G.R. No. 104528, 18 January 1996


Private respondents were buyers on installment of subdivision lots from Marikina Village, Inc. (represented by spouses Antonio and Susana Astudillo). Notwithstanding the land purchase agreements it executed over said lots, the subdivision developer mortgaged the lots in favor of the petitioner, Philippine National Bank. Unaware of this mortgage, private respondents duly complied with their obligations as lot buyers and constructed their houses on the lots in question.

Subsequently, the subdivision developer defaulted and PNB foreclosed on the mortgage. As highest bidder at the foreclosure sale, the bank became owner of the lots.

The HLURB Office of Appeals, Adjudication and Legal Affairs (OAALA) ruled that PNB – without prejudice to seeking relief against Marikina Village, Inc. – may collect from private respondents only the “remaining amortizations, in accordance with the land purchase agreements they had previously entered into with” Marikina Village, Inc., and cannot compel private respondents to pay all over again for the lots they had already bought from said subdivision developer.


May a buyer of a property at a foreclosure sale dispossess prior purchasers on installment of individual lots therein, or compel them to pay again for the lots which they previously bought from the defaulting mortgagor-subdivision developer, on the theory that P.D. 957, “The Subdivision and Condominium Buyers’ Protective Decree”, is not applicable to the mortgage contract in question, the same having been executed prior to the enactment of P.D. 957?


While P.D. 957 did not expressly provide for retroactivity in its entirety, yet the same can be plainly inferred from the unmistakable intent of the law 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 favors 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 ascertained (whether thru ocular inspection or other modes of investigation) the actual status, condition, utilization and occupancy of the property offered as collateral. It could not have been unaware that the property had been built on by small lot buyers. 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.”

Truly, this Court cannot allow the injustice that will be wrought by a strictly prospective application of the law. Little people who have toiled for years through blood and tears would be deprived of their homes through no fault of their own.

Protection must be afforded small homeowners who toil and save if only to purchase on installment a tiny home lot they can call their own. The consuming dream of every Filipino is to be able to buy a lot, no matter how small, so that he may somehow build a house. It has, however, been seen of late that these honest, hard-living individuals are taken advantage of, with the delivery of titles delayed, the subdivision facilities, including the most essential such as water installations not completed, or worse yet, as in the instant case, after almost completing the payments for the property and after constructing a house, the buyer is suddenly confronted by the stark reality, contrived or otherwise, in which another person would now appear to be owner.

We cannot over emphasize the fact that the BANK cannot barefacedly argue that simply because the title or titles offered as security were clean of any encumbrance or lien, that it was thereby relieved of taking any other step to verify the over-reaching implications should the subdivision be auctioned on foreclosure. The BANK could not have closed its eyes that it was dealing over a subdivision where there were already houses constructed. Did it not enter the mind of the responsible officers of the BANK that there may even be subdivision residents who have almost completed their installment payments?

Thus, as the country strives to move ahead towards economic self-sufficiency and to achieve dreams of “NIC-hood” and social well-being for the majority of our countrymen, we hold that petitioner Bank, the premier bank in the country, which has in recent years made record earnings and acquired an enviable international stature, with branches and subsidiaries in key financial centers around the world, should be equally as happy with the disposition of this case as the private respondents, who were almost deprived and dispossessed of their very homes purchased through their hard work and with their meager savings.

*Case digest by Legine S. Ramayla, JD – 4, Andres Bonifacio College, SY 2019 – 2020