MARILAG v.

MARTINEZ

FACTS:

Rafael Martinez (Rafael), respondent's father, obtained-from petitioner a loan secured by a real estate
mortgage over a parcel of land -Rafael failed to settle his obligation, prompting petitioner to file a
Complaint for Judicial Foreclosure of Real Estate Mortgage.-Rafael was declared in default. -

After an ex parte presentation of petitioner's evidence, the RTC-lmus declared that the stipulated 5%
monthly interest to be usurious and reducing the same to 12% per annum and ordered Rafael to pay
petitioner the amount of ₱229,200.00, consisting of the principal and accrued interest -Records do
not show that this Decision had already attained finality.

Prior to Rafael's notice of the above decision, respondent agreed to pay Rafael's obligation to
petitioner which was pegged at ₱689,000.00. After making a total payment of ₱400,000.00,he
executed a promissory note binding himself to pay the balance of the agreed financial obligation
of[his] father to [petitioner]. After learning of the January 30, 1998 Decision, respondent refused to
pay the amount covered by the subject PN despite demands, prompting petitioner to file a complaint
for sum of money and damages -Respondent filed his answer, contending that petitioner has no cause
of action against him.

He averred that he has fully settled Rafael's obligation and that he committed a mistake in paying
more than the amount due under the loan as adjudged by the RTC-Imus in the judicial foreclosure
case which, thus, warranted the return of the excess payment. -The Court A quo’s ruling:denied
recovery on the subject [Link] that the RTC-Imus had adjudged Rafael liable to petitioner
only for the amount of ₱229,200.00, for which a total of ₱400,000.00 had already been paid, the
court a quo found no valid or compelling reason to allow petitioner to recover further on the subject
PN.

There being an excess payment, it declared that a quasi-contract (in the concept of solution indebiti)
exists between the parties and, accordingly, directed petitioner to return the said amount to
respondent, -However, the court a quo granted petitioner's motion for reconsideration, and recalled
and set aside its August 28, 2003 Decision. It declared that the causes of action in the collection and
foreclosure cases are distinct, and respondent's failure to comply with his obligation under the subject
PN justifies petitioner to seek judicial relief. It further opined that the stipulated 5% monthly interest
is no longer usurious considering the suspension of the Usury Law. Aggrieved, respondent filed a
motion for reconsideration which was denied prompting him to elevate the matter to the CA.

CA Ruling: recalled and set aside the court a quo 's orders and reinstated the August 28, 2003
Decision. It held that the doctrine of res judicata finds application in the instant case,considering that
both the judicial foreclosure and collection cases were filed as a consequence of the non-payment of
Rafael's loan, which was the principal obligation secured by the real estate mortgage and the primary
consideration for the execution of the subject PN. Petitioner's motionfor reconsideration was denied.

Issue: Whether or not the CA committed reversible error in upholding the dismissal of the collection
case. (YES)

Ruling: As petitioner had already instituted judicial foreclosure proceedings over the mortgaged
property, she is now barred from availing herself of an ordinary action for collection

In loan contracts secured by a real estate mortgage, the rule is that the creditor-mortgagee has a
single cause of action against the debtor-mortgagor, i.e., to recover the debt, through the filing of a
personal action for collection of sum of money or the institution of a real action to foreclose on the
mortgage security. The two remedies are alternative, not cumulative or successive, and each remedy
is complete by itself. Thus, if the creditor-mortgagee opts to foreclose the real estate mortgage, he
waives the action for the collection of the unpaid debt, except only for the recovery of whatever
deficiency may remain in the outstanding obligation of the debtor-mortgagor after deducting the bid
price in the public auction sale of the mortgaged properties. Accordingly, a deficiency judgment shall
only issue after it is established that the mortgaged property was sold at public auction for an amount
less than the outstanding obligation.

In the present case, records show that petitioner, as creditor-mortgagee, instituted an action for
judicial foreclosure pursuant to the provisions of Rule 68 of the Rules of Court in order to recover on
Rafael's debt. In light of the foregoing discussion, the availment of such remedy thus bars recourse to
the subsequent filing of a personal action for collection of the same debt, in this case, under the
principle of litis pendentia, considering that the foreclosure case only remains pending as it was not
shown to have attained finality.

BACHRACH MOTOR CO., INC. V. ICARAÑGAL

FACTS: The respondent executed in favor of the plaintiff, Bachrach Motor Co., Inc., a promissory note.
Promissors defaulted in the payment of the agreed monthly installments; wherefore, plaintiff
instituted in the Court of First Instance of Manila an action for the collection of the amount due on
the note. Judgment was there rendered for the plaintiff. A writ of execution was subsequently issued
and, in pursuance thereof, the provincial sheriff of Laguna, at the indication of the plaintiff, levied on
the properties of the defendants, including that which has been mortgaged by Esteban Icarañgal in
favor of the plaintiff. The other defendant herein, Oriental Commercial Co., Inc., interposed a third-
party claim, alleging that by virtue of a writ of execution, the property which was the subject of the
mortgage and which has been levied upon by the sheriff, had already been acquired by it at the public
auction. By reason of this third-party claim, the sheriff desisted from the sale of the property and, in
consequence thereof, the judgment rendered in favor of the plaintiff remained unsatisfied.
Whereupon, plaintiff instituted an action to foreclose the mortgage. The trial court dismissed the
complaint and, from the judgment thus rendered plaintiff took the present appeal.

