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G.R. No. 175816. December 7, 2011.*

BPI FAMILY SAVINGS BANK, INC., petitioner, vs. MA. ARLYN

T. AVENIDO & PACIFICO A. AVENIDO, respondents.

Remedial Law; Extrajudicial Foreclosure of Mortgage; Auction Sales;

It is settled that if the proceeds of the sale are insufficient to cover the debt
in an extrajudicial foreclosure of mortgage, the mortgage is entitled to
claim the deficiency from the debtor; While Act No. 3135 as amended does
not discuss the mortgagee’s right to recover the deficiency, neither does it
contain any provision expressly or impliedly prohibiting recovery.—It is
settled that if “the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the
deficiency from the debtor. While Act No. 3135, as amended, does not
discuss the mortgagee’s right to recover the deficiency, neither does it
contain any provision expressly or impliedly prohibiting recovery. If the
legislature had intended to deny the creditor the right to sue for any
deficiency resulting from the foreclosure of a security given to guarantee an
obligation, the law would expressly so provide. Absent such a provision in
Act No. 3135, as amended, the creditor is not precluded from taking action
to recover any unpaid balance on the principal obligation simply because he
chose to extrajudicially foreclose the real estate mortgage.”
Same; Same; Same; There is no legal basis for requiring that the bid
should at least be equal to the market value of the foreclosed property or the
outstanding obligation of the foreclosed property on the outstanding
obligation of the mortgage debtor.—The aforequoted provision does not
mention any minimum bid at the public auction sale. There is no legal basis
for requiring that the bid should at least be equal to the market value of the
foreclosed property or the outstanding obligation of the mortgage debtor.
Same; Same; Same; Unlike in an ordinary sale, inadequacy of the price
at a forced sale is immaterial and does not nullify the sale.—We have
consistently held in previous cases that unlike in an ordinary sale,
inadequacy of the price at a forced sale is immaterial and does not nullify
the sale. In fact, in a forced sale, a low price is more beneficial to the
mortgage debtor for it makes redemption of the property easier.

_______________

* FIRST DIVISION.

759

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BPI Family Savings Bank, Inc. vs. Avenido

Civil Law; Unjust Enrichment; There is unjust enrichment when a

person unjustly retains a benefit to the loss of another, or when a person
retains money or property of another against the fundamental principles of
justice, equity and good conscience; Conditions Required under the
Principle of Unjust Enrichment.—There is unjust enrichment when a person
unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice,
equity and good conscience. Article 22 of the Civil Code provides that every
person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him. The principle of
unjust enrichment under Article 22 requires two conditions: (1) that a person
is benefited without a valid basis or justification, and (2) that such benefit is
derived at another’s expense or damage.”

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
   The facts are stated in the opinion of the Court.
  Calderon, Davide, Trinidad, Tolentino & Castillo for petitioner.
  Paras, Enojo & Associates for respondents.

LEONARDO-DE CASTRO, J.:

This Petition for Review on Certiorari under Rule 45 of the
Rules of Court assails the Decision1 dated March 31, 2006 of the
Court of Appeals in CA-G.R. CV No. 79008, which affirmed the
Decision2 dated November 13, 2002 of the Regional Trial Court
(RTC), Branch 58 of Cebu City, in Civil Case No. CEB-25629. The
RTC dismissed the Complaint for Collection of Deficiency of
Mortgage Obligation with Damages filed by petitioner BPI Family
Savings Bank (BPI Family) against respondent spouses Pacifico A.
Avenido and Ma. Arlyn T. Avenido (spouses Avenido), following
the extrajudicial foreclosure of the property given by the latter as
security for their loan. The instant

_______________
1  Rollo, pp. 27-34; penned by Associate Justice Pampio A. Abarintos with
Associate Justices Enrico A. Lanzanas and Apolinario D. Bruselas, concurring.
2 Id., at pp. 72-78; penned by Judge Gabriel T. Ingles.

