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) is the owner/developer of the Aurora Milestone Tower condominium project. JOS mortgaged the project to Far East Bank and Trust Co. (Far East). Petitioner United Overseas Bank (UOB) later assumed JOS’s indebtedness, and the mortgage was released in favor of UOB for ₱200 million. UOB did not secure a mortgage clearance from the HLURB. JOS failed to pay its loan, leading UOB to foreclose the mortgage and become the highest bidder at a public auction.
Meanwhile, JOS and respondent EDUPLAN Phils., Inc. entered into a contract to sell covering a specific unit in the condominium. EDUPLAN fully paid for the unit, and a Deed of Absolute Sale was executed, which disclosed the mortgage lien in favor of UOB. JOS could not issue the individual condominium certificate of title to EDUPLAN because UOB had custody of the “mother title.”
EDUPLAN filed a Complaint for specific performance and damages against JOS and UOB before the HLURB Arbiter. The HLURB Arbiter declared the mortgage between JOS and UOB, including the foreclosure, void for violating Section 18 of Presidential Decree No. 957 (which requires prior HLURB approval for mortgages) and ordered JOS and UOB to cause the release of the title free from liens. The HLURB Board of Commissioners affirmed with modification, also declaring the mortgage null and void.
UOB filed a Petition for Review under Rule 43 before the Court of Appeals, which dismissed it for failure to exhaust administrative remedies, stating the proper recourse was an appeal to the Office of the President. The Court of Appeals, on motion for reconsideration, affirmed the dismissal but reconsidered its finding that the petition was filed out of time. UOB elevated the case to the Supreme Court via a Petition for Review on Certiorari, arguing the Court of Appeals erred in not applying an exception to the exhaustion doctrine, as the issue involved a purely legal question. UOB also contended that the HLURB went beyond its jurisdiction by declaring the entire mortgage void, instead of only the portion pertaining to EDUPLAN’s unit.

ISSUE

The primary issue is whether the Court of Appeals erred in dismissing UOB’s petition for failure to exhaust administrative remedies. A more important substantive issue, as noted in the concurring and dissenting opinion, is whether the HLURB’s nullification of the entire mortgage over the condominium project is proper under Section 18 of Presidential Decree No. 957.

RULING

The concurring and dissenting opinion concurs with the ponencia that an exception to the doctrine of exhaustion of administrative remedies exists because the main issue involves a legal question that only the courts may address. The opinion then focuses on the legality of nullifying the entire mortgage.
The opinion concurs that the lack of mortgage clearance from the HLURB resulted in the nullity of the mortgage for violating Section 18 of Presidential Decree No. 957, a prohibitory law where acts contrary to it are invalid. The opinion references jurisprudence (Far East Bank & Trust Co. v. Marquez) to support the view that the mortgage should be declared void only as to the specific unit (EDUPLAN’s unit) and not the entire condominium project, as EDUPLAN had no claim over the other units. The burden of compliance with Section 18 rests on the owner/developer (JOS), not the mortgagee (UOB).