GR 35453; (September, 1989) (Digest)
G.R. No. 35453 September 15, 1989
INDUSTRIAL FINANCE CORPORATION, petitioner, vs. HON. SERGIO A.F. APOSTOL, Judge of the Court of First Instance of Rizal, Branch XVI, Quezon City, JUAN DELMENDO and HONORATA DELMENDO and JOAQUIN PADILLA and SOCORRO PADILLA, respondents.
FACTS
Spouses Joaquin and Socorro Padilla purchased three trucks on credit from Industrial Transport and Equipment, Inc., executing a promissory note secured by a chattel mortgage on the trucks and a real estate mortgage on their property. The seller subsequently endorsed the note and assigned the real estate mortgage to petitioner Industrial Finance Corporation (IFC), with the assignment duly annotated on the title. Due to the Padillas’ default, IFC filed a personal action for collection of a sum of money against Joaquin Padilla (Civil Case No. Q-14417) and obtained a favorable final judgment for the unpaid balance.
Meanwhile, private respondents Juan and Honorata Delmendo acquired the mortgaged real property from the Padillas. They filed a complaint (Civil Case No. Q-15942) against IFC and the Padillas, seeking the cancellation of the mortgage lien on the title. The Delmendos argued that by electing to file a personal action for the debt, IFC had waived its right to enforce the real estate mortgage. The trial court granted the Delmendos’ motion for summary judgment, ordering the cancellation of the mortgage lien.
ISSUE
Whether the filing by a mortgage creditor of a personal action for the recovery of a debt constitutes a waiver of its right to enforce the real estate mortgage securing that debt.
RULING
Yes. The Supreme Court affirmed the summary judgment, ruling that IFC, by instituting and pursuing to finality a personal action for the collection of the debt, had waived and abandoned its mortgage lien. The Court reiterated the settled doctrine that a mortgage creditor has a single cause of action arising from the debtor’s non-payment. This single cause of action encompasses two potential remedies: a personal action for the debt or a real action to foreclose the mortgage. The creditor must elect one remedy; pursuit of one constitutes a waiver of the other.
The legal logic is grounded in preventing multiplicity of suits, vexation to the debtor, and the splitting of a single cause of action. As established in Bachrach Motor Co. v. Icarangal, the debt and the mortgage, though separate contracts, refer to a single obligation. A creditor who sues and obtains a personal judgment upon the credit chooses to hold the debtor personally liable, making all of the debtor’s properties, including the mortgaged asset, liable for execution. Consequently, the mortgage security is deemed relinquished. Since IFC secured a final money judgment against Padilla, it waived its right to foreclose on the specific mortgaged property. The Delmendos, as successors-in-interest, are therefore entitled to have the title cleared of the encumbrance. The Court found no error in the trial court’s application of this doctrine via summary judgment.