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Petition likewise challenges the Resolution3 dated November 16,

2006 of the Court of Appeals in the same case denying the Motion
for Reconsideration of BPI Family.
The controversy arose from the following facts.
On September 20, 2000, BPI Family filed with the RTC a
Complaint for Collection of Deficiency of Mortgage Obligation with
Damages against the spouses Avenido, docketed as Civil Case No.
CEB-25629.
BPI Family alleged in its Complaint that pursuant to a Mortgage
Loan Agreement4 dated April 25, 1996, the spouses Avenido
obtained from the bank a loan in the amount of P2,000,000.00,
secured by a real estate mortgage on a parcel of land situated in Bais
City, which is covered by Transfer Certificate of Title (TCT) No. T-
1216 (mortgaged/foreclosed property). The spouses Avenido failed
to pay their loan obligation despite demand, prompting BPI Family
to institute before the Sheriff of Bais City extrajudicial foreclosure
proceedings over the mortgaged property, in accordance with Act
No. 3135, otherwise known as an Act to Regulate the Sale of
Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages. At the public auction sale held on March 8, 1999, BPI
Family was the highest bidder for the foreclosed property. The bid
price of P2,142,616.00 of BPI Family was applied as partial
payment of the mortgage obligation of the spouses Avenido, which
had amounted to P2,917,381.43 on the date of the public auction
sale, thus, still leaving an unpaid amount of P794,765.43. The
Certificate of Sale dated March 8, 1999 was registered on TCT No.
T-1216 on May 25, 1999.5
BPI Family prayed that the RTC order the spouses Avenido to
pay the deficiency of their mortgage obligation amounting to
P794,765.43, plus legal interest thereon from the date of the filing of
the Complaint until full payment; 15% as contractual attorney’s fees;
P50,000.00 as litigation expenses; and costs of the suit.6

_______________
3 Id., at p. 35.
4 Id., at pp. 57-58.
5 Id., at p. 61.
6 Id., at pp. 53-56.

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BPI Family Savings Bank, Inc. vs. Avenido

The spouses Avenido filed their Answer with Special/Affirmative

Defenses and Counterclaims on September 18, 2001. The spouses
Avenido averred therein that they had already paid a substantial
amount to BPI Family, which could not be less than P1,000,000.00,
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but due to the imposition by BPI Family of unreasonable charges

and penalties on their principal obligation, their payments seemed
insignificant. Per the Notice of Extrajudicial Sale dated February 4,
1999, the spouses Avenido’s indebtedness to BPI Family only
amounted to less than P2,000,000.00, and such amount was already
fully covered when the foreclosed property was sold at the public
auction for P2,142,616.00. The spouses Avenido sought the
dismissal of the Complaint for lack of merit, plus the award of
P500,000.00 as moral damages and P300,000.00 as exemplary
damages given the prejudice and unnecessary expenses they suffered
because of the unjustified suit of BPI Family.7
Failing to reach an amicable settlement during the pre-trial
conference, trial ensued.
BPI Family submitted the following computation in support of its
claim for deficiency mortgage obligation from the spouses Avenido:

AUCTION SALE: MARCH 8, 1999    

Principal Balance   P 1,918,722.47
Interest   266,754.66
Fire Insurance 1997-1998   6,725.00
                            1998-1999   6,725.00
Unpaid MRI   10,720.00
Late Charges   37,425.46
Less: Unapplied   (0.18)
Sub-total   2,247,072.41
     
Foreclosure Expenses    
     
Filing Fee P 5,719.60  
Sheriff’s Fee  1,500.00  
Cost of Publication 5,000.00  

_______________
7 Id., at pp. 62-69.

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 Interest on Litigation Expenses     12,451.77

 232.17
    2,259,524.18
     
Contractual Penalties    
     
   Attorney’s fees   338,928.63
   Liquidated Damages   338,928.63
     
Total   2,937,381.43
     
Total Appraised Value as of 03/05/99   2,678,270.00
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80% of TAV   2,142,616.00
     
Summary:    
     
Total Exposure as of 03/08/99   2,937,381.43
Bid Price(lower amt. between total   2,142,616.00
exposure or -----------------
     80% of TAV) --
Deficiency   794,765.43
     
