G.R. No. 228354 & 228359, November 26, 2018
CONCORDE CONDOMINIUM, INC. vs. PHILIPPINE NATIONAL BANK, ET AL.; NEW PPI CORPORATION vs. CONCORDE CONDOMINIUM, INC.

FACTS

Pulp and Paper, Inc. (PPI) was the developer of the Concorde Condominium. It executed a Master Deed in 1974, which defined the common areas to include the land, basement, deck roof, and “all other areas…shown as part of the common areas in the condominium project plan.” This included an uncovered parking area at the rear of the building. The Concorde Condominium, Inc. (CCI) was subsequently organized to manage these common areas. However, PPI retained the titles to the land. Years later, without CCI’s knowledge or consent, PPI subdivided the property, segregating the uncovered parking lot from the main building lot. It then obtained an alteration of the project plan from the HLURB, excluding the parking area from the common areas, and secured a separate title for it.
PPI later mortgaged this segregated parking lot to Philippine National Bank-International Finance Limited (PNB-IFL). Upon PPI’s default, the mortgage was foreclosed, and the property was sold to Philippine National Bank (PNB). CCI then filed a complaint to annul the title and mortgage, arguing the parking area was an indivisible part of the condominium’s common areas. The HLURB and the Office of the President ruled in favor of CCI, declaring the segregation, amended master deed, and subsequent mortgage null and void. The Court of Appeals reversed, holding that PNB was a mortgagee in good faith and that the parking area was not an essential common area.

ISSUE

The core issue was whether the uncovered parking area formed part of the condominium’s common areas, making its segregation and subsequent mortgage by PPI null and void, and whether PNB could be considered a mortgagee in good faith.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the rulings of the HLURB and the Office of the President. The Court held that the uncovered parking area was indisputably a common area under the Condominium Act (R.A. 4726) and the project’s Master Deed. The Master Deed explicitly defined common areas to include the parcels of land and all areas indicated in the condominium plan. The parking area, being part of the original land and project plan, was therefore owned in common by all condominium unit owners. Consequently, PPI, as the developer, could not unilaterally segregate and claim exclusive ownership over it after the condominium project was established and units were sold. Its acts of subdivision, plan alteration, and obtaining a separate title were void for violating the law and the Master Deed.
Regarding PNB’s status, the Court ruled it could not be a mortgagee in good faith. The Master Deed, which expressly included the land as a common area, was annotated on the original title. This annotation constituted a lien and an express notice to the whole world of CCI’s interest. PNB was bound to investigate the property’s status, and such an investigation would have revealed the condominium’s existence and the parking area’s integral nature. PNB’s failure to exercise due diligence meant it was not an innocent mortgagee for value. Thus, the real estate mortgage over the parking area was null and void.