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Credit Transactions Bank of America Vs American Realty Corp., 321 SCRA 659
Credit Transactions Bank of America Vs American Realty Corp., 321 SCRA 659
SYNOPSIS
SYLLABUS
DECISION
BUENA, J : p
In the civil suits instituted before the foreign courts, private respondent
ARC, being a third party mortgagor, was not impleaded as party-defendant.
In its answer 9 petitioner alleged that the rule prohibiting the mortgagee
from foreclosing the mortgage after an ordinary suit for collection has been
filed, is not applicable in the present case, claiming that:
"a) The plaintiff, being a mere third party mortgagor and not
a party to the principal restructuring agreements, was never made a
party defendant in the civil cases filed in Hongkong and England;
"b) There is actually no civil suit for sum of money filed in the
Philippines since the civil actions were filed in Hongkong and England.
As such, any decisions (sic) which may be rendered in the
abovementioned courts are not (sic) enforceable in the Philippines
unless a separate action to enforce the foreign judgments is first filed
in the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules
of Court. prLL
"c) Under English Law, which is the governing law under the
principal agreements, the mortgagee does not lose its security interest
by filing civil actions for sums of money."
". . . The rule is now settled that a mortgage creditor may elect to
waive his security and bring, instead, an ordinary action to recover the
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indebtedness with the right to execute a judgment thereon on all the
properties of the debtor, including the subject matter of the mortgage .
. ., subject to the qualification that if he fails in the remedy by him
elected, he cannot pursue further the remedy he has waived.
(Underscoring Ours)
Anent real properties in particular, the Court has laid down the rule that a
mortgage creditor may institute against the mortgage debtor either a personal
action for debt or a real action to foreclose the mortgage. 19
In our jurisdiction, the remedies available to the mortgage creditor are
deemed alternative and not cumulative. Notably, an election of one remedy
operates as a waiver of the other. For this purpose, a remedy is deemed
chosen upon the filing of the suit for collection or upon the filing of the
complaint in an action for foreclosure of mortgage, pursuant to the provision of
Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure,
such remedy is deemed elected by the mortgage creditor upon filing of the
petition not with any court of justice but with the Office of the Sheriff of the
province where the sale is to be made, in accordance with the provisions of Act
No. 3135, as amended by Act No. 4118. cdphil
Petitioner further faults the Court of Appeals for allegedly disregarding the
doctrine enunciated in Caltex, wherein this High Court relaxed the application
of the general rules to wit:
"In the present case, however, we shall not follow this rule to the
letter but declare that it is the collection suit which was waived and/or
abandoned. This ruling is more in harmony with the principles
underlying our judicial system. It is of no moment that the collection
suit was filed ahead, what is determinative is the fact that the
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foreclosure proceedings e n d e d even before the decision in the
collection suit was rendered. . . ."
Notably, though, petitioner took the Caltex ruling out of context. We must
stress that the Caltex case was never intended to overrule the well-entrenched
doctrine enunciated in Bachrach, which to our mind still finds applicability in
cases of this sort. To reiterate, Bachrach is still good law.
We then quote the decision 25 of the trial court, in the present case, thus:
"The aforequoted ruling in Caltex is the exception rather than the
rule, dictated by the peculiar circumstances obtaining therein. In the
said case, the Supreme Court chastised Caltex for making ". . . a
mockery of our judicial system when it initially filed a collection suit
then, during the pendency thereof, foreclosed extrajudicially the
mortgaged property which secured the indebtedness, and still pursued
the collection suit to the end." Thus, to prevent a mockery of our
judicial system", the collection suit had to be nullified because the
foreclosure proceedings have already been pursued to their end and
can no longer be undone.
xxx xxx xxx
"In the case at bar, it has not been shown whether the defendant
pursued to the end or are still pursuing the collection suits filed in
foreign courts . There is no occasion, therefore, for this court to apply
the exception laid down by the Supreme Court in Caltex, by nullifying
the collection suits. Quite obviously, too, the aforesaid collection suits
are beyond the reach of this Court. Thus the only way the court may
prevent the specter of a creditor having "plural redress for a single
breach of contract" is by holding, as the Court hereby holds, that the
defendant has waived the right to foreclose the mortgages constituted
by the plaintiff on its properties originally covered by Transfer
Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761."