Portion of Principal covered by bid price 0.008
      to be retained in IL

BPI Family presented as witness Alfred Rason (Rason), the

Assistant Manager for Operation, who was in charge of keeping
track and collecting unpaid obligations of the bank. Rason testified
that in the Petition for Extrajudicial Foreclosure, BPI Family
reported that the loan obligation of the spouses Avenido amounted to
P1,918,722.47, inclusive of interest, penalty charges, insurance,
foreclosure expenses, and others, as of November 16, 1998.
However, as of the public auction sale of the foreclosed property on
March 8, 1999, the total loan obligation of the spouses Avenido
already reached P2,937,381.43. The foreclosed property was
awarded to BPI Family as the highest bidder at the public auction
sale for P2,142,616.00. The bid price was arrived at by BPI Family
following bank policy, i.e., total exposure of claim or 80% of the
total appraised value of the foreclosed property, whichever is lower.
In a letter dated July 8, 2000, sent to the spouses Avenido through
registered mail, counsel for BPI family demanded

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8 Id., at p. 60.

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payment of the deficiency balance of P794,766.43 on the loan

obligation of said spouses.9
When respondent Ma. Arlyn T. Avenido (Arlyn) took the witness
stand, she admitted that she and her husband, co-respondent Pacifico
A. Avenido (Pacifico), obtained from BPI Family a Motor Vehicle
Loan in 1995 and a Home Mortgage Loan in 1996. The Home
Mortgage Loan was for P2,000,000.00, payable in 15 years through
debit memos (or automatic debit arrangement), instead of post-dated
checks. The spouses Avenido failed to make some payments in
1998. The spouses Avenido subsequently deposited with their

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account at BPI Family branch in Bais City, Negros Occidental, the

amount of P250,000.00, which would have been sufficient to cover
their arrears; as well as made arrangements with Dumaguete City
Rural Bank to buy out their loan from BPI Family. Yet, in February
1999, the spouses Avenido learned of the foreclosure proceedings
over their mortgaged property only from court personnel. BPI
Family never communicated with the spouses Avenido about the
foreclosure proceedings except when the former sent the latter a
demand letter in July 2000 for the P700,000.00 deficiency. Counsel
for the spouses Avenido answered BPI Family through a letter dated
August 2, 2000, stating that the demand of the bank for deficiency
was not only surprising, but lacked basis in fact and in law, for the
mortgaged property was already foreclosed and sold at the public
auction for P2,142,616.00, which was more than the P1,918,722.47
loan obligation of the spouses Avenido. Next thing the spouses
Avenido knew, BPI Family had filed Civil Case No. CEB-25629
against them. In addition, the spouses Avenido had already fully
paid their Motor Vehicle Loan in 1999, but BPI Family refused to
release the Hi-Lux from the mortgage constituted thereon. BPI
Family attached the Hi-Lux to cover the deficiency of the spouses
Avenido on their home loan obligation. Due to the aforementioned
acts of BPI Family, Arlyn suffered sleepless nights and humiliation.
Hence, she prayed for the award of moral and exemplary damages
and attorney’s fees and the release of the Hi-Lux.10 

_______________
9 TSN, May 6, 2002, pp. 2-17.
10 TSN, June 21, 2002, pp. 1-17.

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The RTC rendered its Decision on November 13, 2002.

According to the RTC, the principal issue to be resolved was
“whether or not [BPI Family] is entitled to deficiency judgment,”
which includes “a determination of the existence of the right to
recover deficiency, and how much, if any.”11
At the outset, the RTC recognized that in an extrajudicial
foreclosure, the mortgagee has a right to recover deficiency where
the proceeds of the sale are insufficient to cover the debt:

“Although Act 3135 is silent on the mortgagee’s right to recover the

deficiency where the proceeds of the sale is insufficient to cover the debt, it
is now well-settled that said mortgagee has the right to recover the
deficiency. (PB Com v. De Vera, 6 SCRA 1026; DBP v. Vda. de Noel, 43
SCRA 82; DBP v. Zaragosa, 84 SCRA 668.). The reasons advanced are 1)
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Although Act 3135 discusses nothing as to the mortgagee’s right to recover

such deficiency, neither is there any provision thereunder which expressly or
impliedly prohibits such recovery; and 2) now Rule 68 on judicial
foreclosure expressly grants to the mortgagee the right to recover deficiency
and the underlying principle is the same for extra-judicial foreclosure that
the mortgage is but a security and not a satisfaction of indebtedness.
In the case of DBP v. Tomeldon, 101 SCRA 171, the Supreme Court
ruled that the action to recover the deficiency prescribes after ten (10) years
from the time the right to action accrues x x x.
Thus, in the case at bar the mortgagee’s right and the period the said
right is enforced are not contested. What is essentially in controversy is
whether there is a deficiency and how much.”12

