DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff-appellee, vs. JOVENCIO A.

ZARAGOZA and AVELINA E. ZARAGOZA, defendants-appellants. G.R. No. L-23493 |

August 23, 1978

FACTS: On December 10, 1952, appellee foreclosed extrajudicially the appellant’s mortgaged
property and the Sheriff posted the requisite notice of sale at public auction. The property was
sold at public auction on June 10, 1957 after numerous transfers made of the date of sale upon
requests of the appellants themselves. Because the proceeds of the sale were not sufficient to
satisfy the balance of appellant’s indebtedness, appellee sued the appellants for the deficiency.
The trial court found for appellee and ordered the appellants to pay the deficiency, with interest
thereon at the legal rate until fully paid plus the sum equivalent to 10% of the amount due as
attorney’s fees and cost of suit.

ISSUES:
1. Whether the mortgagee is entitled to claim the deficiency in extrajudicial foreclosure of
mortgage?
2. Whether additional interests are properly chargeable on the balance of the indebtedness during
the period from notice of sale to actual sale?

HELD:
1. Yes. In extrajudicial foreclosure of mortgage, where the proceeds of the sale are insufficient to
cover the debt, the mortgagee is entitled to claim the deficiency from the debtor. While Act No.
3135, as amended (re extrajudicial foreclosure) discloses nothing as to the mortgagee’s right to
recover such deficiency, neither does it expressly or impliedly prohibit such recovery. Article
2131 of the New Civil Code expressly provides that the form, extent and consequences of a
mortgage and as to other matters not included in the Civil Code shall be governed by the
provisions of the Mortgage Law and of the Land Registration Law. And under the Mortgage
Law, the mortgagee has the right to claim for the deficiency resulting from the price obtained in
the sale of the real property at public auction and the outstanding obligation. Moreover, if the
legislature intended to foreclose the right of a creditor to sue for deficiency resulting from the
foreclosure of the security to guarantee the obligation, it so expressly provides.

2. No Where the sale of the mortgaged property in an extrajudicial foreclosure proceedings had
been held in abeyance for four years due to the numerous transfers made of the date of sale upon
requests of the mortgage debtors themselves, the latter cannot take advantage of the delay which
was of their own making, to the prejudice of the other party, so that prior to the completion of the
foreclosure, the mortgagor is liable for the interest on the mortgage. any, to redeem.