G.R. No. 155113; January 9, 2013
PHILIPPINE BANK OF COMMUNICATIONS, Petitioner, vs. PRIDISONS REALTY CORPORATION, ANTONIO GONZALES, BORMACHECO, INC., NAZARIO F. SANTOS, TERESITA CHUA TEK, CHARITO ONG LEE, and ERNESTO SIBAL, Respondents.

FACTS

Pridisons Realty Corporation mortgaged its land to Philippine Bank of Communications (PBComm) in 1989 to secure a loan. Pridisons later transferred its rights to its sister company, Ivory Crest, which developed a condominium project on the land. Several buyers, the respondent buyers, purchased condominium units from Ivory Crest. When Pridisons defaulted on the loan, PBComm initiated extrajudicial foreclosure. The respondent buyers, led by Bormacheco, Inc., filed complaints with the Housing and Land Use Regulatory Board (HLURB) against Pridisons, Ivory Crest, and PBComm, seeking specific performance to compel the transfer of titles free from PBComm’s mortgage lien.
PBComm contested the HLURB’s jurisdiction, arguing it was not a real estate developer or seller subject to HLURB regulation. It also asserted the priority of its mortgage, which was registered before the units were sold. The HLURB, affirmed by the Office of the President and the Court of Appeals, ruled against PBComm. The tribunals held that the HLURB had jurisdiction and that the mortgage was void for lack of prior HLURB approval as required by Section 18 of Presidential Decree No. 957 (The Subdivision and Condominium Buyers’ Protective Decree).

ISSUE

The core issues were: (1) whether the HLURB had jurisdiction over PBComm, a mortgagee bank, in a case involving condominium buyers; and (2) whether the real estate mortgage was null and void for non-compliance with PD 957.

RULING

The Supreme Court denied PBComm’s petition and affirmed the lower rulings. On jurisdiction, the Court held that the HLURB’s regulatory authority under PD 957 is broad and extends to cases necessary to protect subdivision and condominium buyers. Since the complaints directly involved the buyers’ rights to titles free from an allegedly invalid encumbrance affecting the condominium project, the HLURB properly exercised jurisdiction over all indispensable parties, including the mortgagee bank.
On the validity of the mortgage, the Court upheld its nullity. Section 18 of PD 957 mandates that no mortgage on any unit or lot shall be made by the owner or developer without prior written HLURB approval. The provision is a protective measure for buyers, ensuring mortgage proceeds are used for project development. The Court found that PBComm was aware of the owner’s development plans for a condominium project at the time of the mortgage. Consequently, the mandatory clearance requirement applied even to the mortgage of the raw land. PBComm’s failure to secure HLURB approval rendered the mortgage void. However, consistent with jurisprudence, the Court clarified that the nullity of the mortgage did not extinguish the underlying loan obligation, which remained valid and enforceable.