In Gregorio De Vera, Jr. v. Court of Appeals, the Supreme Court ruled in favor of a condominium buyer whose unit was improperly foreclosed due to irregularities between the developer and the bank. The Court emphasized the importance of protecting the rights of condominium buyers and ensuring that developers fulfill their obligations to deliver clean titles upon full payment. This decision clarifies the remedies available to buyers when developers fail to remit payments to mortgagees, leading to unjust foreclosure.

Condominium Chaos: Can a Buyer Overcome a Developer’s Mortgage Mess?

The case revolves around Gregorio de Vera, Jr.’s purchase of a condominium unit in Quezon City from Q. P. San Diego Construction, Inc. (QPSDCI). To finance the construction, QPSDCI entered into a Syndicate Loan Agreement with several banks, including Asiatrust Development Bank (ASIATRUST), mortgaging the property and individual condominium units. De Vera entered into a Condominium Reservation Agreement with QPSDCI, arranging for a Pag-IBIG loan to cover a portion of the purchase price. Despite De Vera’s compliance with the down payment and subsequent turnover of the unit, ASIATRUST later claimed that the loan could not be released due to QPSDCI’s failure to remit De Vera’s payments, leading to a foreclosure of the property. The question before the Supreme Court was whether the foreclosure sale was valid and what remedies were available to protect De Vera’s rights as a buyer.

The trial court initially ruled in favor of De Vera, ordering the respondents to pay for the redemption of the unit. However, the Court of Appeals modified this decision, deleting the award for actual and exemplary damages. It found that the regular courts lacked jurisdiction, arguing that the Housing and Land Use Regulatory Board (HLURB) was the proper venue. The Court of Appeals did, however, affirm De Vera’s superior right to the unit, citing QPSDCI’s breach of warranties. The Supreme Court ultimately addressed the issue of damages and the validity of the foreclosure, focusing on the protection afforded to condominium buyers under Philippine law.

At the heart of the matter was the failure of QPSDCI to remit De Vera’s payments to ASIATRUST, which led to the attempted foreclosure. The Supreme Court emphasized that under Presidential Decree No. 957, also known as “The Subdivision and Condominium Buyers’ Protective Decree“, developers have specific obligations to buyers, especially regarding the transfer of title upon full payment. Section 25 of P.D. 957 explicitly states:

Sec. 25. Issuance of Title. – The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith.

The Court underscored that QPSDCI’s negligence in not remitting De Vera’s payments directly contravened this provision. It also clarified the rights of buyers in cases where developers mortgage the property without the buyer’s knowledge or consent. The failure to secure prior written approval from the then National Housing Authority (NHA), now HLURB, for the mortgage, as mandated by Section 18 of P.D. 957, further invalidated the mortgage.

Despite the finding that De Vera had not presented sufficient proof of actual damages to warrant a monetary award, the Supreme Court recognized the need to provide full relief to the petitioner. The Court cited Union Bank of the Philippines v. HLURB, reinforcing the principle that mortgages executed without the buyer’s consent and NHA/HLURB approval could be annulled. The Court emphasized that it could waive the general rule that it may only pass upon assigned errors when the consideration is necessary for a just decision and complete resolution of the case.

Building on this principle, the Supreme Court, in a rare move, acted beyond the specific errors assigned by the petitioner, given the circumstances. It found it necessary to annul the mortgage and foreclosure sale to fully protect De Vera’s rights. The Court stated:

These remedies were clearly within those sought for in petitioner’s complaint. The trial court should have also ordered QPSDCI to credit petitioner’s payments to his outstanding balance and deliver to petitioner a clean CCT upon full payment of the purchase price as mandated by Sec. 25 of PD 957.

This decision provides clarity on the responsibilities of developers and mortgagees in condominium transactions, particularly highlighting the protection afforded to buyers who have fulfilled their financial obligations. The ruling serves as a strong reminder that developers cannot disregard the rights of buyers by failing to remit payments or by mortgaging properties without proper consent and approval. It further reinforces the protective intent of P.D. 957, ensuring that buyers are not unduly prejudiced by the actions of unscrupulous developers or lenders.

The Supreme Court ultimately modified the Court of Appeals’ decision. The mortgage over Unit 211-2C and its subsequent foreclosure sale were declared null and void. The Ex-Officio Sheriff of Quezon City was ordered to cancel the certificate of sale, and the Register of Deeds was directed to cancel the annotations related to the mortgage and certificate of sale. Additionally, QPSDCI and ASIATRUST were ordered to credit all payments made by De Vera to his outstanding balance and to deliver the certificate of title to him upon full payment of the purchase price, free from any penalties, liens, or charges accruing before the finality of the decision. The award of nominal damages of P50,000.00 was affirmed.

FAQs

What was the key issue in this case?	The key issue was whether the foreclosure of Gregorio de Vera’s condominium unit was valid, given the developer’s failure to remit his payments to the mortgagee bank and the lack of proper consent for the mortgage.
What is Presidential Decree No. 957?	Presidential Decree No. 957, also known as “The Subdivision and Condominium Buyers’ Protective Decree,” is a law designed to protect the rights of real estate buyers against unscrupulous developers. It outlines the obligations of developers regarding the sale, mortgage, and delivery of titles for subdivision lots and condominium units.
What does Section 25 of P.D. 957 stipulate?	Section 25 of P.D. 957 requires the developer to deliver the title of the lot or unit to the buyer upon full payment. If there is an existing mortgage, the developer must redeem it within six months of the title’s issuance, ensuring the buyer receives a clean title.
What was the role of ASIATRUST in this case?	ASIATRUST was the lead bank in a syndicate that provided a loan to QPSDCI, secured by a mortgage on the condominium units. ASIATRUST’s failure to properly communicate with De Vera and its attempt to foreclose on his unit were central to the legal dispute.
Why was the foreclosure sale declared null and void?	The foreclosure sale was declared null and void because the mortgage was made without the prior written approval of the NHA/HLURB and without the knowledge and consent of De Vera, violating the provisions of P.D. 957.
What is the significance of the Union Bank v. HLURB case cited in this decision?	The Union Bank v. HLURB case reinforces the principle that mortgages executed without the buyer’s consent and NHA/HLURB approval can be annulled, protecting the rights of buyers against unauthorized encumbrances on their properties.
What remedies were granted to Gregorio de Vera Jr. by the Supreme Court?	The Supreme Court nullified the mortgage and foreclosure sale, ordered the cancellation of the certificate of sale and related annotations, directed the crediting of all payments made by De Vera, and mandated the delivery of the certificate of title upon full payment.
What is the practical implication of this ruling for condominium buyers?	This ruling affirms the strong legal protection afforded to condominium buyers, ensuring that developers fulfill their obligations to deliver clean titles and that mortgages made without proper consent can be invalidated, safeguarding buyers from unjust foreclosure.

In conclusion, De Vera v. Court of Appeals stands as a landmark case, underscoring the judiciary’s commitment to safeguarding the rights of condominium buyers and enforcing the protective provisions of P.D. 957. This decision provides vital guidance for buyers, developers, and lending institutions alike, promoting transparency and fairness in real estate transactions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Gregorio De Vera, Jr. v. Court of Appeals, G.R. No. 132869, October 18, 2001