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11. Prudential Bank v.

Martinez the same, that the mortgage is but a security and not
a satisfaction of indebtedness.
Facts:
Likewise in the event of the foreclosure of a chattel
A case for sum of money filed by plaintiff Prudential mortgage on the thing sold in installments he (the vendor)
Bank against defendants Renato M. Martinez and shall have no further action against the purchaser to
Virginia J. Martinez, seeking to recover a deficiency recover any unpaid balance of the price. Any agreement
of P25,775.10 with daily interest thereon of P15.35. to the contrary shall be void. (Article 1484, paragraph 3).
Prudential Bank alleged that Spouses Martinez
obtained a loan in the total sum of P48,000.00 and in It is then clear that in the absence of a similar provision in
consideration thereof, the said defendants executed Act No. 3135, as amended, it can not be concluded that
on said dates promissory notes in favor of the the the creditor loses his right given him under the
bank, promising to pay jointly and severally, the sum Mortgage Law and recognized in the Rules of Court,
of P48,000.00 on or before January 27, 1971 with to take action for the recovery of any unpaid balance
interest of 12% per annum. Said loan is partially on the principal obligation, simply because he has
secured by a real estate mortgage. chosen to foreclose his mortgage extra- judicially
The loan became due and demandandle. Spouses pursuant to a special power of attorney given him by
Marinez defaulted. As a consequence, extrajudicially the mortgagor in the mortgage contract.
foreclosed the mortgage.
However, there still remained a balance of The fact that the mortgaged property is sold at an amount
P25,775.10 due to bank, which the bank now seeks less than its actual market value should not militate
to recover the said balance. against the right to such recovery. We fail to see any
Defendant Spouses Martinez raised an issue during disadvantage going for the mortgagor. On the contrary, a
pre-trial on whether the bank can recover the balance mortgagor stands to gain with a reduced price
despite extrajudicial foreclosure of mortgage. because he possesses the right of redemption. When
TC: rendered judgment in favor of bank and ordered there is the right to redeem, inadequacy of price should
Spouses Martinez to pay the balance. not be material, because the judgment debtor recover the
CA: affirmed TC loss he claims to have suffered by the reason of the price
obtained at the auction sale.
Spouses Martinez argues that:
o no right is granted to a mortgagee the right to
However, the proceeds in that sale were insufficient to
recover the deficiency arising from an
pay the debt contained in the appellants promissory
extrajudicial foreclosure of mortgage
note. The appellee was, therefore, constrained to file a
inasmuch as such recovery is not a natural
deficiency suit, an eventuality not covered by the Deed of
right of the mortgagee, hence, the need to
Real Estate Mortgage. Necessarily, the basis of this
expressly grant the same in a judicial
case is the promissory note executed by the
foreclosure proceedings.
appellants. We find that the note itself shows that
o if mortgagees were allowed such right, the
appellants obligated themselves to pay the sum of ten
debtors would be at the mercy of their
percent as attorneys fees whether incurred or not,
creditors considering the summary nature of
exclusive of cost and other expenses of collection.
extrajudicial foreclosure proceedings.
Hence, this petition
ACCORDINGLY, the decision appealed from is hereby
AFFIRMED. Costs against the appellants.
Issue: W/N the bank has the right to recover
deficiency in an extrajudicial foreclosure

Held: Yes

In extrajudicial foreclosure of mortgage, where the


proceeds of the sale are insufficient to pay the debt, the
mortgagee has the right to recover the deficiency from
the debtor.

Under the Rules of Court (Sec. 6, Rule 70), Upon the sale
of any real property, under an order for a sale to satisfy a
mortgage or other encumbrance thereon, if there be a
balance due to the plaintiff after applying the proceeds of
the sale, the court, upon motion, should render a
judgment against the defendant for any such balance for
which, by the record of the case, he may be personally
liable to the plaintiff, x x x. It is true that this refers to a
judicial foreclosure, but the underlying principle is