G.R. No. 198745 - Banco de Oro Unibank, Inc. vs. Sunnyside Heights Homeowners Association, Inc.

Mover Enterprises, Inc. is the owner and developer of the Sunnyside Heights Subdivision located in Batasan Hills, Quezon City.
In March 1988, Mover mortgaged Lot 5, Block 10 of Phase I of the subdivision, covering 5,764 square meters, to the Philippine Commercial International Bank (PCIB) to secure a loan of P1,700,000.00.
Due to Mover’s failure to pay the loan, PCIB foreclosed the mortgage, and the title was consolidated in PCIB’s name, with the Registry of Deeds issuing Transfer Certificate of Title (TCT) No. 86389 on May 17, 1993.

In mid-1994, after PCIB advertised the lot for sale, SHHA filed a letter-complaint with the Housing and Land Use Regulatory Board (HLURB), alleging that the subject property had been allocated as the subdivision’s open space under law.
SHHA sought the annulment of the mortgage between Mover and PCIB, asserting that the property (originally under TCT No. 366219) was designated for open space and thus non-alienable.

In its Answer, PCIB asserted that the mortgaged lot differed from the lot identified by SHHA, noting that the title bore no annotation regarding open space reservation.
PCIB maintained its status as an innocent mortgagee acting in good faith and argued that claims of this nature should be filed with the regular courts pursuant to Batas Pambansa Bilang 129 and Presidential Decree (P.D.) No. 1344.
On August 28, 1995, the ITLURB Arbiter dismissed SHHA’s complaint for lack of cause of action, highlighting the discrepancy between TCT Nos. 366219, 86389, and 223475.

On petition for review before the HLURB Board of Commissioners, SHHA adduced a certification showing that on May 18, 1987, an approved alteration in the subdivision plan had renamed Block 10 (the original open space under TCT No. 223475) as Block 7, now covered by TCT No. 366219.
On September 6, 1996, the HLURB Board ruled that:

Lot 5, Block 10 (TCT No. 223475) had become Block 7 in the altered plan and was subsequently mortgaged to PCIB.
TCT Nos. 223475, 366219, and 86389 referred to one and the same property.
The property, being an open space not subject to commerce, was inalienable, thereby rendering the mortgage and foreclosure null and void.

The Board directed the cancellation of TCT No. 86389, the issuance of a new title in Mover’s name, compliance with P.D. 957 (as amended), and the refund of P1,700,000.00 by Mover to PCIB.

PCIB, after its motion for reconsideration was denied, appealed to the Office of the President (OP), while Mover did not contest.
On November 22, 2007, the OP ruled in favor of the HLURB decision, finding that HLURB had jurisdiction over the annulment of the mortgage.
Subsequent corporate mergers transformed PCIB into Banco de Oro-EPCI, Inc., which is now known as Banco de Oro Unibank, Inc.
Banco de Oro-EPCI, Inc. then filed a petition for review with the Court of Appeals (CA), contending:

On March 11, 2011, the CA affirmed, with modifications, that HLURB’s jurisdiction was broad enough and held Mover liable for the principal amount plus interest.
Banco de Oro-EPCI, Inc. raised additional procedural and substantive objections in its petition for review before the Supreme Court.

Whether the HLURB has jurisdiction over complaints for annulment of a mortgage, particularly when the subject property is designated as an open space under statutory mandates.
The extent to which the alteration of the subdivision plan (renaming and re-identification of the open space) affects HLURB’s authority.

Whether Banco de Oro-EPCI, Inc. (formerly PCIB, and now Banco de Oro Unibank, Inc.) is considered an innocent mortgagee acting in good faith, thereby entitling it to protection of its title against annulment.

Whether the presentation of new documentary evidence on appeal—specifically, the certification regarding the 1987 alteration in the subdivision plan—violated Banco de Oro’s right to due process.

Whether Mover Enterprises, Inc. should be held liable not only for the principal mortgage loan amount but also for interest accrued, given the findings on the nullity of the mortgage over the reserved open space.