PHILIPPINE NATIONAL

BANK,
Petitioner,

G.R. No. 149221

Present:

- versus -

MARCELINO
BANATAO,ROSA BANATAO,
VICTORINA B. CADANGAN,
AVELINO BANATAO,
ROSALINDA B. GUMABAY,
EDNA B. CALUCAG,
CATALINA BANATAO,
ABDON BANATAO,
GELACIO BANATAO,
CONSTANCIO BANATAO,
DOMINGO BANATAO,
RICHARD BANATAO,
ARNOLD BANATAO,
SALVACION BANATAO,
LANIE BANATAO, VIVIAN
BANATAO, ALVIN
BANATAO, ROLAND
BANATAO, FE SACQUING,
MAXIMO SACQUING,
POMPEO BANTAO, ANNIE
MALUPENG, BONG
MALUPENG, EDILBERTO
BANGAYAN, EVANGELINE
BANGAYAN, ELPIDIO
BANGAYAN, MARLIN
PAMITTAN, LOIDA

QUISUMBING, J., Chairperson,

CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

PAMITTAN, VICENTE
PAMITTAN, MICHAEL
PAMITTAN, EDGARDO
PAMITTAN, LORINA
BANATAO, ASSISTED BY
HUSBAND WILLY
BANATAO, MARAVITA
BANATAO, PAULINA
BANATAO ASSISTED BY
HUSBAND DOMINGO
CUNTAPAY, JULIETA
BANATAO, ROSITA
PAMITTAN ASSISTED BY
HUSBAND SALVADOR
BANATO, AND ELENA
BANATAO,
Plaintiffs-Respondents,
and MARCIANO CARAG,
EUGENIO
SORIANO, MARIA
CAUILAN, PEDRO
SORIANO, PAZ TACACAY,
BENJAMIN TACACAY,
Promulgated:
FAUSTA AGUSTIN,
MILAGAROS B. CARAG,
Defendants-Respondents.
April 7, 2009
x ---------------------------------------------------------------------------------------- x
DECISION
BRION, J.:

This petition for review on certiorari[1] brings into focus: (1) the effect of a
compromise agreement entered into by some, but not all, of the parties to a
litigation, and its effect on the non-participating litigants; and (2) the prohibition
against the encumbrance, within the same periods prescribed by law, of lands
granted under homestead patent.

The facts as culled from the records are outlined below.

On November 16, 1962, Banatao, et al. (plaintiffs-respondents) initiated an action
docketed as Civil Case No. 1600 against Marciano Carag (one of the defendantsrespondents) before the Regional Trial Court (RTC), Branch IV, Tuguegarao,
Cagayan.[2] The action was for the recovery of real property (disputed property)
situated at Malabac, Iguig, Cagayan. The disputed property was a new land
formation on the banks of the Cagayan River an accretion to Lot 3192 of the Iguig
Cadastre that the plaintiffs-respondents claimed as the owners of the
adjoining Lot 3192. The defendants-respondents, on the other hand, were the
occupants of the disputed property.
The records show that while the case was pending, the defendants-respondents
(particularly the spouses Pedro Soriano and Paz Tagacay, the spouses Eugenio
Soriano and Maria Cauilan, the spouses Benjamin Tagacay and Fausta Agustin,
and Milagros B. Carag wife of Marciano Carag) were able to secure homestead
patents evidenced by Original Certificates of Title (OCTs) issued in their names,
denominated as OCT Nos. 24800, 24801, 25217, and 25802, respectively.[3] The
OCTs were issued in 1965 and 1966, and all bear the proviso that, in accordance
with the Public Land Act, the patented homestead shall neither be alienated nor
encumbered for five (5) years from the date of the issuance of the patent.[4]
Armed with their OCTs, the defendants-respondents separately applied for loans
with the Philippine National Bank (PNB or the bank) secured by real estate
mortgages on their respective titled portions of the disputed property. The bank
approved the mortgages, relying solely on the OCTs which, at the time, did not
contain any notice of lis pendens or annotation of liens and encumbrances. The
PNB mortgages were annotated on the defendants-respondents' respective
OCTs also in the years 1965 and 1966.[5]
On February 22, 1968, the trial court decided the case in favor of the plaintiffsrespondents and against defendant-respondent Carag, and ordered the return of the
disputed property to the plaintiffs-respondents.[6] Carag appealed the trial court
decision to the Court of Appeals (CA).

While the appeal was pending, the appellate court discovered that the disputed
property had been subject of homestead patents issued in the names of defendantsrespondents Carag, et al. Hence, in its Resolution dated April 16, 1969, the Special
Fourth Division of the CA set aside the February 22, 1968 decision of the RTC and
ordered the remand of the records to the trial court for further proceedings. [7] The
appellate court likewise ordered the necessary amendment of the complaint to
implead the defendants-respondents who were deemed indispensable parties to the
case.
The plaintiffs-respondents filed on October 14, 1970 the required amended
complaint, impleading as party defendants Eugenio Soriano, Maria Cauilan, Pedro
Soriano, Paz Tagacay, Benjamin Tagacay, Fausta Agustin, and Milagros B. Carag,
as well as the bank.[8] The plaintiffs-respondents also added two (2) additional
causes of action, or a total of three (3) causes of action, namely: (1) recovery of
real property; (2) cancellation of the OCTs; and (3) annulment of real estate
mortgage. The bank was made a party to the case in view of the suit for annulment
of mortgage.
The records disclose that on March 29, 1973, while the case was pending before
the trial court, the bank extrajudicially foreclosed the property covered by OCT
No. 24800 issued to the spouses Pedro Soriano and Paz Tagacay. The bank was
declared the highest bidder in the ensuing public auction. The spouses Soriano
failed to redeem the foreclosed property, resulting in the consolidation of title in
the banks name; hence, the issuance on October 3, 1985 of TCT No. T-65664 in the
name of the bank.[9]
On February 28, 1991, the plaintiffs-respondents and the defendants-respondents
entered into a compromise agreement whereby ownership of virtually the northern
half of thedisputed property was ceded to the plaintiffs-respondents, while the
remaining southern half was given to the defendants-respondents. [10] In the same
compromise agreement, the defendants-respondents acknowledged their
indebtedness to petitioner PNB and bound themselves to pay their respective
obligations to the bank, including the interests accruing thereon. Petitioner PNB,
however, was not a party to the compromise agreement which reads:
COMPROMISE AGREEMENT[11]

