Right of The Mortgagee To Recover Deficiency

RIGHT OF THE MORTGAGEE TO RECOVER DEFICIENCY
1. Where the mortgage foreclosed.

2. Where the mortgage constituted as security for purchase of personal property payable in
installments.
3. Where mortgaged property subsequently attached and sold.
1. Where the mortgage foreclosed

- The creditor may maintain an action for the deficiency for the reason that a chattel
mortgage is only given as a security and not as payment for the debt in case of failure
of payment.
- The action may be brought within ten (10) years from the time the cause of action
accrues, even if not upon a written contract because the obligation of the mortgagor to
pay the deficiency is one created by law, and furthermore, the action is in the nature
of a mortgage action because its purpose is precisely to enforce the mortgage
contract.
*LUIS G. ABLAZA v. GABRIEL A. IGNACIO +, G.R.No.L-11466

*Bicol Savings & Loan Association vs. Guinhawa, 188 SCRA 642)
2. Where the mortgage constituted as security for purchase of personal property payable
in installments
- If the chattel mortgage is constituted, whether by the debtor-vendee or a third person,
as security for the purchase of personal property payable in installments, no
deficiency judgment can be asked and any agreement to the contrary shall be
void.
- Once the vendor of personal property sold on installment has foreclosed the chattel
mortgage on the things sold, he is precluded from proceeding against the security put
up by third person.
*Pascual vs Universal Motors, Inc., 61 SCRA 121
- The remedies granted by Article 1484 are alternative, not cumulative, and exclusive,
that is, the exercise of one would bar the exercise of others.
3. Where mortgaged property subsequently attached and sold.
- The chattel mortgage is entitled to deficiency judgment in an action for specific
performance where the mortgaged property is subsequently attached and sold. The
execution sale in such case is not a foreclosure sale.
*Industrial Finance Corp. v. Ramirez, 77 SCRA 152
*ZENAIDA M. PALMA vs.

HONORABLE COURT OF APPEALS AND PRODUCTS, INC., G.R. No. 45158 June 2, 1994
APPLICATION OF PROCEEDS OF SALE
The proceeds of sale are to be applied to the payment of the following:
1. Cost and expenses of keeping and sale;

2. Payment of the obligation secured by the mortgage;
3. Claims of persons holding subsequent mortgages in their order;
4. The balance, if any, shall be paid to the mortgagor, or person holding under him.
*G.R. No. 106435, July 14, 1999, 310 SCRA 281 PAMECA Wood Treatment Plant, Inc. v.
Court of Appeals
*see Act. No. 1508, Sec. 14
RIGHT OF REDEMPTION
This is the right of the mortgagor to purchase the property within a certain period after it
was sold for the purpose of paying the mortgage debt.
 Who may Redeem?
When the condition of chattel mortgage is broken the following may redeem:
a. The Mortgagor;
b. A person holding a subsequent mortgage; or
c. A subsequent attaching creditor.
 An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee
and entitled to foreclose the mortgage in the same manner that the mortgagee could
foreclose it.
 How does redemption being made?
The redemption is made by paying or delivering to the mortgagee the amount due on
such mortgage and the costs and expenses incurred by such breach of the condition
before the sale thereof.
Upon the sale personal property at the foreclosure or execution sale, all rights of
ownership leave the mortgagor and become vested the purchaser. There is no right to
redeem personal property.
ANTICHRESIS
Art. 2138. The contracting parties may stipulate that the interest upon the debt be compensated
with the fruits of the property which is the object of the antichresis, provided that if the value of
the fruits should exceed the amount of interest allowed by the laws against the usury, the excess
shall be applied to the principal.
The antichretic creditor is under the obligation to apply fruits of the property in
satisfaction of the following;
a. Whatever interest on the debt is due;

b. Payment of the principal.
NOTE: The fruits must be appraised on the basis of their current /actual market value at the time
of application.
Usurious rates are also being prohibited.
Art. 2139. The last paragraph of Article 2085, and Article 2089 to 2091 are applicable to this
contract.
Art. 2085. *lastparagraph. Third persons who are not parties to the principal obligation may
secure the latter by pledging or mortgaging their own property.
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the
successors in interest of the debtor or of the creditor.
Therefore, the debtor's heir who has paid a part of the debt cannot ask for the proportionate
extinguishment of the pledge or mortgage as long as the debt is not completely satisfied.
Neither can the creditor's heir who received his share of the debt return the pledge or cancel the
mortgage, to the prejudice of the other heirs who have not been paid.
From these provisions is expected the case in which, there being several things given in
mortgage or pledge, each one of them guarantees only a determinate portion of the credit.
The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the
portion of the debt for which each thing is specially answerable is satisfied. (1860)
Art. 2090. The indivisibility of a pledge or mortgage is not affected by the fact that the debtors
are not solidarily liable. (n)
Art. 2091. The contract of pledge or mortgage may secure all kinds of obligations, be they pure
or subject to a suspensive or resolutory condition. (1861)

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RIGHT OF THE MORTGAGEE TO RECOVER DEFICIENCY

1. Where the mortgage foreclosed.

1. Where the mortgage foreclosed

*LUIS G. ABLAZA v. GABRIEL A. IGNACIO +, G.R.No.L-11466

*Pascual vs Universal Motors, Inc., 61 SCRA 121

*Industrial Finance Corp. v. Ramirez, 77 SCRA 152

*ZENAIDA M. PALMA vs.

APPLICATION OF PROCEEDS OF SALE

The proceeds of sale are to be applied to the payment of the following:

1. Cost and expenses of keeping and sale;

*see Act. No. 1508, Sec. 14

 Who may Redeem?

 How does redemption being made?

a. Whatever interest on the debt is due;

Usurious rates are also being prohibited.

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