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, Philippineson 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 extra
judicially 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.