Plaintiffs and defendants, by counsels, enter into and submit the

following compromise agreement:
xxx
(b) That the defendant, PEDRO SORIANO, acknowledges the
plaintiffs as the lawful owners of the NORTHERN PORTION
of the land covered by Original Certificate of Title No. P24800, with an area of 85,348 square meters more or less and
is more particularly described in the technical description
hereto attached as Annex A and forming part hereof;
(c) That the defendant, BENJAMIN TAGACAY, acknowledges
the plaintiffs to be the owners of the NORTHERN PORTION
of the land covered by Original Certificate of Title No. P25217, with an area of 98,790 square meters more or less and
is more particularly described in the technical description
hereto attached as Annex B and forming part hereof;
(d) That the defendant, MILAGROS B. CARAG, acknowledges
the plaintiffs to be the owners of the NORTHERN PORTION
of the land covered by Original Certificate of Title No. P24802, with an area of 58,378 square meters more or less and
is more particularly described in the technical description
attached hereto as Annex C and forming part hereof;
(e) That the defendant Pedro Soriano acknowledges indebtedness
to the Philippine National Bank and binds himself to pay his
loan together with the interest and other charges;
(f) That the defendant Benjamin Tagacay acknowledges
indebtedness to the Philippine National Bank and binds
himself to pay his loan together with the interest and other
charges;
(g) That the defendant Milagros B. Carag acknowledges
indebtedness to the Philippine National Bank and binds
himself to pay his loan together with the interest and other
charges;
(h) That the private defendants acknowledge the plaintiffs to be
the owners and possessors of the motherland otherwise known

as Lot 3192 and the area ceded to the plaintiffs by the private
defendants;
(i) That the parties hereto submit the foregoing compromise
agreement as basis for the decision in the above-entitled case
by the Honorable Court.
Tuguegarao, Cagayan, December 26, 1990.

On March 15, 1991, the trial court rendered its decision, approving and adopting in
toto the compromise agreement, and ordering the participating parties to strictly
comply with its terms.[12] The bank moved for reconsideration of the trial courts
decision and for the setting aside of the compromise agreement. The trial court
denied the motion in its Resolution of February 7, 1992, thus, compelled the bank
to elevate the case to the CA.[13]
The appellate court dismissed the appeal in its decision of March 30, 2001, ruling
that the bank is not an indispensable party to the compromise agreement that only
settles the actions for: (1) recovery of property; and (2) cancellation of OCTs.
[14]
On the third cause of action for annulment of mortgage, the court held the bank
is only a necessary partyand the issue could be dealt with in a separate and
distinct action. The appellate court in the same decision proceeded to strike down
the mortgages as void because the mortgagors (defendants-respondents), not being
the absolute owners of the disputed parcels of land as agreed upon in the
compromise agreement, did not have the right to constitute a mortgage on these
properties.
The PNB sought reconsideration of the dismissal of its appeal, but the appellate
court denied its motion in a Resolution dated July 27, 2001;[15] hence, this petition
for review oncertiorari.
The PNB raises the following legal issue:
WHETHER THE COMPROMISE AGREEMENT ENTERED INTO
BY AND BETWEEN THE HEREIN PLAINTIFFS-RESPONDENTS
AND DEFENDANTS-RESPONDENTS AND APPROVED BY THE
TRIAL COURT LEGALLY BINDS PETITIONER PNB WHICH IS
NOT A PARTY THERETO AND CONSTITUTES SUFFICIENT

LEGAL BASIS TO NULLIFY PNB'S MORTGAGE LIEN ON THE

REALTY IN QUESTION.
In attacking the compromise agreement between the plaintiffs-respondents and the
defendants-respondents, the PNB argues that it is an indispensable, not merely a
necessary, party to all three causes of action, namely, for (1) recovery of real
property; (2) cancellation of the OCTs; and (3) annulment of mortgages. Arguing
that the causes of action are closely intertwined and intimately related, and that the
compromise was entered into precisely to put an end to the case, the PNB submits
that its consent to the compromise agreement is necessary to secure a final and
complete determination of the claims and defenses of all the parties to the case.
The PNB further argues that when the appellate court approved in toto the trial
court's judgment on the compromise agreement, it failed to consider that the bank
was a mortgagee in good faith. The bank claims good faith on the position that the
OCTs presented to it were all clean on their faces at the time the mortgages were
applied for; that there were no notices of lis pendens or any annotation of liens or
encumbrances on all of them; and that it had no knowledge, actual or constructive,
of facts or circumstances to warrant further inquiry into the titles of the defendantsrespondents.
THE COURTS RULING
We resolve to dismiss the petition for the reasons discussed below.
The compromise agreement disposed of the first two causes of action filed
by plaintiffs-respondents Banatao, et al. against defendants-respondents Carag, et
al., namely, the actions for (1) recovery of real property; and (2) cancellation of the
OCTs, thereby settling the question of ownership between them. The trial court
approved the compromise agreement in toto. The appellate court, in turn, upheld
the trial court, but it proceeded to discuss on the third cause of action (for
annulment of mortgage), concluding that the mortgages were void because the
mortgagors were not the absolute owners of the mortgaged properties. In the
words of the appellate court:
The main cause of action here is the Recovery of Realty and
Reconveyance, the Annulment of Mortgage is only an ancillary cause of

action. In the decision approving the compromise agreement it disposes

and finally determined the Recovery of Realty and Reconveyance.
The moment ownership of the disputed real property was clearly
proven to be that of the [plaintiffs-respondents], the question of the
validity of the mortgage made by the [defendants-respondents] with
[petitioner PNB] could easily be determined.
xxx
The [defendants-respondents], not being the absolute owners and not
having been authorized to mortgage the subject real property, could not
validly mortgage the said real property with [petitioner
PNB]. However, we are not unmindful of the [defendants-respondents']
liability to [the bank]. But such issue could be dealt with in a separate
and distinct action. [Emphasis supplied.]

With the above ruling, the bank who was not a party to the agreement was
therefore affected; it was a mortgagee of a part of the disputed property, and had in
fact foreclosed the portion covered by OCT No. 24800.
It is basic in law that a compromise agreement, as a contract, is binding only upon
the parties to the compromise, and not upon non-parties. This is the doctrine of
relativity of contracts. Consistent with this principle, a judgment based entirely on
a compromise agreement is binding only on the parties to the compromise the court
approved, and not upon the parties who did not take part in the compromise
agreement and in the proceedings leading to its submission and approval by the
court. Otherwise stated, a court judgment made solely on the basis of a
compromise agreement binds only the parties to the compromise, and cannot bind
a party litigant who did not take part in the compromise agreement. In the case
of Castaeda v. Heirs of Maramba,[16] we held that:
Judgment based on a compromise affects only participating litigantsA
partial decision, stemming from an amicable settlement among two of
several parties to an action, binds only the parties so participating in the
settlement. This decision never becomes final with respect to the
parties who did not take part in the settlement confirmed by the
partial decision aforesaid. [Emphasis supplied.]

