[G.R. No. 188802. February 14, 2011.

]
REVELINA LIMSON, petitioner, vs. WACK WACK CONDOMINIUM CORPORATION, respondent.
CARPIO MORALES, J p:
DECISION
On January 22, 1996, Revelina Limson 1 (Revelina) purchased from Conchita Benitez an apartment unit (Unit 703)
at Wack Wack Apartments, Wack Wack Road, Mandaluyong City.
Upon moving in, Revelina noticed defects in the electrical main panel located inside the unit, drawing her to report
them, by letter of February 22, 1996, to the Wack Wack Condominium Corporation (respondent), a non-stock
corporation organized for the purpose of holding title to and managing the common areas of Wack Wack
Apartments.
Racquel Gonzalez, who sits as Member of respondent's Board of Directors, replied by letter of February 23, 1996
that under Section 3 of the House Rules and Regulations, it is the duty of the unit owner to maintain the electrical
and plumbing systems at his/her expense.
By still another letter dated February 28, 1996, Revelina informed respondent that the "switch board is such that
No. 12 wire is protected by 30 ampere fuse" and that five appliances — refrigerator, freezer, iron, dryer and
washing machine — are connected to only one fuse.
Revelina later sought professional assistance from a private electrical consultant, Romago, Incorporated. It was
concluded that the wirings in Unit 703 are unsafe, hazardous and did not comply with the Philippine Electrical
Code.
On Revelina's request, the City Building Office conducted an inspection of Unit 703 following which a Report dated
January 21, 1997 was accomplished with the following findings and recommendations:
Findings:
1. The load center consists of 100 A 2 pst main switch and fusible cut out Blocks with 16 circuits. The fusible cut out
block enclosure is not provided with cover, exposing electrical live part that makes it hazardous, unsafe and will be
difficult to maintain because a portion was blocked by a shelf.
2. The jumper cable from main safety switch to fusible cut-out blocks used 2 #10 wire (Capt. 60 amp) per phase.
This is undersized and would overheat.
3. The fusible current protective devise where all 30 Amp., sp., 240 v FOR 2 #12 TW (20 AMP. Capacity wire) this
does not comply with the provision of the Philippine Electrical Code that stipulates rating of the protective devise
shall be the same as the conductor ampacity especially on a multi outlet circuit.
4. Power supply for water heaters was tapped to small appliance for convenience outlet circuit.
Recommendation:
1. Replacement of fusible load center with panel board and circuit breaker components to correct the problem as
enumerated on items 2, 3, 4 of our findings.
2. Replace the embedded circular loom with conduit on moulding.
3. Check all grounded circuit for water heater lad.
4. Provide separate circuit for water heater lad.
5. Submit as Built Electrical Plan signed and sealed by a Professional Electrical Engineer together with the previous
approved Electrical Plan. (emphasis and underscoring supplied)
The Report was sent by then Mayor Benjamin Abalos, Sr. to respondent by letter dated January 31, 1997. On
February 3, 1997, respondent, through Architect Eugenio Gonzalez, wrote Revelina to demand that repairs in line
with the above-stated recommendation of the City Building Office be undertaken within ten (10) days.
Before the deadline, respondent's Board of Directors convened on February 7, 1997 and resolved to impose a daily
fine of P1,000.00 on Revelina and her husband Benjamin, to commence on February 14, 1997, should the latter fail
to comply.
Revelina and her husband refused to undertake the repairs and to pay the fine. They claimed that the electrical
main panel forms part of the common areas, citing Section 6 of Republic Act No. 4726, 2 "AN ACT TO DEFINE
CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS CREATION AND GOVERNMENT OF ITS INCIDENTS," the
pertinent provision of which reads:
Sec. 6. Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the
incidents of a condominium grant are as follows:
a.) . . . The following are not part of the unit: bearing walls, columns, floors, roofs, foundations, and other common
structural elements of the buildings; lobbies, stairways, hallways and other areas of common use, elevator
equipment and shafts, central heating, central refrigeration and central air conditioning equipment, reservoir,
tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits wires and other utility
installations, wherever located, except the outlets thereof when located within the unit. (emphasis and
underscoring supplied)
They argued that an electrical main panel is in the nature of a utility installation.
Meanwhile, Revelina and her husband purchased an oversized whirlpool. In the process of installation, the 7th
floor utility room which is adjacent to Unit 703 was damaged.
Revelina claimed that an agreement had been reached under which respondent would take charge of the repair of
the utility room and would bill her for the cost incurred therefor but respondent failed to do so. Yet the Board of
Directors assessed her and her husband a fine of P1,000.00 per day until the utility room is repaired.
Respondent thereupon filed a complaint for specific performance and damages against Revelina and Benjamin
before the Securities and Exchange Commission (SEC) upon the following causes of action:
1. To compel the defendants (Spouses Limson) to undertake the necessary repairs of the defective and hazardous
condition of the electrical wiring of their Unit 703 in accordance with the report and recommendation of the Office
of the Building Official of Mandaluyong City;
2. To seek payment of liquidated damages from the defendants in accordance with the Resolution of the Board of
Directors of plaintiff (respondent herein), starting February 15, 1997 until the defendants shall have complied with
the aforestated report and recommendation of the building officials; and
3. To seek payment of [sic] from the defendants for the damages they have caused to the common area of Wack
Wack Apartments due to their insistence to install in their unit an over-sized whirlpool. 3
Pursuant to A.M. No. 01-2-04-SC n, 4 the complaint was transferred to the Regional Trial Court (RTC) of
Mandaluyong City for disposition.
As of June 30, 1997, the assessments and penalties charged against the spouses had reached P569,736.94. On July
17, 1997, respondent filed a Notice of Assessment with the Register of Deeds, Mandaluyong City with application
for foreclosure and public auction of Unit 703.
At the public auction held on August 28, 1997, respondent emerged as highest bidder and thereupon purchased
Unit 703 in the amount of P569,736.94, on account of which it was issued a Certificate of Sale on September 15,
1997.
By Decision of December 22, 2003, Branch 214 of the Mandaluyong RTC dismissed respondent's complaint for lack
of merit in this wise:
Guided by the findings and recommendation of the building official of Mandaluyong City, it would appear that the
questioned electrical installations are to be considered as part of the common area and not of Unit 703, though
the same are necessarily found inside the said unit. As contained in Section 6, par. 1 of the Condominium Act: "a)
The boundary of the Unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows and
doors thereof. The following are not part of the unit: bearing walls, columns, floors, roofs, foundations, and other
common structural elements of the buildings; lobbies, stairways, hallways and other areas of common use,
elevator equipment and shafts, central heating, central refrigeration and central air conditioning equipment,
reservoir, tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits wires and
other utility installations, wherever located, except the outlets thereof when located within the unit. (underscoring
supplied; emphasis in the original) 5
On appeal, the Court of Appeals, by Decision of December 19, 2008, 6 reversed the decision of the trial court,
holding in the main that for the electrical main panel to be considered as part of the common areas, it should have
been intended for communal use and benefit. The subject electrical main panel being located inside the unit and
its principal function being to control the flow of electricity into the unit, the appellate court concluded that
charges for its repair cannot be for respondent's account.
On the imposition of fine on the spouses Limson for failure to correct the faulty electrical wiring despite notice, the
appellate court upheld respondent's authority to enforce the same. Finding, however, that the amount of P1,000
fine per day was excessive, it reduced the same to P200.
Respecting respondent's imposition of a fine of P1,000 per day on the spouses' alleged failure to repair the 7th
floor utility room, the appellate court disallowed the same, however, it holding that respondent did not first seek
reimbursement from them before assessment.
Finally, the appellate court denied respondent's prayer for actual damages in the amount of P5,000 representing
repair expenses on the utility room, it having failed to present receipts therefor.
Her Motion for Reconsideration having been denied, Revelina filed the present petition for review.
The Court finds for Revelina.
The pertinent provisions of the Wack Wack Apartments Master Deed follow:
Section 5. The Common Areas. — The common elements or areas of the Project (herein referred to as the
"Common Areas") shall comprise all parts of the Project other than the Units, including without limitation the
following:
xxx xxx xxx
(e) All central and appurtenant equipment and installations for common facilities and utilities such as power, light,
sewerage, drainage, garbage chute, and water connections (including all outlets, pipes, ducts, wires, cables and
conduits used in connection therewith, whether located in Common Areas or in Units); all elevators, elevator
shafts, tanks, pumps, motors, fans, compressors, and control equipment; all common utility spaces and areas;
(f) All other parts of the Project and all apparatus, equipment and installations therein which are for common use
or necessary or convenient for the existence, maintenance of safety of the Project. (emphasis and underscoring
supplied)
Section 3. Maintenance, Repairs and Alterations. — (a) All maintenance of and repairs of any Unit (other than the
maintenance of and repairs to any of the Common Areas contained therein not necessitated by the act or
negligence of the owner, tenant or occupant of such Unit) shall be made [by], and at the expense of, the owner of
such unit. Each Unit owner shall be responsible for all damages to any other Unit and to the Common Areas
resulting from his failure to effect such maintenance and repairs. Each Unit owner shall also be responsible for
promptly reporting to the Condominium Corporation any defect or need for repairs in any of the Common Areas in
his Unit. (emphasis and underscoring supplied)
xxx xxx xxx
Section 3 (e) of R.A. 4726 defines "common areas" as "the entire project except all units separately granted or held
or reserved." Section 6 (a) of the same law provides:
a.) . . . The following are not part of the unit: bearing walls, columns, floors, roofs, foundations, and other common
structural elements of the buildings; lobbies, stairways, hallways and other areas of common use, elevator
equipment and shafts, central heating, central refrigeration and central air conditioning equipment, reservoir,
tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits wires and other utility
installations, wherever located, except the outlets thereof when located within the unit. (emphasis and
underscoring supplied)
The electrical panel's location inside the unit notwithstanding, it is not automatically considered as part of it. The
above-quoted pertinent provisions of the law and the master deed contemplate that "common areas," e.g., utility
installations, may be situated within the unit.
Where a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without
attempt to interpret. 7 Verba legis non est recedendum, index animi sermo est. There should be no departure
from the words of the statute, for speech is the index of intention.
An explanation of the Apartment's electrical supply system was presented by respondent, viz.:
a.) . . . [T]he electrical system of the Apartments commences with a common main electrical line (main line)
provided by the Apartments, connected to a Meralco line outside the building. This common main line runs to the
ground floor of the building, where the common meter station is located; from where individual secondary lines,
are tapped to the common main line. There are as many individual secondary lines tapped to the common main
line, as there are units. EVERY SECONDARY LINE TRAVELS VERTICALLY TO ITS DESIGNATED FLOOR AND LEADS TO
AN INDIVIDUAL UNIT.
b.) The construction is such, that every secondary line is embedded within the wall of a unit, until it surfaces from
the wall, ready to supply electricity to that unit; the UNIT, in this case, has two (2) metal boxes, inside the UNIT;
both attached to the wall of the UNIT. The first of the two (2) metal boxes is the main switch box. (Annexes "B" and
"B-1"). The main switch box has a hole, through which the secondary line enters and is attached to the upper end
of two (2) big fuses, located in the main switch box (Annex "B-1-a"). The upper end of the two (2) big fuses, where
the secondary line (tapped to the main line) ends are indicated and marked as (Annexes "B-1-b" and "B-1-c").
c.) At the lower end of these two (2) big fuses, there are separate electrical wires (technically called " jumper
cables"). The jumper cables originate in the UNIT's second metal box which is the fusible cutout box (fuse box), and
the jumper cables are connected to the lower end of the two (2) big fuses in the main switch box to draw
electricity to feed the fuse box. . . . 8 (capitalization and underscoring in the original)
In a multi-occupancy dwelling such as Apartments, limitations are imposed under R.A. 4726 9 in accordance with
the common interest and safety of the occupants therein which at times may curtail the exercise of ownership. To
maintain safe, harmonious and secured living conditions, certain stipulations are embodied in the duly registered
deed of restrictions, in this case the Master Deed, and in house rules which the condominium corporation, like
respondent, is mandated to implement. Upon acquisition of a unit, the owner not only affixes his conformity to the
sale; he also binds himself to a contract with other unit owners. 10
Unquestionably, the fuse box controls the supply of electricity into the unit. Power is sourced through jumper
cables attached to the main switch which connects the unit's electrical line to the Apartment's common electrical
line. It is an integral component of a power utility installation. Respondent cannot disclaim responsibility for the
maintenance of the Apartments' electrical supply system solely because a component thereof is placed inside a
unit.
