QUASI-CONTRACTS (A. 1160 in relation to Arts.

2142-2175) / Unjust Enrichment

ARTURO SARTE FLORES v. Sps. ENRICO LINDO, Jr. and EDNA LINDO
G.R. No. 183984, April 13, 2011

FACTS:
On October 31, 1995, Edna Lindo obtained a P400,000, 3% interest compounded
monthly and 3% surcharge in case of late payment payable on December 1, 1995,
from Arturo Flores. A Deed of Real Estate Mortgage covering a property under the
name of Edna and her husband Enrico Lindo was executed to secure the loan but
without the husbands consent. But in November 1995, Enrico executed a special
power of attorney authorizing Edna to mortgage the property. Partial payments were
also made by her through issuing three checks but the same were all dishonored for
insufficiency of funds. Hence, the creditor filed a Complaint for Foreclosure of
Mortgage with Damages against respondents.
The trial court (RTC Manila, Branch 33) dismissed the case as the mortgage was not
valid between Edna and Flores because the REM was made without the necessary
consent of the husband, despite the SPA executed later by the husband for the wife.
It must be noted that the SPA was executed by Enrico only a few days after the REM
was entered by Edna. However, the trial court ruled that Flores can file a personal
action (collection suit) against Edna.
Eventually, Flores filed a Complaint for Sum of Money with Damages against Sps.
Lindo (raffled to RTC Manila, Branch 42). The respondents filed a Motion to Dismiss
on the grounds of res judicata and lack of cause of action. The trial court denied the
dismissal. The spouses then filed a Petition for Certiorari and Mandamus with Prayer
for a Writ of Preliminary Injunction and/or Temporary Restraining Order before the
Court of Appeals.
The CA ruled in favor of Sps. Lindo. It ruled that when Flores filed an action for
foreclosure of the mortgage, he had abandoned the remedy of filing a personal
action to collect the indebtedness. These remedies are mutually exclusive.
ISSUE:
Whether or not the Court of Appeals committed a reversible error in dismissing the
complaint for collection of sum of money on the ground of multiplicity of suits.
RULING:
Yes, the Court of Appeals committed an error in dismissing the complaint for
collection of sum of money on the ground of multiplicity of suits.
The rule is that a mortgagee-creditor has a single cause of action against a
mortgagor-debtor, to recover the debt; and that he has the option of either filing a
personal action for collection of sum of money or instituting a real action to
foreclose on the mortgage security, but not both. These two remedies are

alternative and each is complete by itself. However, the Supreme Court made a pro
hac vice decision (applicable on to this case and as an exception to the rule) which
allows Flores to recover via a personal action despite his prior filing for foreclosure
of REM to recover the indebtedness, applying the principle that no person may
unjustly enrich himself at the expense of another (Art.22 of the Civil Code). This
principle is applicable here because Edna admitted obtaining the loan from Flores
and that the same has not been fully paid without just cause. The principle against
unjust enrichment, being a substantive law, should prevail over the procedural rule
on multiplicity of suits.
Furthermore, there is misapplication of rules in the decision made the trial court
(RTC Manila, Branch 33) in dismissing the real action of foreclosure on the ground of
invalidity of REM. It is true that the power of disposition or encumbrance over a
conjugal property by one spouse without authority of the court or the written
consent of the other spouse shall be VOID. However, under the second paragraph of
Art. 124 of the Family Code, the provision states that the transaction shall be
construed as a continuing offer on the part of the consenting spouse and the third
party, and maybe perfected as a binding contract upon the acceptance by the other
spouse, before the offer is withdrawn by either or both offerors. Hence, the
execution of the SPA is the acceptance of the other spouse that perfected the
continuing offer as a binding contract between parties, making the REM a valid
contract.
Thus, the Court of Appeals committed a reversible error in dismissing the complaint
for collection of sum of money on the ground of multiplicity of suits.