The RTC then determined the total amount of the loan obligation
of the spouses Avenido as follows:

“In the Mortgage Loan Agreement (Exhibits A and I) the due execution
and genuineness of which are admitted by both parties, the [spouses
Avenido] obligated themselves as Borrower-Mortgagor to pay [BPI Family]
the aggregate principal amount of TWO HUNDRED TWO MILLION
PESOS (P202,000,000.00) and interest on the unpaid balance from the date
thereof

_______________
11 Rollo, p. 75.
12 Id., at pp. 75-76.

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BPI Family Savings Bank, Inc. vs. Avenido

until paid in full on the repayment dates. It further provides that in case the
mortgagee fails to pay any of the sums secured, the mortgagor has the right
to declare the entire obligation due and payable and to foreclose the
mortgage. Moreover, Exhibit “A-2” shows that the proceeds of sale of the
mortgaged property shall be applied as follows: “a) to the payment of the
expenses and cost of foreclosure and sale, including the attorney’s fees as
herein provided; b) to the satisfaction of all interest and charges accruing
upon the obligation herein and hereby secured; c) to the satisfaction of the
principal amount of the obligation herein and hereby secured; d) to the
satisfaction of all other obligation then owed to the bank or any of its
subsidiaries. The balance, if any, to be due to the mortgagor.” Finally, the
attorney’s fees stipulated is 15% of the total amount claimed by the bank
(Exhibit A-3). The Court, however, finds no stipulation as regards liquidated
damages.
xxxx
This Court is not convinced that [spouses Avenido’s] total indebtedness
should only be ONE MILLION NINE HUNDRED EIGHTEEN
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THOUSAND SEVEN HUNDRED TWENTY[-]TWO [PESOS] AND

FORTY[-]SEVEN [CENTAVOS] (P1,918,722.47) because the Notice of
Extra-Judicial Sale (Exhibit “3”) itself states “x x x to satisfy the mortgaged
indebtedness which as of November 16, 1998 amount to ONE MILLION
NINE HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED
TWENTY[-]TWO AND FORTY[-]SEVEN CENTAVOS (P1,918,722.47)
plus interest and penalty charges thereon from June 30, 1998 to date of the
foreclosure sale, attorney’s fees and necessary expenses for foreclosure
x x x.”
Foreclosure is not a single process and it is not therefore correct to
conclude that what is material is the petition for extra-judicial sale nor the
date of the filing of the application.
Thus, the Court gives credence to [BPI Family’s] Exhibit “C” but not
including the claim for liquidated damages in the sum of THREE
HUNDRED THIRTY[-]EIGHT THOUSAND NINE HUNDRED
TWENTY PESOS AND SIXTY[-]THREE CENTAVOS (P330,920.63)
because it has no basis whatsoever. Thus the total amount due is TWO
MILLION FIVE HUNDRED NINETY[-]EIGHT THOUSAND FOUR
HUNDRED FIFTY[-]TWO PESOS AND EIGHTY CENTAVOS
(P2,598,452.80). x x x.”13

_______________
13 Id., at pp. 76-77.

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More than just reducing the total loan obligation of the spouses
Avenido to P2,598,452.80, the RTC, in the end, denied the claim for
deficiency of BPI Family based on the following ratiocination:

“[T]he Court finds very significant the admission by [BPI Family’s] witness
that the appraised value of the foreclosed property is actually TWO
MILLION SIX HUNDRED SEVENTY[-]EIGHT THOUSAND TWO
HUNDRED SEVENTY PESOS (P2,678,270.00) but [BPI Family] bidded
only for 80% of the value as a matter of bank policy (TSN Afredo Rason,
Aug. 6, 2002, p. 17). In other words, the actual market value of the property
is more than the amount of TWO MILLION FIVE HUNDRED
NINETY[-]EIGHT THOUSAND FOUR HUNDRED FIFTY[-]TWO
PESOS AND EIGHTY CENTAVOS (P2,598,452.80).
Under this circumstance, it would be inequitable to still grant the [BPI
Family’s] prayer for deficiency as it will be in effect allowing it to unjustly
enrich itself at the expense of the [spouses Avenido].”14