As earlier stated, both the law and the Master Deed refer to utility installations as forming part of the common
areas, which reference is justified by practical considerations. Repairs to correct any defects in the electrical wiring
should be under the control and supervision of respondent to ensure safety and compliance with the Philippine
Electrical Code, 11 not to mention security and peace of mind of the unit owners.
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of December 19, 2008 is REVERSED and SET
ASIDE. The Decision of Branch 214 of the Mandaluyong Regional Trial Court dismissing the complaint of Wack
Wack Condominium Corporation against Revelina and Benjamin Limson is, in light of the foregoing discussions,
REINSTATED.
SO ORDERED.
[G.R. No. 163196. July 4, 2008.]
FIRST MARBELLA CONDOMINIUM ASSOCIATION, INC., petitioner, vs. AUGUSTO GATMAYTAN, respondent.
DECISION
AUSTRIA-MARTINEZ, J p:
From the January 7, 2004 Order 1 of the Regional Trial Court (RTC), Pasay City, denying the request of First
Marbella Condominium Association, Inc. (petitioner) for extrajudicial foreclosure against Augusto Gatmaytan
(respondent); and the March 31, 2004 RTC Order, 2 denying petitioner's Motion for Reconsideration, the latter
filed directly with this Court a Petition for Review on Certiorari under Rule 45 of the Rules of Court on this sole
ground: HAICcD
The Executive Judge of the Regional Trial Court of Pasay City gravely erred in dismissing the petition in view of the
fact that:
(A) Section 20 of Rep. Act No. 4726, as amended, otherwise known as the "Condominium Act", expressly grant the
petitioner, being the acknowledged association of unit owners at Marbella I Condominium, the right to enforce its
liens of unpaid dues and other assessments in the same manner provided for by law for judicial or extra-judicial
foreclosure of mortgage of real property; and
(B) Such practice of auctioning the delinquent condominium unit through a petition for extra-judicial foreclosure of
mortgage, as aforestated is permitted in other jurisdictions, such as in the City of Manila. 3
The factual antecedents are as follows.
Respondent is the registered owner of Fontavilla No. 501 (condominium unit), Marbella I Condominium, Roxas
Boulevard, Pasay City, under Condominium Certificate of Title No. 1972 (CCT No. 1972). 4 Inscribed on his title is a
Declaration of Restrictions, to wit: CcHDSA
Entry No. 65370/T-20065 — DECLARATIONS OF RESTRICTIONS — executed by the herein registered owner, is
hereon annotated restrictions shall be deemed to run with the land, the bldg. & other improvements making up
the project, shall constitute lien upon the project, and each unit and shall inure to the benefit of, and be binding
upon all units owners, purchasers, interchangeably or sometimes referred to in this Master of Deed with Dec. of
Restrictions as occupant, [sic] or holding any w/o [sic] or any right or interest therein or in the project, pursuant to
the prov. of the condominium act or other pertinent laws. See restrictions and conditions imposed on Doc. No.
114, Page 24, Bk. I, s. of 1974 of the Not. Pub. for Rizal, M. Perez, Cardenas among w/c are those dealing on scope
& coverage; Management Body; repair, alteration et [sic] assessment real property of restrictions & bldg. rules &
waivers rights and assignee, tenants occupants of unit validity, [sic] amendment of declaration dated March 19,
1974. Date of inscription May 9, 1979 — 3:02 p.m. 5 (Emphasis supplied). IcDCaS
Also inscribed is a Notice of Assessment, which states:
Entry No. 96-2466/CCT No. 1972 — NOTICE OF ASSESSMENT — Executed by MILAGROS D. CUBACUB in her
capacity as Vice-President/Administrator of FIRST MARBELLA CONDOMINIUM ASSOCIATION, INC. (FMCAI) [herein
petitioner], stating among other things that the condominium unit, described herein has an outstanding dues with
the FMCAI in the sum of P775,786.17, inclusive of interests, penalties and attorney's fees, which aforementioned
liabilities constitute as first lien against this condominium unit pursuant to the Master Deed of Restrictions. (Doc.
No. 34; Page No. 7; Book No. III; Series of 1996 before Notary Public Jose A. Suing, Notary Public for Quezon City).
Date of Instrument — March 27, 1996.
Date of Inscription — May 3, 1996 – 2:10 p.m. 6
On November 11, 2003, petitioner filed with the RTC, through the Office of the Clerk of Court & Ex-Oficio Sheriff, a
Petition 7 for extrajudicial foreclosure of the condominium unit of respondent, alleging that it (petitioner) is a duly
organized association of the tenants and homeowners of Marbella I Condominium; that respondent is a member
thereof but has unpaid association dues amounting to P3,229,104.89, as of June 30, 2003; and that the latter
refused to pay his dues despite demand. The petition is docketed as File Case No. 03-033. Attached to it are the
June 30, 2003 Statement of Account 8 and July 22, 2000 demand letter 9 issued to respondent. TAacIE
In a letter dated November 21, 2003, the Clerk of Court, as Ex-Oficio Sheriff, recommended to the RTC Executive
Judge that the petition be dismissed for the following reasons:
Under the facts given, no mortgage exists between the petitioner and respondent. Evidently, it is not one of those
contemplated under Act 3135 as amended by Act 4118. The allegation simply does not show a mortgagor-
mortgagee relationship since respondent liability arises from his failure to pay dues, assessments and charges due
to the petitioner.
As clearly stated, the authority of the Executive Judge under Administrative Matter No. 99-10-05-0, as amended
dated March 1, 2001, covers extra-judicial foreclosure of real estate mortgages under R.A. No. 3135 and chattel
mortgages under P.D. No. 1508. There is nothing in the above mentioned Circular which authorizes the Executive
Judge and/or the Ex-Officio Sheriff to extra judicially foreclose properties covered by obligations other than the
said mortgages. Hence, the subject petition is not proper for extra-judicial foreclosure under the supervision of the
Executive Judge. Dismissal of the subject petition is recommended. 10
Agreeing with the Clerk of Court, the RTC Executive Judge issued on January 7, 2004 the following Order:
Upon perusal of the pertinent laws and Supreme Court Resolutions, this Court concurs with the position taken by
the Ex-Oficio Sheriff that herein petition is not within the coverage of Administrative Matter No. 99-10-05-0 as
amended, dated March 1, 2001 re: Procedure in Extra Judicial Foreclosure of Mortgage, paragraph 1 thereof is
hereby quoted as follows:
"1. All applications for extra-judicial foreclosure of mortgage whether under the direction of the sheriff or a notary
public, pursuant to Act 3135, as amended by Act 4118, and Act 1508, as amended, shall be filed with the Executive
Judge, through the Clerk of Court who is also the Ex-Oficio Sheriff."
Hence, it is not within the authority of the Executive Judge to supervise and approve extra judicial foreclosures of
mortgages.
WHEREFORE, the request for extra-judicial foreclosure of the subject condominium unit is DENIED. Consequently,
the petition is DISMISSED. cTEICD
SO ORDERED. 11 (Emphasis added).
Petitioner filed a Motion for Reconsideration, 12 but the RTC Executive Judge denied it in an Order 13 dated March
31, 2004.
Hence, the present petition.
Petitioner asserts that it is expressly provided under Section 20 of Republic Act (R.A.) No. 4726 that it has the right
to cause the extrajudicial foreclosure of its annotated lien on the condominium unit. Its petition then is cognizable
by the RTC under Administrative Matter No. 99-10-05. 14
In his Comment, 15 Supplemental Comment 16 and Memorandum, 17 respondent objects to petitioner's direct
appeal to this Court from an Order issued by the RTC on a mere administrative matter. 18 Respondent also
impugns petitioner's right to file the petition for extra-judicial foreclosure, pointing out that the latter does not
hold a real estate mortgage on the condominium unit or a special power of attorney to cause the extra-judicial
foreclosure sale of said unit. 19 Respondent claims that there is even a pending litigation regarding the validity of
petitioner's constitution as a homeowners association and its authority to assess association dues, annotate
unpaid assessments on condominium titles and enforce the same through extrajudicial foreclosure sale. 20 In sum,
respondent contends that petitioner has no factual or legal basis to file the petition for extrajudicial foreclosure.
HDTISa
The petition lacks merit.
Only a judgment, final order or resolution rendered by a court in the exercise of its judicial functions relative to an
actual controversy is subject to an appeal to this Court by way of a Petition for Review on Certiorari under Rule 45
of the Rules of Court. 21 The January 7, 2004 Order and March 21, 2004 Order assailed herein were issued by the
RTC Executive Judge in the exercise of his administrative function to supervise the ministerial duty of the Clerk of
Court as Ex-Oficio Sheriff in the conduct of an extrajudicial foreclosure sale; hence, said orders are not appealable
under Rule 45. Rather, the correct mode of appeal is by petition for mandamus 22 under Section 3, Rule 65 of the
Rules of Court, to wit:
Sec. 3. Petition for mandamus — When any tribunal, corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and
there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be
rendered commanding the respondent, immediately or at some other time to be specified by the court, to do the
act required to be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner
by reason of the wrongful acts of the respondent. aIcCTA
Although under Section 5, 23 Rule 56, an erroneous appeal may be dismissed outright, this Court shall not exercise
such option; but instead, shall treat the present petition as a petition for mandamus to obviate further litigation
between the parties. 24
Yet, in order to avail itself of a writ of mandamus, petitioner must establish that it has a clear right to the
extrajudicial foreclosure sale of the condominium unit of respondent. 25 Under Circular No. 7-2002, 26
implementing Supreme Court Administrative Matter No. 99-10-05-0, 27 it is mandatory that a petition for
extrajudicial foreclosure be supported by evidence that petitioner holds a special power or authority to foreclose,
thus:
Sec. 1. All applications for extra-judicial foreclosure of mortgage, whether under the direction of the Sheriff or a
notary public pursuant to Art. No. 3135, as amended, and Act 1508, as amended, shall be filed with the Executive
Judge, through the Clerk of Court, who is also the Ex-Officio Sheriff (A.M. No. 99-10-05-0, as amended, March 1,
2001). DAHSaT
Sec. 2. Upon receipt of the application, the Clerk of Court shall:
a. Examine the same to ensure that the special power of attorney authorizing the extra-judicial foreclosure of the
real property is either inserted into or attached to the deed of real estate mortgage (Act No. 3135, Sec. 1, as
amended) . . . .
Without proof of petitioner's special authority to foreclose, the Clerk of Court as Ex-Oficio Sheriff is precluded from
acting on the application for extrajudicial foreclosure. 28
In the present case, the only basis of petitioner for causing the extrajudicial foreclosure of the condominium unit
of respondent is a notice of assessment annotated on CCT No. 1972 in accordance with Section 20 of R.A. No.
4726. However, neither annotation nor law vests it with sufficient authority to foreclose on the property. DaACIH
The notice of assessment contains no provision for the extrajudicial foreclosure of the condominium unit. All that it
states is that the assessment of petitioner against respondent for unpaid association dues constitutes a "first lien
against [the] condominium unit". 29
Neither does Section 20 of R.A. No. 4726 30 grant petitioner special authority to foreclose. All that the law
provides is the following:
Sec. 20. The assessment upon any condominium made in accordance with a duly registered declaration of
restrictions shall be an obligation of the owner thereof at the time the assessment is made. The amount of any
such assessment plus any other charges thereon, such as interest, costs (including attorney's fees) and penalties,
as such may be provided for in the declaration of restrictions, shall be and become a lien upon the condominium to
be registered with the Register of Deeds of the city or province where such condominium project is located. The
notice shall state the amount of such assessment and such other charges thereon as may be authorized by the
declaration of restrictions, a description of condominium unit against which same has been assessed, and the
name of the registered owner thereof. Such notice shall be signed by an authorized representative of the
management body or as otherwise provided in the declaration of restrictions. Upon payment of said assessment
and charges or other satisfaction thereof, the management body shall cause to be registered a release of the lien.
