Philippine National Bank vs Court of Appeals and Allan Chua

Allan Chua was the administrator of the estate of Antonio Chua (his dead father). In 1989, Allan
was authorized by the probate court to take out a loan of P550k using a land belonging to Antonios
estate as a collateral. Allan then took out a P450k loan from the Philippine National Bank (PNB)
and the loan was secured by a real estate mortgage involving the said parcel of land.
Allan however defaulted from paying the loan. The loan has now grown to P679,185.63 inclusive
of interests. In December 1990, PNB chose to foreclose extrajudicially the mortgaged land. So a
public sale was held and PNB was the highest bidder at P306,360.00. Since the purchase price was
not sufficient to cover Allans indebtedness, PNB filed a complaint against Allan in his capacity
as administrator of the Chua Estate. Allan defaulted in the civil case and it was heard ex parte.
Nevertheless, the RTC dismissed the complaint. The Court of Appeals affirmed the RTC. The case
was dismissed because it was ruled that PNB can no longer run after the estate after the
extrajudicial foreclosure. PNB contends that under prevailing jurisprudence, when the proceeds
from an extrajudicial foreclosure is not enough to pay off the loan, the mortgagee can file a civil
case against the mortgagor to satisfy the deficiency.
ISSUE: Whether or not PNB may demand Allan Chua or the estate to cover the deficiency which
was not paid off in the extrajudicial foreclosure.
HELD: No. Once a deed of real estate mortgage executed by an administrator involving a property
belonging to the estate is registered with the Registry of Deeds, it is as if the mortgage has been
executed by the deceased himself. As such, the indebtedness belongs to the estate. It is true that if
the proceeds from an extrajudicial foreclosure is not enough to pay off the loan, the mortgagee can
file a civil case against the mortgagor to satisfy the deficiency. However, this rule is only applicable
to ordinary mortgages. In mortgages involving properties of an estate, pursuant to Rule 89 of the
Rules of Court as well as prevailing case laws, the mortgagee (in this case PNB) has three remedies
in case the estate defaults from paying the loan, to wit:

1. To waive the mortgage and claim the entire debt from the estate of the mortgagor (deemed as
Antonio Chua) as an ordinary claim;
2. To foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and
3. To rely on the mortgage exclusively, foreclosing the same at any time before it is barred by
prescription without right to file a claim for any deficiency.

In the case at bar, PNB chose the third remedy which as an exclusive remedy. The third remedy
includes extrajudicial foreclosure as what PNB opted to have. As a result, PNB waived all right to
recover against the estate of the deceased debtor for any deficiency remaining unpaid after the
sale.