Case Summary (G.R. No. 95364)
Factual Background
David’s purchase agreement with FRDC covered the condominium unit “Lorraine Flat 552,” then still in the process of completion, together with a parking space No. S-12. David complied with the installment payment scheme and took possession upon the project’s development stage, treating the unit as her own and notifying the management.
The critical event occurred on January 2, 1978, when FRDC mortgaged the condominium project to Bancom without David’s knowledge and without prior approval by the National Housing Authority, as allegedly required by P.D. No. 957. The mortgage was executed as security for a loan of P40,000,000. After FRDC defaulted, the mortgagee proceeded to extrajudicial foreclosure and included 45 condominium units, among them David’s unit.
After the sheriff executed the Certificate of Sale on March 4, 1980, and redemption lapsed, UBP and FEBTC held certificates of title as highest bidders. Subsequently, UBP offered the units for sale. David, and later Quazon who purchased the unit from David, challenged the effect of those mortgage and foreclosure acts and the resulting condominium title.
HLURB Complaint and Relief Sought
On June 26, 1989, David and Quazon filed their complaint before HLURB against FRDC, UBP, and FEBTC. The complaint sought to annul the condominium certificate of title issued to UBP and FEBTC as highest bidders and to require issuance of a new condominium certificate of title to Quazon as assignee. The pleadings also prayed for authority to deposit on consignation P200,000.00 and for HLURB to order cancellation of the existing title and issuance of a new title consistent with Quazon’s asserted rights.
Proceedings Before the HLURB Arbiter
UBP and FEBTC filed an answer on July 17, 1989, in which UBP questioned HLURB’s jurisdiction. UBP followed with a motion to dismiss on the same ground. In an Order dated August 27, 1990, HLURB Arbiter Cesar Manuel denied the motion, reasoning that the motion would render nugatory the summary nature of proceedings before HLURB. HLURB required the parties to submit position papers within fifteen days and deemed the case submitted for resolution after compliance.
Aggrieved, UBP filed the present petition for certiorari and prohibition with injunction.
The Parties’ Contentions
UBP’s principal contention challenged HLURB’s jurisdiction. It argued that HLURB had no jurisdiction over the complaint’s consignation aspect and that consignation should have been filed in the regular trial courts. UBP also asserted that because HLURB was created in 1981 by E.O. No. 641, it had no jurisdiction over contracts that took effect prior to 1981.
The respondents, consistent with HLURB’s view of the controversy, anchored their complaint on the asserted invalidity of the mortgage executed by FRDC without the required prior written approval of the National Housing Authority, the legality of the foreclosure sale, and the propriety of the condominium certificate of title issued to the highest bidders.
Legal Framework on HLURB/NHA Jurisdiction
The decision addressed the statutory basis for exclusive jurisdiction. P.D. No. 957 declared in Sec. 3 that the National Housing Authority had exclusive jurisdiction to regulate the real estate trade and business. Under Sec. 18, it prohibited any mortgage on a condominium unit or lot without the owner’s or developer’s prior written approval of the Authority, and it required that such approval depended on conditions showing the use of loan proceeds for development and measures ensuring such utilization, along with buyer notification.
P.D. No. 1344 expanded the National Housing Authority’s exclusive jurisdiction by providing in Sec. 1 that, in addition to P.D. No. 957 functions, the National Housing Authority had exclusive jurisdiction to hear and decide cases involving, among others, claims involving refund filed by subdivision lot or condominium unit buyers against the project owner and related parties, and cases involving specific performance of contractual and statutory obligations filed by buyers against the owner, developer, dealer, broker, or salesman.
The institutional transition was relevant. E.O. No. 648 transferred the regulatory and quasi-judicial functions of the National Housing Authority pursuant to P.D. No. 957, P.D. No. 1216, P.D. No. 1344, and other related laws, transferring both functions and necessary personnel and records to the responsible commission. Later, E.O. No. 90 renamed the human settlements regulatory body as the Housing and Land Use Regulatory Board (HLURB).
HLURB Jurisdiction Over the Mortgage, Foreclosure, and Title Annulment
The Court characterized the substance of HLURB’s case as involving the validity of the mortgage executed by FRDC over David’s condominium unit without prior approval of the National Housing Authority, and the legal effect of the title acquired by the mortgagee banks as highest bidders at the extrajudicial foreclosure sale. It held that the complaint’s allegations made out a dispute within the regulatory and quasi-judicial realm defined by P.D. No. 957 and P.D. No. 1344, not merely a private contract dispute for ordinary civil courts.
The decision further observed that FRDC’s act of mortgaging the condominium project without David’s knowledge and consent, and without the required National Housing Authority approval, was not only an “unsound real estate business practice” but also highly prejudicial to the buyer. Accordingly, the buyer had a cause of action for the asserted annulment of the mortgage, the foreclosure sale, and the condominium certificate of title issued to the banks.
Responding to UBP’s Defenses
UBP attempted to defeat the complaint by asserting matters of defense, including claims that the contract between FRDC and David had been rescinded, that installment payments were forfeited, and that FRDC should refund installment payments to David. The Court ruled that such defenses were not proper grounds for a jurisdictional challenge in a petition for certiorari, citing Planters Products Inc. vs. CA and Commercial Corp. vs. PNB for the principle that jurisdictional attacks cannot be anchored on defenses that should be resolved in the merits.