Following Castaeda, the judgment on compromise rendered by the trial court in

this case, and later affirmed by the appellate court, is final with respect only to the
plaintiffs-respondents and defendants-respondents, but not with respect to the
PNB. Hence, the trial court's judgment on compromise which settles the issue of
ownership over the properties in question is but a partial decision that does not
completely decide the case and cannot bind the PNB.
In its assailed decision, the CA, while recognizing the liability of the defendantsrespondents to the PNB, declared that the mortgagors, not being the absolute
owners of the mortgaged properties as agreed upon in the compromise agreement,
do not have the right to constitute the mortgage. This conclusion is legally
incorrect as the CA capitalized on the ownership issue settled between the
plaintiffs-respondents and the defendants-respondents in invalidating the PNB
mortgages, without hearing the side of the PNB asmortgagee, and later, co-owner
of the disputed property. As discussed above, the compromise agreement cannot
bind the bank, a non-party to the agreement; necessarily, the ownership issue
which was settled by the compromise agreement cannot be made applicable to the
bank without hearing it.
Our own review of the records of the case shows that the appellate court was not
without basis to properly dispose of all the causes of action, including the
annulment of mortgage issue, had it fully scrutinized the records of the case. A
glaring fact that escaped the scrutiny of both the trial and appellate courts, and
which would have led them to the quick and correct disposition of the annulment
issue (and of the entire case, given the compromise agreement), is the proviso
against alienation or encumbrance of lands granted by homestead patent a fact
plainly evident upon a facial examination of the OCTs involved.
We conclude from our own examination of these OCTs that the mortgages cannot
but be void ab initio. On the faces of all the OCTssecured through homestead
patentsare inscribed the following words that echo the mandatory provisions of
law:
TO HAVE AND TO HOLD the said tract of land with the appurtenances
thereunto x x x subject to the provisions of Sections 118, 121, 122 and
124 of Commonwealth Act No. 141, as amended, which provide that

except in favor of the Government or any of its branches, units or

institutions, THE LAND HEREBY ACQUIRED SHALL BE
INALIENABLE AND SHALL NOT BE SUBJECT TO
[E]NCUMBRANCE FOR A PERIOD OF FIVE (5) YEARS NEXT
FOLLOWING THE DATE OF THIS PATENT, and shall not be
liable for the satisfaction of any debt contracted prior to the expiration of
that period; x x x.[17] [Emphasis supplied.]

This inscription reproduces Section 118[18] of the Public Land Act,[19] as amended,
which contains a proscription against the alienation or encumbrance of homestead
patents within five years from issue. The rationale for the prohibition, reiterated in
a line of cases, first laid down in Pascua v. Talens[20] states that x x x homestead
laws were designed to distribute disposable agricultural lots of the State to landdestitute citizens for their home and cultivation. Pursuant to such benevolent
intention the State prohibits the sale or encumbrance of the homestead (Section
116, now Section 118) within five years after the grant of the patent. x x x. It aims
to preserve and keep in the family of the homesteader that portion of public land
which the State had gratuitously given to him.
In the present case, the annotation of the mortgage liens occurred only months
after the date of the issuance of the homestead patents. The pertinent facts as
seen on the faces of the OCTs are illustrated below:

OCT
No.

Mortgagors

Date
of HomesteadPaten
t

Date of Annotation
Period from
/ Inscription of
Date of
Mortgage
Patent[21]

P-24800 Pedro Soriano/ Paz

Tagacay

28 Apr 1965

17 Sep 1965

5 Months

P-24801 Eugenio Soriano/

Maria Cauilan

28 Apr 1965

27 Oct 1965

6 Months

P-24802 Milagros B. Carag/

Marciano Carag

28 Apr 1965

13 Oct 1965

6 Months

P-25217 Benjamin Tagacay/

Fausta Agustin

15 Feb 1966

25 Mar 1966

1 Month

This situation is similar to that of Republic v. Heirs of Alejaga, Sr.[22] where the
respondent obtained a loan of P100,000.00 in 1981 from the PNB, secured by a

real estate mortgage on the patented land. The 1981 encumbrance was contracted
two years from date of issuance of the patent in 1979, for which reason the Court
cited a violation of Section 118 of the Public Land Act which proscribes the
alienation or encumbrance of the patented land within five years from the date of
the patent, and which proscription clearly appears as a proviso in the OCT issued
in the name of the respondent in the case. Consequently, the PNB mortgage was
declared void.
The present case deserves exactly the same treatment, and the PNB cannot claim
that it is a mortgagee in good faith. The proscription against alienation or
encumbrance is unmistakable even on a cursory reading of the the OCTs. Thus,
one who contracts with a homestead patentee is charged with knowledge of the
law's proscriptive provision that must necessarily be read into the terms of any
agreement involving the homestead. Under the circumstances, the PNB simply
failed to observe the diligence required in the handling of its transactions and thus
made the fatal error of approving the loans secured by mortgages of properties that
cannot, in the first place, be mortgaged.
Both the defendants-respondents and the bank are to be faulted for the invalidity of
the mortgages. We cannot, however, apply the doctrine of pari delicto in
accordance with the ruling that the doctrine does not apply when the contract is
prohibited by law.[23] A saving factor for the bank under the situation is that a
mortgage is merely an accessory agreement and does not affect the principal
contract of loan. The mortgages, while void, can still be considered as instruments
evidencing the indebtedness of defendants-respondents to the PNB in a proper case
for the collection of the defendants-respondents loans.
Our conclusion on the nullity of mortgage issue renders it unnecessary to decide
the question of whether the compromise agreement between the plaintiffsrespondents and the defendants-respondents should be set aside for its effect on the
bank. With the mortgages invalidated, the PNB no longer has any interest that the
compromise agreement can affect. In the absence of any other reason to impugn
the lower court decisions approving the compromise agreement, we affirm the
approval of the compromise agreement and the disposition of the case on the basis
of compromise. Given our ruling on the invalidity of the mortgages, a remand of
this issue is no longer necessary. The parties liabilities to PNB on the loans they

obtained are not issues before us for disposition, and are for the parties to act upon
as matters outside the coverage of this case.
WHEREFORE, we
hereby DECLARE the
mortgages
constituted
on
OCT Nos. 24800, 24801, 25217 and
25802 VOID and,
for
this
reason,
we DISMISS the petition. WeAFFIRM the approval of the compromise
agreement by the Court of Appeals and the disposition of the case on the basis of
compromise. The order to remand the case to the Regional Trial Court, Branch IV,
Tuguegarao, Cagayan, for further proceedings is therefore REVERSED.
Costs against petitioner PNB.
SO ORDERED.

