Title
Concorde Condominium, Inc. vs. Philippine National Bank
Case
G.R. No. 228354
Decision Date
Nov 26, 2018
PPI segregated and mortgaged condominium parking area without CCI’s consent; SC voided mortgage, upheld HLURB jurisdiction, ruled PNB lacked due diligence.

Case Summary (G.R. No. 182648)

Material Facts

PPI developed the Concorde Condominium in Makati and executed a Master Deed (1974) that identified two land parcels and various parking areas (including uncovered parking) as common or limited common areas. PPI organized CCI (1975) to own, hold, and manage the common areas, but did not transfer the titles. PPI later consolidated, re‑surveyed, and subdivided the original lots and obtained separate titles for the segregated uncovered parking area. HLURB clearance was later obtained for an amended plan excluding the uncovered parking area; a new TCT without the master-deed annotation was issued for that lot. PPI mortgaged the segregated lot to PNB-IFL; foreclosure occurred and PNB acquired the property at public auction.

Procedural History — Administrative Proceedings

CCI filed an HLURB complaint (annulment of title/mortgage and reconveyance). The HLURB-NCRFO Arbiter initially ruled in favor of CCI in 2003 but did not annul the mortgage; after intervention by unit owners and remand, the Arbiter (2005) rendered a decisive ruling: the segregations, new titles, mortgage and sale were null and void; the Register of Deeds was ordered to reinstate original TCTs and deliver titles to CCI; exemplary and attorney’s fees were awarded. The HLURB Board (2011) dismissed CCI’s appeal as moot and denied PNB/PNB‑IFL’s appeal; the Office of the President (2013) affirmed the HLURB Board’s ruling. PNB and New PPI filed petitions with the Court of Appeals (consolidated), which issued conflicting outcomes: it granted PNB/PNB‑IFL’s petition (finding HLURB lacked jurisdiction re title and that PNB/PNB‑IFL acted in good faith) but dismissed New PPI’s petition for lack of appeal from prior administrative rulings.

Procedural History — Supreme Court Review

Petitions for certiorari under Rule 45 to the Supreme Court challenged the CA’s reversal in favor of PNB/PNB‑IFL and the CA’s dismissal of New PPI’s petition. The Supreme Court reviewed jurisdictional scope, exhaustion of administrative remedies, and factual findings on the mortgagee’s good faith.

Issue 1 — Whether HLURB Had Jurisdiction

The Court framed jurisdiction as determined by the material allegations of the complaint and the law at commencement. P.D. No. 957 and P.D. No. 1344 (and implementing reorganizations culminating in HLURB) vested exclusive jurisdiction over unsound real estate business practices, buyers’ claims against developers (including claims for annulment of mortgages executed without required approvals), and related contractual enforcement against developers. The Court reiterated established doctrine: where administrative agencies possess specialized quasi‑judicial power over subdivision/condominium controversies, HLURB’s jurisdiction covers disputes that arise from developer‑buyer contractual and statutory obligations even where title or possession may be implicated. Accordingly, the Supreme Court held HLURB had jurisdiction over CCI’s complaint for annulment of title and mortgage because the complaint alleged unsound real estate business practices and sought enforcement of developer obligations to unit owners under the master deed and condominium law.

Issue 2 — Whether New PPI’s Direct CA Petition Was Proper

New PPI failed to pursue required administrative remedies (it did not appeal the HLURB-NCRFO Arbiter’s December 14, 2005 decision to the OP). The Court reiterated the principle that a party who fails to appeal is bound by the decision and cannot later litigate to modify or reverse it. The exception of vicarious appeal (where co‑parties have commonality of interest) did not apply because PPI’s contractual liabilities to unit owners are distinct from PPI’s liabilities to its creditor. Consequently, New PPI was not entitled to relief, and the CA correctly dismissed New PPI’s petition (i.e., the Supreme Court denied New PPI’s petition).

Issue 3 — Whether PNB‑IFL and PNB Were in Good Faith

The Court addressed the mortgagee’s good-faith status, recognizing that ordinarily the question of good faith is a factual issue outside the scope of a Rule 45 petition, but that conflicting factual findings between CA and administrative bodies warranted resolution. The Court examined the Master Deed’s clear provisions: limited common areas (including uncovered parking) were appurtenant to units; CCI was formed to hold title and manage these areas; the Condominium Act requires voter approval by registered owners for amendment of the master deed and HLURB and municipal/city engineer approvals for alterations. HLURB found PPI failed to comply (it submitted only a secretary’s certificate, not a registrable board resolution, and did not secure the required consents). Accordingly the Arbiter and HLURB concluded the segregation and re‑titling were void.

Standards for Mortgagee Banks and Application to PNB‑IFL/PNB

The Court reiterated heightened duties for banking institutions acting as mortgagees: banks must exercise a higher degree of diligence than private individuals in verifying the status and history of the property offered as collateral and conducting ocular inspection and title verification. The onus to prove mortgagee/purchaser in good faith rests on the mortgagee/purchaser; such status is not presumed. In this case, PNB‑IFL/PNB failed to meet this burden: documentation showed inconsistencies (inspection report dated over a year after the mortgage execution; notation that the TCT was not available at verification) and absence of proof of timely, adequate inspection or inquiry into the recent history of the title — which would have disclosed the lot’s prior annotation and common-area character. On these facts, the Supreme Court concluded PNB‑IFL was not a mortgagee in good faith and PNB’s foreclosure sale was void.

Legal Effect of the Mortgage and Remedies

Although the Court declared the mortgage and foreclosure sale void because of the mortgagee’s lack of due diligence and PPI’s unsound business practice, it recognized the mortgage contract remains evidence of an indebtedness. Thus, PNB‑IFL retains the right to pursue repayment from PPI/New PPI from other assets, subject to the claims and defenses between the bank and PPI not resolved in the decision. The HLURB remedy directing cancellation/reinstatement of original titles, delivery of titles to CCI, and award of exemplary damages and attorney’s fees to CCI was reinstated by the Supreme Court.

Rationale on Public Policy and Protection of Buyers

The Court emphasized that the statutory scheme (P.D. No. 957, P.D. No. 1344, and the Condominium Act) aims to protect subdivision and condominium buyers from fraudulent or unsound practices. HLURB’s broad jurisdiction over developer‑buyer disputes is justified by the public interest and technical nature of condomi

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