BANK OF AMERICA V. AMERICAN REALTY CORP.

FACTS:
As borne by the records, BANTSA and BAIL on several occasions granted three major multi-million United
States (US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation, S.A.; (2) El
Challenger S.A. and (3) Eshley Compania Naviera S.A. (hereinafter collectively referred to as "borrowers"), all
of which are existing under and by virtue of the laws of the Republic of Panama and are foreign affiliates of
private respondent.
Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and
entered into restructuring agreements. As additional security for the restructured loans, private respondent ARC
as third party mortgagor executed two real estate mortgages
Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner
BANTSA to file civil actions before foreign courts for the collection of the principal loan
n the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was
private not impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan,
Philippines an application for extrajudicial foreclosure of real estate mortgage and the lots were subsequently
sold at an auction.
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an action for
damages 8 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.
On 14 December 1993, private respondent filed a motion for
suspension which the trial court granted.
After trial, the lower court rendered a decision in favor of private respondent ARC .
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to file a
motion for reconsideration which the appellate court denied.
Hence, the instant petition for review on certiorari
ISSUE:
Whether or not the requisites of filing the action for collection and rendition of final judgment therein should
concur.
RULING:
In the instant case, petitioner's contention that the requisites of filing the action for collection and rendition of
final judgment therein should concur, is untenable.
Thus, in Cerna vs. Court of Appeals, 22 we agreed with the petitioner in said case, that the filing of a collection
suit barred the foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel
mortgage constituted over the personal property as security for the debt or value of the
promissory note when he seeks to recover in the said collection suit.
. . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning
the chattel mortgage as basis for relief, he clearly manifests his lack of desire and interest to go
after the mortgaged property as security for the promissory note . . . .
Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere act of

filing of an ordinary action for collection operates as a waiver of the mortgage-creditor's remedy to foreclose the
mortgage. By the mere filing of the ordinary action for collection against the principal debtors, the petitioner in
the present case is deemed to have elected a remedy, as a result of which a waiver of the other necessarily must
arise. Corollarily, no final judgment in the collection suit is required for the rule on waiver to apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case relied upon by petitioner,
supposedly to buttress its contention, this Court had occasion to rule that the mere act of filing a collection suit
for the recovery of a debt secured by a mortgage constitutes waiver of the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt.
Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt to
exercise only one of two remedies so as not to violate the rule against splitting a cause of action.