G.R. No. L-32624 - People vs. Nierra

Ronald Rapanot paid Golden Dragon Real Estate Corporation (developer of Wack-Wack Twin Towers Condominium) a reservation fee of ₱453,329.64 on May 9, 1995 for Unit 2308-B2 (41.1050 sqm), then completed full payment of ₱1,511,098.97 on April 23, 1997, upon which Golden Dragon executed a Deed of Absolute Sale and Rapanot demanded delivery of the unit and title.
On September 13, 1995, Prudential Bank (now BPI) extended a ₱50,000,000 loan to Golden Dragon for working capital. To secure the loan, Golden Dragon executed a mortgage agreement over several condo units (including 2308-B2), annotated on CCT No. 2383.

On April 27, 2001, Rapanot filed a Complaint for Specific Performance and Damages with the HLURB’s Expanded NCR Field Office, alleging failure to deliver the unit free of liens. Golden Dragon and its president were duly served but defaulted; only the Bank answered.
On April 5, 2002, the Arbiter declared Golden Dragon and its president in default and directed Rapanot and the Bank to file position papers and draft decisions within 30 days. The Bank’s copy was returned “refused to receive,” but Rapanot served its submissions on May 22 and 24, 2002.
On July 3, 2002, the Arbiter rendered a decision declaring the mortgage null and void for violating Section 18 of PD 957, ordering cancellation of the mortgage, release of title, payment of moral/exemplary damages, attorney’s fees, costs, and an administrative fine.

The Bank petitioned the HLURB Board on January 16, 2003, claiming deprivation of due process. The Board modified awards (reduced moral damages, deleted exemplary damages, reduced attorney’s fees) and directed Golden Dragon to settle the mortgage obligation.
The Bank appealed to the Office of the President; on October 10, 2005, its resolution adopted HLURB Board findings and denied reconsideration on March 3, 2006.
On April 17, 2006, the Bank filed a Rule 45 Petition with the Court of Appeals (CA), arguing violation of due process and claiming status as a mortgagee in good faith. The CA on November 18, 2009 dismissed the petition, finding no denial of due process and that the Bank failed to exercise required diligence, thus not a good-faith mortgagee. Reconsideration was denied on March 17, 2010.
The Bank filed its Supreme Court Petition for Review on Certiorari on May 6, 2010.

Whether the Court of Appeals erred in affirming that the Bank was afforded due process before the HLURB.
Whether the Court of Appeals erred in holding that the Bank cannot be considered a mortgagee in good faith.