Union Bank of the Philippines vs. Housing and Land Use Regulatory Board

The Housing and Land Use Regulatory Board has exclusive jurisdiction over a condominium unit buyer’s complaint for annulment of a mortgage, foreclosure sale, and the resulting certificate of title, where the project owner mortgaged the unit without the buyer’s knowledge and without the prior written approval of the National Housing Authority in violation of Section 18 of Presidential Decree No. 957; such a complaint constitutes an unsound real estate business practice and a buyer’s claim against the project owner under Presidential Decree No. 1344, and the HLURB’s broad regulatory jurisdiction extends to the annulment of the mortgagee-bank’s title.

Martha S. David acquired a condominium unit from Fereit Realty Development Corporation in Baguio City in 1973 on installment. She took possession in 1975 and had paid at least twenty-two installments by late 1976. In early 1978, FRDC mortgaged the entire condominium project to Bancom Development Corporation, predecessor-in-interest of Union Bank, to secure a P40 million loan. The mortgage was executed without David’s knowledge and without the prior written approval of the National Housing Authority. FRDC defaulted, and Bancom foreclosed on 45 units, including David’s, acquiring title after the redemption period lapsed. David later sold her interest to Teresita Quazon. The buyers then filed a complaint before the HLURB seeking annulment of the mortgage, the foreclosure sale, and the condominium certificate of title issued to the banks, along with the issuance of a new title in Quazon’s name.

• Purchase and Installment Payments: In 1973, Martha S. David purchased from Fereit Realty Development Corporation (FRDC) a condominium unit, Lorraine Flat 552, with parking space No. S-12, in the “Europa Condominium Villas” project in Baguio City. The agreed price was P217,000. David made a 20% downpayment of P43,400, leaving a balance of P173,600 (including 1% monthly interest) payable in 60 equal monthly installments of P3,861.64. By October 1976, she had paid at least twenty-two installments and had taken possession of the unit in 1975 with notice to management.
• Unauthorized Mortgage: On 2 January 1978, FRDC, without the knowledge or consent of David and without the prior written approval of the National Housing Authority (NHA), mortgaged the condominium project to Bancom Development Corporation (Bancom), predecessor-in-interest of petitioner Union Bank of the Philippines (UBP), as security for a P40,000,000 loan.
• Default, Foreclosure, and Title in Favor of Banks: FRDC failed to pay its obligation, which Bancom computed at P42,075,134.84 as of 30 June 1979. Bancom extrajudicially foreclosed the mortgage on 45 condominium units, including David’s unit. On 4 March 1980, the Sheriff executed a Certificate of Sale in favor of Bancom and Far East Bank and Trust Company (FEBTC) as the highest bidders for P19,324,000. After the redemption period expired, UBP held out the units for sale.
• HLURB Complaint by Buyers: On 26 June 1989, David and Teresita T. Quazon (who had purchased David’s interest, assisted by her husband Alfonso Maria Quazon) filed a complaint before the HLURB against FRDC, UBP, and FEBTC. The complaint specifically prayed for: (a) an order allowing deposit of P200,000 in consignation to be paid to UBP and FEBTC according to their respective interests; (b) a declaration that complainants had fully paid the purchase price; (c) cancellation of Condominium Certificate of Title No. 1117 in the names of UBP and FEBTC; and (d) issuance of a new condominium certificate of title in the name of Teresita T. Quazon.
• UBP’s Jurisdictional Challenge: UBP and FEBTC filed an answer questioning the HLURB’s jurisdiction and UBP moved to dismiss on the same ground, arguing that the complaint was essentially for consignation, cognizable by regular courts, and that the HLURB, created only in 1981, could not exercise jurisdiction over contracts that took effect before that year. The HLURB Arbiter denied the motion.

• Lack of Jurisdiction over Consignation: Petitioner argued that the complaint before the HLURB was fundamentally one for consignation, a matter falling within the exclusive jurisdiction of regular trial courts, and therefore outside the HLURB’s quasi-judicial authority.
• No Jurisdiction over Pre-1981 Contracts: Petitioner maintained that the HLURB was created only in 1981 under Executive Order No. 648 and could not exercise jurisdiction over contracts, such as the 1973 purchase agreement between David and FRDC, that took effect prior to its creation.
• Rescission and Forfeiture: Petitioner contended that the contract between FRDC and David had been rescinded, the installment payments forfeited, and that any refund was the sole responsibility of FRDC, not the bank—arguments characterized as mere defenses not properly litigable in a petition for certiorari.

• Exclusive Jurisdiction under P.D. No. 957 and P.D. No. 1344: Respondents asserted that the HLURB possessed exclusive jurisdiction because FRDC’s act of mortgaging the condominium unit without the buyer’s knowledge and without prior NHA approval was an unsound real estate business practice and a claim by a buyer against the project owner, as well as a case for specific performance of statutory obligations, all within the protective decree’s coverage.
• Regulatory Character of the Action: The complaint sought to annul the mortgage and its consequences due to direct violations of the buyer-protective provisions of P.D. No. 957, thereby invoking the regulatory and quasi-judicial functions transferred to the HLURB, not merely a contractual consignation.

• Exclusive Jurisdiction of HLURB: Whether the Housing and Land Use Regulatory Board had exclusive jurisdiction to hear and decide a condominium buyer’s complaint for (a) 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; (b) annulment of the foreclosure sale; and (c) annulment of the condominium certificate of title issued to the highest bidder at the foreclosure sale.

