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BANK OF AMERICA VS.

AMERICAN REALTY Leave a comment
Bank of America vs American Realty Corporation
GR 133876 December 29, 1999
Facts:
Petitioner granted loans to 3 foreign corporations. As security, the latter mortgaged
a property located in the Philippines owned by herein respondent ARC. ARC is a third
party mortgagor who pledged its own property in favor of the 3 debtor-foreign
corporations.
The debtors failed to pay. Thus, petitioner filed collection suits in foreign courts to
enforce the loan. Subsequently, it filed a petition in the Sheriff to extra-judicially
foreclose the said mortgage, which was granted.
On 12 February 1993, private respondent filed before the Pasig RTC, Branch 159, an
action for damages against the petitioner, for the latter’s act of foreclosing extrajudicially the real estate mortgages despite the pendency of civil suits before
foreign courts for the collection of the principal loan.
Issue:
WON petitioner’s act of filing a collection suit against the principal debtors for the
recovery of the loan before foreign courts constituted a waiver of the remedy of
foreclosure.
Held: Yes.
1. Loan; Mortgage; remedies:
In the absence of express statutory provisions, a mortgage creditor may institute
against the mortgage debtor either a personal action or debt or a real action to
foreclose the mortgage. In other words, he may pursue either of the two remedies,
but not both. By such election, his cause of action can by no means be impaired, for
each of the two remedies is complete in itself.
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. 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 the case at bar, petitioner only has one cause of action which is non-payment of
the debt. Nevertheless, alternative remedies are available for its enjoyment and

this Court adopted the well-imbedded principle in our jurisdiction that there is no judicial notice of any foreign law. when the foreign law. In the instant case. assuming arguendo that the English Law on the matter were properly pleaded and proved in said foreign law would still not find applicability. Petitioner then may opt to exercise only one of two remedies so as not to violate the rule against splitting a cause of action. Clearly then. In a long line of decisions. petitioner alleges that under English Law. the mortgagee does not lose its security interest by simply filing civil actions for sums of money. or judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws. the said foreign law. public policy and good customs shall not be rendered ineffective by laws or judgments promulgated. . or by determinations or conventions agreed upon in a foreign country.exercise. judgment or contract is contrary to a sound and established public policy of the forum. necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor and herein private respondent ARC. A foreign law must be properly pleaded and proved as a fact. Conflicts of Law Incidentally. if the foreign law involved is not properly pleaded and proved. Thus. by filing the four civil actions and by eventually foreclosing extra-judicially the mortgages. English Law is not applicable. foreign law should not be applied when its application would work undeniable injustice to the citizens or residents of the forum. Moreover. judgment or order shall not be applied. we hold that petitioner. To give justice is the most important function of law. their acts or property. prohibitive laws concerning persons. and those which have for their object public order. The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction proscribing the splitting up of a single cause of action. We rule in the negative. hence. This is what we refer to as the doctrine of processual presumption. applying the foregoing rules. which according to petitioner is the governing law with regard to the principal agreements. Additionally. by the expediency of filing four civil suits before foreign courts. Thus. our courts will presume that the foreign law is the same as our local or domestic or internal law. petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute books. Moreover. Accordingly. a law. 2.