Concorde Condominium, Inc. v. Philippine National Bank
REITERATIONFacts
The Antecedents: Pulp and Paper, Inc. (PPI) developed the Concorde Condominium (Concorde). PPI executed a Master Deed with Declaration of Restrictions (master deed) designating common areas, including an uncovered parking area. Concorde Condominium, Inc. (CCI) was organized to manage these common areas, but PPI retained title to the land. PPI, without CCI's knowledge, consolidated and subdivided the land, segregating the uncovered parking area. New titles were issued for the segregated lots. PPI then applied to HLURB to alter the project plan, excluding the uncovered parking area from common areas. This was approved, and a new title (TCT No. 208874) was issued for the parking area without the master deed annotation. PPI mortgaged this property to Philippine National Bank-International Finance Limited (PNB-IFL) to secure a loan. Upon default, the property was foreclosed and sold to Philippine National Bank (PNB). Procedural History: CCI filed a complaint against PPI, PNB-IFL, and the Register of Deeds for annulment of title, mortgage, and reconveyance. The HLURB Arbiter initially ordered PPI to compensate CCI for the segregated land and provide replacement parking, but considered PNB an innocent assignee. Upon intervention by unit owners, the HLURB Arbiter reversed, declaring the new titles, mortgage, and foreclosure sale void, and ordering the cancellation of new titles and reinstatement of original titles. The HLURB Board dismissed CCI's appeal as moot but denied PNB-IFL and PNB's appeal. The Office of the President (OP) affirmed the HLURB Board's decision. The Court of Appeals (CA) reversed, holding HLURB lacked jurisdiction and that PNB-IFL was a mortgagee in good faith, thus the mortgage and sale were valid. The CA dismissed New PPI's petition for failing to exhaust administrative remedies. The Petition: CCI and New PPI (formerly PPI) filed separate petitions for review with the Supreme Court, assailing the CA decision.
Issue(s)
Whether the HLURB has jurisdiction over CCI's complaint. Whether the dismissal of New PPI's petition for review before the CA was proper. Whether PNB-IFL is a mortgagee in good faith, and PNB an innocent assignee/purchaser in good faith.
Ruling
The Supreme Court granted the petition in G.R. No. 228354 (CCI's petition) and denied the petition in G.R. No. 228359 (New PPI's petition). The Court reversed the Court of Appeals' ruling that HLURB lacked jurisdiction and reinstated the decision of the HLURB Arbiter, as affirmed by the HLURB Board and the Office of the President. The Court found that PNB-IFL was not a mortgagee in good faith and the foreclosure sale in favor of PNB was void.
Ratio Decidendi
On the Jurisdiction of HLURB: The Supreme Court held that the HLURB has jurisdiction over CCI's complaint. The nature of the action is determined by the material allegations of the complaint and the governing law. Presidential Decree No. 957 (P.D. No. 957) and subsequent issuances conferred exclusive jurisdiction upon the HLURB (and its predecessors) to regulate the real estate trade and business, including cases involving unsound real estate business practices, claims by buyers against developers, and specific performance of contractual and statutory obligations. The complaint, which alleged that PPI's actions constituted unsound real estate business practice and sought to compel the performance of contractual and statutory obligations related to condominium common areas, clearly falls within the HLURB's specialized jurisdiction. The Court reiterated that split jurisdiction is not favored and that HLURB's jurisdiction is broad enough to include annulment of mortgages and foreclosure sales on condominium projects, as these involve the enforcement of rights between developers and buyers. On the Dismissal of New PPI's Petition: The Supreme Court affirmed the CA's dismissal of New PPI's petition for failing to exhaust administrative remedies. New PPI failed to appeal the decision of the HLURB-NCRFO to the Office of the President. The rule is that a party who fails to appeal a judgment cannot seek its modification or reversal. While an exception exists where parties have a commonality of interests, the Court found no such commonality between PPI and PNB-IFL/PNB. PPI's liability to CCI for breach of contract is distinct from PNB-IFL's and PNB's potential liability as mortgagee and purchaser. Therefore, the appeal of PNB-IFL and PNB did not inure to PPI's benefit, and PPI was bound by the HLURB-NCRFO decision. On PNB-IFL's Status as Mortgagee in Good Faith: The Supreme Court ruled that PNB-IFL is not a mortgagee in good faith, and the foreclosure sale to PNB is void. The uncovered parking area was part of the condominium project's common areas under the master deed, and PPI was contractually bound to transfer its title to CCI. PPI's segregation of the area and amendment of the master deed without the required consent of unit owners constituted an unsound real estate business practice and violated Section 18 of P.D. No. 957, which prohibits the mortgage of condominium project portions without prior HLURB approval. As a mortgagee bank, PNB-IFL was expected to exercise a higher degree of diligence. The Court found that PNB-IFL failed to do so, evidenced by the discrepancy in dates on its inspection report (dated after the mortgage) and the lack of inquiry into the property's history, which would have revealed its status as part of the condominium project. The presumption of regularity in the issuance of TCT No. 208874 did not shield PNB-IFL from its duty to conduct due diligence. Consequently, the mortgage and the subsequent foreclosure sale were declared void.
Main Doctrine
The Housing and Land Use Regulatory Board (HLURB) has jurisdiction over cases involving unsound real estate business practices, including the annulment of mortgages on condominium units and common areas, as these fall within its mandate to regulate the real estate trade and business. A mortgagee bank is expected to exercise a higher degree of diligence than private individuals, and failure to do so, particularly in verifying the status of properties offered as collateral, precludes it from invoking the status of a mortgagee in good faith.