Facts:

The case involves BPI Family Savings Bank, Inc. (Petitioner) and spouses Ma. Arlyn T. Avenido and Pacifico A. Avenido (Respondents). The events leading to the case began on April 25, 1996, when the spouses Avenido entered into a Mortgage Loan Agreement with BPI Family, securing a loan of ₱2,000,000.00 with a real estate mortgage on a property in Bais City, covered by Transfer Certificate of Title No. T-1216. The spouses defaulted on their loan payments, prompting BPI Family to initiate extrajudicial foreclosure proceedings under Act No. 3135. The public auction took place on March 8, 1999, where BPI Family emerged as the highest bidder with a bid of ₱2,142,616.00. This amount was applied as partial payment against the total loan obligation, which had accrued to ₱2,917,381.43, leaving a deficiency of ₱794,765.43.

On September 20, 2000, BPI Family filed a Complaint for Collection of Deficiency of Mortgage Obligation with Damages against the spouses Avenido in the Regional Tr...

Facts:

Loan Agreement and Mortgage:

• On April 25, 1996, respondents Ma. Arlyn T. Avenido and Pacifico A. Avenido (spouses Avenido) obtained a loan of ₱2,000,000.00 from petitioner BPI Family Savings Bank, Inc. (BPI Family). The loan was secured by a real estate mortgage on a parcel of land in Bais City, covered by Transfer Certificate of Title (TCT) No. T-1216.

Default and Foreclosure:

• The spouses Avenido failed to pay their loan obligation despite demand. Consequently, BPI Family initiated extrajudicial foreclosure proceedings under Act No. 3135. The property was sold at a public auction on March 8, 1999, with BPI Family as the highest bidder at ₱2,142,616.00.

Deficiency Claim:

• The bid price was applied to the spouses Avenido’s total obligation of ₱2,937,381.43, leaving a deficiency of ₱794,765.43. BPI Family filed a complaint for collection of the deficiency amount, plus legal interest, attorneys’ fees, and litigation expenses.

Spouses Avenido’s Defense:

• The spouses Avenido argued that they had already paid a substantial amount (at least ₱1,000,000.00) and that the foreclosure sale price of ₱2,142,616.00 was sufficient to cover their obligation, which they claimed was less than ₱2,000,000.00. They also sought moral and exemplary damages due to the alleged unjustified suit.

RTC Decision:

• The Regional Trial Court (RTC) dismissed BPI Family’s complaint, finding that the total loan obligation of the spouses Avenido was ₱2,598,452.80. The court noted that the foreclosed property’s appraised value was ₱2,678,270.00, and BPI Family’s bid of 80% of this value was unfair. The RTC ruled that allowing BPI Family to recover the deficiency would result in unjust enrichment.

Court of Appeals Decision:

• The Court of Appeals affirmed the RTC’s decision, emphasizing that the spouses Avenido should not be liable for the deficiency since the property was purchased at a “nominal cost” by BPI Family. The appellate court also noted that the mortgage contract was one of adhesion and should be strictly construed against BPI Family.

Issue:

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Ruling:

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Ratio:

1. Deficiency Recovery in Extrajudicial Foreclosure:

   • Act No. 3135 does not prohibit the mortgagee from recovering the deficiency if the foreclosure sale proceeds are insufficient to cover the debt. The mortgage is merely a security, not a satisfaction of the obligation.

2. Bid Price vs. Market Value:

   • In extrajudicial foreclosure, the bid price at the auction sale, not the market value, is the relevant amount to be applied against the loan obligation. The law does not require the bid to match the market value, and inadequacy of price does not invalidate the sale.

3. No Unjust Enrichment:

   • Unjust enrichment occurs when a person benefits at another’s expense without legal basis. Here, BPI Family’s claim for deficiency was legally justified, and the spouses Avenido were not unfairly disadvantaged.

4. Interest on Deficiency:

   • Legal interest is imposed on the deficiency amount to compensate for the delay in payment, consistent with established jurisprudence.

Conclusion:

The Supreme Court granted BPI Family’s petition, reversing the lower courts’ decisions. The spouses Avenido were ordered to pay the deficiency of ₱455,836.80, plus legal interest, to BPI Family.