Bachrach Motor Co., Inc. vs. Icarañgal

A mortgage creditor has a single cause of action for the non‑payment of a note secured by a real estate mortgage; the creditor may elect either a personal action for the debt or a real action to foreclose the mortgage, but not both. By filing a personal action and obtaining judgment on the note, the creditor waives the right to subsequently foreclose the mortgage. The rule against splitting a single cause of action bars the second suit.

Defendant Esteban Icarañgal, together with Jacinto Figueroa, executed a promissory note for P1,614 in favor of plaintiff Bachrach Motor Co., Inc. Icarañgal additionally executed a real estate mortgage over a parcel of land in Pañgil, Laguna, as security for the note. The debtors defaulted in paying the monthly installments. Bachrach elected to sue on the note in a personal action, obtained a favorable judgment, and sought execution against the debtors’ properties. When the sheriff levied on the mortgaged property, a third‑party claim was interposed, and the personal judgment remained unsatisfied. Bachrach then instituted a separate foreclosure action, which the trial court dismissed.

• The Loan and Mortgage: On June 11, 1930, Esteban Icarañgal and Jacinto Figueroa executed a promissory note for P1,614 in favor of Bachrach Motor Co., Inc. To secure payment, Icarañgal constituted a real estate mortgage over a parcel of land in Pañgil, Laguna, which was registered in the Registry of Deeds of Laguna on August 5, 1931.
• Default and Personal Action: The promissors defaulted on the agreed monthly installments. Bachrach Motor Co., Inc. filed a personal action for collection of the amount due on the note in the Court of First Instance of Manila and obtained a personal judgment against the defendants.
• Execution and Third‑Party Claim: A writ of execution was issued. At plaintiff’s indication, the provincial sheriff of Laguna levied on several properties of the defendants, including the mortgaged parcel. Oriental Commercial Co., Inc. interposed a third‑party claim, asserting that it had acquired the mortgaged property at a public auction on May 12, 1933, by virtue of a writ of execution issued in Civil Case No. 88253 of the Municipal Court of Manila. The sheriff desisted from selling the property, leaving the personal judgment unsatisfied.
• Foreclosure Suit: Bachrach Motor Co., Inc. then commenced an action to foreclose the real estate mortgage. The trial court dismissed the complaint on the ground that the prior personal action barred the foreclosure.

• Cumulative Remedies: Petitioner argued that the remedies on the note and on the mortgage are cumulative, not alternative, and that an unsatisfied personal judgment does not bar a subsequent foreclosure action. It invoked the ruling in Matienzo vs. San Jose, G.R. No. 39510, where a division of the Supreme Court held that “an unsatisfied personal judgment for a debt is no bar to an action to enforce a mortgage or other lien given as security for such debt.”

• Election and Waiver: Respondents maintained that by electing to sue on the note and obtaining a personal judgment, petitioner had waived its right to foreclose the mortgage. They relied on Hijos de I. de la Rama vs. Sajo, 45 Phil. 703, which recognized the mortgagee’s right to waive the security and sue personally, and the rule against splitting a single cause of action.

• Election of Remedies / Splitting a Cause of Action: Whether a creditor who sues on a promissory note, obtains a personal judgment, and thereafter files a separate action to foreclose the real estate mortgage securing the same debt is barred from maintaining the foreclosure suit.

• Election of Remedies / Splitting a Cause of Action: The dismissal of the foreclosure complaint was affirmed. A creditor holding a promissory note secured by a real estate mortgage has a single cause of action arising from the non‑payment of the debt. The cause of action consists of the right to recover the credit and the right to execute the security; both demands spring from one breach of obligation and cannot be divided. The creditor may elect either a personal action for the debt or a real action to foreclose the mortgage, but pursuit of one remedy waives the other. The rule against splitting a single cause of action—intended to prevent repeated litigation, vexation, and multiplicity of suits—bars a subsequent foreclosure suit after a personal judgment has been obtained. Each remedy is complete in itself: the personal action opens all the debtor’s properties to attachment and execution, including the mortgaged property; the foreclosure action, if resulting in a deficiency, permits a deficiency judgment against other properties. Consequently, allowing both actions simultaneously or successively would afford plural redress for a single breach of contract. The Court declined to follow the contrary holding in Matienzo vs. San Jose because it was a division decision that could not prevail over the En Banc ruling in Hijos de I. de la Rama vs. Sajo, and because the doctrine in De la Rama aligned more closely with the procedural principles underlying the Code of Civil Procedure, including Section 708 on claims against estates of deceased persons, Section 59 of the Insolvency Law, and the judicially‑enforced rule against splitting a cause of action.