EN BANC
[G.R. No. 14129. July 30, 1919.]
Voluntary insolvency of P. Blanc. D.J. MAHONEY, Receiver-Appellee, vs.
MARIANO TUASON,Creditor, Appellant.
DECISION
TORRES, J.:
In a petition dated October 26, 1916, counsel for D.J. Mahoney, receiver of the
insolvency of P. Blanc, prayed the Court of First Instance of Manila to cite Mariano
Tuason to appear and explain before the court the reason why he had in his custody
the jewels mentioned in the said petition, and after the hearing, to order him, if
proper, to deliver the said jewels to the receiver, in order that they form part of the
estate of the insolvent P. Blanc. Said receiver alleges that Mariano Tuason took the
said Jewels from the store of the insolvent P. Blanc before the adjudication of the
insolvency of the latter, said jewels not having been mortgaged or encumbered in
any manner in his favor, according to informations received by the receiverpetitioner in the investigation he conducted for the purpose.
Mariano Tuason was cited to appear. On November 6, 1916, he submitted his
answer stating that before the month of February, 1913, he guaranteed, at the
instance of the insolvent P. Blanc, the credit in the sum of fourteen thousand pesos
(P14,000) which the Chartered Bank of India, Australia and China had granted to
said P. Blanc that on February 3rd of the same year, in order to guarantee the said
security, P. Blanc gave as pledge the jewels mentioned in Exhibit 1, the value of
which was fixed by P. Blanc himself in the amount of fourteen thousand ten pesos
(P14,010), although the value fixed in the document is fourteen thousand one
hundred fifteen pesos (P14,115); that said credit was increased till it reached the
amount of sixteen thousand pesos (P16,000) and to secure the payment of this sum
P. Blanc executed, on June 20, 1913, a document whereby he bound himself to
refund the said amount by paying the creditor a monthly installment of one
thousand pesos (P1,000) plus 1 per cent interest per month on the amount he owed
the bank as mentioned above, and in case of failure to do so, to pay an indemnity of
one hundred fifty pesos (P150) a month, as is stipulated in Exhibit 2. In the said
exhibit it was stipulated that if said P. Blanc could not comply with the obligations
contracted by him, the surety would be authorized to detain the jewels pledged for
half their value; that P. Blanc did not pay the debt due to the bank, wherefore
Tuason had to pay and did in fact pay to the said bank the entire debt owed by P.
Blanc which exceeded the sum of sixteen thousand pesos (P16,000). Of this
amount, P. Blanc only paid to Tuason five monthly payments, that is, five thousand
pesos (P5,000) which, when deducted from sixteen thousand pesos (P16,000), gives
a balance of eleven thousand pesos (P11,000); that this remainder added to the
three thousand six hundred seventy pesos (P3,670), the interests accrued, and four
thousand two hundred pesos (P4,200), the sum of the accumulated penalties, gives
a total of eighteen thousand eight hundred seventy pesos (P18,870) in favor of the
creditor and against P. Blanc; at the latter had been taking from the creditor various
jewels amounting to three thousand seven hundred forty-four pesos (P3,744) which
sum deducted from twenty thousand and ninety-four pesos (P20,094), the total

value of the jewels pledged, gives a balance of sixteen thousand three hundred fifty
pesos (P16,350); that, in view of the default incurred by the said P. Blanc from April,
1914, the surety appropriated to himself the said jewels in half their value, that is,
in eight thousand one hundred seventy five pesos (P8,175) which sum, deducted
from the total debt of P. Blanc in the sum of eighteen thousand eight hundred
seventy pesos (P18,870), gives a balance of ten thousand six hundred ninety-five
pesos (P10,695); that, in turn, Mariano Tuason on various occasions had been
receiving from the debtor P. Blanc certain jewels amounting to one thousand five
hundred forty six pesos and forty centavos (P1,546.40) which, deducted from the
preceding balance, gives a remainder of nine thousand one hundred forty eight
pesos and sixty centavos (P9,148.60) which is the net amount actually due from the
insolvent P. Blanc to his creditor. Wherefore, after stating that of the jewels
mentioned in the petition of D.J. Mahoney he has not received any of those
specified in paragraph 12th of his answer, Tuason prayed that the jewels specified in
paragraph 2 and 4 of his petition be declared to have passed in his favor court
approve as correct the liquidation of P. Blancs debt of nine thousand one hundred
forty-eight pesos and sixty centavos (P9,148 60) in the same proportion and under
the same conditions as the other creditors of the said P. Blanc.
After hearing the evidence the court, on November 19, 1917, ordered Mariano
Tuason to deliver to deliver to the receiver all the jewels which he (Tuason) has
received by way of pledge from the insolvent P. Blanc and which appear in detail in
the motion filed by the said receiver on October 26, 1916, and, in case he cannot
deliver all of the said jewels or any of them, to pay to the said receiver the price
thereof, after an appraisal to be had in the same proceeding, in order that they form
part of the estate of the insolvent without prejudice to the right of Mariano Tuason
to present his claim in these proceedings for the amount of his credit, still due from
the insolvent to the end that the said claim may be settled in accordance with law.
On December 3. 1917, Mariano Tuason appealed from this order, and his appeal
having been admitted by the court the corresponding bill of exceptions was
forwarded to the clerk of this court. (Record, pp. 15-17.)
The evidence presented by both parties to sustain their respective claims does not
seem to have been forwarded to this court, but as the Appellant in his brief only
impugns the holding of the trial court declaring the nullity of the agreement
contained in the document of June 20, 1913, to the effect that should the debtor P.
Blanc fail to comply with the obligations contracted by him in said document in
favor of Mariano Tuason, the latter would be entitled to retain the jewels given in
pledge, all the other conclusions reached by the trial court in his decision are
therefore accepted.
The questions involved in this case and submitted for the decision of this court is
whether a contract of pledge or of chattel mortgage duly entered into is rendered
null and void by an additional stipulation among the contracting parties that in case
of the debtors failure to comply with the conditions agreed upon, the creditor would
be authorized to retain the jewels and merchandise pledged in half of their value
and absolutely appropriating them to himself.
In the private document containing the contract of pledge appears the express
agreement that if Blanc should fail to comply with the obligations stipulated, among
other things, that of paying one thousand pesos (P1,000) monthly in advance
beginning from June, 1913, till his debt shall have been paid together with the

