Banco de Oro v. Sunnyside Heights Homeowners Association
REITERATIONFacts
The Antecedents: Mover Enterprises, Inc. (Mover) mortgaged Lot 5, Block 10 of Sunnyside Heights Subdivision to Philippine Commercial International Bank (PCIB) to secure a loan. Mover defaulted, and PCIB foreclosed the mortgage, consolidating title in its name. Sunnyside Heights Homeowners Association (SHHA) filed a complaint with the Housing and Land Use Regulatory Board (HLURB) seeking to declare the mortgage void, alleging the property was allocated as SHHA's open space. PCIB argued the mortgaged lot was different from the alleged open space and that it was an innocent mortgagee in good faith. The HLURB Arbiter dismissed the complaint for lack of cause of action, finding no proof that the mortgaged property was the same as the designated open space. Procedural History: On appeal, the HLURB Board of Commissioners reversed the Arbiter's decision, finding that an alteration in the subdivision plan had renamed the open space from Block 10 to Block 7, and this Block 7 was the property mortgaged to PCIB. The Board declared the mortgage and foreclosure null and void, ordered the cancellation of PCIB's title, and directed Mover to comply with P.D. 957 and pay PCIB the loan amount plus interest. The Office of the President (OP) affirmed the HLURB Board's decision, upholding HLURB's jurisdiction. PCIB, which had merged with other banks and was now Banco de Oro Unibank, Inc. (BDO), appealed to the Court of Appeals (CA). The CA affirmed the OP's decision, with a modification that Mover was liable for interest on the principal loan amount. The Petition: BDO filed a Petition for Review on Certiorari with the Supreme Court, raising issues of HLURB's jurisdiction, PCIB's status as a mortgagee in good faith, the admission of new evidence on appeal, and Mover's obligation.
Issue(s)
Whether the HLURB has jurisdiction over the complaint for annulment of mortgage. Whether PCIB (now BDO) is an innocent mortgagee in good faith whose title cannot be annulled. Whether the admission of new evidence on appeal violated BDO's right to due process. Whether Mover is liable for the principal loan amount and interest.
Ruling
The Supreme Court denied the petition, affirming the Court of Appeals' decision with clarification. It held that the HLURB has jurisdiction over the case, that the mortgage and foreclosure were null and void, and that Mover is liable to pay Banco de Oro Unibank, Inc. the principal amount of P1,700,000.00 plus legal interest.
Ratio Decidendi
On the HLURB's Jurisdiction: The Court reiterated that under Presidential Decree (P.D.) No. 957 and P.D. No. 1344, the National Housing Authority (NHA), whose functions were transferred to the HLURB, has exclusive jurisdiction over unsound real estate business practices and cases involving specific performance of contractual and statutory obligations by developers. SHHA's complaint questioned the validity of the mortgage over a property designated as an open space, which is considered inalienable and beyond the commerce of man under P.D. No. 1216. Such an act constitutes an unsound real estate business practice and a violation of Mover's statutory obligation to maintain the open space. Therefore, the HLURB correctly exercised its jurisdiction. On PCIB's Status as Innocent Mortgagee in Good Faith: While PCIB claimed to be an innocent mortgagee in good faith, the Court found that the property mortgaged was indeed the designated open space. The HLURB Board of Commissioners correctly ruled that open spaces, being inalienable and non-buildable, cannot be the subject of a mortgage or foreclosure. The subsequent title held by PCIB, and later BDO, was therefore void with respect to the open space designation. The Court acknowledged that PCIB acted in good faith in accepting the mortgage, but this did not validate the mortgage itself. On Due Process and New Evidence: The Court found no violation of due process. BDO's continuous objection to the HLURB's jurisdiction estopped it from complaining about the admission of additional evidence on appeal that ultimately confirmed the HLURB's jurisdiction. The certification from the HLURB showing the alteration of the subdivision plan and the re-designation of the open space was crucial in establishing the HLURB's authority over the matter. Jurisdictional issues cannot be waived, and BDO's persistent challenge to jurisdiction meant it could not later claim prejudice from evidence supporting that jurisdiction. On Mover's Liability for Principal and Interest: The Court agreed that it would be unjust enrichment for Mover not to acknowledge its indebtedness to BDO, despite the nullity of the mortgage. Mover was ordered to pay the principal amount of P1,700,000.00. Regarding interest, the Court applied the ruling in Eastern Shipping Lines, Inc. v. CA, mandating 12% per annum legal interest from the filing of the complaint (September 14, 1994) until full payment. However, it clarified that the rate should be reduced to 6% per annum from July 1, 2013, in accordance with Monetary Board Circular No. 799, and that the principal and subsequently computed interest shall earn 6% per annum until fully paid.
Main Doctrine
The Housing and Land Use Regulatory Board (HLURB) has jurisdiction over complaints for annulment of mortgage involving subdivision open spaces, as such spaces are considered inalienable and beyond the commerce of man, and their mortgage constitutes an unsound real estate business practice or a violation of statutory obligations by the developer. An innocent mortgagee in good faith cannot be prejudiced by the nullity of the mortgage if the mortgagor is also held liable for the loan amount with legal interest.