Philippine Bank of Commerce vs.
Tomas De Vera
This is an appeal filed by the defendant, Tomas de Vera, challenging the
decision of the Court of First Instance of Manila (in Civil Case No. 35169),
which directed him to pay the plaintiff, Philippine Bank of Commerce, the
amount of P99,033.20 for his outstanding debt, along with 6% interest from
April 16, 1956, until fully settled, P5,000.00 in attorney's fees, and additional
costs.
Facts of the Case
Tomas de Vera owed the Philippine Bank of Commerce
P127,312.24, secured by a real estate mortgage on his properties in
Pasay City and Rizal.
This debt was secured by a real estate mortgage on de Vera's
properties, as described in TCT No. 1631 from the Register of Deeds of
Pasay City and TCT No. 37641 from the Register of Deeds of Rizal (now
Pasay City). The terms and conditions of the mortgage were consistent
with those in the original Deed of Real Estate Mortgage, both of which
were dated February 28, 1947.
The debt was consolidated under a contract titled "Consolidation of
First Real Estate Mortgage and Deed of Assignment" executed on April
26, 1951. When the obligation matured on March 15, 1956, De Vera failed
to pay the remaining balance of P99,033.20, despite multiple demands.
As a result, the bank petitioned the Sheriff of Pasay City to sell the
mortgaged properties. In a public auction, the bank purchased the
properties for P86,700.00, but the remaining debt, including interest,
amounted to P99,033.20 as of January 31, 1958. The bank then filed an
action to recover this outstanding balance from De Vera.
The trial court ruled in favor of the bank, ordering De Vera to pay the
remaining amount.
Issue
1. Whether or not the trial court was correct in ruling that the appellee, the Bank,
is entitled to recover P99,033.20 from the appellant as a deficiency that arose
after the extrajudicial foreclosure of the mortgaged properties, in accordance with
Tomas
ActDe Vera
No. (Defendant
3135, - Appellant)
as amended. Philippine Bank Commerce (Plaintiff -
Appellee)
The appellant argues that, because Act There is also no provision that expresses
No. 3135 does not explicitly mention the or implies that prohibits recovery.
mortgagee's right to recover a deficiency
after an extrajudicial foreclosure sale, the
mortgagee (the bank) cannot claim this
amount.
In contrast, Article 2131 of the Civil Code
clearly states that the form, extent, and
consequences of a mortgage—including its
creation, modification, termination, and other
aspects—are governed by the Mortgage
Law and the Land Registration Law. Under
the Mortgage Law, which remains in effect, a
mortgagee has the right to claim any
deficiency that arises between the price
obtained at a public auction and the
remaining outstanding obligation at the time
of foreclosure proceedings.
Under the Rules of Court (Sec. 6, Rule 70),
if a property is sold to satisfy a mortgage, and
the sale doesn't cover the full debt, the court
can issue a judgment requiring the defendant
to pay the remaining balance. Although this
rule applies to judicial foreclosures (court-
ordered), the same principle applies here: a
mortgage is simply a security for the debt,
not full payment of the debt itself. As the trial
court pointed out, this means that the
borrower may still owe money even after the
property is sold.
Ruling
The ruling in the case Philippine Bank of Commerce vs. Tomas de Vera (G.R.
No. L-18816) affirms the decision of the lower court. The Court of First Instance
of Manila ruled in favor of the Philippine Bank of Commerce, ordering Tomas
de Vera to pay the bank P99,033.20 as the remaining balance (deficiency) after
the extrajudicial foreclosure of the mortgaged properties.
The court held that, even though Act No. 3135 (on extrajudicial foreclosure) does
not explicitly mention the recovery of a deficiency, there is no law prohibiting the
bank from recovering it. Under the Mortgage Law and Rules of Court, the bank
has the right to pursue the remaining debt after foreclosure.
Thus, the appeal was denied, and the lower court's decision was upheld,
requiring De Vera to pay the deficiency along with interest, attorney's fees, and
court costs.
ALAC
Yes, the trial court acted correctly in holding appellee Bank entitled to recover
from appellant the sum of P99,033.20.
Under Act No. 3135, which governs extrajudicial foreclosure, there is no explicit
provision regarding the creditor's right to recover a deficiency. However, Article
2131 of the Civil Code and the Mortgage Law provide that the creditor may pursue
the remaining balance of the debt if the proceeds from the sale of the mortgaged
property are insufficient to cover the total obligation. The Rules of Court also allow
a creditor to recover the deficiency after a foreclosure sale in a judicial
foreclosure. These principles apply to extrajudicial foreclosure as well, where the
mortgage serves as security, not a full satisfaction of the debt.
In this case, after the extrajudicial foreclosure of the mortgaged properties, the
sale proceeds were insufficient to cover De Vera's total debt. De Vera argued that
the bank should not be allowed to recover the deficiency because Act No. 3135
does not explicitly grant the right to do so. However, the court ruled that the
absence of an express prohibition in Act No. 3135 does not prevent the bank from
claiming the deficiency, especially since the Civil Code and Mortgage Law
recognize the right to recover any unpaid balance.
Hence, the trial court acted correctly in holding the Philippine Bank of Commerce
entitled to recover from Tomas de Vera the sum of P99,033.20 as the remaining
deficiency after the extrajudicial foreclosure.