HcSCED
Such lien shall be superior to all other liens registered subsequent to the registration of said notice of assessment
except real property tax liens and except that the declaration of restrictions may provide for the subordination
thereof to any other liens and encumbrances, such liens may be enforced in the same manner provided for by law
for the judicial or extra-judicial foreclosure of mortgage or real property. Unless otherwise provided for in the
declaration of the restrictions, the management body shall have power to bid at foreclosure sale. The
condominium owner shall have the right of redemption as in cases of judicial or extra-judicial foreclosure of
mortgages. (Emphasis supplied).
Clearly, Section 20 merely prescribes the procedure by which petitioner's claim may be treated as a superior lien —
i.e., through the annotation thereof on the title of the condominium unit. 31 While the law also grants petitioner
the option to enforce said lien through either the judicial or extrajudicial foreclosure sale of the condominium unit,
Section 20 does not by itself, ipso facto, authorize judicial as extra-judicial foreclosure of the condominium unit.
Petitioner may avail itself of either option only in the manner provided for by the governing law and rules. As
already pointed out, A.M. No. No. 99-10-05-0, as implemented under Circular No. 7-2002, requires that petitioner
furnish evidence of its special authority to cause the extrajudicial foreclosure of the condominium unit. SaDICE
There being no evidence of such special authority, petitioner failed to establish a clear right to a writ of mandamus
to compel the RTC to act on its petition for extrajudicial foreclosure.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
[G.R. No. 149696. July 14, 2006.]
CARDINAL BUILDING OWNERS ASSOCIATION, INC., petitioner, vs. ASSET RECOVERY AND MANAGEMENT
CORPORATION, respondent.

DECISION
SANDOVAL-GUTIERREZ, J p:
For our resolution is the instant Petition for Review on Certiorari 1 assailing the Decision 2 dated August 31, 2001
of the Court of Appeals in CA-G.R. SP No. 53216, entitled "ASSET RECOVERY & MANAGEMENT CORPORATION,
petitioner, versus HON. ANTONIO I. DE CASTRO, as Pairing Judge of the Regional Trial Court, Branch 4, Manila, and
CARDINAL BUILDING OWNERS ASSOCIATION, INC., respondents."
The facts of this case are:
Cardinal Building Owners Association, Inc., petitioner, is a corporation organized and existing under Republic Act
(R.A.) No. 4726 (The Condominium Act) with office located at 999 Stanisco Towers, Pedro Gil corner Agoncillo
Streets, Malate, Manila.
Benjamin Marual is a member of petitioner association being the owner of two condominium units at the Cardinal
Office Condominium, covered by Condominium Certificates of Title No. 14335 (1st floor) and No. 17730 (2nd
floor). Due to his failure to pay assessment dues in the amount of P530,554.00, petitioner association filed with the
Regional Trial Court (RTC), Branch 4, Manila, a complaint for sum of money against him, docketed as Civil Case No.
95-74919.
During the course of the proceedings, or on September 13, 1996, petitioner and Marual filed with the RTC a
Compromise Agreement, 3 declaring that they have amicably settled their controversy under the following terms
and conditions:
1. Defendant (Benjamin Marual) binds himself to settle all his outstanding dues and/or assessments to plaintiff
(Cardinal Building Owners Association, Inc.) totaling, as of July 1, 1996, the sum of P381,152.52 in the following
manner:
a) P75,000.00 — upon signing of this agreement as and by way of initial settlement of dues and/or assessments in
the amount of P25,000.00, and attorney's fees in the amount of P50,000.00;
b) P21,739.52 — every fifth day of each and every succeeding month until his account is fully paid.
To this end, defendant agrees to issue two (2) checks in payment of the amount mentioned in par. 1(a), and one
(1) check in the amount of P21,739.52 dated August 5, 1996, and one (1) check in the same amount every month
thereafter;
2. The parties hereby waive their respective claims and counterclaims with respect to the case at bar;
3. Should defendant fail to make good any of the postdated checks given to the plaintiff in payment of his
obligation, the plaintiff shall be entitled to execute the judgment of this court, for the full amount of plaintiff’s
claim of P381,152.52, plus accruing amounts due in months subsequent to July 1, 1996 and interest and charges.
Should the foregoing be not complied with, the parties further agree that plaintiff may, at his option, proceed with
the extrajudicial enforcement of its lien under the provisions of the Condominium Act and the condominium's
master deed, and pertinent provisions of documents covering defendant's condominium units at Stanisco Towers
(formerly Cardinal Bldg. Condominium).
xxx xxx xxx
On October 9, 1996, the RTC rendered a Decision 4 approving the Compromise Agreement and enjoining the
parties to strictly comply with its terms.
However, Marual failed to comply with his obligation, prompting petitioner to file with the RTC a motion for the
execution of the compromise judgment. Accordingly, on February 25, 1997, the RTC issued a writ of execution. 5
On March 7, 1997, the court sheriff served a "Notice of Levy/Attachment upon Realty" 6 on the Registry of Deeds
of Manila. It was only at this time when petitioner learned 7 that there were prior annotations on the same titles,
thus:
(a) On October 7, 1993, Marual mortgaged his two condominium units to Planters Development Bank. The
mortgage was foreclosed and the said units were sold to the bank at a public auction. On March 27, 1996, the
certificate of sale was annotated on the two Condominium Certificates of Title. DSEIcT
(b) On November 11, 1996, before the expiration of the period for redemption of the foreclosed realties, Marual
sold the same units to Asset Recovery and Management Corporation, 8 herein respondent. On February 26, 1997,
the deed of sale was registered in the Registry of Deeds of Manila. 9
(c) On March 4, 1997, respondent filed with the RTC, Branch 55, Manila, an action for mandamus to redeem the
condominium units against the bank, docketed as Civil Case No. 97-82366. On April 1, 1997, the RTC issued a writ
of preliminary injunction 10 enjoining the bank from consolidating in its name the titles or taking possession of the
units, or otherwise disposing of them until further orders from the court.
After learning of the above circumstances, petitioner filed with the RTC, Branch 4, in the same Civil Case No. 95-
74919 for sum of money, a Motion for Possession 11 of the units. On June 8, 1999, the RTC, Branch 4 issued an
Order 12 granting the motion and directing the issuance of the writ of possession, as prayed for by petitioner,
thus:
. . . . Accordingly:
(a) plaintiff (now petitioner Cardinal Building Owners Association, Inc.) is allowed to repossess subject condo units
for four (4) years to enable it to recover the aforesaid account of defendant (Benjamin Marual) plus reasonable
interest thereon, under proper accounting procedure and periodic reports thereon to the Court;
(b) plaintiff is allowed to lease, as it may deem necessary, but not to mortgage or sell, said condo units to achieve
the foregoing objective; and
(c) defendant and/or his agents or assigns are enjoined from interfering in any manner the aforesaid possession by
plaintiff until the foregoing objective is achieved.
Further, upon the filing of an indemnity bond of P2 million, let a writ of possession issue directing a sheriff of the
Regional Trial Court of Manila or his authorized representative to place plaintiff herein in actual, physical
possession of the two condominium units located in the Cardinal Office Condominium at 999 Pedro Gil St., Malate,
Manila and covered by CCTs No. 14335 (1st floor) and No. 17730 (2nd floor) and to eject therefrom defendant
Benjamin Marual and all other persons claiming rights under him.
SO ORDERED.
On July 30, 1999, upon petitioner's filing of the required bond, a writ of possession 13 was issued.
Aggrieved, respondent filed with the Court of Appeals a Petition for Certiorari, docketed as CA-G.R. SP No. 53216.
Respondent alleged mainly that the RTC Judge acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the Order dated June 8, 1999 and the writ of possession which are in variance with the
compromise judgment and the corresponding writ of execution in Civil Case No. 95-74919. CAETcH
On August 31, 2001, the Court of Appeals rendered a Decision 14 granting respondent's petition and nullifying the
assailed RTC Order of June 8, 1999, thus:
There are four instances when a writ of possession may be issued, to wit:
1) in a land registration proceeding, which is a proceeding in rem (Sec. 17, Act No. 496; Estipona v. Navarro, L-
41825, Jan. 30, 1976, 69 SCRA 285, 291);
2) in an extra-judicial foreclosure of a realty mortgage (Sec. 7, Act No. 3135);
3) in a judicial foreclosure of mortgage, a quasi in rem proceeding, provided that the mortgagor is in possession of
the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened (Rivera v. Court of
First Instance of Nueva Ecija and Rupac, 61 Phi. 201; Ramos v. Manalac and Lopez, 89 Phil. 270, 275); and
4) in execution sales (last par. Of Sec. 35, Rule 39, Rules of Court). 15
Since the case at bar does not fall under any of these four instances and, in any event, since it is not claimed that
the judgment based on a compromise contemplated the issuance of a writ of possession to private respondent of
the condominium units in case Marual, from whom petitioner claims to have purchased the same, failed to comply
with his obligation under said judgment based on a compromise, then public respondent's assailed Order directing
the issuance of a writ of possession was issued with grave abuse of discretion.
Hence, the instant Petition for Review on Certiorari. Petitioner contends that the Court of Appeals Decision "is not
based upon, and militates against, the applicable law, R.A. No. 4726."
In its Comment, 16 respondent avers that the petition should be denied for being unmeritorious.
The petition must fail.
Section 20 of R.A. No. 4726, otherwise known as the Condominium Act, provides:
Sec. 20. An assessment upon any condominium made in accordance with a duly registered declaration of
restrictions shall be an obligation of the owner thereof at the time the assessment is made. The amount of any
such assessment plus any other charges thereon, such as interest, costs (including attorney's fees) and penalties,
as such may be provided for in the declaration of restrictions, shall be and become a lien upon the condominium
assessed when the management body causes a notice of assessment to be registered with the Register of Deeds of
the city or province where such condominium project is located. The notice shall state the amount of such
assessment and such other charges thereon as may be authorized by the declaration of restrictions, a description
of the condominium unit against which the same has been assessed, and the name of the registered owner
thereof. Such notice shall be signed by an authorized representative of the management body or as otherwise
provided in the declaration of restrictions. Upon payment of said assessment and charges or other satisfaction
thereof, the management body shall cause to be registered a release of the lien.
Such lien shall be superior to all other liens registered subsequent to the registration of said notice of assessment
except real property tax liens and except that the declaration of restrictions may provide for the subordination
thereof to any other liens and encumbrances. Such liens may be enforced in the same manner provided for by law
for the judicial or extra-judicial foreclosure of mortgage or real property. Unless otherwise provided for in the
declaration of restrictions, the management body shall have power to bid at foreclosure sale. The condominium
owner shall have the right of redemption as in cases of judicial or extra-judicial foreclosure of mortgages.
(Underscoring supplied)
Records do not show that petitioner had its notice of assessment registered with the Registry of Deeds of Manila in
order that the amount of such assessment could be considered a lien upon Marual's two condominium units.
Clearly, pursuant to the above provisions, petitioner's claim can not be considered superior to that of respondent.
As mentioned earlier, the deed of sale wherein Marual conveyed to respondent his two condominium units, was
registered in the Registry of Deeds of Manila.
Moreover, the Decision rendered by the RTC based on the compromise agreement by the parties is a money
judgment, the enforcement of which is provided in Section 9, Rule 39 of the 1997 Rules of Civil Procedure, as
amended, thus:
Section 9. Execution of judgments for money, how enforced. — (a) Immediate payment on demand. — The officer
shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate
payment of the full amount stated in the writ of execution and all lawful fees. The judgment obligor shall pay in
cash, certified bank check payable to the judgment obligee, or any other form of payment acceptable to the latter,
the amount of the judgment debt under proper receipt directly to the judgment obligee or his authorized
representative if present at the time of payment. The lawful fees shall be handed under proper receipt to the
executing sheriff who shall turn over the same amount within the same day to the clerk of court that issued the
writ.
If the judgment obligee or his authorized representative is not present to receive payment, the judgment obligor
shall deliver the aforesaid payment to the executing sheriff. The latter shall turn over all the amount coming into
his possession within the same day to the clerk of court of the court that issued the writ, or if the same is not
practicable, deposit said amounts to a fiduciary account in the nearest government depository bank of the
Regional Trial Court of the locality.