Hence, the RTC decreed:

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“Accordingly, the [BPI Family’s] complaint and [spouses Avenido’s]

counterclaim are DISMISSED.”15

Aggrieved by the RTC judgment, BPI Family filed an appeal

before the Court of Appeals, docketed as CA-G.R. CV No. 79008,
with a lone assignment of error, to wit:

“THE LOWER COURT ERRED IN NOT HOLDING [THE SPOUSES

AVENIDO] LIABLE TO [BPI FAMILY] FOR DEFICIENCY OF THE
MORTGAGE OBLIGATION.”16

In its Decision promulgated on March 31, 2006, the Court of

Appeals ruled:

“A careful scrutiny of the arguments presented in the case at bar yields

no substantial and convincing reason for us to depart from the ruling found
by the trial court x x x.

_______________
14 Id., at pp. 77-78.
15 Id., at p. 78.
16 Id., at p. 81.

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xxxx
Indubitably, mortgagors whose properties a foreclosed and are purchased
by the mortgagee as highest bidder at the auction sale are decidedly at a
great disadvantage because almost invariably, mortgagors forfeit their
properties at a great loss as they are purchased at a nominal cost by the
mortgagee himself, who ordinarily bids in no more than his credit or the
balance thereof at the auction sale.
More importantly, the mortgage contract is also one of adhesion as it was
prepared solely by [BPI Family] and the only participation of the [spouses
Avenido] was the affixing of their signatures or adhesion thereto. Under
such contracts, which are common in the Philippines and elsewhere, the
lending institutions are free to require borrowers to provide assets, like real
property, of much higher value than the desired loan amount, as collateral.
Being a contract of adhesion, the mortgage is to be strictly construed against
[BPI Family], the party which prepared the agreement.
In the case at bar, the intent of [BPI Family] is manifest that the [spouses
Avenido] shall assume liability not only for the entire obligation mentioned
in the mortgage but beyond, which is improper, as it will defeat the purpose
of the foreclosure proceedings which is to answer or satisfy the principal
obligation in case of default or non payment thereof.

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Moreover, for all intents and purposes, we hold that [spouses Avenido]
shall not be liable to pay for the deficiency of their mortgage obligation
because it will be at their great disadvantage considering that their property
was purchased at a nominal cost by [BPI Family] at the auction sale. As a
matter [of] fact, there was an admission made by [BPI Family’s] witness
that the amount of the bid was only 80% of the actual price of the property.
This is unfair on the part of the [spouses Avenido].
Besides, if mortgagees were allowed such right, the debtors would be at
the mercy of their creditors considering the summary nature of extrajudicial
foreclosure proceedings. It is also worthy to note the limited readership of
auction sale notices which lead to the sale.
Accordingly, We upheld the ruling of the court a quo in absolving the
[spouses Avenido] from any liability corresponding to the amount of
deficiency of mortgage obligation as it will in effect be allowing [BPI
Family] to unjustly enrich itself at the expense of the [spouses Avenido].”17

_______________
17 Id., at pp. 32-33.

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The dispositive of the Court of Appeals judgment reads:

“WHEREFORE, premises considered, the assailed Decision dated

November 13, 2002 of the Regional Trial Court, Cebu City, 7th Judicial
Region, Branch 58, in Civil Case No. CEB-25629, is hereby AFFIRMED.
No pronouncement as to costs.”18

In its Resolution dated November 16, 2006, the Court of Appeals

denied the Motion for Reconsideration of BPI Family since the
arguments set forth therein were but a rehash, repetition and/or
reinstatement of the arguments/matters already passed upon and
extensively discussed by the appellate court in its earlier decision.
Hence, the present Petition for Review of BPI Family with the
following assignment of errors:

I
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR IN RENDERING ITS
DECISION (ANNEX “A”) AND RESOLUTION (ANNEX “B”)
DECLARING THAT [BPI FAMILY] IS NOT ENTITLED TO ITS CLAIM
AGAINST THE [SPOUSES AVENIDO] FOR DEFICIENCY OF
MORTGAGE OBLIGATION DESPITE THE EXPRESS PROVISIONS OF
THE MORTGAGE LAW AND NUMEROUS JURISPRUDENCE
ENTITLING THE MORTGAGEE-[BPI FAMILY] TO THE SAME.

