G.R. No. 182133 , June 23, 2015
UNITED OVERSEAS BANK OF THE PHILIPPINES, INC., PETITIONER, VS. THE BOARD OF COMMISSIONERS-HLURB, J.O.S. MANAGING BUILDERS, INC., AND EDUPLAN PHILS., INC., RESPONDENTS.

FACTS

Respondent J.O.S. Managing Builders, Inc. (JOS Managing Builders) is the developer of the Aurora Milestone Tower condominium project. On December 16, 1997, it entered into a Contract to Sell with respondent EDUPLAN Philippines, Inc. (EDUPLAN) covering a specific condominium unit. EDUPLAN paid in full by August 1998, and a Deed of Absolute Sale was executed in December 1998. However, JOS Managing Builders failed to deliver the Condominium Certificate of Title. EDUPLAN discovered that the lots on which the condominium was built had been mortgaged by JOS Managing Builders to petitioner United Overseas Bank of the Philippines (United Overseas Bank) without the prior written approval of the HLURB as required by law. EDUPLAN filed a complaint before the HLURB against JOS Managing Builders and United Overseas Bank, praying for the nullity of the mortgage, the issuance of the title, and other reliefs. JOS Managing Builders alleged it could not issue the title because United Overseas Bank had custody of the mother titles. United Overseas Bank explained it had a valid Real Estate Mortgage over the parcels of land (including the improvements) securing a loan, and that it foreclosed the mortgage after JOS Managing Builders defaulted. The HLURB Arbiter ruled in favor of EDUPLAN, declaring the mortgage and foreclosure null and void for lack of HLURB approval under Section 18 of P.D. No. 957, and ordering the issuance of the title to EDUPLAN, among other things. The HLURB Board of Commissioners affirmed the Arbiter’s decision but deleted certain awards. United Overseas Bank filed a petition for review with the Court of Appeals (CA). The CA dismissed the petition because United Overseas Bank failed to exhaust administrative remedies by not appealing the HLURB Board’s decision to the Office of the President before going to the CA. United Overseas Bank elevated the case to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in dismissing the petition for failure to exhaust administrative remedies.

RULING

Yes, the Court of Appeals erred. The Supreme Court ruled that the doctrine of exhaustion of administrative remedies admits of exceptions. The issue in this case—whether non-compliance with the HLURB clearance requirement results in the nullification of the entire mortgage contract or only a part of it—is a purely legal question. Such a question does not require technical administrative expertise but involves the interpretation and application of law, and its final resolution rests with the courts of justice. Therefore, exhaustion of administrative remedies was not required.
On the substantive legal issue, the Supreme Court modified the HLURB’s decision. It held that the HLURB erred in declaring the entire mortgage null and void. Citing jurisprudence, the Court ruled that the mortgage is null and void only with respect to the specific condominium unit purchased by EDUPLAN (Unit E, 10th Floor, Aurora Milestone Tower), for which full payment had been made and a Deed of Absolute Sale executed prior to the foreclosure. The nullity does not extend to the entire mortgage or the other properties covered therein. The Court affirmed the HLURB’s decision with the modification that the mortgage and foreclosure are declared null and void only insofar as EDUPLAN’s specific unit is concerned.