the collection case was barred by the principle of litis pendentia. The Court reiterated that a creditor-mortgagee has a single cause of action against the debtor-mortgagor, which is to recover the debt, either through a personal action for collection or a real action to foreclose the mortgage security. These remedies are alternative, not cumulative or successive, and the election of one bars the other. As elucidated in Bachrach Motor Co., Inc. v. Icarangal, the creditor cannot split a single cause of action by filing separate complaints for payment of the debt and foreclosure of the mortgage. The Court emphasized that the remedy of foreclosure of mortgage is deemed chosen upon the filing of the complaint therefor, as explained in Suico Rattan & Buri Interiors, Inc. v. CA. Therefore, since petitioner had already instituted judicial foreclosure proceedings, she was barred from availing herself of an ordinary action for collection, regardless of whether the foreclosure decision had attained finality. The Court further determined that the promissory note executed by respondent did not constitute a separate and distinct contract of loan that would give rise to a separate cause of action. It found no novation of the original loan contract between Rafael and petitioner. The promissory note merely represented respondent's assumption to pay Rafael's remaining unpaid balance on his father's behalf, thus referring to the same original obligation. Consequently, the dismissal of the collection case was proper. Regarding respondent's counterclaim for excess payment, the Court found the stipulated 5% monthly interest to be excessive, iniquitous, unconscionable, and exorbitant, reducing it equitably to 1% per month or 12% per annum, consistent with Agner v. BPI Family Savings Bank, Inc. Based on this reduced interest, the Court computed an overpayment of P134,400.00 by respondent, giving rise to a quasi-contractual obligation of solutio indebiti under Article 2154 in relation to Article 2163 of the Civil Code. The Court ordered the return of this amount with legal interest at 6% per annum from the filing of the Answer interposing the counterclaim. Finally, the award of attorney's fees was deleted because the court a quo failed to state the factual or legal basis for such award in the body of its decision, as required by Article 2208 of the New Civil Code and reiterated in S.C. Megaworld Construction and Development Corporation v. Parada.
Main Doctrine
The Supreme Court reiterated and clarified the doctrine that a creditor-mortgagee has a single cause of action against a debtor-mortgagor for the recovery of a debt secured by a real estate mortgage. This single cause of action can be pursued either through a personal action for collection of a sum of money or a real action for judicial foreclosure of the mortgage. These remedies are alternative, not cumulative, and the election of one bars the other. The Court emphasized that the filing of a judicial foreclosure complaint constitutes an election of remedy, thereby barring a subsequent personal action for collection of the same debt under the principle of litis pendentia, as it amounts to splitting a single cause of action. Furthermore, the Court clarified that a promissory note executed by a third party to assume the original debtor's obligation does not automatically result in novation, which requires clear and unequivocal intent, and thus does not create a separate cause of action if the underlying debt remains the same.