GR 203194; (April, 2021) (Digest)
G.R. No. 203194 , April 26, 2021
Asset Pool A (SPV-AMC), Inc., Petitioner, vs. Spouses Buenafrido and Felisa Berris, Respondents.
FACTS
On November 15, 1995, Far East Bank and Trust Company (FEBTC) and B. Berris Merchandising (BBM), a sole proprietorship owned by Buenafrido Berris, entered into a Loan Agreement for P5,000,000.00, secured by a real estate mortgage on two parcels of land, a chattel mortgage on a rice mill, and a Comprehensive Surety Agreement executed by the spouses Berris. FEBTC also granted BBM a Discounting Line facility, initially for P15,000,000.00 and later increased to P18,000,000.00, secured by the same mortgages on additional properties. To evidence these obligations, the spouses Berris executed several Promissory Notes (PNs). Due to the spouses’ failure to pay, FEBTC sent demand letters. On August 19, 1999, FEBTC filed a Petition for Extra-Judicial Foreclosure of Real Estate Mortgage over two properties for two specific PNs. Subsequently, on August 30, 1999, FEBTC filed a collection suit (Civil Case No. 99-1572) before the RTC of Makati for the amounts due under five other PNs. FEBTC later merged with Bank of the Philippine Islands (BPI), which then assigned the loans to petitioner Asset Pool A (SPV-AMC), Inc. The RTC ruled in favor of Asset Pool, ordering the spouses Berris to pay. The Court of Appeals reversed the RTC, holding that the prior institution of foreclosure proceedings barred the subsequent collection suit under the rule against splitting a single cause of action.
ISSUE
Whether the Court of Appeals erred in ruling that the prior filing of an extrajudicial foreclosure of real estate mortgage barred the subsequent personal action for the collection of debt, thereby dismissing the collection suit.
RULING
The Supreme Court partly granted the petition. It held that the two loan facilities—the Term Loan Agreement and the Discounting Line—were separate and distinct obligations. The foreclosure proceeding was specifically for loans under the Discounting Line facility, secured by a mortgage on two properties. The collection suit, however, was for the unpaid balance of the Term Loan Agreement, which was a separate contract. Therefore, the rule against splitting a cause of action did not apply because the foreclosure and the collection suit involved different principal obligations. The Court modified the CA decision, ordering the spouses Berris to pay Asset Pool the outstanding balance on the Term Loan Agreement with stipulated interest, penalty interest, and attorney’s fees. The CA’s dismissal of the collection suit was affirmed but modified to reflect the spouses’ liability under the separate Term Loan.