BANK OF AMERICA vs AMERICAN REALTY CO.

321 SCRA 659

In a conflict between a Philippine law and a foreign law, Philippine law prevails

Facts:

The Bank of America granted a loan to a corporation secured by a real estate

mortgage by the respondent. Upon the loan maturity, the corporation debtor failed
to pay and the petitioner bank filed 4 collection cases in the foreign courts (England
and Hong Kong) against the corporation debtors. At the same time it also filed an
extrajudicial foreclosure in the office of the Provincial Sheriff of Bulacan,Philippines
on the real estate mortgage and said was sold in a public auction. The respondent
files action for damages against petitioner due to the act of foreclosing the real
estate mortgage extrajudicially despite the pending civil suits before the foreign
courts to collect the principal loan. Petitioner contends that the respondent is not
made a party on the collection case before the foreign courts for being a third party
mortgagor and such actions were filed in foreign courts and thus decisions rendered
on such courts are not enforceable in the Philippines unless a separate action is filed
in the Phils to enforce such judgment and that under the English law which is the
law governing in the principal agreement, the mortgagee does not lose its security
interest by filing a civil action for sum of money. The court rendered judgment in
favor of defendants declaring that the filing of civil suit on collection of a sum of
money in foreign courts constitutes a waiver on the security of the mortgages.

ISSUE:

WON the petitioners act of filing a collection suit against the principal debtors
before foreign courts constitutes a waiver of the remedy of foreclosure.

RULING:

The court held that Section 4 Rule 2 of the 1997 Rules on Civil Procedure provides
that if two or more suits are instituted on the basis of the same cause of action, the
filing of one or a judgment upon the merits in any one is available as a ground for
the dismissal of the others. A mortgagor creditor may pursue two remedies either
to institute against the mortgage debtor a personal action for collection of money or
foreclosure of a mortgage but cannot avail of both remedies. In Phil. jurisdiction
these remedies are alternative and not cumulative. Thus, choosing one remedy is a
bar to avail of the other remedy. Plaintiff cannot split up a single cause of action by
filing both remedies as expressly prohibited by the rules on civil procedure.

On the contention of the petitioner that the English law should apply to the principal
agreements that states that the mortgagee does not lose its security interest by
simply filing civil actions for sums of money, the court held that a foreign law must
be properly pleaded and proved as fact. If not pleaded, the court will presume that
the foreign law is the same as our local or domestic or internal law. This is the
DOCTRINE OF PROCESSUAL PRESUMPTION.

Granting however that the English law is applicable in the Phil. court, such law is
contrary to sound and established public policy of the forum which proscribes the
splitting of a single cause of action, thus still cannot be applied by the court in the
case.

It is proper that Philippine law should be upheld since it is the country upon which
the case is filed. Therefore the filing of a collection case by the petitioner in foreign
courts is a waiver for the remedy of foreclosure of real estate mortgage.