SPS. MAGLASANG v. MANILA BANKING CORPORATION GR No. 171206 September 23, 2013
Facts:
On June 16, 1975, spouses Flaviano and Salud Maglasang (Sps.Maglasang) obtained a credit line from respondent in the amount of ₱350,000.00 which was secured by a real estate mortgage executed over seven of their properties located in Ormoc City and the Municipality of Kananga, Province of Leyte. They availed of their credit line by securing loans in the amounts of ₱209,790.50 and ₱139,805.83 both of which becoming due and demandable within a period of one year. Further, the parties agreed that the said loans would earn interest at 12% per annum (p.a.) and an additional 4% penalty would be charged upon default.
After Flaviano Maglasang (Flaviano) died intestate on February 14,1977, his widow Salud Maglasang (Salud) and their surviving children appointed their brother petitioner Edgar Maglasang (Edgar) as their attorney-in-fact which the latter filed a petition for letter of administration before the probate court and was granted thereafter.
In view of the issuance of letters of administration, the probate court issued a Notice to Creditors for the filing of money claims against Flaviano’s estate. During the pendency of the intestate proceedings, Edgar and Oscar were able to obtain several loans from respondent, secured by promissory notes which they signed.
The probate court terminated the proceedings with the surviving heirs executing an extra-judicial partition of the properties of Flaviano’s estate. The loan obligations owed by the estate to respondent, however, remained unsatisfied due to respondent’s certification that Flaviano’s account was undergoing a restructuring. Nonetheless, the probate court expressly recognized the rights of respondent under the mortgage and promissory notes executed by the Sps. Maglasang, specifically, its "right to foreclose the same within the statutory period." In this light, respondent proceeded to extra-judicially foreclose the mortgage covering the Sps. Maglasang’s properties and emerged as the highest bidder at the public auction for the amount of ₱350,000.00. There, however, remained a deficiency on Sps. Maglasang’s obligation to respondent. Thus, respondent filed a suit to recover the deficiency amount against the estate of Flaviano.
Issue:
Whether or not the CA erred in affirming the RTC’s award of the deficiency amount in favor of respondent.
Ruling:
Yes. However, the petition is partly meritorious. Claims against deceased persons should be filed during the settlement proceedings of their estate. Such proceedings are primarily governed by special rules found under Rules 73 to 90 of the Rules. "A creditor holding a claim against the deceased secured by a mortgage or other collateral security" as highlighted, it may be reasonably concluded that the aforementioned section covers all secured claims, whether by mortgage or any other form of collateral, which a creditor may enforce against the estate of the deceased debtor.
Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured creditor has three remedies/options that he may alternatively adopt for the satisfaction of his indebtedness. In particular, he may choose to: (a) waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other security and foreclose the same before it is barred by prescription, without the right to file a claim for any deficiency. It must, however, be emphasized that these remedies are distinct, independent and mutually exclusive from each other; thus, the election of one effectively bars the exercise of the others. Anent the third remedy, it must be mentioned that the same includes the option of extra-judicially foreclosing the mortgage under Act No. 3135,as availed of by respondent in this case. However, the plain result of adopting the last mode of foreclosure is that the creditor waives his right to recover any deficiency from the estate.
To obviate any confusion, the Court observes that the operation of Act No. 3135 does not entirely discount the application of Section 7, Rule 86, or vice-versa. Rather, the two complement each other within their respective spheres of operation. Section 7, Rule 86 governs the parameters and the extent to which a claim may be advanced against the estate, whereas Act No. 3135 sets out the specific procedure to be followed when the creditor subsequently chooses the third option – specifically, that of extra-judicially foreclosing real property belonging to the estate. Rule 86 does not detail the procedure for extra-judicial foreclosures, the formalities governing the manner of availing of the third option – such as the place where the application for extra-judicial foreclosure is filed, the requirements of publication and posting and the place of sale – must be governed by Act No. 3135.
Lest it be misunderstood, it did not exercise the first option of directly filing a claim against the estate, as petitioners assert, since it merely notified the probate court of the outstanding amount of its claim against the estate of Flaviano and that it was currently restructuring the account. Thus, having unequivocally opted to exercise the third option of extra-judicial foreclosure under Section 7, Rule 86, respondent is now precluded from filing a suit to recover any deficiency amount as earlier discussed.
