GR 147964; (January, 2004) (Digest)
G.R. No. 147964 ; January 20, 2004
FAR EAST BANK & TRUST CO., Petitioner, vs. ARTURO L. MARQUEZ, Respondent.
FACTS
Respondent Arturo Marquez entered into a Contract to Sell with Transamerican Sales and Exposition (TSE) for a townhouse unit and lot. TSE later obtained a loan from petitioner Far East Bank & Trust Co. (FEBTC) and mortgaged the entire property, which included the lot sold to Marquez, without securing the prior written approval of the Housing and Land Use Regulatory Board (HLURB) as required by law. When TSE defaulted, FEBTC extrajudicially foreclosed the mortgage. Marquez, who had made substantial payments, discovered the foreclosure and initiated a case before the HLURB to annul the mortgage as it pertained to his lot. The HLURB ruled in favor of Marquez, declaring the mortgage unenforceable against him and ordering FEBTC to accept payment for his lot and deliver the title. This decision was affirmed by the HLURB Board of Commissioners, the Office of the President, and the Court of Appeals.
ISSUE
The primary issue is whether the mortgage contract executed by the developer without HLURB approval is void as to the buyer of a subdivision lot, and whether the remedy granted by the HLURB was proper.
RULING
The Supreme Court affirmed the rulings of the lower bodies, holding that the mortgage was void as to Marquez’s lot. The legal logic is anchored on Section 18 of Presidential Decree No. 957, which explicitly prohibits a developer from mortgaging any subdivision lot or condominium unit without prior HLURB written approval. This provision is a mandatory and prohibitory law designed to protect subdivision and condominium buyers. An act executed in violation of such a law is void under Article 5 of the Civil Code. The Court rejected FEBTC’s argument that the mortgage covered the mother title and not the individual lot, ruling that the protective mantle of PD 957 extends to the specific unit or lot being purchased. The bank, which was aware the loan was for a townhouse project, was negligent in not verifying HLURB approval. However, the Court modified the HLURB’s disposition, limiting its application solely to Marquez’s specific lot (Unit No. 10) and not the entire mortgaged property, as Marquez’s actionable interest was confined to his purchased unit. The remedy directing FEBTC to accept Marquez’s payment and deliver the title was deemed proper and in accord with equity.