[G.R. No. 133876.

December 29, 1999]

BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN REALTY

CORPORATION and COURT OF APPEALS, respondents
Facts:

(Petitioner Bank of America [organized under English laws] granted multi-million

dollar loans to affiliate companies of respondent American Realty Corp. Properties of
American Realty Corp in the Philippines were mortgaged as security. When the
affiliate companies were not able to pay, Petitioner Bank of America filed cases for
collection of sum of money [principal loan] in courts in England and in Hongkong.
The American Realty Corp was not impleaded as a party-defendant in these cases.
Then, Bank of America brought a case in the Philippines [ Office of the Provincial
Sheriff of Bulacan Philippines] for the foreclosure of the mortgaged properties). RTC
ruled for respondent stating that filing for claim for principal loan by petitioner
operated as waiver of its right to foreclose mortgage. CA affirmed RTC.

Issue:

Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted
over a third party mortgagors property situated in the Philippines by filing an action for the
collection of the principal loan before foreign courts?
SC Ruling: Yes. Pursuing collection of principal loan means waiver of its remedy to foreclose the
real estate mortgage.
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, pursuant to the provision of Rule 68 of
the 1997 Rules of Civil Procedure. 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 accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
The English law which rules otherwise cannot be applied in Philippine jurisdiction because it is
against public policy.