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, itfiled 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 latters act of foreclosing extra-judicially the real estate
mortgages despite the pendency of civil suits before foreign courts for the collection of the
principal loan.

Issue:

WON petitioners 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 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.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four
civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate
mortgages constituted over the properties of third-party mortgagor and herein private
respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extra-

judicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of
action well-enshrined in jurisprudence and our statute books.

2. Conflicts of Law
Incidentally, petitioner alleges that under English Law, which according to petitioner is the
governing law with regard to the principal agreements, the mortgagee does not lose its security
interest by simply filing civil actions for sums of money.
We rule in the negative.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that
there is no judicial notice of any foreign law. A foreign law must be properly pleaded and proved
as a fact. Thus, if the foreign law involved is not properly pleaded and proved, our courts will
presume that the foreign law is the same as our local or domestic or internal
law. This is what we refer to as the doctrine of processual presumption.
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.
Thus, when the foreign law, judgment or contract is contrary to a sound and established public
policy of the forum, the said foreign law, judgment or order shall not be applied.
Additionally, prohibitive laws concerning persons, their acts or property, and those which have
for their object public order, 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.
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.
Moreover, foreign law should not be applied when its application would work undeniable injustice
to the citizens or residents of the forum. To give justice is the most important function of law;
hence, a law, or judgment or contract that is obviously unjust negates the fundamental principles
of Conflict of Laws.
Clearly then, English Law is not applicable.

FROM ATTY. ALBA^^

ASIAVEST V CA
FACTS:
295 SCRA 469 Conflict of Laws Private International Law Service of Summons to a Non Resident Processual Presumption
In 1984, a Hong Kong court ordered Antonio Heras to pay US$1.8 million or its equivalent, with interest, to Asiavest Ltd. Apparently, Heras guaranteed a
certain loan in Hong Kong and the debtor in said loan defaulted hence, the creditor, Asiavest, ran after Heras. But before said judgment was issued and
even during trial, Heras already left for good Hong Kong and he returned to the Philippines. So when in 1987, when Asiavest filed a complaint in court
seeking to enforce the foreign judgment against Heras, the latter claim that he never received any summons, not in Hong Kong and not in the
Philippines. He also claimed that he never received a copy of the foreign judgment. Asiavest however contends that Heras was actually given service of
summons when a messenger from the Sycip Salazar Law Firm served said summons by leaving a copy to one Dionisio Lopez who was Heras son in
law.
ISSUE: Whether or not the foreign judgment can be enforced against Heras in the Philippines.
HELD: No. Although the foreign judgment was duly authenticated (Asiavest was able to adduce evidence in support thereto) and Heras was never able
to overcome the validity of it, it cannot be enforced against Heras here in the Philippines because Heras was not properly served summons. Hence, as
far as Philippine law is concerned, the Hong Kong court has never acquired jurisdiction over Heras. This means then that Philippine courts cannot act to
enforce the said foreign judgment.
The action against Heras is an action in personam and as far as Hong Kong is concerned, Heras is a non resident. He is a non resident because prior to
the judgment, he already abandoned Hong Kong. The Hong Kong law on service of summons in in personam cases against non residents was never
presented in court hence processual presumption is applied where it is now presumed that Hong Kong law in as far as this case is concerned is the
same as Philippine laws. And under our laws, in an action in personam wherein the defendant is a non-resident who does not voluntarily submit himself
to the authority of the court, personal service of summons within the state is essential to the acquisition of jurisdiction over her person. This method of
service is possible if such defendant is physically present in the country. If he is not found therein, the court cannot acquire jurisdiction over his person
and therefore cannot validly try and decide the case against him. Without a personal service of summons, the Hong Kong court never acquired
jurisdiction. Needless to say, the summons tendered to Lopez was an invalid service because the same does not satisfy the requirement of personal
service.