stipulated interests and the interests paid to the bank, the creditor would be
entitled to retain the jewels and other thing given in pledge to the said creditor in
an amount which results after deducting the fifty per cent (50%). Moreover, it is
found that the debtor Blanc had withdrawn or taken from the possession of the
creditor several jewels worth three thousand seven hundred forty-four pesos
(P3,744) which amount deducted from twenty thousand ninety-four pesos
(P20,094), the total value of the jewels pledged to the creditor, would leave a
balance in the hands of the latter of jewels worth sixteen thousand three hundred
fifty pesos (P16,350).
The following are indisputable facts: that P. Blanc, the owner of the jewels, entered
into the said contract of pledge, delivering to the creditor Mariano Tuason several
jewels and other merchandise mentioned in the documents referred to, for the
purpose of securing the fulfillment of the obligation which he (Blanc) had contracted
in favor of the latter who had guaranteed the payment of a considerable amount of
money which Blanc owed to the Chartered Bank which amount Tuason had to pay,
because of Blancs obligation to do so; that the latter is unquestionably the owner of
the jewels and merchandise so pledged and had the free disposition of them as in
fact he did, there appearing nothing to the contrary; and lastly, it appears from the
document, although private, and not discussed nor impugned by anybody, that the
creditor Tuason is in actual possession of the jewels and merchandise which were
pledged and delivered to him freely and spontaneously by the debtor Blanc.
(Articles 1857 and 1863, Civil Code.)
On July 2, 1906, Act No. 1508, entitled The Chattel Mortgage Law, was approved
and became effective beginning August 1st of the same year. Section 3 of the said
Act reads: A chattel mortgage is a conditional sale of personal property as security
for the payment of a debt or the performance of some other obligation specified
therein, the condition being that the sale shall be void upon the seller paying to the
purchaser a sum of money or doing some other act named. If the condition is
performed according to its terms the mortgage and sale immediately become void,
and the mortgagee is thereby divested of his title.
And Section 4 of the same Act provides:
A chattel mortgage shall not be valid against any person except the mortgagor, his
executors or administrators unless the possession of the property is delivered to
and retained by the mortgagee or unless the mortgage is recorded in the office of
the register of deeds of the province in which the mortgagor resides at the time of
making the same, or, if he resides without the Philippine Islands, in the province in
which the property is situated: Provided, however, That if the property is situated in
a different province from that in which the mortgagor resides, the mortgage shall be
recorded in the office of the register of deeds of both the province in which the
mortgagor resides and that in which the property is situated, and for the purposes
of this Act the city of Manila shall be deemed to be a province.
From the foregoing provisions of the above-cited act, it is inferred that the same
does not entirely repeal the provisions of the Civil Code, but only modify them in
part and amplify them in another, as may be seen from an examination of, and
comparison between, the provisions of the Civil Code regarding pledge and the
above-quoted provisions of Act No. 1508.

Article 1865 of the Civil Code provides that no pledge shall be effective against a
third person unless evidence of its date appears in a public instrument. The
provision of this article has, undoubtedly, been modified by Section 4 of the Chattel
Mortgage Law, in so far as it provides that a chattel mortgage shall not be valid
against any person except the mortgagor, his executors or administrators, unless
the possession of the property is delivered to and retained by the mortgagee or
unless the mortgage is recorded in the office of the register of deeds of the province
in which the mortgagor resides.
From the date the said Act No. 1508 was in force, a contract of pledge or chattel
mortgage should be deemed legally entered into and should produce all its effects
and consequences, provided it appears to have been in some manner perfected and
that the things pledged have been delivered, and in a contrary case, and even if the
creditor has not received them or has not retained them in his custody, provided
that the contract of pledge of chattel mortgage appears in a notarial document and
is inscribed in the registry of deeds of the province.
It is a fact admitted as well as fully proven in the record that the creditor Tuason
paid to the Chartered Bank the sum of sixteen thousand pesos (P16,000) which the
debtor Blanc owed and failed to pay, and that the latter did not reimburse Tuason
the amount paid to the bank together with interests thereon. It is but just, therefore,
that Tuason recover all the amounts paid by him to the bank in payment of Blancs
debt, and that he recovers his credit together with the interests paid to the bank
and the other amounts agreed upon between him and debtor Blanc with regard to
the selling price of the jewels and merchandise which were delivered to him by
Blanc and of those of which Tuason is actually in lawful possession, said contract of
pledge of chattel mortgage producing at all events the effect of preference, in
accordance with the provisions of the Civil Code and Act No. 1508.
It is true that the creditor Tuason has no right to appropriate to himself the
merchandise pledged, nor can he make payment by himself and to himself with half
or the total value of the same (Art. 1859, Civil Code), inasmuch as he is only
permitted to recover his credit, which Blanc owes, from the proceeds of the sale of
the jewels and merchandise delivered to him in pledge, and said sale at public
auction should be effected, according to Article 1872, before a notary, and
according to Section 14 of Act No. 1508, in a public place in the municipality after
previous notices and notifications to the debtor through the sheriff of the province.
If the last part of the contract concerning the fact that the creditor Tuason is entitled
to retain and appropriate to himself the merchandise received in pledge is null and
indefensible, because he can only recover his credit, according to law, from the
proceeds of the sale of the same, there is no sound reason nor any legal provision
which determines the nullity of the principal contract by virtue of which Tuason paid
Blancs debt to the bank, and according to the stipulation, Tuason took possession
of the jewels and merchandise pledged as security for the big sum of money which
he had paid and which the debtor Blanc had not refunded.
The additional stipulation between the contracting parties whereby the debtor
authorized the creditor to appropriate to himself the merchandise pledged for the
recovery of his credit, is certainly contrary to law, and besides being expressly
forbidden by law, it is immoral; but the fact that said stipulation is added to the
principal contract of chattel mortgage does not substantially and necessarily affect
the validity and efficacy of the said contract, for the reason that the contract being

perfect in itself could have subsisted even if the parties had not agreed as to the
manner the creditor could collect his credit from the proceeds of the things pledged,
inasmuch as the law has expressly established the procedure in order that the
creditor may not be defrauded or deceived in his right to recover his credit from the
proceeds of the things retained by him as security, in case the debtor should fail to
comply with the obligation contracted by him.
If the creditor Tuason could not appropriate to himself the jewels and merchandise
which he had in his custody, by way of pledge an act expressly prohibited by law
it does not follow that the contract of pledge or mortgage of the jewels and the
other merchandise which was duly executed between the said Tuason and Blanc
was also null, because if the latter could not pay his debt by refunding to Tuason the
amount paid to the Chartered Bank, there is no just nor legal reason which prevents
the creditor from recovering his credit and other amounts which Blanc was obliged
to pay from the proceeds of the sale of the jewels and merchandise pledged.
Moreover, it appears that the contract of pledge or mortgage of the jewels and
merchandise, which are now in the possession of Tuason, and the delivery of the
same to him as security for the considerable amount of debt took place long before
the commencement of the insolvency proceeding of the debtor Blanc and before the
thirty days referred to in Section 70 of Act No. 1956.
In view of the foregoing considerations, it follows that, in reversing the judgment
appealed from, it should be held, as we hereby hold, that the contract of pledge or
chattel mortgage entered into between P. Blanc and Mariano Tuason on June 20,
1913, and stated in the documents on pp. 14 to 21 of the bill of exceptions, is valid
and subsisting; that the creditor, Mariano Tuason, has the right to recover his credit
of eighteen thousand eight hundred seventy pesos (P18,870) from the proceeds of
the public sale of the merchandise pledged, which sale should be effected by the
sheriff of the city of Manila in the manner and with the formalities established by
Section 14 of Act No. 1508; and that the stipulation contained in the last part of the
document (page 21 of the bill of exceptions) whereby the debtor authorized the
creditor Tuason to retain the jewels in his possession is null and void. However, the
creditor Tuason is obliged to deliver to the receiver, D.J. Mahoney, the balance of the
proceeds of the sale of the jewels and merchandise pledged, after deducting his
credit, the interests thereon and the other amounts to which he is entitled to
recover, according to the stipulation contained in the said contract. There is no
special finding as to costs. SO ORDERED.

