G.R. No. 74730 . August 25, 1989.
CALTEX PHILIPPINES, INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT and HERBERT MANZANA, respondents.

FACTS

Private respondent Herbert Manzana purchased petroleum products on credit from petitioner Caltex Philippines, Inc., incurring an indebtedness of P361,218.66. To secure this debt, Manzana executed a Deed of First Mortgage over a parcel of land in favor of Caltex on October 4, 1969. Due to Manzana’s failure to pay, Caltex filed a complaint for the recovery of the entire debt on August 17, 1970. Subsequently, on September 15, 1970, Caltex extrajudicially foreclosed the mortgaged property, which was sold at auction to Caltex for P20,000 on October 30, 1970. The trial court later rendered judgment ordering Manzana to pay Caltex the amount of P353,218.66, with interest and attorney’s fees.
On appeal, Manzana raised for the first time the issues of whether Caltex could simultaneously pursue a personal action for collection and extrajudicial foreclosure, and whether Caltex could obtain a deficiency judgment after foreclosure. The Intermediate Appellate Court initially affirmed the trial court’s decision but, upon Manzana’s motion for reconsideration, vacated its decision and remanded the case to determine the proper deficiency. Caltex filed this petition, arguing these issues were raised belatedly.

ISSUE

The primary issues were: (1) whether the appellate court erred in considering issues raised for the first time on appeal; (2) whether filing a collection suit constitutes a waiver of the right to foreclose; and (3) whether Caltex’s actions constituted splitting a single cause of action.

RULING

The Supreme Court ruled in favor of Caltex on the procedural issue but modified the monetary award. On the first issue, the Court held that the appellate court did not err in taking cognizance of the issues raised for the first time on appeal, as the presence of substantial justice warranted a relaxation of the procedural rule. However, the Court applied this liberal approach to also consider Caltex’s own belated argument that the mortgage secured the debt only up to P120,000, as stipulated in the deed.
On the second and third issues, the Court applied the doctrine in Bachrach Motor Co. v. Icarangal, holding that a creditor has a single cause of action for the recovery of a debt secured by a mortgage. The creditor may pursue the debt and foreclosure simultaneously or successively, but cannot split the cause of action. Here, Caltex’s filing of the collection suit and subsequent extrajudicial foreclosure did not constitute splitting, as both remedies were pursued to enforce the same obligation. The Court further clarified that an action for a deficiency judgment after foreclosure is a mortgage action subject to a ten-year prescriptive period, which had not prescribed in this case.
Accordingly, the Supreme Court set aside the appellate court’s resolution and affirmed the trial court’s decision with modification. It held that Manzana’s liability was only up to P233,218.66, calculated by deducting the P120,000 mortgage coverage and the P8,000 payment from the original debt, plus interest and attorney’s fees as awarded.