Case Summary (G.R. No. 172027)
Key Dates
The original loan was approved on September 7, 1950, and the mortgage was foreclosed on July 30, 1957. The initial judgment from the Court of First Instance of Davao was rendered on May 14, 1963, and modified on July 1, 1963.
Applicable Law
The case is governed by various laws, including Act No. 3135, as amended, concerning extrajudicial foreclosure, and the provisions of the Civil Code of the Philippines regarding mortgages. The legal principles applied are reflective of the laws effective up to the 1975 decision date.
Facts of the Case
On September 7, 1950, Mirang was granted a loan of P14,000 by the Rehabilitation Finance Corporation, which later became the DBP. The loan was secured by a first mortgage on Mirang's homestead and was to be used for agricultural development. Due to the outbreak of mosaic disease affecting the plants, the DBP stopped releasing the remaining loan amounts after providing P13,000. Eventually, the mortgage was foreclosed extrajudicially, with the auction resulting in a sale price of only P2,010, significantly less than the outstanding debt.
Issues Raised
The main legal issues presented on appeal pertain to the right of the DBP to recover the remaining balance of the loan after the foreclosure, the potential exemption of Mirang from payment due to the destruction of his crops, and the appropriate redemption amount that Mirang must pay to reclaim his property.
Creditor's Right to Recover Deficiency
On the first issue, it was determined that despite the extrajudicial foreclosure of the mortgage under Act 3135, the DBP retained its right to collect the deficiency balance. The court cited previous rulings indicating that the absence of explicit statutory prohibition regarding deficiency recovery means the creditor is not precluded from seeking the remainder of the debt. Thus, Mirang remains liable for the deficiency arising from the auction sale.
Exemption from Debt Due to Crop Loss
Mirang's argument for exemption based on the failure of crops to yield income due to external factors was rejected. The court emphasized that contractual obligations distinctly define the terms of repayment, and no conditions provided relief from liability based on external circumstances. The terms of Mirang's indebtedness, therefore, remained binding.
Redemption Payment
The court clarified that Mirang's right to redeem the property after foreclosure requires him to pay not on
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Case Background
- The appeal originated from the Court of Appeals, subsequently certified to the Supreme Court due to the presence of purely legal questions.
- The decision under appeal was rendered by the Court of First Instance of Davao on May 14, 1963, regarding Civil Case No. 3762, modified by an Order dated July 1, 1963.
- The ruling mandated the defendant, Dionisio Mirang, to pay the Development Bank of the Philippines (DBP) the sum of P16,013.13, plus 6% interest per annum from July 30, 1957, until full payment, deducting P360.00 for the value of an engine as stipulated in the facts.
- The defendant was also ordered to pay P500.00 in attorney's fees and the costs of the suit.
Loan Details and Defaults
- On September 7, 1950, Mirang approved a loan of P14,000.00 from the Rehabilitation Finance Corporation (RFC), secured by a first mortgage on his homestead.
- The loan was designated for:
- P1,000 for work animals and farm implements
- P1,500 for constructing a farmhouse and laborer's quarters
- P11,500 for development and maintenance of 18.5 hectares of abaca land.
- A total of P13,000.00 was released to Mirang, after which the RFC ceased further disbursements due to a mosaic disease affecting the abaca plants.
- Mirang subsequently failed to pay the yearly amortizations, leading to the extrajudicial foreclosure of the mortgage on July 30, 1957, under Act 3135.
Foreclosure and Sale
- At the time of foreclosure, Mirang's total indebtedness, including interest, reached P19,714.35, alongside auction sale expenses of P101.00.
- The DBP, as the highest bidder, purchased the mortgaged property for P2,010.00.
- Mirang wa