Case Summary (G.R. No. 222469)
Applicable Law
The primary law applicable to the case is Presidential Decree No. 957 (PD 957) which regulates the sale of subdivision lots and condominiums in the Philippines. Specifically, Section 18 of PD 957 outlines the requirement that no mortgage on any unit or lot shall be executed by the developer without prior written approval from the Housing and Land Use Regulatory Board (HLURB).
Background Facts
Respondent Marquez entered into a Contract to Sell with Transamerican Sales and Exposition (TSE) on March 13, 1989, for a townhouse unit in Diliman, Quezon City, at a total cost of PHP 800,000. Subsequently, TSE secured a loan from FEBTC amounting to PHP 7,650,000, mortgaging the property that included Marquez's unit. Due to TSE's default, FEBTC foreclosed on the mortgage and acquired the property. Marquez, having already paid PHP 600,000, halted further payments when he learned of the foreclosure.
Proceedings Before the HLURB
On January 29, 1991, Marquez initiated a case against TSE with the HLURB to compel the completion of his townhouse and declare the mortgage with FEBTC invalid, alleging it violated Section 18 of PD 957. The HLURB’s Office of Appeals, Adjudication, and Legal Affairs ruled in favor of Marquez on November 11, 1991, declaring the mortgage unenforceable against him and ordering that he be notified of the mortgage effectively.
Appeals and Rulings
FEBTC appealed the HLURB decision, but the Board of Commissioners affirmed the ruling on July 18, 1994. Subsequently, the Office of the President upheld this decision. Finally, FEBTC appealed to the Court of Appeals, which identified procedural failures regarding the certification against forum shopping submitted by FEBTC.
Court of Appeals Ruling
The Court of Appeals noted that FEBTC should have been aware of the ongoing subdivision development, suggesting negligence in verifying whether the required approvals had been obtained. They ruled that the mortgage was void concerning Marquez, and the appellate court affirmed the HLURB's position but also noted procedural discrepancies in FEBTC's appeal.
Issues Raised
The following critical issues arose for consideration:
- Whether the mortgage contract violated Section 18 of PD 957, thereby rendering it void as to third parties.
- Assuming a violation occurred, whether the HLURB's remedy was proper.
- Whether the absence of a notary's signature on the certification against forum shopping was grounds for dismissing the appeal.
Supreme Court's Findings
The Supreme Court found the appeal partly meritorious, validating the Court of Appeals' conclusion that the mortgage was indeed void due to non-compliance with Section 18 of PD 957, affirming that the law serves to protect buyers and prevent developers from mortgaging properties without buyers' awareness. The Court concluded that FEBTC’s failure to conduct due diligence and its reliance on TSE's representations constituted negligence, thus eliminating its claim of being an i
...continue readingCase Syllabus (G.R. No. 222469)
Case Background
- The case involves a petition for review under Rule 45 of the Rules of Court, filed by Far East Bank & Trust Company (FEBTC) against Arturo L. Marquez.
- The Court of Appeals (CA) had previously denied the petition for lack of merit, leading to FEBTC's appeal.
Facts of the Case
- On March 13, 1989, Arturo Marquez entered into a Contract to Sell with Transamerican Sales and Exposition (TSE) for a 52.5 square meter lot in Diliman, Quezon City, with a three-storey townhouse unit to be constructed for a total price of P800,000.00.
- On May 22, 1989, TSE secured a loan of P7,650,000.00 from FEBTC, mortgaging the property covered by TCT No. 156254.
- Due to TSE's failure to fulfill its obligations, FEBTC conducted an extrajudicial foreclosure, becoming the highest bidder at P15.7 million.
- Marquez had paid P600,000.00 toward the contract before halting payments due to construction delays caused by the foreclosure.
- Marquez filed a case with the HLURB to compel TSE to complete the construction and contest the validity of the mortgage between TSE and FEBTC, arguing that it violated Section 18 of P.D. 957.
- The OAALA ruled in favor of Marquez on November 11, 1991, declaring the mortgage unenforceable against him and ordering FEBTC to accept payment from Marquez for the property.
- FEBTC'