G.R. No. L-45350

May 29, 1939

BACHRACH MOTOR CO., INC., plaintiff-appellant,

vs.
ESTEBAN ICARAGAL and ORIENTAL COMMERCIAL CO., INC., defendants-appellees.
B. Francisco for appellant.
Matias P. Perez for appellees.
MORAN, J.:
On June 11 , 1930, defendant herein, Esteban Icaragal, with one Jacinto Figueroa, for value
received, executed in favor of the plaintiff, Bachrach Motor Co., Inc., a promissory note for one
thousand six hundred fourteen pesos (P1,614), and in security for its payment, said Esteban
Icaragal executed a real estate mortgage on a parcel of land in Pagil, Laguna, which was duly
registered on August 5, 1931, in the registry of deeds of the Province of Laguna. Thereafter,
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 Icaragal 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 issued in civil case No. 88253 of the municipal
court of the City of Manila, 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 on May 12, 1933. 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.
The sole question before us is 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 defendantappellee on the promissory note for the payment of which the mortgage was constituted as a
security.
In Hijos de I. de la Rama vs. Sajo (45 Phil., 703), the mortgage creditor, instead of instituting
proceedings for the foreclosure of his mortgage, filed a personal action for the recovery of the debt.
The mortgage debtor objected to the action, alleging that, if it be allowed, he would be subjected to
two suits, one personal and another for the foreclosure of the mortgage. We answered this objection,
laying down the rule that "in the absence of statutory provisions, the mortgagee may waive the right
to foreclose his mortgage and maintain a personal action for the recovery of the indebtedness." And
we emphasized the doctrine in the later part of our decision by saying that "the rule is well
established that the creditor may waive whatever security he has and maintain a personal action, in
the absence of statutory provisions to the contrary." (P. 705.)
It is true that Matienzo vs. San Jose (G.R. No. 39510, June 16, 1934), a decision of three justices of
this court ruled that "apart from special proceedings regulated by statute, an unsatisfied personal
judgment for a debt is no bar to an action to enforce a mortgage or other lien given as security for
such debt." But this decision cannot be made to prevail over a decision given by this court in banc.
Besides, the rule laid down in the De la Rama case is more in harmony with the principles underlying
our procedural system.

Most of the provisions of our Code of Civil Procedure are taken from that of California, and in that
jurisdiction the rule has always been, and still is, that a party who sues and obtains a personal
judgment against a defendant upon a note, waives thereby his right to foreclose the mortgage
securing it. (Ould vs. Stoddard, 54 Cal., 613; Felton vs. West, 102 Cal., 266; Craiglow vs. Williams,
514 Cal. App., 45; 188 Pac., 76, following doctrine in Biddel vs. Brizzolara, 64 Cal., 354; 30 Pac.,
609; Brown vs. Willis, 67 Cal., 235; 7 Pac., 682; Barbieri vs. Ramelli, 84 Cal., 134; 23 Pac., 1086;
Toby vs. Oregon Pac. R. Co., 98 Cal., 490; 33 Pac., 550; McKean vs. German-American Sav. Bank.,
118 Cal., 334; 50 Pac., 656; Woodward vs. Brown, 119 Cal., 283; 63Am. St. Rep., 108; 51 Pac., 2,
542; Meyer vs. Weber, 133 Cal., 681; 65 Pac., 1110; Crisman vs. Lanterman, 149 Cal., 647, 651; 117
Am. St. Rep., 167;87 Pac., 89; Gnarin vs. Swiss American Bank, 162 Cal., 181; 121 Pac., 726.) The
same rule obtains in the states of Idaho, Montana, Nevada and Utah. (See Johns on Mortgages,
986, 1015, 1019, 1046.) It is true that this rule is founded on express statutory provisions to that
effect. We have here, however, section 708 of our Code of Civil Procedure which provides that a
creditor holding a claim against the deceased, secured by a mortgage or other collateral security,
has to elect between enforcing such security or abandoning it by presenting his claim before the
committee and share it in the general assets of the estate. Under this provision, It has been
uniformly held by this court that, if the plaintiff elects one of the two remedies thus provided, he
waives the other, and if he fails, he fails utterly. (Veloso vs. Heredia, 33 Phil., 306; Cf. Osorio vs. San
Agustin, 25 Phil., 404.) The same rule applies under the Insolvency Law. (Sec. 59, Act No. 1956;
Unson and Lacson vs. Central Capiz, 47 Phil., 42; Chartered Bank of India, Australia and
China vs. Imperial, 48 Phil., 931; O'Brien vs. Del Rosario and Bank of the Philippine Islands, 49 Phil.,
657.) There is indeed no valid reason for not following the same principle of procedure in ordinary
civil actions. With the substitution of the administrator or executor in place of the deceased, or of the
assignee or receiver in place of the insolvent debtor, the position of the parties plaintiff and
defendant in the litigation is exactly the same in special or insolvency proceedings as in ordinary civil
actions.
But, even if we have no such section 708 of our Code of Civil Procedure, or section 59 of the
Insolvency Law, we have still the rule against splitting a single cause of action. This rule, though not
contained in any statutory provision, has been applied by this court in all appropriate cases. Thus, in
Santos vs. Moir (36 Phil., 350, 359), we said: "It is well recognized that a party cannot split a single
cause of action into parts and sue on each part separately. A complaint for the recovery of personal
property with damages for detention states a single cause of action which cannot be divided into an
action for possession and one for damages; and if suit is brought for possession only a subsequent
action cannot be maintained to recover the damages resulting from the unlawful detention." In Rubio
de Larena vs. Villanueva (53 Phil., 923, 927), we reiterated the rule by stating that" . . . a party will
not be permitted to split up a single cause of action and make it the basis of several suits" and that
when a lease provides for the payment of the rent in separate installments, each installment
constitutes an independent cause of action, but when, at the time of the complaint is filed, there are
several installments due, all of them constitute a single cause of action and should be included in a
single complaint, and if some of them are not included, they are barred. The same doctrine is stated
in Lavarro vs. Labitoria (54 Phil., 788), wherein we said that "a party will not be permitted to split up a
single cause of action and make it a basis for several suits" and that a claim for partition of real
property as well as improvements constitutes a single cause of action, and a complaint for partition
alone bars a subsequent complaint for the improvements. And in Blossom & Co. vs. Manila Gas
Corporation (55 Phil., 226, 240), we held that "as a general rule a contract to do several things at
several times is divisible in its nature, so as to authorize successive actions; and a judgment
recovered for a single breach of a continuing contract or covenant is no bar to a suit for a
subsequent breach thereof. But where the covenant or contract is entire, and the breach total, there
can be only one action, and plaintiff must therein recover all his damages."
The rule against splitting a single cause of action is intended "to prevent repeated litigation between
the same parties in regard to the same subject of controversy; to protect defendant from

