GR 167724; (June, 2006) (Digest)
G.R. No. 167724 ; June 27, 2006
BPI FAMILY SAVINGS BANK, INC., Petitioner, vs. MARGARITA VDA. DE COSCOLLUELA, Respondent.
FACTS
Respondent Margarita Coscolluela and her husband obtained an agricultural sugar crop loan from Far East Bank & Trust Co. (FEBTC), later merged with petitioner BPI, evidenced by 67 promissory notes executed from 1996 to 1998. The total obligation amounted to over P13 million. To secure these and future loans, the spouses executed a Real Estate Mortgage (REM) over a parcel of land, with a maximum secured amount stipulated at P7,000,000. Upon the husband’s death and respondent’s failure to pay, FEBTC initiated extrajudicial foreclosure of the mortgage for a portion of the debt (covering Promissory Notes 1-33, except two). Simultaneously, it filed a separate collection case for the remaining balance (covering Promissory Notes 34-67 and two others).
ISSUE
Whether the bank’s act of foreclosing the mortgage for part of the debt and filing a separate personal action for the unsecured balance constitutes splitting a single cause of action, thereby violating the rule against multiplicity of suits.
RULING
The Supreme Court ruled in the affirmative, affirming the Court of Appeals. The legal logic is anchored on the principle that a single contract or transaction gives rise to only one cause of action. Here, the 67 promissory notes, though executed on different dates, constituted a single agricultural crop loan obligation as treated by the bank itself in its records. The Real Estate Mortgage secured this entire aggregate obligation. Consequently, the bank had only one cause of action for the recovery of the total loan amount secured by the mortgage.
By foreclosing on the mortgage for only a portion of the debt and simultaneously suing for the remainder, the bank improperly split its single cause of action. This violates the rule against multiplicity of suits, which aims to prevent vexatious litigation and avoid burdening the courts and the defendant with several suits over the same subject. The remedy for a mortgagee in case of a debtor’s default is to foreclose the mortgage and, if the proceeds are insufficient, to claim the deficiency. However, the foreclosure must be for the entire debt. The bank cannot arbitrarily select which parts of the debt to include in the foreclosure and which to pursue separately. Therefore, the collection case was correctly dismissed for being a case of splitting a cause of action.