Doctrinal Support From Prior Cases
The Court relied on earlier jurisprudence affirming the administrative board’s authority over disputes that require determination of buyers’ rights under condominium and subdivision regulatory rules.
In Solid Homes Inc. vs. Payawal, the Court struck down a trial court’s exercise of jurisdiction over a lot buyer’s complaint for delivery of title against the subdivision owner. In Antipolo Realty Corporation vs. NHA, the Court upheld the National Housing Authority’s jurisdiction to determine the parties’ rights under a contract to sell involving a subdivision lot, citing P.D. Nos. 957 and 1344. In CT Torres Enterprises vs. Hibionada, the Court affirmed HLURB’s jurisdiction to hear and decide a complaint for specific performance of the seller’s obligation to deliver the title to a subdivision lot, including damages.
These cases were treated as consistent with the view that HLURB’s jurisdiction to regulate the real estate trade is sufficiently broad to encompass not only direct claims for refund or specific performance, but also the annulment of acts affecting the validity of the mortgage and the resulting title, in connection wi
...continue reading
Case Syllabus (G.R. No. 95364)
Parties and Procedural Posture
- Union Bank of the Philippines (UBP) acted as the petitioner in a petition for certiorari and prohibition with preliminary injunction.
- The respondents were the Housing and Land Use Regulatory Board (HLURB), Martha S. David, and Teresita T. Quazon, assisted by her husband Alfonso Maria Quazon.
- HLURB Arbiter Cesar Manuel denied UBP’s jurisdiction-based motion to dismiss in an Order dated August 27, 1990.
- HLURB directed the parties to submit position papers within fifteen (15) days after the denial of the motion to dismiss.
- UBP filed the present petition to stop the HLURB proceedings on the theory that HLURB lacked jurisdiction over the controversy.
- The Court dismissed the petition, thereby sustaining HLURB’s authority to hear and decide the buyer’s complaint.
Key Factual Allegations
- In 1973, Martha David purchased a condominium unit, Lorraine Flat 552, with parking space No. S-12, from Fereit Realty Development Corporation (FRDC) in the “Europa Condominium Villas” project in Baguio City.
- The agreed purchase price was P217,000, with a twenty percent (20%) downpayment of P43,400 and a remaining balance of P173,600 (including interest of 1% per month) payable in 60 equal monthly installments of P3,861.64.
- In 1975, David took possession of the condominium unit as owner with notice to management.
- As of October 1976, David had paid at least twenty-two (22) monthly installments.
- On January 2, 1978, FRDC mortgaged the condominium project to Bancom Development Corporation (Bancom), the predecessor-in-interest of UBP, without David’s knowledge and without prior written approval of the National Housing Authority.
- The mortgage secured a loan of P40,000,000, and FRDC’s failure to pay led Bancom to foreclose the mortgage on 45 condominium units, including David’s unit.
- On March 4, 1980, a Sheriff’s Certificate of Sale was executed to Bancom and Far East Bank and Trust Company (FEBTC) as the highest bidders for a total price of P19,324,000.
- After redemption, UBP offered the units for sale.
- On June 26, 1989, David and Teresita Quazon (who had in the meantime purchased David’s unit) filed a complaint in HLURB to annul the banks’ title and to require issuance of a new condominium certificate of title in Quazon’s name.
- David’s HLURB complaint prayed for permission to deposit on consignation P200,000.00 (to be deposited by and/or in the name of Quazon) for payment to UBP and FEBTC according to their interests.
- The complaint also sought judicial findings that the complainants had fully paid the total purchase price, cancellation of Condominium Certificate of Title No. 1117 in the name of UBP and FEBTC, and issuance of a new certificate of title in Quazon’s name as assignee of the unit.
Grounds Invoked Before HLURB
- UBP and FEBTC challenged HLURB’s jurisdiction by questioning whether HLURB could entertain the buyer’s claims.
- UBP filed a motion to dismiss on the same jurisdictional ground.
- The HLURB Arbiter denied the motion to dismiss, reasoning that granting it would render nugatory the summary nature of proceedings before the office.
- HLURB ordered the parties to file position papers, after which the case would be deemed submitted for resolution.
- UBP’s petition to the Court relied on the premise that HLURB lacked jurisdiction and that the requested reliefs should have been pursued in regular trial courts.
Issues Presented
- The core issue was whether HLURB had jurisdiction over a condominium buyer’s complaint seeking:
- annulment of a real estate mortgage constituted by the project owner without the buyer’s consent and without prior written approval of the National Housing Authority; and
- annulment of the foreclosure sale; and
- annulment of the condominium certificate of title issued to the highest bidders at the foreclosure sale.
- A subsidiary issue was whether the buyer’s prayer for consignation transformed the controversy into a matter exclusively cognizable by regular courts.
- Another subsidiary issue was whether HLURB’s creation in 1981 barred it from exercising jurisdiction over transactions or contractual arrangements that took effect before 1981.
Statutory and Regulatory Framework
- P.D. No. 957 (“The Subdivision and Condominium, Buyer’s Protective Decree”) vested in the National Housing Authority exclusive jurisdiction to regulate the real estate trade and business.
- P.D. No. 957, Sec. 18 required that no mortgage on any unit or lot could be made by the owner or developer without prior written approval of the Authority.
- The decree further specified that approval was contingent on the showing that mortgage proceeds would be used for project development and that effective measures ensured su