Yap v. First E-Bank Corp.
NEW DOCTRINEFacts
The Antecedents: Sammy Yap obtained a P2 million loan from PDCP Development Bank, Inc. (PDCP), with his parents, Spouses Simon and Milagros Yap (petitioners), executing a third-party mortgage on their land and warehouse as security. Sammy also issued a promissory note and six postdated checks as additional security. When Sammy defaulted on the loan, PDCP filed six counts of violation of BP 22 (Bouncing Checks Law) against him and subsequently initiated extrajudicial foreclosure proceedings on the petitioners' mortgaged property. Procedural History: The BP 22 cases were provisionally dismissed upon motion by Sammy Yap. The Regional Trial Court (RTC) ruled in favor of the petitioners, holding that PDCP waived its right to foreclose the mortgage by electing to file the BP 22 cases. However, the Court of Appeals reversed the RTC's decision, opining that PDCP was not barred from foreclosing the mortgage despite the prior BP 22 cases. The Petition: Petitioners, Spouses Simon and Milagros Yap, filed this petition for review on certiorari under Rule 45 of the Rules of Court. They argue that PDCP's filing of the BP 22 cases against Sammy Yap should be deemed to have included a civil action for collection, thereby precluding PDCP from pursuing the extrajudicial foreclosure of their mortgaged property. They contend that PDCP elected a remedy and should not be allowed to pursue another.
Issue(s)
Whether PDCP waived its right to extrajudicially foreclose the mortgaged property by filing BP 22 cases against Sammy Yap. Whether Supreme Court Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court apply to the present case.
Ruling
The petition is denied. The Court of Appeals did not err in reversing the RTC ruling. PDCP is not barred from exercising its right to foreclose on the property of petitioners despite having filed BP 22 cases against Sammy Yap.
Ratio Decidendi
On whether PDCP waived its right to extrajudicially foreclose the mortgaged property by filing BP 22 cases against Sammy Yap: The Court held that prior to the effectivity of Supreme Court Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court, the remedies of foreclosure and collection (including BP 22 cases) were not mutually exclusive unless a judgment of conviction was rendered in the BP 22 case. In this instance, the BP 22 cases were provisionally dismissed at Sammy Yap's instance, preventing PDCP from obtaining a judgment. Therefore, PDCP was not barred from pursuing foreclosure. The Court also emphasized that petitioners, as third-party mortgagors, assumed the risk of their property being foreclosed until the loan was fully paid. To release the mortgage due to inconvenience would be unjust to PDCP. The Court reiterated the principle that a creditor who obtains a personal judgment against the debtor on a loan waives the right to foreclose on the mortgage securing the loan to avoid splitting a single cause of action (nemo debet bis vexare pro una et eadem causa). On whether Supreme Court Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court apply to the present case: The Court ruled that Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court were not yet in force when PDCP filed the BP 22 cases and the petition for extrajudicial foreclosure. Therefore, these rules, which mandate that a criminal action for BP 22 necessarily includes the civil action and prohibits separate filing, were not applicable to the situation at bar. The Court cited Lo Bun Tiong v. Balboa where a similar principle was applied because the cases were filed prior to the adoption of Circular 57-97. The Court clarified that the rule at present is that if a debtor fails to pay a debt secured by a mortgage and a check, the creditor has three options: a collection suit, foreclosure, or a BP 22 case (which includes the civil action), and the exercise of one bars the others.
Main Doctrine
Prior to the effectivity of Supreme Court Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court, the filing of a BP 22 case did not automatically bar a creditor from pursuing the alternative remedy of extrajudicial foreclosure of mortgage, unless a judgment of conviction had already been rendered in the BP 22 case. Furthermore, a creditor who obtains a personal judgment against the debtor on a loan waives the right to foreclose on the mortgage securing the loan, to avoid splitting a single cause of action.