The clerk of said court shall thereafter arrange for the remittance of the deposit to the account of the court that
issued the writ whose clerk of court shall then deliver said payment to the judgment obligee in satisfaction of the
judgment. The excess, if any, shall be delivered to the judgment obligor while the lawful fees shall be retained by
the clerk of court for disposition as provided by law. In no case shall the executing sheriff demand that any
payment by check be made payable to him.
(b) Satisfaction by levy. — If the judgment obligor cannot pay all or part of the obligation in cash, certified bank
check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of
the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise
exempt from execution giving the latter the option to immediately choose which property or part thereof may be
levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer
shall first levy on the personal properties, if any, and then on the real properties if the personal properties are
insufficient to answer for the judgment. TIDcEH
The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has
been levied upon.
When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he
must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.
Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal
property, may be levied upon in like manner and with like effect as under a writ of attachment.
(c) Garnishment of debts and credits. — The officer may levy on debts due the judgment obligor and other credits,
including bank deposits, financial interests, royalties, commissions and other personal property not capable of
manual delivery in the possession or control of third parties. Levy shall be made by serving notice upon the person
owing such debts or having in his possession or control such credits to which the judgment obligor is entitled. The
garnishment shall cover only such amount as will satisfy the judgment and all lawful fees.
The garnishee shall make a written report to the court within five (5) days from service of the notice of
garnishment stating whether or not the judgment obligor has sufficient funds or credits to satisfy the amount of
the judgment. If not, the report shall state how much funds or credits the garnishee holds for the judgment
obligor. The garnished amount in cash, or certified bank check issued in the name of the judgment obligee, shall be
delivered directly to the judgment obligee within ten (10) working days from service of notice on said garnishee
requiring such delivery, except the lawful fees which shall be paid directly to the court.
In the event there are two or more garnishees holding deposits or credits sufficient to satisfy the judgment, the
judgment obligor, if available, shall have the right to indicate the garnishee or garnishees who shall be required to
deliver the amount due; otherwise, the choice shall be made by the judgment obligee.
The executing sheriff shall observe the same procedure under paragraph (a) with respect to delivery of payment to
the judgment obligee. (8a, 15a)
There is nothing in the above provisions which authorizes the RTC, Branch 4, Manila to issue a writ of possession
over the two condominium units in favor of petitioner. As we held in Abinujar v. Court of Appeals: 17
A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25
Ohio St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority
(Sydnor v. Roberts, 12 Tex. 598).
An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised
Rules of Court, 641 [1966]; Kramer v. Montgomery, 206 Okla. 190 242 P. 2d 414 [1952]). There should not be a
substantial variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an
execution is fatally defective if the judgment was for sum of money and the writ of execution was for the sale of
the mortgaged property (Bank of the Philippine Islands v. Green, 48 Phil. 284 [1925]).
As petitioners' obligation under the compromise agreement as approved by the court was monetary in nature,
private respondents can avail only of the writ of execution provided in Section 15 (now Section 9), Rule 39 of the
Revised Rules of Court, and not that provided in Section 13 (now Section 10 [c] 18 ). (Underscoring supplied)
In sum, we find no reversible error committed by the Court of Appeals in its assailed Decision.
WHEREFORE, we DENY the instant petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 53216
is AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 154993. October 25, 2005.]
LUZ R. YAMANE, in her capacity as the CITY TREASURER OF MAKATI CITY, petitioner, vs. BA LEPANTO
CONDOMINIUM CORPORATION, respondent.
DECISION
TINGA, J p:
Petitioner City Treasurer of Makati, Luz Yamane (City Treasurer), presents for resolution of this Court two novel
questions: one procedural, the other substantive, yet both of obvious significance. The first pertains to the proper
mode of judicial review undertaken from decisions of the regional trial courts resolving the denial of tax protests
made by local government treasurers, pursuant to the Local Government Code. The second is whether a local
government unit can, under the Local Government Code, impel a condominium corporation to pay business taxes.
While we agree with the City Treasurer's position on the first issue, there ultimately is sufficient justification for
the Court to overlook what is essentially a procedural error. We uphold respondents on the second issue. Indeed,
there are disturbing aspects in both procedure and substance that attend the attempts by the City of Makati to flex
its taxing muscle. Considering that the tax imposition now in question has utterly no basis in law, judicial relief is
imperative. There are fewer indisputable causes for the exercise of judicial review over the exercise of the taxing
power than when the tax is based on whim, and not on law.
The facts, as culled from the record, follow.
Respondent BA-Lepanto Condominium Corporation (the "Corporation") is a duly organized condominium
corporation constituted in accordance with the Condominium Act, 2 which owns and holds title to the common
and limited common areas of the BA-Lepanto Condominium (the "Condominium"), situated in Paseo de Roxas,
Makati City. Its membership comprises the various unit owners of the Condominium. The Corporation is
authorized, under Article V of its Amended By-Laws, to collect regular assessments from its members for operating
expenses, capital expenditures on the common areas, and other special assessments as provided for in the Master
Deed with Declaration of Restrictions of the Condominium.
On 15 December 1998, the Corporation received a Notice of Assessment dated 14 December 1998 signed by the
City Treasurer. The Notice of Assessment stated that the Corporation is "liable to pay the correct city business
taxes, fees and charges," computed as totaling P1,601,013.77 for the years 1995 to 1997. 3 The Notice of
Assessment was silent as to the statutory basis of the business taxes assessed. ACDIcS
Through counsel, the Corporation responded with a written tax protest dated 12 February 1999, addressed to the
City Treasurer. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax
assessment.
With due respect, we submit that the Assessment has no basis as the Corporation is not liable for business taxes
and surcharges and interest thereon, under the Makati [Revenue] Code or even under the [Local Government]
Code.
The Makati [Revenue] Code and the [Local Government] Code do not contain any provisions on which the
Assessment could be based. One might argue that Sec. 3A.02(m) of the Makati [Revenue] Code imposes business
tax on owners or operators of any business not specified in the said code. We submit, however, that this is not
applicable to the Corporation as the Corporation is not an owner or operator of any business in the contemplation
of the Makati [Revenue] Code and even the [Local Government] Code. 4
Proceeding from the premise that its tax liability arose from Section 3A.02(m) of the Makati Revenue Code, the
Corporation proceeded to argue that under both the Makati Code and the Local Government Code, "business" is
defined as "trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit." It
was submitted that the Corporation, as a condominium corporation, was organized not for profit, but to hold title
over the common areas of the Condominium, to manage the Condominium for the unit owners, and to hold title to
the parcels of land on which the Condominium was located. Neither was the Corporation authorized, under its
articles of incorporation or by-laws to engage in profit-making activities. The assessments it did collect from the
unit owners were for capital expenditures and operating expenses. 5
The protest was rejected by the City Treasurer in a letter dated 4 March 1999. She insisted that the collection of
dues from the unit owners was effected primarily "to sustain and maintain the expenses of the common areas,
with the end in view [sic] of getting full appreciative living values [sic] for the individual condominium occupants
and to command better marketable [sic] prices for those occupants" who would in the future sell their respective
units. 6 Thus, she concluded since the "chances of getting higher prices for well-managed common areas of any
condominium are better and more effective that condominiums with poor [sic] managed common areas," the
corporation activity "is a profit venture making [sic]". 7
From the denial of the protest, the Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati. 8 On
1 March 2000, the Makati RTC Branch 57 rendered a Decision 9 dismissing the appeal for lack of merit. Accepting
the premise laid by the City Treasurer, the RTC acknowledged, in sadly risible language:
Herein appellant, to defray the improvements and beautification of the common areas, collect [sic] assessments
from its members. Its end view is to get appreciate living rules for the unit owners [sic], to give an impression to
outsides [sic] of the quality of service the condominium offers, so as to allow present owners to command better
prices in the event of sale. 10
With this, the RTC concluded that the activities of the Corporation fell squarely under the definition of "business"
under Section 13(b) of the Local Government Code, and thus subject to local business taxation. 11
From this Decision of the RTC, the Corporation filed a Petition for Review under Rule 42 of the Rules of Civil
Procedure with the Court of Appeals. Initially, the petition was dismissed outright 12 on the ground that only
decisions of the RTC brought on appeal from a first level court could be elevated for review under the mode of
review prescribed under Rule 42. 13 However, the Corporation pointed out in its Motion for Reconsideration that
under Section 195 of the Local Government Code, the remedy of the taxpayer on the denial of the protest filed
with the local treasurer is to appeal the denial with the court of competent jurisdiction. 14 Persuaded by this
contention, the Court of Appeals reinstated the petition. 15
On 7 June 2002, the Court of Appeals Special Sixteenth Division rendered the Decision 16 now assailed before this
Court. The appellate court reversed the RTC and declared that the Corporation was not liable to pay business taxes
to the City of Makati. 17 In doing so, the Court of Appeals delved into jurisprudential definitions of profit, 18 and
concluded that the Corporation was not engaged in profit. For one, it was held that the very statutory concept of a
condominium corporation showed that it was not a juridical entity intended to make profit, as its sole purpose was
to hold title to the common areas in the condominium and to maintain the condominium. 19
The Court of Appeals likewise cited provisions from the Corporation's Amended Articles of Incorporation and
Amended By-Laws that, to its estimation, established that the Corporation was not engaged in business and the
assessment collected from unit owners limited to those necessary to defray the expenses in the maintenance of
the common areas and management the condominium. 20
Upon denial of her Motion for Reconsideration, 21 the City Treasurer elevated the present Petition for Review
under Rule 45. It is argued that the Corporation is engaged in business, for the dues collected from the different
unit owners is utilized towards the beautification and maintenance of the Condominium, resulting in "full
appreciative living values" for the condominium units which would command better market prices should they be
sold in the future. The City Treasurer likewise avers that the rationale for business taxes is not on the income
received or profit earned by the business, but the privilege to engage in business. The fact that the Corporation is
empowered "to acquire, own, hold, enjoy, lease, operate and maintain, and to convey sell, transfer or otherwise
dispose of real or personal property" allegedly qualifies "as incident to the fact of [the Corporation's] act of
engaging in business. 22
The City Treasurer also claims that the Corporation had filed the wrong mode of appeal before the Court of
Appeals when the latter filed its Petition for Review under Rule 42. It is reasoned that the decision of the Makati
RTC was rendered in the exercise of original jurisdiction, it being the first court which took cognizance of the case.
Accordingly, with the Corporation having pursued an erroneous mode of appeal, the RTC Decision is deemed to
have become final and executory.
First, we dispose of the procedural issue, which essentially boils down to whether the RTC, in deciding an appeal
taken from a denial of a protest by a local treasurer under Section 195 of the Local Government Code, exercises
"original jurisdiction" or "appellate jurisdiction." The question assumes a measure of importance to this petition,
for the adoption of the position of the City Treasurer that the mode of review of the decision taken by the RTC is
governed by Rule 41 of the Rules of Civil Procedure means that the decision of the RTC would have long become
final and executory by reason of the failure of the Corporation to file a notice of appeal. 23
There are discernible conflicting views on the issue. The first, as expressed by the Court of Appeals, holds that the
RTC, in reviewing denials of protests by local treasurers, exercises appellate jurisdiction. This position is anchored
on the language of Section 195 of the Local Government Code which states that the remedy of the taxpayer whose
protest is denied by the local treasurer is "to appeal with the court of competent jurisdiction." 24 Apparently
though, the Local Government Code does not elaborate on how such "appeal" should be undertaken. HAIaEc
The other view, as maintained by the City Treasurer, is that the jurisdiction exercised by the RTC is original in
character. This is the first time that the position has been presented to the court for adjudication. Still, this
argument does find jurisprudential mooring in our ruling in Garcia v. De Jesus, 25 where the Court proffered the
following distinction between original jurisdiction and appellate jurisdiction: "Original jurisdiction is the power of
the Court to take judicial cognizance of a case instituted for judicial action for the first time under conditions
provided by law. Appellate jurisdiction is the authority of a Court higher in rank to re-examine the final order or
judgment of a lower Court which tried the case now elevated for judicial review." 26
The quoted definitions were taken from the commentaries of the esteemed Justice Florenz Regalado. With the
definitions as beacon, the review taken by the RTC over the denial of the protest by the local treasurer would fall
within that court's original jurisdiction. In short, the review is the initial judicial cognizance of the matter.
