GR 182128; (February, 2014) (Digest)
G.R. No. 182128 ; February 19, 2014
PHILIPPINE NATIONAL BANK, Petitioner, vs. TERESITA TAN DEE, ANTIPOLO PROPERTIES, INC. (now PRIME EAST PROPERTIES, INC.) and AFP-RSBS, INC., Respondents.
FACTS
Respondent Teresita Tan Dee purchased a residential lot from respondent Prime East Properties Inc. (PEPI) on installment in July 1994. After Dee fully paid the purchase price, a deed of sale was executed in her favor in July 1998. Prior to this, in September 1996, PEPI obtained a loan from petitioner Philippine National Bank (PNB) secured by a real estate mortgage over several properties, which included the lot already sold to Dee. This mortgage was cleared by the Housing and Land Use Regulatory Board (HLURB). When Dee sought the delivery of the owner’s duplicate certificate of title, PNB refused, prompting Dee to file a complaint for specific performance before the HLURB.
The HLURB ruled in favor of Dee, ordering PNB to cancel the mortgage and release the title, and directing PEPI and AFP-RSBS to pay PNB the redemption value. This decision was affirmed by the HLURB Board of Commissioners, the Office of the President, and the Court of Appeals. PNB filed this petition, arguing its mortgage rights are paramount and cannot be nullified, and that release of the title is contingent on payment of the loan obligation by the mortgagor or redemption under PD 957.
ISSUE
Whether PNB can be compelled to cancel the mortgage and release the title to Dee despite the existence of its duly registered mortgage and the non-payment of the secured loan.
RULING
The Supreme Court denied PNB’s petition and affirmed the lower courts’ decisions. The legal logic centers on the primacy of the buyer’s rights under PD 957 (The Subdivision and Condominium Buyers’ Protective Decree) over a subsequent mortgagee’s claims. The Court emphasized that PD 957 is a social legislation designed to protect innocent subdivision lot buyers. Under Section 25 of PD 957, any mortgage on a subdivision lot without prior HLURB approval is null and void. While PNB’s mortgage was HLURB-approved, such approval did not validate the mortgage as to a lot already sold to a buyer in good faith.
The Court ruled that Dee’s rights as a buyer, having fully paid the purchase price prior to the mortgage’s constitution, became vested and paramount. PNB, as a mortgagee, was bound to exercise due diligence and was charged with notice of Dee’s prior interest, as her contract to sell was registered with the HLURB. The subsequent mortgage could not defeat her superior right to a clean title. Furthermore, the Court found that the Affidavit of Undertaking executed by PNB contained a stipulation pour autrui in favor of buyers like Dee, obliging PNB to release titles upon full payment by the buyer, which condition Dee had satisfied. Therefore, PNB was correctly ordered to release the title, with the obligation to pay the loan redemption value falling on the developer/mortgagor, PEPI and AFP-RSBS.