unnecessary vexation; and to avoid the costs and expenses incident to numerous suits." (1 C.J.,
1107) It comes from that old maxim nemo bedet bis vexare pro una et eadem cause (no man shall
be twice vexed for one and the same cause). (Ex parte Lange, 18 Wall., 163, 168; 21 Law. ed.,
872; also U.S. vs. Throckmorton, 98 U.S., 61; 25 Law. ed., 93.) And it developed, certainly not as an
original legal right of the defendant, but as an interposition of courts upon principles of public policy
to prevent inconvenience and hardship incident to repeated and unnecessary litigations (1 C.J.,
1107.)
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 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 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 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. 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. On the other hand, 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 (Soriano vs. Enriquez, 24 Phil., 584) and obnoxious to law and equity (Osorio vs.San Agustin,
25 Phil., 404), but also in subjecting the defendant to the vexation of being sued in the place of his
residence of the plaintiff, and then again in the place where the property lies.
In arriving at the foregoing conclusion, we are not unaware of the rule prevailing in certain States of
the American Union, to the effect that, in cases like the one at bar, the creditor can pursue his
remedies against the note and against the security concurrently or successively. The reason given
for the rule seems to be that the causes of action in the two instances are not the same, one being
personal and the other, real. But, as we have heretofore stated, the creditor's cause of action is not
only single but indivisible, although the agreements of the parties, evidenced by the note and the
deed of mortgage, may give rise to different remedies. (Frost vs. Witter, 132 Cal., 421.) The cause of
action should not be confused with the remedy created for its enforcement. And considering, as we
have shown, that one of the two remedies available to the creditor is as complete as the other, he
cannot be allowed to pursue both in violation of those principles of procedure intended to secure
simple, speedy and unexpensive administration of justice.

Judgment is affirmed, with costs against the appellant.

Avancea, C.J., Villa-Real, and Concepcion, JJ., concur.

Separate Opinions
IMPERIAL, J., dissenting:
The legal question raised is whether the plaintiff, as mortgagee, has waived its right to foreclose a
real estate mortgage by its commencement of a personal action to collect the secured debt or loan;
in other words, whether it is precluded from bringing foreclosure suit after instituting a personal
action for the recovery of the indebtedness represented by the note.
To support the affirmative of the proposition the majority decision cites the case of Hijos de I. de la
Rama vs. Sajo(45 Phil., 703), and asserts that the said case has expressly held that a real estate
mortgagee who has brought an ordinary personal action for the recovery of a debt stated in a note
should be deemed to have waived the foreclosure suit and is estopped thereafter from bringing an
action upon the mortgage. I have read the aforesaid decision and have come to the conclusion that
the doctrine relied upon is neither found nor laid down therein. The said case had to do with the
mortgage of real and personal property executed to secure the payment of P35,000. Instead of filing
foreclosure suit, the plaintiff mortgagee instituted a personal action to recover only the amount of the
note and interest thereon. The question raised was whether it could maintain the personal action
there being, as there was, a mortgage contract. The defendant contended that the action did not lie,
for otherwise he would be subjected to another real action, that upon the mortgage. Resolving this
legal question, this court spoke thus: "The appellant argues, however, that if the plaintiff may waive
his right under the mortgage and maintain a personal action, he is liable to be subject to two actions.
That contention, in our judgment, is without merit. . . . The rule is well established that the creditor
may waive whatever security he has and maintain a personal action, in the absence of statutory
provisions in the contract. In this jurisdiction there are no statutes covering the question. . . . While it
is true in some jurisdictions, by virtue of statutory provisions, that when a mortgage is given to
secure the payment of an indebtedness tmust be one for the foreclosure of the mortgage, yet we are
of the opinion that in the absence of statutory provisions in this jurisdiction prohibiting a personal
action to recover a sum of money even though a mortgage has been given as security for the
payment of the same." It will be noted that all that was said and held in said case is that the
mortgagee may waive the foreclosure suit and bring the personal action for the sole purpose of
recovering the debt. The doctrine now sought to be established, to the effect that in such case the
mortgagee waives in fact and in law his action upon the mortgage and that he is already estopped
from bringing the latter should he have previously instituted the personal action, has not been
enunciated. We should not lose sight of the material difference between "to be able to waive" and
the fact that he has waived or that he has in law actually waived the action upon the mortgage. If that
decision had simply said that the mortgagee "may waive" the foreclosure suit, it was doubtless
because there are cases, at the present, where should the creditor fail in his personal action and the
debt remains unpaid notwithstanding the execution of the judgment obtained, there is no doubt that
said mortgagee may yet maintain a foreclosure suit for the purpose of executing the security. This
idea is corroborated by the language in the said decision that "There is no statutory provision in this
jurisdiction prohibiting a personal action to recover a sum of money even though a mortgage has
been given as security for the payment of the same."

