CIVIL PROCEDURE LIST OF CASES (PART 2)
No. 3
Marilag vs. Martine
G.R. No. 201892, 22 July 2015
FACTS:
The case involves a dispute between Norlinda S. Marilag
(petitioner) and Marcelino B. Martinez (respondent) over a loan
obtained by Rafael Martinez, the respondent's father, from the
petitioner. The loan was secured by a real estate mortgage.
When Rafael failed to settle the debt, the petitioner filed a
Complaint for Judicial Foreclosure of Real Estate Mortgage.
The Regional Trial Court (RTC) initially issued a Decision in
the foreclosure case, reducing the monthly interest rate and
ordering Rafael to pay the petitioner. Meanwhile, prior to the
notice of the decision, the respondent agreed to pay Rafael's debt
and executed a promissory note for the remaining balance.
However, after learning of the decision, the respondent refused
to pay the amount covered by the promissory note, leading to the
filing of a collection case by the petitioner.
The court initially denied recovery on the promissory note,
citing the prior decision in the foreclosure case. However, it later
granted petitioner's motion for reconsideration, setting aside its
previous decision and directing the respondent to pay the
amount due under the promissory note.
The Court of Appeals (CA) reversed the RTC's decision,
applying the doctrine of res judicata. The petitioner appealed to
the Supreme Court (SC), arguing that the principle of res
judicata is inapplicable.
ISSUES:
Whether or not the CA committed reversible error in upholding
the dismissal of the collection case.
RULING:
The SC ruled that res judicata was not applicable since there was
no evidence that the decision in the foreclosure case had already
attained finality. However, it held that litis pendentia barred the
collection case due to the substantial identity of parties and
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causes of action in both the foreclosure and collection cases. The
SC emphasized that the remedies of foreclosure and collection
are alternative, not cumulative.
The SC also addressed the excessive interest rate stipulated in
the loan, reducing it to a reasonable rate. It found the respondent
entitled to a refund of excess payments made, which were
considered quasi-contractual obligations due to a mistake in
payment.
In conclusion, the SC denied the petition, affirmed the CA
decision with modifications, and directed the petitioner to return
the excess payments with legal interest. The award of attorney's
fees was deleted due to the lack of a clear basis, while the costs
of the suit were upheld.
Here's a summary of the key points:
Res Judicata: The court determined that the principle of res
judicata (a case being barred by a prior judgment) did not apply
because the judgment in the foreclosure case had not yet
attained finality.
Litis Pendentia: The court found that the petitioner's
prosecution of the collection case was barred by the principle
of litis pendentia, as there was a substantial identity of parties
and causes of action in both the foreclosure and collection cases.
Single Cause of Action: The court emphasized that in loan
contracts secured by a real estate mortgage, the creditor has a
single cause of action against the debtor, either through a
personal action for the collection of money or a real action to
foreclose on the mortgage. The remedies are considered
alternative and not cumulative.
Novation: The court rejected the argument of novation (the
substitution of a new obligation for an existing one) based on the
execution of a promissory note by the respondent, noting that
novation must be clearly and unequivocally shown
Excessive Interest: The court determined that the stipulated 5%
monthly interest was excessive and reduced it to 1% per month
or 12% per annum.
Overpayment: The court found that the respondent had
overpaid the debt and was entitled to a refund of the excess
payments.
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Solutio Indebiti: The court invoked the quasi-contractual
obligation of solutio indebiti (unjust enrichment) for the refund
of the excess payments made by the respondent by mistake.
Interest on Refund: The court imposed a 6% per annum
interest rate on the amount to be refunded to the respondent.
Attorney's Fees: The court deleted the award of attorney's fees
due to the absence of a clear basis for the award in the decision.
Costs of Suit: The court affirmed the award of the costs of suit
in favor of the respondent.
In summary, the court denied the petitioner's appeal, affirmed
the decision of the Court of Appeals with some modifications,
and ordered the petitioner to refund the excess payments to the
respondent with a reduced interest rate. The award of attorney's
fees was deleted, but the costs of suit were upheld.
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