GR 23493; (August, 1978) (Digest)
G.R. No. L-23493 August 23, 1978
DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee, vs. JOVENCIO A. ZARAGOZA and AVELINA E. ZARAGOZA, defendants-appellants.
FACTS
The defendants-appellants, Jovencio and Avelina Zaragoza, obtained a loan from the plaintiff-appellee, Development Bank of the Philippines (DBP), secured by a real estate mortgage. Upon their failure to pay the amortizations, DBP extrajudicially foreclosed the mortgage. The property was sold at public auction to DBP as the highest bidder. After applying the proceeds of the sale to the outstanding obligation, a deficiency balance remained.
DBP filed a suit to recover this deficiency. The appellants contended that no deficiency judgment lies after an extrajudicial foreclosure and that they should not be liable for interest accruing during the period between the notice of sale and the actual sale. The trial court ruled in favor of DBP, ordering the appellants to pay the deficiency with interest and attorney’s fees.
ISSUE
The core issues are: (1) Whether a mortgagee is entitled to recover a deficiency after an extrajudicial foreclosure of a real estate mortgage; and (2) Whether the mortgagor remains liable for interest on the loan during the period between the notice of sale and the actual foreclosure sale.
RULING
The Supreme Court affirmed the trial court’s judgment, ruling against the appellants on both issues. On the first issue, the Court held that a mortgagee is entitled to claim a deficiency judgment following an extrajudicial foreclosure. The legal logic is that a mortgage is merely a security for the debt and not a satisfaction thereof. While Act No. 3135 (governing extrajudicial foreclosure) is silent on deficiency claims, it does not prohibit them. The Court, citing Philippine Bank of Commerce v. De Vera, emphasized that the Mortgage Law, which remains in force, recognizes the right to recover such deficiency. This principle is consistent with the Rules of Court for judicial foreclosure and is further supported by the absence of a statutory prohibition akin to those expressly found in provisions governing pledges and chattel mortgages.
On the second issue, the Court ruled that the mortgagor remains liable for interest until the foreclosure sale is completed. The appellants argued the delay in the sale should absolve them from interest. The Court found the delay was due to the appellants’ own repeated requests for postponement, which they could not use to their advantage. More fundamentally, the Court explained that foreclosure denotes the entire procedure to terminate the mortgagor’s rights in the property, culminating in the sale. Until the certificate of sale is issued, the mortgagor’s interests are not extinguished, and liability for interest on the outstanding obligation continues. Therefore, DBP was correctly allowed to charge interest for the intervening period.