GR L 29130; (August 1975) (Digest)
G.R. No. L-29130 August 8, 1975
DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee, vs. DIONISIO MIRANG, defendant-appellant.
FACTS
The defendant-appellant, Dionisio Mirang, obtained a loan from the Rehabilitation Finance Corporation (RFC), predecessor of the Development Bank of the Philippines (DBP), secured by a mortgage on his homestead. The loan was intended for developing an abaca plantation. The DBP released partial disbursements but refused further releases after the plantation was devastated by mosaic disease. Mirang consequently defaulted on his amortizations.
The DBP extrajudicially foreclosed the mortgage under Act No. 3135 . At the public auction, the DBP, as the highest bidder, acquired the property for a sum significantly lower than the total outstanding obligation. After the one-year redemption period lapsed without Mirang redeeming the property, the DBP filed an action to recover the deficiency balance.
ISSUE
The primary legal issue is whether a mortgagee-creditor, after an extrajudicial foreclosure sale under Act No. 3135 where the property is sold for less than the debt, is entitled to recover the deficiency judgment from the mortgagor.
RULING
Yes, the mortgagee is entitled to recover the deficiency. The Supreme Court, affirming the trial court, held that Act No. 3135 , which governs extrajudicial foreclosure, does not prohibit the recovery of a deficiency. The right to such recovery is anchored on the fundamental principle that a mortgage is merely an accessory security for the principal obligation, not its satisfaction. The Court cited the Mortgage Law, which remains in force under Article 2131 of the Civil Code, and established jurisprudence recognizing the mortgagee’s right to claim any balance due after applying the foreclosure proceeds to the debt. The Court distinguished this case from the provisions on pledge (Article 2115) and chattel mortgage (Article 1484), where the law expressly bars deficiency claims, noting that no such prohibition exists for real estate mortgage. The destruction of the abaca crop by disease, while unfortunate, does not constitute a fortuitous event that would extinguish the loan obligation itself, as the debt existed independently of the project’s success or failure. The Court found no legal basis to exempt Mirang from liability or to reduce his obligation on equitable grounds, as the contract terms and applicable law were clear.