(RTC Decision pp., 10-11)
"Thus, when the PCIB filed Civil Case No. 29392 to enforce
payment of the 1.3 million promissory note secured by real estate
mortgages and subsequently filed a petition for extrajudicial
foreclosure, it violates the rule against splitting a cause of action."
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Accordingly, applying the foregoing rules, we hold that petitioner, by the
expediency of filing four civil suits before foreign courts, necessarily abandoned
the remedy to foreclose the real estate mortgages constituted over the
properties of third-party mortgagor and herein private respondent ARC.
Moreover, by filing the four civil actions and by eventually foreclosing
extrajudicially the mortgages, petitioner in effect transgressed the rules against
splitting a cause of action well-enshrined in jurisprudence and our statute
books. LibLex
Notably, it is not the nature of the redress which is crucial but the efficacy
of the remedy chosen in addressing the creditor's cause. Hence, a suit brought
before a foreign court having competence and jurisdiction to entertain the
action is deemed, for this purpose, to be within the contemplation of the
remedy available to the mortgagee-creditor. This pronouncement would best
serve the interest of justice and fair play and further discourage the noxious
practice of splitting up a lone cause of action.
Moreover, foreign law should not be applied when its application would
work undeniable injustice to the citizens or residents of the forum. To give
justice is the most important function of law; hence, a law, or judgment or
contract that is obviously unjust negates the fundamental principles of Conflict
of Laws. 35
Clearly then, English Law is not applicable. Cdpr
In the instant case, petitioner assails the Court of Appeals for relying
heavily on the valuation made by Philippine Appraisal Company. In effect,
BANTSA questions the act of the appellate court in giving due weight to the
appraisal report composed of twenty three pages, signed by Mr. Lauro Marquez
and submitted as evidence by private respondent. The appraisal report, as the
records would readily show, was corroborated by the testimony of Mr. Reynaldo
Flores, witness for private respondent.
This Court will not alter the findings of the trial court on the credibility of
witnesses, principally because they are in a better position to assess the same
than the appellate court. 42 Besides, trial courts are in a better position to
examine real evidence as well as observe the demeanor of witnesses. 43
In arriving at the amount of actual damages, the trial courts justified the
award by presenting the following ratiocination in its assailed decision 45 , to
wit:
"Indeed, the Court has its own mind in the matter of valuation.
The size of the subject real properties are (sic) set forth in their
individual titles, and the Court itself has seen the character and nature
of said properties during the ocular inspection it conducted. Based
principally on the foregoing, the Court makes the following
observations:
Of equal importance is the fact that the trial court did not confine itself to
the appraisal report dated 29 March 1993, and the testimony given by Mr.
Reynaldo Flores, in determining the fair market value of the real property.
Above all these, the record would likewise show that the trial judge in order to
appraise himself of the characteristics and condition of the property, conducted
an ocular inspection where the opposing parties appeared and were duly
represented.
SO ORDERED.
Footnotes
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1. CA Decision in CA-C.R. CV No. 51094, penned by Justice Ricardo P. Galvez
and concurred in by Justice Fidel V. Purisima and Justice B.A. Adefuin-De la
Cruz; Rollo , pp. 38-58.
3. Rollo , p. 38.
4. Ibid., p. 39.
5. Ibid.
6. Ibid., p. 40.
7. Ibid.
8. Ibid.
9. Ibid.
10. Rollo , p. 41.
11. Ibid.
12. Ibid.
13. Rollo , pp. 41-42.
14. Rollo , pp. 10-36.
15. Bachrach Motor Co., Inc. vs. Esteban Icarangal, 68 Phil. 287.
16. 154 SCRA 446.
36. Perfecto vs. Gonzales, 128 SCRA 640, as cited in Danao vs. Court of
Appeals, 154 SCRA 447.
37. 22 Am. Jur. 2d 193.
52. Philtranco Service Exporters, Inc. vs. Court of Appeals, 273 SCRA 562.