Cause of action in loan contracts

The question of whether a cause of action is single and entire or separate is not always easy to determine and the same must often be resolved, not by the general rules, but by reference to the facts and circumstances of the particular case. The true rule, therefore, is whether the entire amount arises from one and the same act or contract which must, thus, be sued for in one action, or the several parts arise from distinct and different acts or contracts, for which a party may maintain separate suits.[1]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,[2] not cumulative or successive,[3] 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,[4] 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.[5] 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.

[1] BPI Family Savings Bank, Inc. v. Vda. de Coscolluela, 526 Phil. 419, 437-438 (2006).

[2] Flores v. Lindo, Jr., 664 Phil. 210, 216 (2011).

[3] Allandale Sportsline, Inc. v. The Good Dev't. Corp., 595 Phil. 265, 280 (2008).

[4] Flores v. Lindo, Jr., 664 Phil. 210, 216 (2011).

[5] Spouses Tanchan v. Allied Banking Corporation, 592 Phil. 252, 273-274 (2008).