Danao vs Court of Appeals

G.R. No. L-48276. September 30, 1987

Facts:
Spouses Danao applied for a commercial credit line of P20,000.00 with the People’s Bank and Trust Company.
Thereafer, the parties executed a Commercial Credit Agreement and Mortgage. It stipulated that the spouses
(mortgagors) agreed to secure the repayment of the said credits and advances by means of a good and valid mortgage.
In consideration of which, the spouses were granted a line of credit. The security was a parcel of land together with the
building and improvements thereon.
The spouses availed of the credit facility not only during the original term of one year but also during the
renewals and extensions thereof. It appears however, that Antonio Co Kit and Pedro Danao signed a promissory note of
P10,000.00 and the proceeds of which were issued to the former. It was agreed that the two shall the the note jointly
and severally. Because of their failure to pay the balance of the promissory note, People’s Bank and Trust Company sent
them a demand letter.
People’s Bank and Trust Company filed a complaint in the City Court against Kit and Danao. The court dismissed
the complaint for lack of interest on the part of the plaintiff.
The branch manager of PBTC then wrote a letter to Danao informing him that they had filed a petition for
foreclosure and that the parcel of land will be sold at public auction. A notice of public auction sale was published in a
weekly newspaper. The Councel of PBTC informed the bank that the spouses paid the obligation in full.
Spouses Danao filed a complaint for damages against BPI (successor of PBTC). They alleged that the published
notice of public auction sale have neither legal nor factual bases and that it was malicious and made with deliberate
intent thus causing the plaintiffs, who are respected members of the Baguio City, untold mental and moral anguish,
serious anxiety, besmirched reputation, etc.
In its counterclaim the bank contended that it merely exercises its legal right as credtor-mortgagee.
The CFI rendered a decision in favor of Danao and dismissed the counterclaim of the bank.
CA affirmed the decision of the trial court.
Hence, this petition.

Issue:
Whether or not PBTC by filing a civil complaint against Kit and Danao for the collection of the unpaid balants of
the promissory note “had waived” the remedy of extra-judicial foreclosure of mortgage, and “such complain barred the
subsequent petition for foreclosure of mortgage”.

Held:
The court has invariably held that:
“The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead a n ordinary
action to recover the indebtedness with the right to execute a judgment thereon on all the properties of the debtor,
including the subject matter of the mortgage xxx, subject to the qualification that if he fails in the remedy by him
elected, he cannot pursue further the remedy he has waived.” (Manila Trading and Supply Co. vs Co Kim, et al.)
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.