G.R. No. 183984 ; April 13, 2011
ARTURO SARTE FLORES, Petitioner, vs. SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.

FACTS

On October 31, 1995, respondent Edna Lindo obtained a loan of ₱400,000 from petitioner Arturo Flores, payable on December 1, 1995, with interest and a surcharge. To secure the loan, Edna executed a Deed of Real Estate Mortgage covering a conjugal property and a Promissory Note, signing for herself and as attorney-in-fact for her husband Enrico. Edna issued three checks as partial payment, all of which were dishonored. Petitioner filed a Complaint for Foreclosure of Mortgage with Damages (Civil Case No. 00-97942) before the Regional Trial Court (RTC) of Manila, Branch 33. In its September 30, 2003 Decision, the RTC, Branch 33 ruled that petitioner was not entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed by Edna without the consent and authority of her husband Enrico, rendering the mortgage void under the Family Code. The RTC, however, stated that this did not preclude petitioner from recovering the loan through a personal action against Edna, which should be filed in the proper venue.
Subsequently, on September 8, 2004, petitioner filed a Complaint for Sum of Money with Damages (Civil Case No. 04-110858) before the RTC of Manila, Branch 42. Respondents filed a Motion to Dismiss on the grounds of res judicata and lack of cause of action. The RTC, Branch 42 denied the motion in its July 22, 2005 Order, ruling that res judicata did not apply as the causes of action were distinct. Respondents filed a Petition for Certiorari before the Court of Appeals. In its May 30, 2008 Decision, the Court of Appeals set aside the RTC, Branch 42’s orders, ruling that the RTC acted with grave abuse of discretion. The Court of Appeals held that petitioner had only one cause of action for the recovery of the debt and, by initially filing the foreclosure suit, he had already waived his right to file a personal action for collection, resulting in a multiplicity of suits. Petitioner’s motion for reconsideration was denied.

ISSUE

Whether the Court of Appeals committed a reversible error in dismissing the complaint for collection of sum of money on the ground of multiplicity of suits.

RULING

Yes, the Court of Appeals committed a reversible error. The Supreme Court granted the petition and reversed the Court of Appeals’ Decision.
The general rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor (recovery of the debt) and may pursue one of two alternative remedies: a personal action for collection of sum of money or a real action to foreclose the mortgage. The election of one remedy constitutes a waiver of the other, preventing multiplicity of suits. However, this rule admits of exceptions.
In this case, the exception applies. The RTC, Branch 33, in the foreclosure case, dismissed the complaint not on the merits of the loan obligation but on a specific finding that the real estate mortgage was void due to the lack of spousal consent. The RTC explicitly stated that its decision did not bar a personal action to recover the loan. Consequently, the dismissal of the foreclosure suit was not an adjudication on the merits of petitioner’s cause of action for the recovery of the debt itself. Therefore, the filing of the subsequent collection case did not constitute splitting a single cause of action or result in a multiplicity of suits. The causes of action in the two suits were distinct: the first was a real action based on a void mortgage, and the second was a personal action for the loan. The principle of res judicata or bar by prior judgment did not apply. The RTC, Branch 42 correctly denied the motion to dismiss.