BPI Family v Coscuella

R68. Reiteration from R2

Facts:
1. Respondent Spouses Coscuella obtained an agricultural loan from Far East Bank & Trust
Co (FEBTC), now merged with BPI. This loan was treated as a single account in FEBTCs
books, which totaled 13.5M evidenced by 67 promissory notes
2. Respondent executed a real estate mortgage in favor of FEBTC over a land in Bacolod as
security for their loan as well as those that may be obtained, pegged at 7M.
a. Under the terms of this mortgage, if the Respondents fail to pay when due, the
entire obligation will be immediately due, and upon such breach, FEBTC may
foreclose the mortgage extrajudicially in accordance with Act 3135.
3. Respondents failed to settle outstanding obligations.
4. FEBTC sent a demand letter for 19.4M (13.4M for principal obligation, plus 6M for past
due interests). Respondent failed to pay despite demands
5. FEBTC then filed for extrajudicial foreclosure for the promissory notes 1-33 (except 2 and
10).
6. Pending the resolution of this, FEBTC filed a complaint before the RTC for 12M (8M
principal, plus 4M interest) representing the amounts in promissory notes 64-67, 2 ,and
10.
a. Respondent Answered, that the complaint is barred by litis pendentia. The bank
also charged exorbitant interests. The act of the bank in seeking to collect twice
on the same promissory notes is not only unfair but condemnable
b. Petitioner Bank presented its loan officer as an employee, who essentially
admitted in testimony that the loan of the spouses was a single account and each
loan drawings is covered by a promissory note with uniform maturity dates
c. Respondent filed a demurrer to evidence, that by admitting that it was a single
loan account covered by a real estate mortgage, Petitioner is thus barred from
collecting from the notes 2, 10, 33-67 after filing an extrajudicial foreclosure.
d. Petitioner opposed demurrer. While the loans were treated as a single account,
each promissory note is a separate contract.
e. RTC denied demurrer
i. The promissory notes contained different amounts, and Petitioner has the
option to file an extrajudicial foreclosure on some of the notes and
ordinary collection for the others.
7. Respondent appealed to CA of the denial of demurrer. CA set aside RTC decision,
ruled IFO Respondent
a. Either an action to foreclose or collect the debt may be chosen as a remedy by a
creditor. The two are alternative and not cumulative. The filing of the two actions
results in a splitting of a single cause of action.
8. Hence, this petition.
Issue: W/N the extrajudicial foreclosure may prosper

Held: No
Ratio:
Petitioner raises that R65 before the CA is improper as the denial of demurrer is merely
interlocutory, but an aggrieved party is entitled to the writ of certiorari if the trial court commits
grave abuse of discretion. In this case, SC agrees with the CA that RTC committed GAD when it
denied the demurrer.
SC said that according to R2 S3, a party may not institute more than one suit for a single cause
of action. The question of determining if there is a single cause of action is determined not by
rules but by the facts and circumstance of the case. In this case, the court determined that there
is only one cause of action even though there may be separate promissory notes.
As can be gleaned by the mortgage contract, as well as the testimony of Petitioners employee
before the RTC, the mortgage contract covers the loans already taken by Petitioner as well as
those which the mortgagee may extend to the mortgagor; the mortgage covering the principal
amount of 7m as well as any other obligation owing to mortgagee. This was reiterated when
the Petitioners employee is examined. He said that the mortgage was executed not only to
secure the loan already obtained but also the other loans that may be extended.
With regards to foreclosure
The mortgagee may only opt for either foreclosure or collection for a single loan. In this case, the
mortgage covers the loan already obtained as well as those that may still be given. As such,
when the Petitioner moved to foreclose the property, he may no longer claim collection.
The general rule for mortgage is that an action to foreclose a mortgage is limited to the amount
mentioned in the mortgage. But such amount does not limit the amount for which the mortgage
may stand as a security if it is apparent from the mortgage document itself that the intent to
secure future indebtedness is apparent. Literal accuracy in describing the amount due, secured
by a mortgage, is not required, but the description of the debt must be correct and full enough
to direct attention to the sources of correct information in regard to it.
In this case, there is a dragnet clause that secured not only the existing debt but future debt as
well. To sum, since there is only one cause of action, and Petitioner has already chosen to
foreclose the property, Petitioner is now barred from availing of the personal action to collect.
WHEREFORE, petition is DENIED.