The only existing prohibition against the simultaneous or alternative institution of the two cumulative
actions available to a real estate mortgagee is found in section 708 of the Code of Civil Procedure
providing that the filing of a claim against the property of a deceased person, secured by a
mortgage, implies the waiver of the latter, and the creditor cannot thereafter make use of his right to
bring a real action, and vice versa. But this rule is only applicable to actions arising from mortgages
upon property of deceased persons. In other cases the mortgagee may not only bring real and
personal actions but may avail himself thereof successively as long as the indebtedness, upon the
commencement of the second action, has not been fully paid.
Where there is a principal debt or obligation with some other obligation as collateral to or
security therefor, each gives rise to a separate cause of action for which different actions
may be brought, although there can be but one satisfaction, of the amount of the debt. This
rule applies in the case of principal debt with a collateral note or bond, and also in the case
of a note or bond with a mortgage given as security therefor, unless it is otherwise provided
by statute. (Ford vs. Burks, 37 Ark., 91; Fairchild vs. Holly, 10 Conn., 474; White vs. Smith,
33 Pa., 186; Anderson vs. Neef, 32 Pa., 379; Jordan vs. Massey, 134 S.W. 804;
Clark vs.Young, 2 Law. ed., 74; McCullough vs. Hellman, 8 Or., 191; Milwaukee First Nat.
Bank vs. Finck, 76 N.W., 608; 1 C.J., p. 1115, sec. 294.)
Upon the other hand, the majority decision does not give importance to the doctrine
enunciated in the case of Matienzo vs. San Jose (G.R. No. 39510),where the same legal
question was squarely passed upon in the sense that in this jurisdiction the mortgagee is not
precluded from availing himself of both actions, that for the recovery of the debt or note, and
that to foreclose the mortgage when the debt has not yet been paid. We said in that case:
"Apart from special proceedings regulated by statute, an unsatisfied personal judgment for a
debt is no bar to an action to enforce a mortgage or other lien given as security for such
debt."
In treating lightly of the doctrine laid down in the latter case, the majority decision states that it is not
binding upon the court because the decision was signed by three justices only, without considering,
however, that while it was promulgated by a division of three justices, before the law it was a
decision of the Supreme Court. We have repeatedly said that the decisions promulgated by a
division of this court, under the former law, have the same legal force and weight as though rendered
by the Supreme Court, for the obvious reason that the Supreme Court is only one and is by law
authorized to work in divisions and decide cases within the latter's jurisdiction. It is strange to state
that a rule or doctrine enunciated in a decision rendered by one of the former divisions of this court
neither binds nor constitutes a precedent of the Supreme Court, as it is now constituted, just
because the decision has been promulgated and authorized by three justices. I can not find
persuasive force in the argument or imagine any weighty reason to view a rule or doctrine thus
enunciated with indifference or disregard. The doctrine, when sound and based upon the law, has
the same legal and convincing force as any decision promulgated with the concurrence of seven
justices. What is persuasive in a decision of a constituted court of justice is not the number of votes
of the justices composing it, but the legal grounds upon which it rests. When a decision subscribed
by seven votes is erroneous and without support either in the law or in the facts, evidently it has less
persuasive value than another decision authorized by three votes only under the old law.
The majority decision states:
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 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 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 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.
This part of the majority decision involves various propositions that will bear clarification and
rectification. In fine, it is affirmed that a contract of real estate mortgage implies a single action or a
single cause of action only; that while the contract includes the loan, which is the principal, and the
mortgage, which is accessory, when the creditor elects to bring the action for the recovery of the
debt, he may not institute the other for the foreclosure of the mortgage; and that if the
commencement of the actions is authorized the result would be vexatious and oppressive upon the
debtor.
The first point is of transcendental importance and should not constitute a doctrine in this jurisdiction
because it undermines the foundation of the institution of real estate mortgage consecrated by the
civil law. All the countries that have adopted the civil law inspired by the Roman law, and even those
that have based it on Anglo-Saxon and American principles have recognized and proclaimed that the
contract of mortgage supposes and implies two contracts, one the principal, which is the loan, and
the other the accessory, which is the mortgage properly so-called. (Arts. 1857, 1858 and 1861, Civil
Code; 1 C.J., p. 1115 sec. 294.)
Commenting on paragraph 1 of article 1857 of the Civil Code (vol. 12, p. 341), Manresa has the
following to say:
This requisite arises from the object and purpose of said contracts and from the accessory character
which distinguishes them, for both the pledge and the mortgage are purely accessory contracts and
as much, like all others of the same kind, cannot exist without a principal obligation, prior or
coetaneous, for which they serve as a security, from which it follows that without said principal
obligation, such contracts cannot subsist or come about. Hence, altho there is a promise to
constitute a pledge or a mortgage, this promise is not demandable while the obligation to be secured
in any of said forms has no existence or has not been constituted.
Such contracts, therefore, fall under the same case as that of guaranty, with respect to which
they have this common and analogous character, and, as in the case of guaranty, the pledge
and the mortgage cannot have jurisdiction existence without a valid obligation for which they
serve as a security, for while the article we are commenting does not expressly require the
condition of validity of the obligation which is to be the object of the said contracts, as is done
in article 1824 with respect to guaranty, that condition is understood to be imposed, because
the voids acts among which are to be counted the obligations secured by the pledge or the
mortgage, if not valid, cannot produce any juridical effect.
The pledge and the mortgage being in the same condition as that of the guaranty, with
respect to their accessory character, it is evident that what we said with respect to this in the
preceding title is now applicable to the two contracts aforesaid, without the necessity now or

at the present to go into further explanation of this common character or essential requisite
of one and the other of the aforesaid contracts.
If a contract of real estate mortgage, by its nature, necessarily includes two distinct and separate
contracts, namely, the loan and the mortgage, it is obvious and undoubted that the creditor has also
two independent and separate rights, to wit, to recover the debt and to foreclose the mortgage; and if
he has two rights it cannot be denied that two actions or causes of action are available to him upon
the principle that for every right he has necessarily a corresponding action, and the latter is the
correlative of the former. For this reason section 256 of our Code of Civil Procedure provides that the
judgment rendered in a foreclosure suit should require, first, that the debtor against whom judgment
is rendered should pay his indebtedness to the creditor or deposit it in court, and , secondly, that in
default thereof, the mortgaged property should be sold. This procedure marked out for the
foreclosure of a mortgage merely corroborates and executes the fundamental idea that a mortgage
implies two contracts giving rise to two rights in favor of the creditor who is also entitled to two
actions or two causes of action.
It is, consequently, incorrect to state and lay down as a doctrine of the Supreme Court that in a
contract of real estate mortgage there is, under the law, but one action, that upon the mortgage.
The second point is refuted by the decision in the case of Mateinzo vs. San Jose, supra, wherein it
was held, soundly because founded upon the law, that with the exception of special proceedings, an
unsatisfied personal judgment for debt is not a bar to an action to foreclose a mortgage or any lien
given to secure an indebtedness, and by what has been said in the case of Hijos de I. de la Rama
vs. Sajo, supra, that in this jurisdiction there is no law prohibiting personal and real actions, apart
from those cases where the mortgagee has to enforce his right against the property of deceased
persons. In laying down the doctrine that upon the commencement of a personal action the
mortgagee cannot bring the real action, the majority decision does not cite any authority in support
thereof, and I said that it does not cite any authority because the California decisions cited cannot be
applied in this jurisdiction inasmuch as in that State there is positive and express law prohibiting the
second action when the mortgage has elected to exhaust the first.
As to the third point, it is said that the other ground of the rule sought to be established is that, if the
second action is permitted, the debtor would be subjected to vexatious and oppressive proceedings.
This is likewise incorrect, at least in those cases where, as in the present, the debt has not been
paid when an attempt was made to execute the personal judgment obtained by the creditor. In the
present case the debtor cannot plead oppression or vexation as he has not yet satisfied his
indebtedness, and this is so because when the sheriff tried to execute the judgment, Oriental
Commercial Co., Inc., presented a third-party claim alleging that it had acquired ownership of the
mortgaged property.
To strengthen the doctrine sought to be established, the majority decision applies the rule of splitting
of actions. This is another objectionable feature of the majority decision. The rule of the procedure
relied upon is no applicable to the present case because it refers solely to those where is only one
action or cause of action. In the case under consideration it has already been shown that there are
two causes of action, for the enforcement of which there is no need of dividing or separating them as
they are already separate and independent. In truth, what is intended to be applied to the case is the
rule of merger of actions because with the doctrine desired to be established it is sought to
enunciate the rule that from two separate and independent actions arising from the complex contract
of mortgage, not more than one of them can be instituted, which, as we have said, is not supported
by any law, express or implied, in this jurisdiction. For the foregoing reasons, I dissent from the
majority decision and vote to reverse the appealed judgment.