Moreover, labeling the said review as an exercise of appellate jurisdiction is inappropriate, since the denial of the
protest is not the judgment or order of a lower court, but of a local government official.
The stringent concept of original jurisdiction may seemingly be neutered by Rule 43 of the 1997 Rules of Civil
Procedure, Section 1 of which lists a slew of administrative agencies and quasi-judicial tribunals or their officers
whose decisions may be reviewed by the Court of Appeals in the exercise of its appellate jurisdiction. However, the
basic law of jurisdiction, Batas Pambansa Blg. 129 (B.P. 129), 27 ineluctably confers appellate jurisdiction on the
Court of Appeals over final rulings of quasi-judicial agencies, instrumentalities, boards or commission, by explicitly
using the phrase "appellate jurisdiction." 28 The power to create or characterize jurisdiction of courts belongs to
the legislature. While the traditional notion of appellate jurisdiction connotes judicial review over lower court
decisions, it has to yield to statutory redefinitions that clearly expand its breadth to encompass even review of
decisions of officers in the executive branches of government.
Yet significantly, the Local Government Code, or any other statute for that matter, does not expressly confer
appellate jurisdiction on the part of regional trial courts from the denial of a tax protest by a local treasurer. On the
other hand, Section 22 of B.P. 129 expressly delineates the appellate jurisdiction of the Regional Trial Courts,
confining as it does said appellate jurisdiction to cases decided by Metropolitan, Municipal, and Municipal Circuit
Trial Courts. Unlike in the case of the Court of Appeals, B.P. 129 does not confer appellate jurisdiction on Regional
Trial Courts over rulings made by non-judicial entities.
From these premises, it is evident that the stance of the City Treasurer is correct as a matter of law, and that the
proper remedy of the Corporation from the RTC judgment is an ordinary appeal under Rule 41 to the Court of
Appeals. However, we make this pronouncement subject to two important qualifications. First, in this particular
case there are nonetheless significant reasons for the Court to overlook the procedural error and ultimately uphold
the adjudication of the jurisdiction exercised by the Court of Appeals in this case. Second, the doctrinal weight of
the pronouncement is confined to cases and controversies that emerged prior to the enactment of Republic Act
No. 9282, the law which expanded the jurisdiction of the Court of Tax Appeals (CTA).
Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the CTA exercises exclusive appellate
jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases
original decided or resolved by them in the exercise of their originally or appellate jurisdiction. Moreover, the
provision also states that the review is triggered "by filing a petition for review under a procedure analogous to
that provided for under Rule 42 of the 1997 Rules of Civil Procedure." 29
Republic Act No. 9282, however, would not apply to this case simply because it arose prior to the effectivity of that
law. To declare otherwise would be to institute a jurisdictional rule derived not from express statutory grant, but
from implication. The jurisdiction of a court to take cognizance of a case should be clearly conferred and should
not be deemed to exist on mere implications, 30 and this settled rule would be needlessly emasculated should we
declare that the Corporation's position is correct in law.
Be that as it may, characteristic of all procedural rules is adherence to the precept that they should not be
enforced blindly, especially if mechanical application would defeat the higher ends that animates our civil
procedure — the just, speedy and inexpensive disposition of every action and proceeding. 31 Indeed, we have
repeatedly upheld — and utilized ourselves — the discretion of courts to nonetheless take cognizance of petitions
raised on an erroneous mode of appeal and instead treat these petitions in the manner as they should have
appropriately been filed. 32 The Court of Appeals could very well have treated the Corporation's petition for
review as an ordinary appeal. cADSCT
Moreover, we recognize that the Corporation's error in elevating the RTC decision for review via Rule 42 actually
worked to the benefit of the City Treasurer. There is wider latitude on the part of the Court of Appeals to refuse
cognizance over a petition for review under Rule 42 than it would have over an ordinary appeal under Rule 41.
Under Section 13, Rule 41, the stated grounds for the dismissal of an ordinary appeal prior to the transmission of
the case records are when the appeal was taken out of time or when the docket fees were not paid. 33 On the
other hand, Section 6, Rule 42 provides that in order that the Court of Appeals may allow due course to the
petition for review, it must first make a prima facie finding that the lower court has committed an error that would
warrant the reversal or modification of the decision under review. 34 There is no similar requirement of a prima
facie determination of error in the case of ordinary appeal, which is perfected upon the filing of the notice of
appeal in due time. 35
Evidently, by employing the Rule 42 mode of review, the Corporation faced a greater risk of having its petition
rejected by the Court of Appeals as compared to having filed an ordinary appeal under Rule 41. This was not an
error that worked to the prejudice of the City Treasurer.
We now proceed to the substantive issue, on whether the City of Makati may collect business taxes on
condominium corporations.
We begin with an overview of the power of a local government unit to impose business taxes.
The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution
itself, which recognizes the power of these units "to create its own sources of revenue and to levy taxes, fees, and
charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of
local autonomy." 36 These guidelines and limitations as provided by Congress are in main contained in the Local
Government Code of 1991 (the "Code"), which provides for comprehensive instances when and how local
government units may impose taxes. The significant limitations are enumerated primarily in Section 133 of the
Code, which include among others, a prohibition on the imposition of income taxes except when levied on banks
and other financial institutions. 37 None of the other general limitations under Section 133 find application to the
case at bar. IaHCAD
The most well-known mode of local government taxation is perhaps the real property tax, which is governed by
Title II, Book II of the Code, and which bears no application in this case. A different set of provisions, found under
Title I of Book II, governs other taxes imposable by local government units, including business taxes. Under Section
151 of the Code, cities such as Makati are authorized to levy the same taxes fees and charges as provinces and
municipalities. It is in Article II, Title II, Book II of the Code, governing municipal taxes, where the provisions on
business taxation relevant to this petition may be found. 38
Section 143 of the Code specifically enumerates several types of business on which municipalities and cities may
impose taxes. These include manufacturers, wholesalers, distributors, dealers of any article of commerce of
whatever nature; those engaged in the export or commerce of essential commodities; contractors and other
independent contractors; banks and financial institutions; and peddlers engaged in the sale of any merchandise or
article of commerce. Moreover, the local sanggunian is also authorized to impose taxes on any other businesses
not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax.
The coverage of business taxation particular to the City of Makati is provided by the Makati Revenue Code
("Revenue Code"), enacted through Municipal Ordinance No. 92-072. The Revenue Code remains in effect as of
this writing. Article A, Chapter III of the Revenue Code governs business taxes in Makati, and it is quite specific as
to the particular businesses which are covered by business taxes. To give a sample of the specified businesses
under the Revenue Code which are not enumerated under the Local Government Code, we cite Section 3A.02(f) of
the Code, which levies a gross receipt tax:
(f) On contractors and other independent contractors defined in Sec. 3A.01(q) of Chapter III of this Code, and on
owners or operators of business establishments rendering or offering services such as: advertising agencies; animal
hospitals; assaying laboratories; belt and buckle shops; blacksmith shops; bookbinders; booking officers for film
exchange; booking offices for transportation on commission basis; breeding of game cocks and other sporting
animals belonging to others; business management services; collecting agencies; escort services; feasibility studies;
consultancy services; garages; garbage disposal contractors; gold and silversmith shops; inspection services for
incoming and outgoing cargoes; interior decorating services; janitorial services; job placement or recruitment
agencies; landscaping contractors; lathe machine shops; management consultants not subject to professional tax;
medical and dental laboratories; mercantile agencies; messsengerial services; operators of shoe shine stands;
painting shops; perma press establishments; rent-a-plant services; polo players; school for and/or horse-back
riding academy; real estate appraisers; real estate brokerages; photostatic, white/blue printing, Xerox, typing, and
mimeographing services; rental of bicycles and/or tricycles, furniture, shoes, watches, household appliances,
boats, typewriters, etc.; roasting of pigs, fowls, etc.; shipping agencies; shipyard for repairing ships for others;
shops for shearing animals; silkscreen or T-shirt printing shops; stables; travel agencies; vaciador shops; veterinary
clinics; video rentals and/or coverage services; dancing schools/speed reading/EDP; nursery, vocational and other
schools not regulated by the Department of Education, Culture and Sports, (DECS), day care centers; etc. 39
Other provisions of the Revenue Code likewise subject hotel and restaurant owners and operators 40 , real estate
dealers, and lessors of real estate 41 to business taxes.
Should the comprehensive listing not prove encompassing enough, there is also a catch-all provision similar to that
under the Local Government Code. This is found in Section 3A.02(m) of the Revenue Code, which provides:
(m) On owners or operators of any business not specified above shall pay the tax at the rate of two percent (2%)
for 1993, two and one-half percent (2 1/2%) for 1994 and 1995, and three percent (3%) for 1996 and the years
thereafter of the gross receipts during the preceding year. 42
The initial inquiry is what provision of the Makati Revenue Code does the City Treasurer rely on to make the
Corporation liable for business taxes. Even at this point, there already stands a problem with the City Treasurer's
cause of action.
Our careful examination of the record reveals a highly disconcerting fact. At no point has the City Treasurer been
candid enough to inform the Corporation, the RTC, the Court of Appeals, or this Court for that matter, as to what
exactly is the precise statutory basis under the Makati Revenue Code for the levying of the business tax on
petitioner. We have examined all of the pleadings submitted by the City Treasurer in all the antecedent judicial
proceedings, as well as in this present petition, and also the communications by the City Treasurer to the
Corporation which form part of the record. Nowhere therein is there any citation made by the City Treasurer of
any provision of the Revenue Code which would serve as the legal authority for the collection of business taxes
from condominiums in Makati. HSDaTC
Ostensibly, the notice of assessment, which stands as the first instance the taxpayer is officially made aware of the
pending tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the tax. Section
195 of the Local Government Code does not go as far as to expressly require that the notice of assessment
specifically cite the provision of the ordinance involved but it does require that it state the nature of the tax, fee or
charge, the amount of deficiency, surcharges, interests and penalties. In this case, the notice of assessment sent to
the Corporation did state that the assessment was for business taxes, as well as the amount of the assessment.
There may have been prima facie compliance with the requirement under Section 195. However in this case, the
Revenue Code provides multiple provisions on business taxes, and at varying rates. Hence, we could appreciate the
Corporation's confusion, as expressed in its protest, as to the exact legal basis for the tax. 43 Reference to the local
tax ordinance is vital, for the power of local government units to impose local taxes is exercised through the
appropriate ordinance enacted by the sanggunian, and not by the Local Government Code alone. 44 What
determines tax liability is the tax ordinance, the Local Government Code being the enabling law for the local
legislative body.
Moreover, a careful examination of the Revenue Code shows that while Section 3A.02(m) seems designed as a
catch-all provision, Section 3A.02(f), which provides for a different tax rate from that of the former provision, may
be construed to be of similar import. While Section 3A.02(f) is quite exhaustive in enumerating the class of
businesses taxed under the provision, the listing, while it does not include condominium-related enterprises, ends
with the abbreviation "etc.", or "et cetera".
We do note our discomfort with the unlimited breadth and the dangerous uncertainty which are the twin
hallmarks of the words "et cetera." Certainly, we cannot be disposed to uphold any tax imposition that derives its
authority from enigmatic and uncertain words such as "et cetera." Yet we cannot even say with definiteness
whether the tax imposed on the Corporation in this case is based on "et cetera," or on Section 3A.02(m), or on any
other provision of the Revenue Code. Assuming that the assessment made on the Corporation is on a provision
other than Section 3A.02(m), the main legal issue takes on a different complexion. For example, if it is based on "et
cetera" under Section 3A.02(f), we would have to examine whether the Corporation faces analogous comparison
with the other businesses listed under that provision.
Certainly, the City Treasurer has not been helpful in that regard, as she has been silent all through out as to the
exact basis for the tax imposition which she wishes that this Court uphold. Indeed, there is only one thing that
prevents this Court from ruling that there has been a due process violation on account of the City Treasurer's
failure to disclose on paper the statutory basis of the tax — that the Corporation itself does not allege injury arising
from such failure on the part of the City Treasurer.
We do not know why the Corporation chose not to put this issue into litigation, though we can ultimately presume
that no injury was sustained because the City Treasurer failed to cite the specific statutory basis of the tax. What is
essential though is that the local treasurer be required to explain to the taxpayer with sufficient particularity the
basis of the tax, so as to leave no doubt in the mind of the taxpayer as to the specific tax involved.
