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KOREA EXCHANGE BANK v. FILKOR BUSINESS INTEGRATED

FACTS:

Respondent Filkor Business Integrated, Inc. borrowed US$140,000 from petitioner Korea Exchange Bank, payable on July 9, 1997. Only US$40,000 was paid by Filkor. In addition, Filkor executed nine trust receipts but failed to turn over the proceeds from the sale of the goods as required. Filkor also negotiated to petitioner the proceeds of seventeen letters of credit, which were dishonored due to discrepancies. Prior to these transactions, Filkor executed a Real Estate Mortgage, mortgaging improvements belonging to it. Respondents Kim Eung Joe and Lee Han Sang also executed Continuing Suretyships. As respondents failed to pay their obligations, petitioner filed a complaint seeking payment, foreclosure, and sale of the mortgaged property. Petitioner moved for summary judgment, which the trial court granted. However, the trial court failed to order the foreclosure and sale of the mortgaged property. Petitioner filed a motion for partial reconsideration seeking such relief, which the trial court denied, claiming that the petitioner had abandoned its mortgage lien on the property.

ISSUES:

  1. Whether the trial court erred in denying petitioner's motion for foreclosure and sale of the mortgaged property.

  2. Whether petitioner's option to file a civil action for collection of the debt constitutes a waiver of its mortgage lien.

RULING:

  1. The trial court did not err in denying petitioner's motion for foreclosure and sale of the mortgaged property. The court ruled that petitioner's option to file a civil action for collection of the debt constituted a waiver of its mortgage lien.

PRINCIPLES:

  • A summary judgment may be granted when there are no important questions or issues of fact involved, and the moving party is entitled to judgment as a matter of law. (Section 1, Rule 35, 1997 Rules of Civil Procedure)

  • Copies of documents may be attached to a pleading as exhibits, and the failure to specifically deny the genuineness and due execution of such documents deems their admission. (Section 7 and 8, Rule 8, Rules of Court)

  • A mortgage creditor may elect to waive their security and bring an ordinary action to recover the debt, with the right to execute a judgment on all properties of the debtor, including the subject matter of the mortgage. (Danao vs. Court of Appeals)