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II
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR WHEN IT BASED ITS
FINDING THAT THERE IS NO MORE DEFICIENCY OF MORTGAGE
OBLIGATION BY COMPARING THE MARKET VALUE OF THE
FORECLOSED PROPERTY AGAINST THE LOAN OBLIGATION OF
THE MORTGAGORS-RESPONDENTS INSTEAD OF COMPARING
THE ACTUAL BID PRICE AT THE AUCTION SALE AGAINST THE
LOAN OBLIGATION OF THE MORTGAGORS-[SPOUSES
AVENIDO].19

_______________
18 Id., at p. 34.
19 Id., at pp. 15-16.

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The primary issue posed before us is whether or not BPI Family

is still entitled to collect the deficiency mortgage obligation from the
spouses Avenido in the amount of P455,836.80, plus interest.
We answer in the affirmative.
It is settled that if “the proceeds of the sale are insufficient to
cover the debt in an extrajudicial foreclosure of mortgage, the
mortgagee is entitled to claim the deficiency from the debtor. While
Act No. 3135, as amended, does not discuss the mortgagee’s right to
recover the deficiency, neither does it contain any provision
expressly or impliedly prohibiting recovery. If the legislature had
intended to deny the creditor the right to sue for any deficiency
resulting from the foreclosure of a security given to guarantee an
obligation, the law would expressly so provide. Absent such a
provision in Act No. 3135, as amended, the creditor is not precluded
from taking action to recover any unpaid balance on the principal
obligation simply because he chose to extrajudicially foreclose the
real estate mortgage.”20
It is no longer challenged before us that the outstanding loan
obligation of the spouses Avenido amounted to P2,598,452.80,
inclusive of interests, penalties, and charges, by March 8, 1999. The
controversy herein now only revolves around the value to be
attributed to the foreclosed property, which would be applied against
the outstanding loan obligation of the spouses Avenido to BPI
Family. BPI Family insists that it should be P2,142,616.00, its
winning bid price for the foreclosed property at the public auction
sale, which, being less than the outstanding loan obligation of the
spouses Avenido, will still leave a deficiency collectible by BPI
Family from the spouses Avenido in the amount of P455,836.80.
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The spouses Avenido maintain that, as the RTC and the Court of
Appeals ruled, it should be P2,678,270.00, the fair market value of
the foreclosed property, which, being more than the outstanding loan
obligation of the spouses Avenido, will already fully settle their
indebtedness.
The spouses Avenido, the RTC, and the Court of Appeals may
not have said it outright, but they actually consider the winning bid
of

_______________
20 Cuñada v. Drilon, 476 Phil. 725, 734; 432 SCRA 618, 625 (2004).

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BPI Family for the foreclosed property at the public auction sale to
be insufficient. They took exception to the fact that the winning bid
of BPI Family was equivalent to “only” 80% of the appraised value
of the mortgaged property. The RTC and the Court of Appeals even
went as far as to refer to the amount of the winning bid of BPI
Family as “nominal” and “unfair” and would “unjustly enrich” the
bank at the expense of the spouses Avenido. So the RTC and the
Court of Appeals disregarded the winning bid of BPI Family and
applied instead the fair market value of the foreclosed property
against the outstanding loan obligation of the spouses Avenido.
According to Section 4 of Act No. 3135, an extrajudicial
foreclosure sale of a mortgaged real property shall be conducted as
follows:

“SEC. 4. Public Auction.—The sale shall be made at public auction,

between the hours of nine in the morning and four in the afternoon; and
shall be under the direction of the sheriff of the province, the justice or
auxiliary justice of the peace of the municipality in which such sale has to
be made, or a notary public of said municipality, who shall be entitled to
collect a fee of five pesos for each day of actual work performed, in addition
to his expenses.”

