G.R. No. 48533; January 30, 1943
ANAK-PAWIS SANTA ROSA, plaintiff-appellant, vs. MATILDE DE GUZMAN, ET AL., defendants-appellees.

FACTS

The plaintiff-appellant, Anak-Pawis Santa Rosa, a corporation, filed an action for the foreclosure of a mortgage executed by the deceased Vicente de Guzman to secure two promissory notes (one for P850 and another for P300) on a specific lot. The defendants are the legal heirs of the debtor. After the debtor’s death, the creditor instituted intestate estate proceedings. The creditor presented its claim based on the promissory notes before the committee on claims and appraisals appointed by the court. The committee disallowed the claim. The creditor’s appeal to the Court of First Instance from the committee’s action was dismissed due to the creditor’s failure to file a complaint reproducing its claim as required by procedural law. Subsequently, the project of partition in the intestate proceedings was approved and the proceedings were closed. The trial court dismissed the foreclosure action, holding that by presenting its claim before the committee on claims, the creditor forfeited its right to bring a separate action to foreclose the mortgage, as it could not pursue both remedies under the applicable rules.

ISSUE

Whether the plaintiff-appellant, by presenting its claim before the committee on claims in the intestate proceedings, forfeited its right to bring an independent action for the foreclosure of the mortgage.

RULING

Yes. The Supreme Court affirmed the trial court’s decision. Under Rule 87, Section 7 of the Rules of Court, a creditor holding a claim secured by a mortgage has three mutually exclusive options: (1) abandon the security and prosecute the claim before the committee to share in the general distribution of the estate; (2) foreclose the mortgage by ordinary action in court (with the executor or administrator as a party) and claim any deficiency judgment; or (3) rely solely on the security and foreclose it within the statute of limitations, thereby forfeiting any right to share in the other assets of the estate. By electing to present its claim before the committee on claims, the creditor irrevocably chose to pursue the first option—to share in the general distribution of the estate’s assets—and thereby lost the right to foreclose the mortgage in an independent action. The Court noted that the creditor’s petition before the committee, which included a prayer for the sale of the mortgaged property, was improper because a committee on claims lacks the power to order a foreclosure; such a prayer should be disregarded. Consequently, the creditor’s act of submitting to the committee’s jurisdiction constituted an abandonment of the foreclosure remedy.