In this case, the Corporation seems confident enough in litigating despite the failure of the City Treasurer to admit
on what exact provision of the Revenue Code the tax liability ensued. This is perhaps because the Corporation has
anchored its central argument on the position that the Local Government Code itself does not sanction the
imposition of business taxes against it. This position was sustained by the Court of Appeals, and now merits our
analysis.
As stated earlier, local tax on businesses is authorized under Section 143 of the Local Government Code. The word
"business" itself is defined under Section 131(d) of the Code as "trade or commercial activity regularly engaged in
as a means of livelihood or with a view to profit." 45 This definition of "business" takes on importance, since
Section 143 allows local government units to impose local taxes on businesses other than those specified under
the provision. Moreover, even those business activities specifically named in Section 143 are themselves
susceptible to broad interpretation. For example, Section 143(b) authorizes the imposition of business taxes on
wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature. IAcDET
It is thus imperative that in order that the Corporation may be subjected to business taxes, its activities must fall
within the definition of business as provided in the Local Government Code. And to hold that they do is to ignore
the very statutory nature of a condominium corporation.
The creation of the condominium corporation is sanctioned by Republic Act No. 4726, otherwise known as the
Condominium Act. Under the law, a condominium is an interest in real property consisting of a separate interest in
a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly,
in the land on which it is located and in other common areas of the building. 46 To enable the orderly
administration over these common areas which are jointly owned by the various unit owners, the Condominium
Act permits the creation of a condominium corporation, which is specially formed for the purpose of holding title
to the common area, in which the holders of separate interests shall automatically be members or shareholders, to
the exclusion of others, in proportion to the appurtenant interest of their respective units. 47 The necessity of a
condominium corporation has not gained widespread acceptance 48 , and even is merely permissible under the
Condominium Act. 49 Nonetheless, the condominium corporation has been resorted to by many condominium
projects, such as the Corporation in this case.
In line with the authority of the condominium corporation to manage the condominium project, it may be
authorized, in the deed of restrictions, "to make reasonable assessments to meet authorized expenditures, each
condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwise
provided) to its owner's fractional interest in any common areas." 50 It is the collection of these assessments from
unit owners that form the basis of the City Treasurer's claim that the Corporation is doing business.
The Condominium Act imposes several limitations on the condominium corporation that prove crucial to the
disposition of this case. Under Section 10 of the law, the corporate purposes of a condominium corporation are
limited to the holding of the common areas, either in ownership or any other interest in real property recognized
by law; to the management of the project; and to such other purposes as may be necessary, incidental or
convenient to the accomplishment of such purpose. 51 Further, the same provision prohibits the articles of
incorporation or by-laws of the condominium corporation from containing any provisions which are contrary to the
provisions of the Condominium Act, the enabling or master deed, or the declaration of restrictions of the
condominium project. 52
We can elicit from the Condominium Act that a condominium corporation is precluded by statute from engaging in
corporate activities other than the holding of the common areas, the administration of the condominium project,
and other acts necessary, incidental or convenient to the accomplishment of such purposes. Neither the
maintenance of livelihood, nor the procurement of profit, fall within the scope of permissible corporate purposes
of a condominium corporation under the Condominium Act.
The Court has examined the particular Articles of Incorporation and By-Laws of the Corporation, and these
documents unmistakably hew to the limitations contained in the Condominium Act. Per the Articles of
Incorporation, the Corporation's corporate purposes are limited to: (a) owning and holding title to the common
and limited common areas in the Condominium Project; (b) adopting such necessary measures for the protection
and safeguard of the unit owners and their property, including the power to contract for security services and for
insurance coverage on the entire project; (c) making and adopting needful rules and regulations concerning the
use, enjoyment and occupancy of the units and common areas, including the power to fix penalties and
assessments for violation of such rules; (d) to provide for the maintenance, repair, sanitation, and cleanliness of
the common and limited common areas; (e) to provide and contract for public utilities and other services to the
common areas; (f) to contract for the services of persons or firms to assist in the management and operation of
the Condominium Project; (g) to discharge any lien or encumbrances upon the Condominium Project; (h) to
enforce the terms contained in the Master Deed with Declaration of Restrictions of the Project; (i) to levy and
collect those assessments as provided in the Master Deed, in order to defray the costs, expenses and losses of the
condominium; (j) to acquire, own, hold, enjoy, lease operate and maintain, and to convey, sell transfer, mortgage
or otherwise dispose of real or personal property in connection with the purposes and activities of the corporation;
and (k) to exercise and perform such other powers reasonably necessary, incidental or convenient to accomplish
the foregoing purposes. 53
Obviously, none of these stated corporate purposes are geared towards maintaining a livelihood or the obtention
of profit. Even though the Corporation is empowered to levy assessments or dues from the unit owners, these
amounts collected are not intended for the incurrence of profit by the Corporation or its members, but to shoulder
the multitude of necessary expenses that arise from the maintenance of the Condominium Project. Just as much is
confirmed by Section 1, Article V of the Amended By-Laws, which enumerate the particular expenses to be
defrayed by the regular assessments collected from the unit owners. These would include the salaries of the
employees of the Corporation, and the cost of maintenance and ordinary repairs of the common areas. 54
The City Treasurer nonetheless contends that the collection of these assessments and dues are "with the end view
of getting full appreciative living values" for the condominium units, and as a result, profit is obtained once these
units are sold at higher prices. The Court cites with approval the two counterpoints raised by the Court of Appeals
in rejecting this contention. First, if any profit is obtained by the sale of the units, it accrues not to the corporation
but to the unit owner. Second, if the unit owner does obtain profit from the sale of the corporation, the owner is
already required to pay capital gains tax on the appreciated value of the condominium unit. 55
Moreover, the logic on this point of the City Treasurer is baffling. By this rationale, every Makati City car owner
may be considered as being engaged in business, since the repairs or improvements on the car may be deemed
oriented towards appreciating the value of the car upon resale. There is an evident distinction between persons
who spend on repairs and improvements on their personal and real property for the purpose of increasing its
resale value, and those who defray such expenses for the purpose of preserving the property. The vast majority of
persons fall under the second category, and it would be highly specious to subject these persons to local business
taxes. The profit motive in such cases is hardly the driving factor behind such improvements, if it were
contemplated at all. Any profit that would be derived under such circumstances would merely be incidental, if not
accidental.
Besides, we shudder at the thought of upholding tax liability on the basis of the standard of "full appreciative living
values", a phrase that defies statutory explication, commonsensical meaning, the English language, or even
definition from Google. The exercise of the power of taxation constitutes a deprivation of property under the due
process clause, 56 and the taxpayer's right to due process is violated when arbitrary or oppressive methods are
used in assessing and collecting taxes. 57 The fact that the Corporation did not fall within the enumerated classes
of taxable businesses under either the Local Government Code or the Makati Revenue Code already forewarns
that a clear demonstration is essential on the part of the City Treasurer on why the Corporation should be taxed
anyway. "Full appreciative living values" is nothing but blather in search of meaning, and to impose a tax hinged on
that standard is both arbitrary and oppressive.
The City Treasurer also contends that the fact that the Corporation is engaged in business is evinced by the Articles
of Incorporation, which specifically empowers the Corporation "to acquire, own, hold, enjoy, lease, operate and
maintain, and to convey, sell, transfer mortgage or otherwise dispose of real or personal property." 58 What the
City Treasurer fails to add is that every corporation organized under the Corporation Code 59 is so specifically
empowered. Section 36(7) of the Corporation Code states that every corporation incorporated under the Code has
the power and capacity "to purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property . . . as the transaction of the lawful business of the
corporation may reasonably and necessarily require . . ." 60 Without this power, corporations, as juridical persons,
would be deprived of the capacity to engage in most meaningful legal relations.
Again, whatever capacity the Corporation may have pursuant to its power to exercise acts of ownership over
personal and real property is limited by its stated corporate purposes, which are by themselves further limited by
the Condominium Act. A condominium corporation, while enjoying such powers of ownership, is prohibited by law
from transacting its properties for the purpose of gainful profit. HSDIaC
Accordingly, and with a significant degree of comfort, we hold that condominium corporations are generally
exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that
seeks to declare otherwise.
Still, we can note a possible exception to the rule. It is not unthinkable that the unit owners of a condominium
would band together to engage in activities for profit under the shelter of the condominium corporation. 61 Such
activity would be prohibited under the Condominium Act, but if the fact is established, we see no reason why the
condominium corporation may be made liable by the local government unit for business taxes. Even though such
activities would be considered as ultra vires, since they are engaged in beyond the legal capacity of the
condominium corporation 62 , the principle of estoppel would preclude the corporation or its officers and
members from invoking the void nature of its undertakings for profit as a means of acquitting itself of tax liability.
Still, the City Treasurer has not posited the claim that the Corporation is engaged in business activities beyond the
statutory purposes of a condominium corporation. The assessment appears to be based solely on the
Corporation's collection of assessments from unit owners, such assessments being utilized to defray the necessary
expenses for the Condominium Project and the common areas. There is no contemplation of business, no
orientation towards profit in this case. Hence, the assailed tax assessment has no basis under the Local
Government Code or the Makati Revenue Code, and the insistence of the city in its collection of the void tax
constitutes an attempt at deprivation of property without due process of law.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
[G.R. No. 123552. February 27, 2003.]
TWIN TOWERS CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS, ALS MANAGEMENT &
DEVELOPMENT CORPORATION, ANTONIO LITONJUA and SECURITIES AND EXCHANGE COMMISSION,
respondents.
DECISION
CARPIO, J p:
The Case
Before us is a petition for review on certiorari 1 to nullify the Decision 2 dated August 31, 1995 of the Court of
Appeals and its Resolution 3 dated January 16, 1996 denying petitioner's motion for reconsideration. The Court of
Appeals dismissed petitioner's appeal from the Decision en banc 4 of the Securities and Exchange Commission,
which reversed the order of the SEC Hearing Officer. 5 The Court of Appeals dismissed the appeal for lack of merit
and for non-compliance with the requirement on certification of non-forum shopping. 6
The Antecedent Facts
On June 30, 1988, petitioner Twin Towers Condominium Corporation ("petitioner" for brevity) filed a complaint 7
with the Securities and Exchange Commission ("SEC" for brevity) against respondents ALS Management &
Development Corporation ("ALS" for brevity) and Antonio Litonjua ("Litonjua" for brevity). The complaint prayed
that ALS and Litonjua be ordered to pay solidarily the unpaid condominium assessments and dues with interests
and penalties covering the four quarters of 1986 and 1987 and the first quarter of 1988. SaHIEA
The complaint alleged, among others, that petitioner, a non-stock corporation, is organized for the sole purpose of
holding title to and managing the common areas of Twin Towers Condominium ("Condominium" for brevity).
Membership in petitioner corporation is compulsory and limited to all registered owners of units in the
Condominium. ALS, as registered owner of Unit A-4 ("Unit" for brevity) of the Condominium, is a member of
petitioner. Litonjua, who is the corporate president of ALS, occupies the Unit.
Petitioner collects from all its members quarterly assessments and dues as authorized by its Master Deed and
Declaration of Restrictions ("Master Deed" for brevity) and its By-Laws. As of the filing of the complaint with the
SEC, petitioner's records of account show that ALS failed to pay assessments and dues starting 1986 up to the first
quarter of 1988. Petitioner claimed against both ALS and Litonjua P118,923.20 as unpaid assessments and dues.
This amount includes accrued interests of P30,808.33 and penalty charges of P7,793.34, plus P1,500.00 as unpaid
contingency fund assessment for 1987. 8
In their joint Answer with Counterclaim, ALS and Litonjua asserted that petitioner failed to state a cause of action
against Litonjua. ALS and Litonjua argued that petitioner's admission that ALS and not Litonjua is the registered
owner of the Unit and member of petitioner exonerates Litonjua from any liability to petitioner. While ALS is a
juridical person that cannot by itself physically occupy the Unit, the natural person who physically occupies the
Unit does not assume the liability of ALS to petitioner. Neither does the agent who acts for the corporation
become personally liable for the corporation's obligation.
