465 Phil. 276
PANGANIBAN, J.:
“WHEREFORE, the petition for review is DENIED, for lack of merit.”[3]
“1. On 13 March 1989, respondent [Arturo] Marquez entered into a Contract to Sell with Transamerican Sales and Exposition (‘TSE’), through the latter’s Owner/General Manager Engr. Jesus Garcia, involving a 52.5 sq. m. lot in Diliman, Quezon City with a three-storey townhouse unit denominated as Unit No. 10 to be constructed thereon for a total consideration of P800,000.00. The parcel of land in question is a portion of that property covered by TCT No. 156254 (now TCT No. 383697).Petitioner then elevated the case to the CA through a Petition for review under Rule 43.
“2. On 22 May 1989, TSE obtained a loan from petitioner FEBTC in the amount of P7,650,000.00 and mortgaged the property covered by TCT No. 156254.
“3. For failure of TSE to pay its obligation, petitioner FEBTC extrajudicially foreclosed the real estate mortgage and became the highest bidder (P15.7 million) in the auction sale conducted for the purpose.
“4. Respondent had already paid a total of P600,000.00 when he stopped payment because the construction of his townhouse unit slackened. He discovered later on that this was due to the foreclosure.
"5. Consequently, [respondent] instituted a case with the Office of Appeals, Adjudication and Legal Affairs (‘OAALA’) of the Housing and Land Use Regulatory Board (‘HLURB’) on 29 January 1991 entitled ‘Arturo Marquez vs. Transamerican Sales, et al’ docketed as HLRB Case No. REM-012991-4712 to compel TSE to complete the construction of the townhouse and to prevent the enforceability of the extra-judicial foreclosure made by petitioner FEBTC and to have the mortgage between TSE and petitioner FEBTC declared invalid, said mortgage having been entered into by the parties in violation of section 18 of P.D. 957.
“6. The OAALA ruled in favor of the respondent via a Decision dated 11 November 1991, the decretal portion of which reads as follows:‘WHEREFORE, premises considered, judgment is hereby rendered as follows:“7. Petitioner FEBTC interposed a Petition for Review from the decision issued by the OAALA with the Board of Commissioners of the HLURB, docketed as HLRB Case No. REM-A-1126, which in a Decision dated 18 July 1994 affirmed in toto the OAALA decision.
- Declaring the mortgage executed by and between x x x Engr. Jesus Garcia/Transamerican Sales and Exposition and Far East Bank and Trust Company to be unenforceable against [respondent];
- Ordering the x x x Far East Bank and Trust Company to compute and/or determine the loan value of the [respondent] who was not able to complete or make full payment and accept payment and/or receive the amortization from the [respondent] and upon full payment to deliver the title corresponding to Unit No. 10 of that Townhouse Project located at No. 10 Panay Ave., Quezon City;
- Ordering the Register of Deeds of Quezon City to cancel the annotations of the mortgage indebtedness between x x x Engr. Jesus Garcia and Far East Bank and Trust Company;
- Ordering, likewise, the Register of Deeds of Quezon City to cancel the annotation of the Certificate of Sale in favor of the Far East Bank and Trust Company on Transfer Certificate of Title No. 156254 to which the lot subject of this case is a part thereof, without prejudice to its right to require x x x Engr. Jesus Garcia/Transamerican Sales and Exposition to constitute new collateral in lieu of said title sufficient in value to cover the mortgage obligation.’
xxx xxx xxx’
“8. Hence, petitioner FEBTC appealed the Decision dated 18 July 1994 to the Office of the President xxx.
xxx xxx xxx’
“9. The Office of the President dismissed the appeal and affirmed the Decision dated 18 July 1994 x x x.”[4] (Citations omitted)
“Whether or not the mortgage contract violated Section 18 of P.D. 957, hence, void insofar as third persons are concerned.
“Assuming arguendo that the mortgage contract violated Section 18 of P.D. 957, whether or not the remedy granted and imposed by the HLURB, as sustained by the Office of the President and the Court of Appeals, is proper.
“Whether or not the inadvertent failure of the notary public to affix his signature on the Certification against forum shopping executed by petitioner FEBTC in connection with the Petition for Review it filed with the Court of Appeals provided a sufficient basis for the dismissal of the appeal.”[8]
“SEC. 18. Mortgages.-No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereof.”Petitioner contends that the above-quoted provision does not apply to this case, because the land mortgaged to it was one whole parcel, not of a “subdivision lot,” but of an unsubdivided one. It insists that the written approval of the National Housing Authority (now the Housing and Land Use Regulatory Board) was not a requirement for the constitution of a mortgage on the property.
“There is no well-defined rule by which a mandatory or prohibitory law may, in all circumstances, be distinguished from one which is directory, suppletory, or permissive. In the determination of this question, the prime object is to ascertain the legislative intention. Generally speaking, those provisions which are mere matter of form, or which are not material, do not affect any substantial right, and do not relate to the essence of the thing to be done, so that compliance is a matter of convenience rather that substance, are considered to be directory. On the other hand, statutory provisions which relate to matters of substance, affect substantial rights and are the very essence of the thing required to be done, are regarded as mandatory.”[10]In Philippine National Bank v. Office of the President,[11] we had occasion to mull over the intent of PD 957 thus:
“x x x [T]he unmistakable intent of the law [is] to protect innocent lot buyers from scheming subdivision developers. As between these small lot buyers and the gigantic financial institutions which the developers deal with, it is obvious that the law -- as an instrument of social justice -- must favor the weak. Indeed, the petitioner Bank had at its disposal vast resources with which it could adequately protect its loan activities, and therefore is presumed to have conducted the usual ‘due diligence’ checking and ascertaining (whether thru ocular inspection or other modes of investigation) the actual status, condition, utilization and occupancy of the property offered as collateral, x x x On the other hand, private respondents obviously were powerless to discover the attempt of the land developer to hypothecate the property being sold to them. It was precisely in order to deal with this kind of situation that P.D. 957 was enacted, its very essence and intendment being to provide a protective mantle over helpless citizens who may fall prey to the razzmatazz of what P.D. 957 termed ‘unscrupulous subdivision and condominium sellers.’”[12]Concededly, PD 957 aims to protect innocent lot buyers. Section 18 of the decree directly addresses the problem of fraud committed against buyers when the lot they have contracted to purchase, and which they have religiously paid for, is mortgaged without their knowledge. The avowed purpose of PD 957 compels the reading of Section 18 as prohibitory -- acts committed contrary to it are void.[13] Such construal ensures the attainment of the purpose of the law: to protect lot buyers, so that they do not end up still homeless despite having fully paid for their home lots with their hard-earned cash.
“x x x. As a general rule, where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. This rule, however, admits of an exception as where the purchaser or mortgagee has knowledge of a defect or lack of title in the vendor, or that he was aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the property in litigation.”[14]Petitioner bank should have considered that it was dealing with a town house project that was already in progress. A reasonable person should have been aware that, to finance the project, sources of funds could have been used other than the loan, which was intended to serve the purpose only partially. Hence, there was need to verify whether any part of the property was already the subject of any other contract involving buyers or potential buyers. In granting the loan, petitioner bank should not have been content merely with a clean title, considering the presence of circumstances indicating the need for a thorough investigation of the existence of buyers like respondent. Having been wanting in care and prudence, the latter cannot be deemed to be an innocent mortgagee.
“Art. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity.”[14] Col. De la Merced v. Government Service Insurance System, 417 Phil. 324, 338, September 11, 2001, per Ynares-Santiago, J.; citing State Investment House, Inc. v. Court of Appeals, 254 SCRA 368, March 5, 1996.