• Exclusive Jurisdiction of HLURB: The HLURB properly assumed exclusive jurisdiction over the complaint. Section 3 of Presidential Decree No. 957 vested the NHA with exclusive jurisdiction to regulate the real estate trade and business. Section 18 of the same decree prohibited any mortgage on a condominium unit by the owner or developer without prior written approval of the Authority. FRDC’s act of mortgaging the project without David’s knowledge and without NHA approval was an unsound real estate business practice highly prejudicial to the buyer. Presidential Decree No. 1344 expanded the NHA’s exclusive jurisdiction to include unsound real estate business practices, claims filed by condominium unit buyers against project owners, and cases involving specific performance of contractual and statutory obligations. Executive Order No. 648 later transferred these regulatory and quasi-judicial functions to the Human Settlements Regulatory Commission, which was renamed the HLURB by Executive Order No. 90. The complaint for annulment of mortgage, foreclosure sale, and title fell squarely within the categories of an unsound practice, a buyer’s claim, and an action for specific performance of the developer’s statutory duties. The argument that the HLURB lacked jurisdiction over pre-1981 contracts was rejected because jurisdiction attached to the nature of the claim under P.D. No. 957 (1976) and P.D. No. 1344 (1978), both of which predated the transaction. The contentions regarding rescission and forfeiture of installment payments were matters of defense that could not be adjudicated in a petition for certiorari.

• HLURB’s Exclusive Jurisdiction over Buyer’s Claims under P.D. No. 957 and P.D. No. 1344 — The Housing and Land Use Regulatory Board has exclusive jurisdiction over complaints filed by subdivision lot or condominium unit buyers against project owners, developers, or dealers, including actions for annulment of mortgages that violate Section 18 of P.D. No. 957, annulment of the consequent foreclosure sale, and cancellation of the resulting certificate of title. A complaint of this nature constitutes a claim involving unsound real estate business practices and falls within the buyer’s right to seek specific performance of statutory obligations. The Court applied this doctrine by dismissing the bank’s jurisdictional challenge and upholding the HLURB’s authority to entertain the entire controversy.
• Mortgage without NHA Approval as Unsound Real Estate Business Practice — The act of a condominium developer in mortgaging the project without the prior written approval of the National Housing Authority and without notifying the buyer is an unsound real estate business practice that renders the mortgage and any subsequent title acquired through foreclosure subject to annulment at the buyer’s instance under P.D. No. 957 and P.D. No. 1344.

• “Clearly, FRDC’s act of mortgaging the condominium project to Bancom and FEBTC, without the knowledge and consent of David as buyer of a unit therein, and without the approval of the NHA (now HLURB) as required by P.D. No. 957, was not only an unsound real estate business practice but also highly prejudicial to the buyer.”
• “We hold that the jurisdiction of the HLURB to regulate the real estate trade is broad enough to include jurisdiction over complaints for specific performance of the sale, or annulment of the mortgage, of a condominium unit, with damages.”

• Solid Homes Inc. vs. Payawal, 177 SCRA 72 — Followed; the Supreme Court struck down the Regional Trial Court’s exercise of jurisdiction over a lot buyer’s complaint for delivery of title against the subdivision owner, affirming the exclusive jurisdiction of the NHA/HLURB.
• Antipolo Realty Corporation vs. NHA, 153 SCRA 399 — Followed; upheld the NHA’s jurisdiction to determine the rights of parties under a contract to sell a subdivision lot, reinforcing the regulatory body’s broad authority.
• CT Torres Enterprises vs. Hibionada, 191 SCRA 268 — Followed; affirmed the HLURB’s exclusive jurisdiction to hear and decide a complaint for specific performance of a seller’s obligation to deliver title to a subdivision lot, with damages.
• Planters Products Inc. vs. CA, 193 SCRA 563; Commercial Corp. vs. PNB, 175 SCRA 1 — Cited for the procedural rule that defenses on the merits such as rescission and forfeiture are not proper subjects of a petition for certiorari.

• Section 3, Presidential Decree No. 957 — Vests the National Housing Authority with exclusive jurisdiction to regulate the real estate trade and business in accordance with the decree; served as the statutory anchor for the HLURB’s exclusive regulatory and quasi-judicial authority over the complaint.
• Section 18, Presidential Decree No. 957 — Prohibits any mortgage on a condominium unit or subdivision lot by the owner or developer without prior written approval of the Authority and requires notification of the buyer; the violation of this provision constituted the unsound practice giving rise to the buyer’s cause of action.
• Section 1, Presidential Decree No. 1344 — Expanded the NHA’s exclusive jurisdiction to hear and decide cases on unsound real estate business practices, claims involving refund and any other claims filed by buyers against project owners or developers, and cases of specific performance of contractual and statutory obligations; the buyer’s complaint fell under “any other claims” and specific performance.
• Section 8, Executive Order No. 648 — Transferred the regulatory and quasi-judicial functions of the NHA under P.D. No. 957, P.D. No. 1344, and other related laws to the Human Settlements Regulatory Commission, expressly including the approval of mortgages on condominium units and the adjudication of buyer claims.
• Executive Order No. 90 — Renamed the Human Settlements Regulatory Commission to the Housing and Land Use Regulatory Board (HLURB), confirming the agency’s continued possession of the transferred powers.

Cruz, Medialdea, and Bellosillo, JJ., concurred. No separate concurring opinions were issued.