Notably, the aforequoted provision does not mention any

minimum bid at the public auction sale. There is no legal basis for
requiring that the bid should at least be equal to the market value of
the foreclosed property or the outstanding obligation of the
mortgage debtor.
We have consistently held in previous cases that unlike in an
ordinary sale, inadequacy of the price at a forced sale is immaterial
and does not nullify the sale. In fact, in a forced sale, a low price is

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more beneficial to the mortgage debtor for it makes redemption of

the property easier.
Section 6 of Act No. 3135 provides for the redemption of an
extrajudicially foreclosed property within a one-year period, to wit:

“Sec. 6. Redemption.—In all cases in which an extrajudicial sale is

made under the special power herein before referred to, the debtor, his
successors-in-interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the
mortgage or deed of trust under which the property is sold, may redeem the
same at any time within the term of one year from and after the date of
the sale;

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BPI Family Savings Bank, Inc. vs. Avenido

and such redemption shall be governed by the provisions of sections four

hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code
of Civil Procedure, in so far as these are not inconsistent with the provisions
of this Act.” (Emphasis ours.)

Republic Act No. 337, the General Banking Act, as amended, in

force at the time of the herein transactions, had a specific provision
on the redemption of property extrajudicially foreclosed by banks,
which reads:

“Sec. 78. Loans against real estate security shall not exceed seventy
percent (70%) of the appraised value of the respective real estate security,
plus seventy percent (70%) of the appraised value of the insured
improvements, and such loans shall not be made unless title to the real
estate shall be in the mortgagor. In the event of foreclosure, whether
judicially or extrajudicially, of any mortgage on real estate which is security
for any loan granted before the passage of this Act or under the provisions
of this Act, the mortgagor or debtor whose real property has been sold at
public auction, judicially or extrajudicially, for the full or partial payment of
an obligation to any bank, banking or credit institution, within the purview
of this Act shall have the right, within one year after the sale of the real
estate as a result of the foreclosure of the respective mortgage, to redeem
the property by paying the amount fixed by the court in order of execution,
or the amount due under the mortgage deed, as the case may be, with
interest thereon at the rate specified in the mortgage, and all the costs, and
judicial and other expenses incurred by the bank or institution concerned by
reason of the execution and sale and as a result of the custody of said
property less the income received from the property. However, the purchaser
at the auction sale concerned in a judicial foreclosure shall have the right to
enter upon and take possession of such property immediately after the date

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of the confirmation of the auction sale by the court and administer the same
in accordance with law.” (Emphasis ours.)

If the foreclosed property is registered, the mortgagor has one

year within which to redeem the property from and after registration
of sale with the Register of Deeds.21

_______________
21  Unionbank of the Philippines v. Court of Appeals, 370 Phil. 837, 847; 311
SCRA 795, 804 (1999).

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BPI Family Savings Bank, Inc. vs. Avenido

We explained in Prudential Bank v. Martinez22 that:

“[T]he fact that the mortgaged property is sold at an amount less than its
actual market value should not militate against the right to such recovery.
We fail to see any disadvantage going for the mortgagor. On the contrary, a
mortgagor stands to gain with a reduced price because he possesses the right
of redemption. When there is the right to redeem, inadequacy of price
should not be material, because the judgment debtor may reacquire the
property or also sell his right to redeem and thus recover the loss he claims
to have suffered by the reason of the price obtained at the auction sale.
Generally, in forced sales, low prices are usually offered and the mere
inadequacy of the price obtained at the sheriff’s sale unless shocking to the
conscience will not be sufficient to set aside a sale if there is no showing
that in the event of a regular sale, a better price can be obtained.”23
(Citations omitted.)

We elucidated further in New Sampaguita Builders Construction

Inc. v. Philippine National Bank24 that:

“In the accessory contract of real mortgage, in which immovable

property or real rights thereto are used as security for the fulfillment of the
principal loan obligation, the bid price may be lower than the property’s fair
market value. In fact, the loan value itself is only 70 percent of the appraised
value. As correctly emphasized by the appellate court, a low bid price will
make it easier for the owner to effect redemption by subsequently
reacquiring the property or by selling the right to redeem and thus recover
alleged losses. x x x.”25

In Hulst v. PR Builders, Inc.,26 we reiterated that:

“[G]ross inadequacy of price does not nullify an execution sale. In an

ordinary sale, for reason of equity, a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one’s

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conscience as to justify the courts to interfere; such does not follow when
the law gives the owner the right to redeem as when a sale is made at public
auction, upon the

_______________
22 G.R. No. 51768, September 14, 1990, 189 SCRA 612.
23 Id., at p. 617.
24 479 Phil. 483; 435 SCRA 565 (2004).
25 Id., at pp. 514-515; pp. 596-597.
26 G.R. No. 156364, September 3, 2007, 532 SCRA 74.

