Pagunsan, who drew level with the Spanish overnight leader courtesy of a birdie at the last, split the fairway with his opening drive in the play-off.
Fernandez-Castaño failed to follow suit as he found a bunker, but in a tournament reduced to 54 holes because of bad weather, the pair were then forced off the course once again due to the threat of lightning.
Fernandez-Castaño began the third and final round three clear of Edoardo Molinari and James Morrison, and with an eagle at the par five fourth, a birdie at the sixth and a bogey in between turned four clear of the chasing pack.
But he had three bogeys in four holes from the 12th, and when Pagunsan holed a ten foot birdie putt the recent Castelló Masters runner-up needed a four at the par five last to win.
Instead he drove into water down the left and ultimately did well to get down in five and force extra holes – dramatically curling in a 20 footer.
