PRUDENTIAL BANK vs. RAPANOT

PRUDENTIAL BANK vs. RAPANOT

GR No. 191636

JANUARY 16, 2017

FACTS:

Golden Dragon Real Estate Corporation (Golden Dragon) is the developer of Wack-Wack Twin Towers Condominium in Mandaluyong City.  Ronald Rapanot (Ronald) bought Unit 2308-B2, on May 9, 1995.  On September 13, 1995, the Bank of the Philippine Islands, formerly known as Prudential Bank (Bank),  extended a loan to Golden Dragon in the amount of P50,000,000.00 to be utilized by the latter as additional working capital.  To secure the loan, Golden Dragon executed a mortgage Agreement in favor of the Bank, which had the effect of constituting a real estate mortgage over several condominium units owned and registered under Golden Dragon’s name.  Unit 2308-B2 is among said units subject of said mortgage agreement.

Ronald made several verbal demands for the delivery of Unit 2308-B2, being its lawful owner, but to no avail.  Hence he filed a complaint before the Expanded National Capital Region Field Office of the Housing and Land Use Regulatory Board (HLURB).    No settlement was arrived at before the said Office. The Arbiter rendered a decision on July 3, 2002, in favor of Ronald, directing Golden Dragon and the Bank to deliver to Ronald the title of the condominium unit and to pay damages and costs.

On January 16, 2003, the Bank filed a Petition for Review with the HLURB Board Commissioner, who, in turn affirmed the decision of the HLURB.  Thereafter the Bank went to the Office of the President, which denied its appeal declaring that the Bank was given due process, and adopted the ruling of the HLURB.  Again, the Bank appealed to the Court of Appeals, who in turn affirmed the decision of the HLURB.

ISSUES:

1. Whether or not the Court of Appeals erred when it affirmed the resolution of the Office of the President finding that the Bank had been afforded due process before the HLURB; and
2. Whether the not the Court of Appeals erred when it affirmed the resolution of the Office of the President that the Bank cannot be considered a mortgagee in good faith.

HELD: 

NO.  The Bank was not deprived of due process before the HLURB.  The Bank was able to set out its position by participating in the preliminary hearing and the scheduled conferences before the Arbiter and even assert its special and affirmative defenses in its Answer to Ronald’s claim.

It was a clear fact that the Arbiter merely acted in accordance with the 1996 Rules of Procedure of the HLURB when it rendered its decision on the basis of the pleadings and records submitted by the parties. 

The mortgage agreement is null and void against Ronald, and thus cannot be enforced against him.  The Bank failed to take note of Section 18 of Presidential Decree No. 957 which states:  no mortgage on any unit or lot shall be made by the owner or developer without prior approval of the Authority.  The mortgage entered into by and between the Bank and Golden Dragon violates the said provision.  Ronald, who was the buyer of the subject condominium unit, was not notified of the mortgage before the release of the loan proceeds by the Bank.  It was an act executed against the provisions of mandatory prohibitory laws, hence, void because of the Bank’s failure to comply with PD 957.