As counterclaim, ALS claimed damages against petitioner arising from petitioner's act of repeatedly preventing
ALS, its agents and guests from using the parking space, swimming pool, gym, and other facilities of the
Condominium. In addition, Litonjua claimed damages against petitioner for the latter's act of including Litonjua's
name in the list of delinquent unit owners which was posted on petitioner's bulletin board. 9
On December 11, 1991, the SEC Hearing Officer ordered petitioner to pay Litonjua moral and exemplary damages
for maliciously including Litonjua's name in the list of delinquent unit owners and for impleading him as a
respondent. On the other hand, the SEC Hearing Officer ordered ALS to pay the assessments and dues to
petitioner. 10 However, the Hearing Officer did not determine the exact amount to be paid by ALS because
petitioner failed to lay down the basis for computing the unpaid assessments and dues. 11 The dispositive portion
of the decision reads thus:
"WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering respondent ALS to pay the legal assessments/dues due the complainant within thirty (30) days from
finality of this Decision; and
2. Ordering the complainant to pay respondent Antonio Litonjua the sum of THREE HUNDRED THOUSAND PESOS
(P300,000.00) as moral damages, FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages, and TWO
HUNDRED THOUSAND PESOS (P200,000.00) as and by way of attorney's fees.
SO ORDERED." 12
Not satisfied with the SEC Hearing Officer's decision, both parties filed their respective appeals to the SEC en banc.
13 Petitioner assailed the award of moral and exemplary damages as well as attorney's fees in favor of Litonjua. On
the other hand, ALS appealed that portion of the decision ordering it to pay to petitioner the assessments and
dues.
In a decision dated July 30, 1993, the SEC en banc nullified the award of damages and attorney's fees to Litonjua
on the ground that the SEC had no jurisdiction over Litonjua. The SEC en banc held that there is no intra-corporate
relationship between petitioner and Litonjua who is not the registered owner of the Unit and thus, not a member
of petitioner. The SEC en banc stated that petitioner could not invoke the doctrine of piercing the veil of ALS'
corporate fiction since disregarding the corporate entity is a function of the regular courts.
Furthermore, the SEC en banc remanded the case to the Hearing Officer to determine the value of the services
petitioner failed to render to ALS because of the latter's non-use of the Condominium facilities. The SEC en banc
ruled that the value of these services could be deducted from the unpaid assessments and dues that ALS owes
petitioner.
Thus, the SEC en banc declared:
"WHEREFORE, in view of the foregoing, the order appealed from is hereby reversed insofar as it awards moral and
exemplary damages and attorney's fees to respondent Litonjua as the same is null and void for lack of jurisdiction
of this Commission over the said party. 14
As regards that portion of the appealed Order directing respondent ALS to pay the legal assessment/dues to the
complainant TTC within thirty (30) [days] from finality of the said decision, the same is hereby modified by
remanding the case to the hearing officer for determination of the value of the services withheld by the
complainant TTC from respondent ALS in order that the same may be deducted from the amount of legal
assessments and dues which the respondent corporation shall pay to the complainant.
SO ORDERED." 15 (Italics supplied)
Petitioner appealed the SEC en banc Decision to the Court of Appeals contending grave error or grave abuse of
discretion by the SEC en banc.
The Ruling of the Court of Appeals
The Court of Appeals dismissed petitioner's appeal on both procedural and substantive grounds. Procedurally, the
Court of Appeals found the petition defective for failure to contain a sworn certification of non-forum shopping as
required by Section 6 of Administrative Circular No. 1-95 and Section 2 of Revised Circular No. 28-91.
On the merits, the Court of Appeals substantially affirmed the decision of the SEC en banc that there is no ground
to pierce the veil of ALS' corporate fiction. The Court of Appeals held that there is nothing in the records to show
that ALS is engaged in unlawful business or that Litonjua is using ALS to defraud third parties. The fact alone that
ALS is in arrears in paying its assessments and dues does not make ALS or Litonjua guilty of fraud which would
warrant piercing the corporate veil of ALS. Thus, it was improper for petitioner to post Litonjua's name instead of
ALS' in the list of delinquent unit owners since Litonjua is not a member of petitioner. aHSTID
The Court of Appeals also sustained the claim of petitioner against ALS for unpaid assessments and dues but found
that petitioner failed to substantiate by preponderance of evidence the basis for computing the unpaid
assessments and dues. Thus, the Court of Appeals remanded the case to the SEC Hearing Officer for further
reception of evidence and for determination of the exact amount of ALS' liability to petitioner. The Court of
Appeals, however, directed the SEC Hearing Officer to deduct from ALS' unpaid assessments and dues the value of
the services denied to ALS because of the latter's non-use of the Condominium facilities. In allowing the deduction,
the Court of Appeals declared the Condominium's House Rule 26.3 as ultra vires. House Rule 26.3, which petitioner
claims as its basis for denying the use of the Condominium facilities to ALS, authorizes withholding of the use of
the Condominium facilities from delinquent unit owners. The Court of Appeals, however, ruled that petitioner is
not expressly authorized by its Master Deed and By-Laws to prohibit delinquent members from using the facilities
of the Condominium.
The Court of Appeals went further and declared the interest and penalty charges prescribed by House Rule 26.5 16
on delinquent accounts as exorbitant or grossly excessive, although this was not raised as an issue. While in its
complaint, petitioner sought to recover P118,923.20 as unpaid assessments and dues, in its amended petition for
review, petitioner sought P994,529.75, more than eight times the amount it originally claimed from ALS. 17
In the dispositive portion of its assailed decision, the Court of Appeals declared:
"WHEREFORE, the instant petition is hereby DENIED and is accordingly DISMISSED." 18
Hence, this petition. HTCDcS
The Issues
In its Memorandum, petitioner assigns the following errors in the decision of the Court of Appeals:
1. "IN DISMISSING THE PETITION ALLEGEDLY BECAUSE OF PETITIONER'S FAILURE TO COMPLY WITH THE
PERTINENT PROVISIONS OF SUPREME COURT CIRCULAR NOS. 1-95 AND 28-91 ON THE CERTIFICATION AGAINST
FORUM SHOPPING;"
2. "IN ORDERING A REMAND OF THE CASE BACK TO THE HEARING OFFICER FOR THE RECEPTION OF EVIDENCE FOR
SERVICES SUPPOSEDLY NOT RENDERED BY PETITIONER;"
3. "IN DECLARING HOUSE RULE NO. 26.3 AS ULTRA VIRES;"
4. "IN FINDING THE PENALTIES AND INTERESTS PRESCRIBED IN HOUSE RULE 26.5 19 AS EXORBITANT AND GROSSLY
EXCESSIVE;"
5. "IN REFUSING TO RECOGNIZE THE FACT THAT RESPONDENT LITONJUA AND NOT ALS IS THE REAL OWNER OF
APARTMENT UNIT 4-A;" and
6. "IN FAILING TO FIND THAT THERE IS ON RECORD OVERWHELMING EVIDENCE TO SHOW THE BASIS OF THE DUES
AND ASSESSMENTS BEING COLLECTED FROM THE PRIVATE RESPONDENTS." 20
The Ruling of the Court
The petition is partly meritorious.
A perusal of the foregoing issues readily reveals that petitioner raises two aspects of the case for consideration —
the procedural aspect and the substantive aspect.
We will discuss the procedural aspect first.
Non-compliance with Supreme Court Circular No. 1-95 and Revised Circular No. 28-91.
Petitioner submits that the Court of Appeals erred in dismissing its appeal for non-compliance with Supreme Court
Circular No. 1-95 and Revised Circular No. 28-91. Petitioner asserts that when it filed its petition, both circulars
were not yet in full force.
Petitioner filed its petition for review with the Court of Appeals on August 18, 1993 and its amended petition on
September 3, 1993. Both the original and amended petitions were filed before the effectivity of Revised
Administrative Circular No. 1-95 on June 1, 1995. However, contrary to petitioner's claim, before the issuance of
Revised Administrative Circular No. 1-95, there was already an existing circular requiring a sworn certification of
non-forum shopping from a party filing a petition for review with the Court of Appeals.
Circular No. 28-91, which took effect on January 1, 1992, required a sworn certification of non-forum shopping in
cases filed with the Court of Appeals and the Supreme Court. Circular No. 28-91 specifically provides for summary
dismissal of petitions which do not contain a sworn certification of non-forum shopping. Sections 2 and 3 of
Circular No. 28-91 state:
"2. Certification — The party must certify under oath that he has not commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, and that to the best of his knowledge, no such action or proceeding is pending in the Supreme
Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency. If there is any action
pending, he must state the status of the same. If he should learn that a similar action or proceeding has been filed
or is pending before the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal
or agency, he should notify the court, tribunal or agency within five (5) days from such notice.
3. Penalties —
a. Any violation of this Circular shall be a cause for the summary dismissal of the multiple petition or complaint.
HTCDcS
xxx xxx xxx."
Clearly, petitioner cannot claim that at the time of the filing of its petitions with the Court of Appeals, it was not
required under any existing Supreme Court Circular to include in its petitions a sworn certification of non-forum
shopping. Circular No. 28-91 applies in the instant case, being the Circular in force at the time. Petitioner cannot
even feign ignorance of Circular No. 28-91 as its petitions were filed more than one year after the Circular's
effectivity. The rule against forum shopping has long been established and Circular No. 28-91 merely formalized
the prohibition and provided the appropriate penalties against violators. 21
The Court of Appeals did not err in dismissing the petition for this procedural lapse. However, special
circumstances or compelling reasons may justify relaxing the rule requiring certification on non-forum shopping.
22 Technical rules of procedure should be used to promote, not frustrate justice. While the swift unclogging of
court dockets is a laudable objective, granting substantial justice is an even more urgent ideal. 23 The certificate of
non-forum shopping is a mandatory requirement. Nonetheless, this requirement must not be interpreted too
literally to defeat the ends of justice. 24
In the instant case, the merits of petitioner's case should be considered special circumstances or compelling
reasons that justify tempering the hard consequence of the procedural requirement on non-forum shopping. In
the interest of justice, we reinstate the petition.
Essentially, the substantive issues for resolution in the instant petition can be summarized into four, as follows:
1. Whether petitioner can collect assessments and dues despite its denial to ALS of the use of the Condominium
facilities pursuant to House Rule 26.3;
2. Whether ALS can validly offset against its unpaid assessments and dues the value of the services withheld by
petitioner; HTCDcS
3. Whether a remand of the case to the proper trial court is necessary to determine the amounts involved; and
4. Whether the penalties prescribed in House Rule 26.2 are grossly excessive and exorbitant.
First Issue: Payment of assessments and dues.
Petitioner's authority to assess dues.
Petitioner was organized to hold title to the common areas of the Condominium and to act as its management
body. The Condominium Act, the law governing condominiums, states that:
"Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a
corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the
holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their respective units in the common areas. . . ." 25
The Condominium Act provides that the Master Deed may authorize the condominium corporation to collect
"reasonable assessments to meet authorized expenditures." 26 For this purpose, each unit owner "may be
assessed separately for its share of such expenditures in proportion (unless otherwise provided) to its owner's
fractional interest in the common areas." 27 Also, Section 20 of the Condominium Act declares:
"Section 20. An assessment upon any condominium made in accordance with a duly registered declaration of
restrictions shall be an obligation of the owner thereof at the time the assessment is made. . . ." (Italics supplied)
Petitioner is expressly authorized by its Master Deed to impose reasonable assessments on its members to
maintain the common areas and facilities of the Condominium. Section 4, Part II of petitioner's Master Deed
provides:
"Section 4. ASSESSMENTS. — From and after date Ayala Investment & Development Corporation formally conveys
the condominium project to the Condominium Corporation, the owner of each unit shall be proportionately liable
for the common expenses of the condominium project, which shall be assessed against each unit owner in the
project and paid to the Condominium Corporation as provided in Part I Section 8 (b) hereof at such times and in
such manner as shall be provided in the By-Laws of the Condominium Corporation,
a.) Regular assessments for such amounts as shall be necessary to meet the operating expenses of the
Condominium Corporation as well as such amounts, determined in accordance with the provisions of the By-Laws,
to be made for the purpose of creating and maintaining a special fund for capital expenditures on the common
areas of the project; including the cost of extraordinary repairs, reconstruction or restoration necessitated by
damage, depreciation, obsolescence, expropriation or condemnation of the common areas or part thereof, as well
as the cost of improvements or additions thereto authorized in accordance with the provisions of the By-Laws;
b.) . . .
c.) There may be assessed against the unit owners, in the manner prescribed herein or in the By-Laws of the
Condominium Corporation, such other assessments as are not specifically provided for herein;
d.) The amount of any such assessment, plus interest penalties, attorney's fees and other charges incurred for the
collection of such assessment, shall constitute a lien upon the unit and on the appurtenant interest of the unit
owner in the Condominium Corporation. Such lien shall be constituted in the manner provided in the By-Laws of
the Condominium Corporation. The foreclosure, transfer of conveyance, as well as redemption of the unit shall
include the unit owner's appurtenant interest in the Condominium Corporation. The Condominium Corporation
shall have the power to bid at the foreclosure sale." 28
Thus, petitioner's right to collect assessments and dues from its members and the corollary obligation of its
members to pay are beyond dispute.
