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ARTURO SARTE FLORES v. SPS. ENRICO L. LINDO

FACTS:

Edna Lindo obtained a loan from Arturo Flores in the amount of P400,000, payable on 1 December 1995. To secure the loan, Edna executed a Deed of Real Estate Mortgage covering a property in her and her husband's name. Edna also issued three checks as partial payments for the loan, but all checks were dishonored. As a result, Arturo filed a Complaint for Foreclosure of Mortgage with Damages against Edna. The Regional Trial Court of Manila, Branch 33 ruled that Arturo was not entitled to judicial foreclosure of the mortgage as the Deed was executed without the consent and authority of Edna's husband. The court also ruled that Arturo could file a personal action against Edna but had no jurisdiction over the case. Arturo filed a motion for reconsideration but it was denied. He then filed a Complaint for Sum of Money with Damages against Edna in another court. Edna filed a motion to dismiss on the grounds of res judicata. The trial court denied the motion and ruled that Arturo could still recover the loan from Edna. Edna filed a petition for certiorari and mandamus before the Court of Appeals, which ultimately dismissed Arturo's complaint for collection of sum of money on the ground of multiplicity of suits. Arturo appealed to the Supreme Court, questioning the dismissal of his complaint.

(Note: The partial digest only includes the facts section of the case.)

ISSUES:

  1. Whether the plaintiff is entitled to institute a personal action against the defendant for the amount due despite the void real estate mortgage.

  2. Whether the liability of the defendant on the principal contract of the loan subsists despite the illegality of the mortgage.

  3. Whether or not the execution of the Special Power of Attorney (SPA) by the other spouse is considered as acceptance that perfects the continuing offer as a binding contract.

  4. Whether or not the petitioner's failure to seek alternative relief in the previous court decisions bars him from seeking recovery of the loan.

  5. Whether or not the principle of unjust enrichment is applicable in this case.

RULING:

  1. Yes, the plaintiff is entitled to institute a personal action against the defendant for the amount due despite the void real estate mortgage.

  2. Yes, the liability of the defendant on the principal contract of the loan subsists despite the illegality of the mortgage.

  3. The execution of the SPA by the other spouse is considered as acceptance that perfects the continuing offer as a binding contract. Thus, making the Deed of Real Estate Mortgage a valid contract.

  4. The petitioner's failure to seek alternative relief in the previous court decisions does not bar him from seeking recovery of the loan. The principle in Chieng v. Santos applies, where a mortgage-creditor may institute either a personal action for debt or a real action to foreclose the mortgage. The remedies are alternative and not cumulative.

  5. The principle of unjust enrichment is applicable in this case. Edna admitted obtaining a loan from the petitioner, which has not been fully paid without just cause. The principle against unjust enrichment should prevail over the procedural rule on multiplicity of suits.

PRINCIPLES:

  • A creditor is not allowed to file separate complaints simultaneously or successively in order to recover a debt and foreclose a mortgage, as this would result in multiplicity of suits and vexation to the debtor.

  • A void real estate mortgage does not render the principal obligation null and void. The mortgage remains as evidence of a personal obligation of the debtor and the amount due to the creditor may be enforced in an ordinary action.

  • In cases where a spouse executes a mortgage without the consent of the other spouse, the mortgage is void, but the liability of the debtor on the principal contract of the loan subsists.

  • Article 124 of the Family Code provides that any disposition or encumbrance without the written consent of the other spouse shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

  • The remedies of a mortgage-creditor are alternative and not cumulative. They may institute either a personal action for debt or a real action to foreclose the mortgage.

  • The principle of unjust enrichment is provided in Article 22 of the Civil Code. There is unjust enrichment when a person acquires or comes into possession of something at the expense of another without just or legal ground. The principle requires that a person is benefited without a valid basis or justification, and that such benefit is derived at the expense of another.