Caltex Vs Iac Case Digest

FIRST ISSUE RULING:
 We rule that the respondent court did not commit any error in taking
cognizance of the aforestated issues:
[Type the company name]

a. The issue whether or not CALTEX can avail at the same time of
a personal action in court for collection of a sum of money and
the extrajudicial foreclosure of the Deed of First Mortgage
b. The issue whether or not CALTEX can avail of a deficiency

judgment, although not raised before the trial court.
*** Issues were never raised in the pleadings of the parties nor at any
stage of the proceedings before the trial court. These were only raised
by Manzana for the first time on appeal before the respondent court.
***CALTEX alleges that the only issue submitted for resolution before
the trial court is whether or not Manzana was indebted and liable to it
in the sum of P361,218.66.
 The general rule is that, except questions on jurisdiction, no question

will be entertained on appeal unless it has been raised in the court
below and it is within the issues made by the parties in their pleadings.
However, the presence of strong consideration of substantial justice
has led this Court to relax the well-entrenched rule.
 The compassionate spirit behind this rule will equally apply to the other
allegation of CALTEX that Manzana's indebtedness of P 361,218.66
was secured up to the extent of P120,000.00 only although it appears
that this issue is raised for the first time in this present petition. Thus,
the liberal application of the rule will favor both parties.
 Thus, where a debt is secured by a mortgage and there is a default in
payment on the part of the mortgagor, the mortgagee has a choice of
one (1) of two (2) remedies, but he cannot have both. The mortgagee
may:
1) foreclosure of the mortgage; or
2) file an ordinary action to collect the debt.
 When the mortgagee chooses:
1) FORECLOSURE OF THE MORTGAGE:
 He enforces his lien by the sale on foreclosure of the

mortgaged property.
 The proceeds of the sale will be applied to the

satisfaction of the debt.
 With this remedy, he has a prior lien on the property.
2) ORDINARY ACTION TO COLLECT THE DEBT:
 He thereby waives his mortgage lien.
 He will have no more priority over the mortgaged

property.
2  If the judgment in the action to collect is favorable to him,
and it becomes final and executory, he can enforce said
judgment by execution.
SECOND ISSUE RULING:

 The mere act of filing a collection suit for the recovery of
a debt secured by a mortgage constitutes waiver of the
other remedy of foreclosure. The rationale behind this
was adequately explained in the Bachrach case, supra:
 “.. a rule that would authorize the plaintiff to

bring a personal action against the debtor
and simultaneously or successively
another action against the mortgaged
property, would result not only in
multiplicity of suits so offensive to justice
and obnoxious to law and equity, but also
in subjecting the defendant to the vexation
of being sued in the place of his residence
or of the residence of the plaintiff, and then
again in the place where the property lies.
 In the present case, however, We shall not follow this

rule to the letter but declare that it is the collection
suit which was waived and/or abandoned. This
ruling is more in harmony with the principles underlying
our judicial system.
 It is of no moment that the collection suit

was filed ahead, but what is determinative
is the fact that the foreclosure 3
proceedings ended even before the
decision in the collection suit was
rendered.
 As a matter of fact, CALTEX informed the

trial court that it had already consolidated
its ownership over the property, in its reply
to the opposition of Manzana to the motion

for execution pending appeal filed by it.
THIRD ISSUE RULING:
 The collection suit filed before the trial court cannot be considered as a
deficiency judgment because a DEFICIENCY JUDGMENT has been
defined as one for the balance of the indebtedness after applying
the proceeds of the sale of the mortgaged property to such
indebtedness and is necessarily filed after the foreclosure
proceedings.
 It is significant to note that the judgment rendered by the trial court was
for the full amount of the indebtedness and the case was filed prior to
the foreclosure proceedings.
 In general, a deficiency judgment is in the nature of an ordinary money

judgment, may constitute a cause of action and is barred by the statute
of limitations applicable to ordinary judgment.
 The ten (10) year period provided in Articles 1142 and 1144 of the Civil
Code applies to a suit for deficiency judgment, to wit:
Art. 1142. A mortgage action prescribes after ten years.
Art. 1144. The following actions must be brought with ten

years from the time the right of action accrues:
(1) Upon a written contract;

4
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
 A suit for the recovery of the deficiency after the foreclosure of a

mortgage is in the nature of a mortgage action because its purpose is
precisely to enforce the mortgage contract; it is upon a written contract
and upon an obligation of Manzana to pay the deficiency which is

created by law.
 Therefore, since more than ten (10) years have elapsed from the time
the right of action accrued, CALTEX can no longer recover the
deficiency from Manzana.
FOURTH ISSUE RULING:
 CALTEX has only one cause of action against Manzana, that is, non-
payment of the debt although two choices of remedies are available to
it. As held in the Bachrach case, supra:
 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
payment of the debt, and thereafter another complaint for
foreclosure of the mortgage. If he does so, the filing of 5
the first complaint will bar the subsequent complaint. By
allowing the creditor to file two separate complaint
simultaneously or successively, one to recover his credit
and another to foreclose his mortgage, we will, in effect,
be authorizing him 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.
ACCORDINGLY, the resolution of the respondent Intermediate Appellate

Court dated January 31,1986 is SET ASIDE. The decision of the trial
court is AFFIRMED with the MODIFICATION that private respondent
Herbert Manzana's liability to petitioner Caltex Philippines, Inc. is only
up to the extent of P233,218.66 with interest thereon at 12% per annum
from August 17, 1970, plus 20% thereof as attorney's fees.
SO ORDERED.

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FIRST ISSUE RULING:

[Type the company name]

b. The issue whether or not CALTEX can avail of a deficiency

 The general rule is that, except questions on jurisdiction, no question

1) foreclosure of the mortgage; or

2) file an ordinary action to collect the debt.

 When the mortgagee chooses:

1) FORECLOSURE OF THE MORTGAGE:

 He enforces his lien by the sale on foreclosure of the

 The proceeds of the sale will be applied to the

 With this remedy, he has a prior lien on the property.

2) ORDINARY ACTION TO COLLECT THE DEBT:

 He thereby waives his mortgage lien.

 He will have no more priority over the mortgaged

[Type the company name]

 “.. a rule that would authorize the plaintiff to

 In the present case, however, We shall not follow this

 It is of no moment that the collection suit

 As a matter of fact, CALTEX informed the

to the opposition of Manzana to the motion

THIRD ISSUE RULING:

 In general, a deficiency judgment is in the nature of an ordinary money

Art. 1142. A mortgage action prescribes after ten years.

Art. 1144. The following actions must be brought with ten

(1) Upon a written contract;

 A suit for the recovery of the deficiency after the foreclosure of a

[Type the company name]

FOURTH ISSUE RULING:

 For non-payment of a note secured by mortgage, the

ACCORDINGLY, the resolution of the respondent Intermediate Appellate

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