BANK OF AMERICA V. AMERICAN REALTY CORP.
FACTS:
BANK OF AMERICA NT & SA (BANTSA) and Bank of America Ltd. (BAIL) on several occasions granted 3 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 AMERICAN REALITY CORP (ARC). a Philippine corp.
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 over its parcels of land including improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan.
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, 2 in England and 2 in HK respectively. In the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was not impleaded as party-defendant.
In 1992, BANTSA filed before the Office of the Provincial Sheriff of Bulacan, Philippines, an application for extrajudicial foreclosure of real estate mortgage. In 1993, after due publication and notice, the mortgaged real properties were sold at public auction in an extrajudicial foreclosure sale.
Thereafter, ARC filed an action for damages against BANTSA and BAIL, for the latter's 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:
If the filing in foreign courts by the defendant of collection suits against the principal debtors constituted a waiver of the security of the mortgages.
HELD:
YES.
The 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.
In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action for 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.
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.
In the case at bench, private respondent ARC constituted real estate mortgages over its properties as security for the debt of the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property.
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 extrajudicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute books.chanrobles.com:cralaw:red
TUASON V. OROZCO
FACTS:
In 1890, Enrique Grupe and Dolores Orozco (wife of Juan Vargas) obtained a loan from Gonzalo Tuason secured by a mortgage on the property. The mortgage property (house) was referred to in the power of attorney executed by Juan Vargas, instituting Grupe as his agent. In the SPA, Enrique Grupe, was authorized to dispose of all his property, and particularly of a certain house and lot known as No. 24 Calle Nueva, Malate, in the city of Manila, for the price at which it was actually sold. He was also authorized to mortgage the house for the purpose of securing the payment of any amount advanced to his wife, Dolores Orozco who, inasmuch as the property had been acquired with funds belonging to the conjugal partnership, was a necessary party to its sale or incumbrance.
In the instrument evidencing the debt, Enrique Grupe acknowledges to have received from Gonzalo Tuason as a loan, the sum of 3,500 pesos in cash, to his entire satisfaction, which sum he promises to pay within one year thereafter.
To secure the payment of the 2,200 pesos delivered to Dolores Orozco, Grupe mortgaged the house and lot referred to in the SPA. This instrument of debt was duly recorded in the Registry of Property.
TUASON filed this complaint for the recovery of the debt against the mortgaged property.
However, Orozco denied having receiving the 2,200 pesos. She claims that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred for the benefit of his principal, Vargas.
ISSUE:
If the debtor can foreclose the mortgage to fulfill the liability of the principal incurred by his agent.
HELD:
YES.
A debt incurred by the agent is binding directly upon the principal, provided the former acted, as in the present case, within the scope of his authority. (Art. 1727 of the Civil Code.)
The fact that the agent has also bound himself to pay the debt does not relieve from liability the principal for whose benefit the debt was incurred. The individual liability of the agent constitutes in the present case a further security in favor of the creditor and does not affect or preclude the liability of the principal.
In the present case the latter's liability was further guaranteed by a mortgage upon his property. The law does not provide that the agent can not bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act on the part of an agent would be valid. (Art. 1725 of the Civil Code.)
The above mortgage being valid and having been duly recorded in the Register of Property, directly subjects the property thus encumbered, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created. (Art. 1876 of the Civil Code and Art. 105 of the Mortgage Law.)
CHINA BANKING CORP. V. LICHAUCO
FACTS:
Lichauco & Company, Inc., owed the plaintiff a large sum by way of loan.
On September 5, 1921, Faustino Lichauco and wife Luisa F. de Lichauco executed a document (Exhibit C) in favor of the plaintiff whereby they secured with a mortgage upon the property described in the document the payment of a part of this loan in the amount of P50,000 with interest at 9 per cent per year. It was agreed that in case of non-fulfillment of the contract, this mortgage would stand as security also for the payment of all the costs of the suit and expenses of any kind, including attorney’s fees, which by way of liquidated damages are fixed at 5 per cent of the principal. It is stated lastly in this document that if Faustino Lichauco and Luisa F. de Lichauco should fail to pay this amount of P50,000, the mortgage shall be in full force and effect.
ISSUE:
If the obligation of Faustino Lichauco and Luisa F. de Lichauco lacked consideration, because what they guaranteed with this mortgage was a debt of Lichauco & Co., Inc.
HELD:
NO. The consideration of a mortgage, which is an accessory contract, is that of the principal contract, from which it receives its life, and without which it cannot exist as an independent contract, even if the obligation thereby secured is of a third person, and therefore it will be valid, if the principal one is valid, and cannot be avoided on the ground of lack of consideration.
