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 DEL…

The present petition is a direct appeal from the summary judgment
dated March 15, 1972 of the
then Court of First Instance of Rizal, Branch 16 (Quezon City) in Civil Case No.
Q-15942 entitled “Juan A. Delmendo and Honorata Delmendo v. Joaquin
Padilla and Socorro Padilla and Industrial Finance Corporation” as well as
the order of said court dated July 7, 1972 denying petitioner’s motion for
reconsideration of said judgment.

As gathered from the records, the facts are as follows:

In 1968, spouses Joaquin Padilla and
Socorro Padilla bought on credit three units of Isuzu trucks from the
Industrial Transport and Equipment, Inc. 
They executed a promissory note for P159,600,
the balance of the purchase price, securing payment thereof by a chattel
mortgage of  said trucks and, as
additional collateral, a real estate mortgage on their property
covered by Transfer Certificate of Title No. T-133625 in
favor of the seller.^[1] Subsequently, Industrial Transport and Equipment, Inc. indorsed the note and
assigned the real estate mortgage to petitioner Industrial Finance Corporation
(IFC), which assignment was duly registered in the Registry of Deeds of Quezon City and annotated on the title of the mortgaged
realty.

On May 15,
1970, in view of the
failure of the Padillas to pay several installments
on the note, the assignee IFC sued Joaquin Padilla in the Court of First
Instance of Rizal (Quezon City) for the recovery of the unpaid balance on
the note including attorney’s fees.^[2]

In due time, decision was
rendered on April 16, 1975, the dispositive
portion of which reads:

“WHEREFORE, premises considered judgment is hereby rendered in
favor of plaintiff (IFC) and against defendant (Joaquin Padilla) to pay
plaintiff.

“A.  the
sum of P82,996.75 with twelve (12%) percent interest per annum from the date of
the filing of the complaint until fully
paid;

“B. 
to pay attorney’s fees in the amount of  P20,749.93 equivalent to 25% of the whole amount due; and

“C.  to pay the costs of this suit.“^[3]

On appeal to the Court of Appeals, the trial court was sustained except for the
modification that the attorney’s fees were reduced to 12% of the balance.^[4] As no appeal was brought by either of the
parties, the appellate court decision became final and executory.

Meanwhile, on September
9, 1971, private
respondents Juan Delmendo and Honorata Delmendo filed a complaint against petitioner IFC, as
principal party, and the Padilla spouses, as formal parties, in
respondent Court of First Instance (Civil Case No. Q-15942).  The Delmendos
alleged that they were the transferees of the real property covered by Transfer
Certificate of Title No. T-133625 of the Quezon
City Register of Deeds which was mortgaged earlier by the Padillas
to the Industrial Transport and Equipment, Inc. to secure the payment of a
promissory note in the sum of P159,600 and then assigned to petitioner
IFC.  The Delmendos
prayed for the cancellation of the
mortgage lien annotated on Transfer Certificate of Title No. T-133625 and the delivery to them by petitioner of the owner’s copy of said title with damages and attorney’s fees,
considering that petitioner IFC had waived its rights over the mortgage when it
instituted a personal action against the
Padillas in Civil Case No. Q-14417
for collection of a sum of money.

Petitioner IFC moved for the dismissal of the complaint, contending that it had not
waived its right over the mortgage lien.

The Delmendos
filed a motion for summary judgment which respondent trial court granted.  Thus:

“WHEREFORE, for being meritorious, the same is hereby
granted.  Judgment is rendered, as prayed for in the Complaint.

“a) declaring the real estate mortgage in favor of the
Industrial Transport and Equipment Corporation and the assignment thereof in
favor of the Industrial Finance
Corporation forfeited, waived and abandoned, and therefore released pursuant to
law and jurisprudence;

“b) ordering the Register of Deeds of Quezon City to remove and
cancel from Transfer Certificate of Title No.
133625, Book T-672, Page 25, the annotations of the real estate mortgage
(PE-8612/T-133625 and of the
assignment of mortgage (PE-8768/T-133265);

“c) ordering the defendant Industrial Finance Corporation to surrender to the Register of Deeds
of  Quezon City the owner’s copy of TCT No T-133626 upon receipt of this order; and

“d) with costs against the defendants.

