GR 132869; (October, 2001) (Digest)
G.R. No. 132869; October 18, 2001
GREGORIO DE VERA, JR., petitioner, vs. COURT OF APPEALS, Q. P. SAN DIEGO CONSTRUCTION, INC., ASIATRUST DEVELOPMENT BANK, SECOND LAGUNA DEVELOPMENT BANK, CAPITOL CITY DEVELOPMENT BANK, EX-OFFICIO SHERIFF OF QUEZON CITY and/or HIS DEPUTY, respondents.
FACTS
Respondent Q. P. San Diego Construction, Inc. (QPSDCI) mortgaged its condominium project to a syndicate of banks (the FUNDERS) to secure a loan. Petitioner Gregorio de Vera, Jr. entered into a Condominium Reservation Agreement to purchase a unit. He completed his downpayment and secured Pag-IBIG loan approval through Asiatrust, the lead bank. The loan proceeds were intended to pay off the unit’s proportionate share of the developer’s mortgage. De Vera Jr. later paid the remaining equity directly to Asiatrust upon its demand. Despite his full payment, Asiatrust, claiming QPSDCI was in default on the master loan, foreclosed the mortgage and sold the entire property at auction, including De Vera Jr.’s fully paid unit.
ISSUE
Whether the foreclosure of the entire mortgage, including a condominium unit already fully paid for by a buyer, is valid.
RULING
The Supreme Court ruled the foreclosure was invalid as to De Vera Jr.’s unit. The legal logic rests on the application of Presidential Decree No. 957, the law governing subdivision and condominium sales. The Court emphasized that the protective intent of the law requires the loan value of each individual unit to be determined and the buyer notified. This creates a scenario where, upon the buyer’s full payment, the mortgage lien on that specific unit should be released. De Vera Jr. had fully complied with his obligations by completing all payments directly to Asiatrust. Consequently, his unit was thereby freed from the blanket mortgage encumbrance. The FUNDERS’ right to foreclose the master mortgage could not extend to a property interest that had already been extinguished by the buyer’s full performance. The foreclosure and sale of a unit for which the purchase price had been completely settled, and whose loan value had been paid, constituted a violation of the buyer’s vested rights under PD 957. The Court ordered the cancellation of the certificate of sale and the mortgage annotation on the title for De Vera Jr.’s unit, and directed the delivery of the title to him upon the final settlement of any remaining balances.