ISSUE: Whether or not plaintiff-appellant is barred from foreclosing the real estate mortgage after it
has elected to sue and obtain a personal judgment against the defendant-appellee on the promissory
note for the payment of which the mortgage was constituted as a security.

RULING: YES.

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. 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 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.

BULATAO v. ESTONACTOC.

FACTS:

Zenaida executed a Deed of Mortgage of Real Property in Favor of Atty. Bulatao covering a subject
property located in La Union, as a security loan in the amount of P200,000. The Deed of Mortgage of
Real Property contained stipulations that the mortgagee shall pay the amount of P200,000 with the
interest rate of 5% per month within a period of 12mos or 1year or before June 4, 2009.

When Zenaida defaulted in her obligation, Atty. Bulatao foreclosed the mortgage and petitioned the
court for the sale of the subject property in a public auction. Zenaida filed a complaint for the
annulment of the Deed of Mortgage of Real Property, asserting that Atty. Bulatao took advantage of
her financial distress and urgent financial needs by imposing in the contract an interest rate of 5% per
month which is excessive, iniquitous, unconscionable, exorbitant and contrary to public policy
rendering the contract null and void.

RTC: Ruled in favor of Atty. Bulatao, that Zenaida is bound by the terms of the contract of loan and
mortgage. Moreover, the trial court declared that Atty. Bulatao is an innocent mortgagee for value,
who merely relied on the alleged sole ownership of Zenaida over the subject property as
demonstrated in the tax declaration; and that in fine, the mortgage of the co-owned property by one
of the co-owners, Zenaida in this case, sans any participation on the part of her son, as co-owner, did
not invalidate the mortgage. Moreover, the foreclosure was valid considering it was made by the
proper authorities.

ISSUES:

1. Whether the Deed of Mortgage of Real Property entirely void

RULING:

1. The court agreed with the CA that the it was correct when it limited the validity of the Deed of
Mortgage of Real Property with modifications only to the portion belonging to Zenaida, being a co-
owner of the subject property to the extent of the ¾ undivided portion, could validly convey through
sale or mortgage to the portion belongingto her and, thus, the real estate mortgage in favor of Atty.
Bulatao is not entirely void.

2. The interest imposed in the contract is void for being excessive, iniquitous, unconscionable, and
exorbitant contrary to morals and the law. Atty. Bulatao's argument of voluntariness in their
agreement on the 5% monthly interest cannot be sustained.

As emphasized in Castro v. Tan, the willingness of the parties to enter into a relation involving an
unconscionable interest rate is inconsequential to the validity of the stipulated rate. Since the interest
rate agreed upon is void, the rate of interest should be 12% per annum from the date of judicial or
extrajudicial demand. Thus, the 5% monthly interest is void for being excessive, iniquitous,
unconscionable, and exorbitant contrary to morals and the law, the interest rate prescribed by the
BangkoSentral ng Pilipinas (BSP) for loans or forbearances of money, credits or goods will be the
surrogate or substitute rate not only for the one-year interest period agreed upon but for the entire
period that the loan of Zenaida remains unpaid.

3. The foreclosure proceeding is void and cannot be given effect, the Court has reiterated that: In a
situation wherein null and void interest rates are imposed under a contract of loan, the non-payment
of the principal loan obligation does not place the debtor in a state of default. Here the debtor is not
in a state of default, the foreclosure of the subject properties should not have proceeded.

AGARRADO v. AGARRADO

FACTS: The petitioners Ma. Rosario Agarrado (Ma. Rosario), Ruth Librada Agarrado (Ruth), and Roy
Agarrado (Roy) are children of the late spouses Rodrigo (Rodrigo) and Emilia (Emilia) Agarrado, who,
during their lifetime, acquired a 287-square meter land (subject property) in Bacolod City, Negros
Occidental.
Rodrigo was involved in an illicit affair with respondent Cristita Librando-Agarrado (Cristita), with
whom Rodrigo begot respondent Ana Lou Agarrado-King (Ana Lou)

Cristita and Ana Lou filed a complaint before the Regional Trial Court (RTC), Branch 44, of Bacolod City
for the partition of the subject property, with Ma. Rosario, Ruth, Roy, "and other heirs of Rodrigo
Agarrado" as defendants.

The RTC ruled in favor of the complainant which affirmed by CA with modification.

The petitioners argue that the complaint must be dismissed for the failure of the respondents to
allege the assessed value of the subject property. They said that the appellate court failed to
appreciate this jurisdictional requirement, which was indispensable in the determination of the
jurisdiction of the RTC. They further averred that the case should not have proceeded in the first
place.

The petitioner aggrieved from the decision of the CA, filed the case before the SC.

ISSUE: WON the CA failed to appreciate the jurisdictional requirement.

RULING: YES.

The CA glossed over this issue by saying that the action for partition instituted by the respondents in
the RTC is one incapable of pecuniary estimation, which would thus confer jurisdiction over the case
to the RTC.

Criterion :

If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary
estimation, and whether jurisdiction is in the municipal courts or in the Courts of First Instance would
depend on the amount of the claim.

However, where the basic issue is something other than the right to recover a sum of money, where
the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has
considered such actions as cases where the subject of the litigation may not be estimated in terms of
money, and are cognizable exclusively by Courts of First Instance (now Regional Trial Courts).

Court ruled that partition is at once an action

(1) for declaration of co-ownership and