“SO ORDERED.”^[5]

Upon denial of its motion
for reconsideration, petitioner IFC came to this Court raising the issue of
whether, by filing a personal action for the recovery of a debt secured by a real estate mortgage, petitioner is deemed to have abandoned, ipso
jure, its mortgage lien on the property in question.

The above question is
certainly far from novel.  In a host of
decided cases, the most recent of which is Danao
v. Court of Appeals,^[6] this Court has resolved this issue in the
affirmative.

In Manila Trading and
Supply Co. v. Co Kim and So Tek,^[7] we declared:

“The rule is now settled that a mortgage creditor may elect to waive his security and bring,
instead, an ordinary action to recover the indebtedness with the right to
execute a judgment thereon on all the properties of the debtor, including the
subject-matter of the mortgage,
subject to the qualification that if he fails in the remedy by him elected, he
cannot pursue further the remedy he has waived.”

The case of Bachrach Motor Co., Inc. v. Icarangal
and Oriental Commercial Co., Inc.,^[8] which
similarly involves a promissory note secured by a real estate mortgage, gives
us an extensive discussion on the rule, to wit:

“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.  Though the debt and the mortgage constitute
separate agreements, the latter is
subsidiary to the former, and both refer to one and the same obligation.  Consequently, there exists only one cause of
action for a single breach of that obligation.  Plaintiff, then, by applying the rule above
stated, cannot split up his single cause of action by filing a
complaint for foreclosure of the mortgage. 
If he does so, the filing of
the first complaint will bar the
subsequent complaint.  By allowing the
creditor to file two separate complaints simultaneously or successively, one to
recover his credit and another to foreclose his mortgage, we will, in effect, be authorizing
him a plural redress for a single breach of
contract at so much cost to the courts and with so much vexation and
oppression to the debtor.

“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 a real action to foreclose
the mortgage.  In other words, he may pursue either of the two remedies, but not both.  By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in
itself.  Thus, an election to bring
a personal action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property itself.  And, if he waives such personal action and
pursues his remedy against the mortgaged property, an unsatisfied judgment
thereon would still give him the right to sue for a deficiency judgment, in
which case, all the properties of the defendant, other than the mortgaged
property, are again open to him for the satisfaction of the deficiency.  In either case, his remedy is complete, his
cause of action undiminished, and any advantages attendant to the pursuit of
one or the other remedy are purely accidental and are all under his right of
election.”

We likewise held in Movido v.
RFC and the Provincial Sheriff of Samar,^[9]
that “a mortgagee who sues and obtains a personal judgment against a
mortgagor upon his credit waives thereby his right to enforce the mortgage
securing it.”

Therefore, by instituting Civil Case No.
Q-14417 in the Court of First Instance of Rizal (Quezon City) to recover the unpaid
balance on the promissory note from the Padilla spouses and by subsequently
obtaining a judgment in its favor, petitioner IFC is considered to have
abandoned its mortgage lien on the subject property covered by Transfer
Certificate of Title No. T-133625.

The end result is the discharge of the real estate mortgage and
the Delmendos, having purchased the mortgaged
property, automatically step into the shoes of the original mortgagors with
every right to have the title delivered to them free from said encumbrance.

WHEREFORE, finding
no error in the summary judgment under appeal, the same is hereby
affirmed in toto.

Considering the length of
time that this case has been pending, this decision is declared immediately executory.

SO ORDERED.

Gutierrez, Jr., Bidin, and Cortes, JJ., concur.

Feliciano, J., on leave.

^[1]
Rollo, pp. 31-32, 37.

^[2]
Civil Case No. Q-14417.

^[3]
See certified xerox
copy of the decision of the Court of Appeals in CA-G.R. CV No. 59391 in
“Industrial Finance Corp. v. Joaquin Padilla”, promulgated on March 8, 1983.

^[4]
supra.

^[5]
Rollo, pp. 87-88.

^[6]
No. 48276, September 30, 1987,
154 SCRA 446

^[7]
71 Phil. 448, 449 (1941).

^[8]
68 Phil. 287, 293-294 (1939).

^[9]
105 Phil. 886 (1959).