GR 109472; (May, 1999) (Digest)
G.R. No. 109472 May 18, 1999
DAVID MAGLAQUE, JOSE MAGLAQUE and PACITA MAGLAQUE, petitioners, vs. PLANTERS DEVELOPMENT BANK, and SPOUSES ANGEL S. BELTRAN AND ERLINDA C. BELTRAN, respondents.
FACTS
The spouses Egmidio Maglaque and Sabina Payawal obtained a loan from Bulacan Development Bank (now Planters Development Bank) secured by a real estate mortgage over their property. Following Sabina’s death in 1976, Egmidio made a P2,000.00 payment in 1977, which the bank accepted. Egmidio died in 1979. Due to the loan’s non-payment in full, the bank extrajudicially foreclosed the mortgage in September 1978. After the redemption period lapsed, the bank consolidated its title in March 1980 and subsequently sold the property to the spouses Beltran in September 1980.
The petitioners, heirs of the Maglaque spouses, filed a complaint for annulment of the foreclosure sale, reconveyance, and damages. They argued, among other points, that the bank should have filed its claim in the settlement of the deceased mortgagors’ estates. The trial court dismissed the complaint, a decision affirmed by the Court of Appeals.
ISSUE
Whether the respondent bank was legally obligated to file its claim in the settlement of the estates of the deceased mortgagors instead of proceeding with the extrajudicial foreclosure of the mortgage.
RULING
The Supreme Court affirmed the decisions of the lower courts. On the pivotal legal issue, the Court held that a secured creditor, such as a mortgagee bank, is not required to submit its claim to the estate settlement proceedings. Under Rule 86, Section 7 of the Revised Rules of Court, a mortgage creditor has three distinct options upon the debtor’s death: (1) waive the mortgage and claim the entire debt from the estate as an ordinary claim; (2) foreclose the mortgage judicially and claim any deficiency from the estate; or (3) rely exclusively on the mortgage by foreclosing it at any time before the right prescribes, forfeiting any claim for a deficiency.
The respondent bank validly exercised the third option. By proceeding with the extrajudicial foreclosure, it chose to enforce its security interest directly against the mortgaged property, independent of the probate proceedings. This option is specifically allowed by the rules and does not require the creditor to participate in the estate settlement. The other errors raised by petitioners were deemed factual and thus not reviewable in a petition for review on certiorari. The foreclosure and subsequent sale were upheld.