Case Summary (G.R. No. 182128)
Facts of the Transactions
In July 1994 Dee entered into a contract to buy a 204-sqm lot in Binangonan, Rizal, from PEPI. In August 1996 PEPI assigned its rights over the parent tract to AFP-RSBS. On September 10, 1996 PEPI obtained a ₱205 million loan from PNB, secured by a mortgage covering, among other lots, Dee’s. Dee completed payment in July 1998, whereupon PEPI and AFP-RSBS executed a deed of sale in her favor. PNB, however, refused to release the owner’s duplicate title.
Procedural History
Dee filed a complaint with the Housing and Land Use Regulatory Board (HLURB) for specific performance. On May 21, 2003 the HLURB ordered cancellation of the mortgage and delivery of title to Dee, or payment of alternative damages and interest, plus fees and sanctions under PD 957. Its Board affirmed with an interest modification on March 15, 2004. The Office of the President (OP) further modified the monetary award but affirmed the HLURB decision on August 4, 2004. The Court of Appeals (CA) denied PNB’s petition for review on August 13, 2007 and denied reconsideration in March 2008. PNB then filed this Rule 45 petition.
Issues for Review
- Whether PNB’s duly registered, HLURB-approved mortgage precluded the outright release of Dee’s title.
- Whether PNB could insist on PEPI’s redemption or Dee’s direct payment under the mortgage, despite full settlement of the lot.
Governing Legal Provisions
1987 Constitution (post-1990 decision)
PD 957 (Subdivision and Condominium Buyers’ Protective Decree), especially Section 25 on issuance of title after full payment and mandatory redemption of outstanding mortgage within six months.
Act 3135 on regulation of mortgages annexed to real estate.
Civil Code provisions on contracts (Articles 1311, 1495, 1582) and accessory character of mortgages.
Privity and Relativity of Contracts
PNB is not a party to the contract to sell between PEPI and Dee. Under Civil Code Article 1311, contractual obligations bind only the parties thereto and cannot create duties for third persons. PNB therefore cannot be ordered to assume PEPI’s or AFP-RSBS’s undertaking beyond cancellation of its own mortgage.
Mortgage as Accessory and PD 957 Section 25
A mortgage is an accessory security for a principal debt and does not alter ownership (Civil Code, accessory nature). Under PD 957 Section 25, once a lot is fully paid, the developer must deliver the title free of encumbrances and redeem any outstanding mortgage within six months. Dee’s full payment triggered that obligation, compelling PNB to cancel or release its lien.
Bank’s Duty to Respect Contract to Sell
Although PNB held a valid HLURB-cleared mortgage, it knew or should have known the property was subject to existing contracts to sell. Jurisprudence holds that banks financing development projects must investigate potential preexisting buyer rights (Luzon Dev’t Bank v. Enriquez). PNB cannot claim superior rights over a lot contractually sold and paid for under PD 957’s protective scheme.
Effect of Rehabilitation Plan and Dacion en Pago
PEPI’s RTC-approved rehabilitation plan provided for partial settlement of its debts by dacion en pago of real properties, including Dee’s lot. Under the Memorandum of Agreement, PNB accepte
...continue readingCase Syllabus (G.R. No. 182128)
Facts of the Case
- In July 1994, Teresita Tan Dee contracted to buy on installment Lot 12, Block 21-A, Village East Executive Homes, Binangonan, Rizal (204 sqm, TCT No. 619608) from Antipolo Properties, Inc. (now Prime East Properties, Inc. or PEPI).
- In August 1996 PEPI assigned to AFP-RSBS, Inc. its rights over a 213,093-sqm property inclusive of Dee’s lot.
- On September 10 1996, PEPI secured a ₱205,000,000 loan from Philippine National Bank (PNB), mortgaging several properties, including Dee’s. HLURB clearance was granted on September 18 1996.
- Dee paid in full; on July 1998 PEPI and AFP-RSBS executed a deed of sale in her favor.
- Dee requested the owner’s duplicate title from PNB; upon refusal, she filed before HLURB a complaint for specific performance and delivery of TCT No. 619608.
HLURB and Office of the President Proceedings
- May 21 2003: HLURB ruled for Dee, ordering PNB to cancel/release the mortgage on TCT No. 619608 and deliver the duplicate title to Dee; PEPI and AFP-RSBS to deliver free from encumbrances; alternatively to pay ₱520,000 plus 12% interest; awarded attorney’s fees (₱25,000), litigation costs, and administrative fine (₱10,000).
- March 15 2004: HLURB Board of Commissioners affirmed with modified interest rate.
- August 4 2004: Office of the President affirmed HLURB decision with modifications to monetary awards.
Court of Appeals Proceedings
- CA-G.R. SP No. 86033: PNB’s appeal denied in Decision dated August 13 2007; motion for reconsideration denied in Resolution dated March 13 2008.
- Dispositive: “The petition is DENIED. Decision dated August 4, 2004 … is hereby AFFIRMED.”
Issues Presented
- Whether PNB must release/cancel its duly registered and HLURB-approved mortgage on TCT No. 619608 despite lack of redemption by PEPI or direct payment by Dee to PNB.
- Whether PNB, not a party to the contract to sell, is bound to perform obligations of PEPI or AFP-RSBS under that contract.
- Whether Presidential Decree No. 957 or Act 3135 can invalidate or subordinate PNB’s mortgage.
- Whether stipulations in PNB’s Affidavit of Undertaking constitute a stipulation pour aut