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BPI Family Savings Bank, Inc. vs. Avenido

theory that the lesser the price, the easier it is for the owner to effect
redemption. When there is a right to redeem, inadequacy of price should not
be material because the judgment debtor may re-acquire the property or else
sell his right to redeem and thus recover any loss he claims to have suffered
by reason of the price obtained at the execution sale. Thus, respondent stood
to gain rather than be harmed by the low sale value of the auctioned
properties because it possesses the right of redemption. x x x.”27

In line with the foregoing jurisprudence, we refuse to consider

the question of sufficiency of the winning bid price of BPI Family
for the foreclosed property; and affirm the application of said
winning bid in the amount of P2,142,616.00 against the total
outstanding loan obligation of the spouses Avenido by March 8,
1999 in the sum of P2,598,452.80, thus, leaving a deficiency of
P455,836.80. BPI Family may still collect the said deficiency
without violating the principle of unjust enrichment, as opined by
the Court of Appeals.
“There is unjust enrichment when a person unjustly retains a
benefit to the loss of another, or when a person retains money or
property of another against the fundamental principles of justice,
equity and good conscience. Article 22 of the Civil Code provides
that every person who through an act of performance by another, or
any other means, acquires or comes into possession of something at
the expense of the latter without just or legal ground, shall return the
same to him. The principle of unjust enrichment under Article 22
requires two conditions: (1) that a person is benefited without a valid
basis or justification, and (2) that such benefit is derived at another’s
expense or damage.”28 There is no unjust enrichment to speak of in
this case. There is strong legal basis for the claim of BPI Family
against the spouses Avenido for the deficiency of their loan
obligation.
BPI Family made an extrajudicial demand upon the spouses
Avenido for the deficiency mortgage obligation in a letter dated July
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8, 2000 and received by the spouses Avenido on July 17, 2000.

Consequently, we impose the legal interest of 12% per annum on the
defi-

_______________
27 Id., at pp. 103-104.
28 Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation, G.R.
No. 138088, January 23, 2006, 479 SCRA 404, 412.

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774 SUPREME COURT REPORTS ANNOTATED

BPI Family Savings Bank, Inc. vs. Avenido

ciency mortgage obligation amounting to P455,836.80 from July 17,

2000 until the finality of this Decision. Thereafter, if the amount
adjudged remains unpaid, it will be subject to interest at the rate of
12% per annum computed from the time the judgment became final
and executory until fully satisfied.
WHEREFORE, the Petition is hereby GRANTED. The assailed
Decision dated March 31, 2006 and Resolution dated November 16,
2006 of the Court of Appeals in CA-G.R. CV No. 79008, affirming
the Decision dated November 13, 2002 of the Regional Trial Court,
Branch 58 of Cebu City, in Civil Case No. CEB-25629, is
REVERSED and SET ASIDE. Respondent spouses Ma. Arlyn T.
Avenido and Pacifico A. Avenido are ORDERED to pay petitioner
BPI Family Savings Bank, Inc. the deficiency of their mortgage
obligation in the amount of P455,836.80, plus legal interest of 12%
per annum from July 17, 2000 until the finality of this Decision.
Thereafter, the amount adjudged shall be subject to legal interest of
12% per annum from the finality of this Decision up to its
satisfaction. No cost.
SO ORDERED.

Corona (C.J., Chairperson), Bersamin, Del Castillo and

Villarama, Jr., JJ., concur. 

Petition granted, judgment and resolution reversed and set aside.

Note.—The fundamental doctrine of unjust enrichment is the

transfer of value without just cause or consideration. (Almocera vs.
Ong, 546 SCRA 164 [2008])
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