• Single Cause of Action in Mortgage Obligations — The non‑payment of a note secured by a real estate mortgage gives rise to a single, indivisible cause of action. The debt and the mortgage are separate agreements, but the mortgage is subsidiary to the debt; both refer to one and the same obligation. The creditor may make two demands—payment of the debt and foreclosure of the security—but both demands arise from the same breach and constitute a single cause of action. Splitting that cause into successive suits is prohibited.
• Election of Remedies / Waiver — In the absence of express statutory provisions to the contrary, a mortgage creditor may waive the right to foreclose and maintain a personal action for the debt. By electing one remedy, the creditor waives the other. If the creditor sues personally and obtains judgment, the right to foreclose the mortgage is extinguished. This rule is supported by analogy to Section 708 of the Code of Civil Procedure (claims against decedents’ estates) and Section 59 of the Insolvency Law, and by the general procedural prohibition against splitting a single cause of action.
• Rule Against Splitting a Single Cause of Action — A party cannot split a single cause of action into parts and sue on each part separately. The rule is grounded on public policy: it prevents repeated litigation between the same parties over the same subject, protects defendants from unnecessary vexation, and avoids the costs and expenses of numerous suits. It derives from the maxim nemo debet bis vexari pro una et eadem causa.

• “For non‑payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two demands, the payment of the debt and the foreclosure of his mortgage. But both demands arise from the same cause, the non‑payment of the debt, and, for that reason, they constitute a single cause of action.” — This passage articulates the ratio decidendi, establishing that the remedy on the note and the remedy on the mortgage are components of one indivisible cause of action.
• “We hold, therefore, that, in the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action for debt or real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both.” — This is the controlling rule of the case, frequently cited to define the election of remedies in mortgage enforcement.

• Hijos de I. de la Rama vs. Sajo, 45 Phil. 703 — Followed as En Banc authority; held that a mortgagee may waive the right to foreclose and maintain a personal action for the debt in the absence of statutory prohibition. The decision clarified that such waiver is permissible and that the rule in California requiring exclusive foreclosure is based on express statutes not present in the Philippines.
• Matienzo vs. San Jose, G.R. No. 39510, June 16, 1934 — Division decision holding that an unsatisfied personal judgment is no bar to a mortgage foreclosure action. Not followed; the Court ruled that a division decision cannot override an En Banc precedent, and its doctrine was inconsistent with the rule against splitting a cause of action.
• Santos vs. Moir, 36 Phil. 350; Rubio de Larena vs. Villanueva, 53 Phil. 923; Lavarro vs. Labitoria, 54 Phil. 788; Blossom & Co. vs. Manila Gas Corporation, 55 Phil. 226 — Cited to establish the general rule against splitting a single cause of action in Philippine jurisprudence.

• Section 708, Code of Civil Procedure — Provides that a creditor holding a mortgage claim against a deceased debtor must elect between enforcing the security and presenting the claim as an unsecured claim in the estate proceedings; election of one waives the other. Applied by analogy to support the principle that a mortgage creditor must elect remedies and cannot pursue both.
• Section 59, Act No. 1956 (Insolvency Law) — Contains a similar election requirement for claims secured by mortgage in insolvency proceedings. Cited to reinforce the principle that the law favors a single, unified remedy in analogous procedural contexts.

Avanceña, C.J., Villa-Real, and Concepcion, JJ., concurred.

• Justice Imperial (joined by Justices Diaz and Laurel) — The dissenting opinion maintained that a real estate mortgage consists of two distinct and separate contracts—the principal loan and the accessory mortgage—giving rise to two independent causes of action and two corresponding remedies. The remedies are cumulative, not alternative, and an unsatisfied personal judgment does not bar a subsequent foreclosure. The dissent argued that Hijos de I. de la Rama vs. Sajo merely declared that a creditor may waive the security and sue personally, not that filing the personal action automatically constitutes a waiver of the mortgage. It emphasized that Matienzo vs. San Jose correctly stated the rule in this jurisdiction and that the California cases, which apply a statutory prohibition, are inapplicable because the Philippines lacks an equivalent express provision for ordinary civil actions. The rule against splitting a cause of action was deemed inapplicable because there are two separate causes of action, not one. Subjecting the debtor to a second action when the debt remains unpaid is neither vexatious nor oppressive where the creditor has not received satisfaction.