There is also no question that ALS is a member of petitioner considering that ALS is the registered owner of the
Unit. Under the automatic exclusive membership clause in the Master Deed, 29 ALS became a regular member of
petitioner upon its acquisition of a unit in the Condominium.
As a member of petitioner, ALS assumed the compulsory obligation to share in the common expenses of the
Condominium. This compulsory obligation is further emphasized in Section 8, paragraph c, Part I of the Master
Deed, to wit:
"Each member of the Condominium Corporation shall share in the common expenses of the condominium project
in the same sharing or percentage stated . . ." 30 (Italics supplied)
Undoubtedly, as a member of petitioner, ALS is legally bound to pay petitioner assessments and dues to maintain
the common areas and facilities of the Condominium. ALS' obligation arises from both the law and its contract with
the Condominium developer and other unit owners.
Petitioner's Master Deed provides that a member of the Condominium corporation shall share in the common
expenses of the condominium project. 31 This obligation does not depend on the use or non-use by the member
of the common areas and facilities of the Condominium. Whether or not a member uses the common areas or
facilities, these areas and facilities will have to be maintained. Expenditures must be made to maintain the
common areas and facilities whether a member uses them frequently, infrequently or never at all.
ALS asserts that the denial by petitioner to ALS and Litonjua of the use of the Condominium facilities deprived
petitioner of any right to demand from ALS payment of any condominium assessments and dues. ALS contends
that the right to demand payment of assessments and dues carries with it the correlative obligation to allow the
use of the Condominium facilities. ALS is correct if it had not defaulted on its assessment and dues before the
denial of the use of the facilities. However, the records clearly show that petitioner denied ALS and Litonjua the
use of the facilities only after ALS had defaulted on its obligation to pay the assessments and dues. The denial of
the use of the facilities was the sanction for the prior default incurred by ALS.
In essence, what ALS wants is to use its own prior non-payment as a justification for its future non-payment of its
assessments and dues. Stated another way, ALS advances the argument that a contracting party who is guilty of
first breaching his obligation is excused from such breach if the other party retaliates by refusing to comply with
his own obligation.
This obviously is not the law. In reciprocal obligations, when one party fulfills his obligation, and the other does
not, delay by the other begins. Moreover, when one party does not comply with his obligation, the other party
does not incur delay if he does not perform his own reciprocal obligation because of the first party's non-
compliance. This is embodied in Article 1169 of the Civil Code, the relevant provision of which reads:
"In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay
by the other begins."
Thus, before ALS incurred its arrearages, petitioner allowed ALS to use the facilities. However, ALS subsequently
defaulted and thus incurred delay. It was only then that petitioner disallowed ALS and Litonjua from using the
facilities. Clearly, petitioner's denial to ALS of the Condominium facilities, after ALS had defaulted, does not
constitute a valid ground on the part of ALS to refuse paying its assessments and dues.
Validity of House Rule 26.3.
Petitioner's House Rules and Regulations ("House Rules" for brevity) expressly authorize denial of the use of
condominium facilities to delinquent members. Specifically, House Rule 26.3 provides that:
"26. ASSESSMENTS:
xxx xxx xxx
26.3 Names of unit owners with delinquent accounts who fail to pay two consecutive quarters shall be posted in
the bulletin board. Unit owners with delinquent accounts, their tenants, guests/visitors and relatives shall not be
allowed the use of all facilities of the condominium such as the swimming pool, gym, social hall, etc." (Italics
supplied)
The issue on the validity of House Rule 26.3 was raised for the first time on appeal. It is settled that an issue not
raised during trial could not be raised for the first time on appeal as to do so would be offensive to the basic rules
of fair play, justice, and due process. 32 Nonetheless, the Court of Appeals opted to address this issue.
Petitioner justifies House Rule 26.3 by invoking Section 36, paragraph 11 of the Corporation Code which grants
every corporation the power "to exercise such powers as may be essential or necessary to carry out its purpose or
purposes as stated in its Articles of Incorporation." Petitioner was organized for the main purpose of holding title
to and managing the common areas of the Condominium. Petitioner claims that there is here implied the power to
enact such measures as may be necessary to carry out the provisions of the Articles of Incorporation, By-Laws and
Master Deed to deal with delinquent members. This, asserts petitioner, includes the power to enact House Rule
26.3 to protect and safeguard the interests not only of petitioner but also of its members.
For their part, ALS and Litonjua assail the validity of House Rule 26.3 alleging that it is ultra vires. ALS and Litonjua
maintain that neither the Master Deed nor the By-Laws of petitioner expressly authorizes petitioner to prohibit
delinquent members from using the Condominium facilities. Being ultra vires, House Rule 26.3 binds no one. Even
assuming that House Rule 26.3 is intra vires, the same is iniquitous, unconscionable, and contrary to morals, good
customs and public policy. Thus, ALS claims it can validly deduct the value of the services withheld from the
assessments and dues since it was barred from using the Condominium facilities for which the assessments and
dues were being collected. ScTCIE
The Court of Appeals sustained respondents' argument and declared House Rule 26.3 ultra vires on the ground
that petitioner is not expressly authorized by its Master Deed or its By-Laws to promulgate House Rule 26.3.
House Rule 26.3 clearly restricts delinquent members from the use and enjoyment of the Condominium facilities.
The question is whether petitioner can validly adopt such a sanction to enforce the collection of Condominium
assessments and dues.
We rule that House Rule 26.3 is valid.
Section 45 of the Corporation Code provides:
"Sec. 45. Ultra vires acts of corporations. — No corporation under this code shall possess or exercise any corporate
powers except those conferred by this Code or by its articles of incorporation and except such as are necessary or
incidental to the exercise of the powers so conferred."
The term ultra viresrefers to an act outside or beyond corporate powers, including those that may ostensibly be
within such powers but are, by general or special laws, prohibited or declared illegal. 33 The Corporation Code
defines an ultra vires act as one outside the powers conferred by the Code or by the Articles of Incorporation, or
beyond what is necessary or incidental to the exercise of the powers so conferred. Moreover, special laws
governing certain classes of corporations, like the Condominium Act, also grant specific corporate powers to
corporations falling under such special laws.
The Condominium Act, petitioner's By-Laws and the Master Deed expressly empower petitioner to promulgate
House Rule 26.3. Section 9 of the Condominium Act provides:
"Section 9. The owner of a project shall, prior to the conveyance of any condominium therein, register a
declaration of restrictions relating to such project, which restrictions . . . shall inure to and bind all condominium
owners in the project. . . . The Register of Deeds shall enter and annotate the declaration of restrictions upon the
certificate of title covering the land included within the project, if the land is patented or registered under the Land
Registration or Cadastral acts.
xxx xxx xxx
Such declaration of restrictions, among other things, may also provide:
(a) As to any management body —
1. For the powers thereof, including power to enforce the provisions of the declaration of restrictions;
xxx xxx xxx
3. Provisions for maintenance . . . and other services benefiting the common areas, . . ." (Italics supplied)
The Condominium Act clearly provides that the Master Deed may expressly empower the management body,
petitioner in the instant case, to enforce all provisions in the Master Deed and Declaration of Restrictions.
Pursuant to Section 9 (a) (1) and (3) of the Condominium Act, the Master Deed expressly authorizes petitioner to
exercise all the powers granted to the management body by the Condominium Act, petitioner's Articles of
Incorporation and By-Laws, the Master Deed, and the Corporation Code. Section 3, Part II of the Master Deed
reads:
"Section 3. MANAGEMENT BODY. — The Condominium Corporation to be formed and organized pursuant to
Section 7 of Part I, above, shall constitute the management body of the project. As such management body, the
powers of the Condominium Corporation shall be such as are provided by the Condominium Act, by the Articles of
Incorporation and the By-Laws of the Corporation, by this instrument and by the applicable provisions of the
Corporation Code as are not inconsistent with the Condominium Act. Among such powers but not by way of
limitation, it shall have the power to enforce the provisions thereof in accordance with the By-Laws of the
corporation." (Italics supplied)
Thus, the Master Deed clearly empowers petitioner to enforce the provisions of the Master Deed in accordance
with petitioner's By-Laws. HTCDcS
Petitioner's By-Laws expressly authorize petitioner's Board of Directors to promulgate rules and regulations on the
use and enjoyment of the common areas. Thus, paragraph 2, Section 2 of petitioner's By-Laws states:
"Without limiting the general nature of the foregoing powers, the Board of Directors shall have the power to
enforce the limitations, restrictions, and conditions contained in the Master Deed and Declaration of Restrictions
of the project; promulgate rules and regulations concerning the use, enjoyment and occupancy of the units,
common areas and other properties in the condominium project, to make and collect assessments against
members as unit owners to defray the costs and expenses of the condominium project and the corporation and to
secure by legal means the observance of the provisions of the Condominium Act, the Master Deed, the Articles of
Incorporation, these By-Laws, and the rules and regulations promulgated by it in accordance herewith. The
members of the corporation bind themselves to comply faithfully with all these provisions." 34 (Italics supplied)
Evidently, the Condominium Act, the Master Deed and petitioner's By-Laws grant petitioner the express power to
promulgate rules and regulations concerning the use, enjoyment and occupancy of the common areas.
Moreover, House Rule 26.3, which prohibits delinquent members from using the common areas, is necessary to
ensure maintenance of the common areas. Petitioner's purpose in enacting House Rule 26.3 is to enforce
effectively the provisions of the Master Deed. House Rule 26.3 is well within the powers of petitioner to adopt as
the same is reasonably necessary to attain the purpose for which both petitioner and the Condominium project
were created. Thus, Section 7 of the Master Deed declares:
"Section 7. CONDOMINIUM CORPORATION. — A corporation to be known as THE TWIN TOWERS CONDOMINIUM
(hereinafter referred to as the "Condominium Corporation"), shall be formed and organized pursuant to the
Condominium Act and the Corporation Code to hold title to all the aforestated common areas of the condominium
project including the land, to manage THE TWIN TOWERS CONDOMINIUM and to do such other things as may be
necessary, incidental and convenient to the accomplishment of said purposes . . ." 35 (Italics supplied)
Petitioner would be unable to carry out its main purpose of maintaining the Condominium common areas and
facilities if members refuse to pay their dues and yet continue to use these areas and facilities. To impose a
temporary ban on the use of the common areas and facilities until the assessments and dues in arrears are paid is
a reasonable measure that petitioner may undertake to compel the prompt payment of assessments and dues.
Second Issue: Offsetting the value of services withheld against ALS' unpaid assessments and dues.
ALS' claim for reduction of its assessments and dues
because of its non-use of the Condominium facilities.
We rule that ALS has no right to a reduction of its assessments and dues to the extent of its non-use of the
Condominium facilities. ALS also cannot offset damages against its assessments and dues because ALS is not
entitled to damages for alleged injury arising from its own violation of its contract. Such a breach of contract
cannot be the source of rights or the basis of a cause of action. 36 To recognize the validity of such claim would be
to legalize ALS' breach of its contract.
ALS' claim for unrendered repair services barred by estoppel.
ALS also justifies its non-payment of dues on the ground of the alleged failure of petitioner to repair the defects in
ALS' Unit. However, this claim for unrendered repairs was never raised before the SEC Hearing Officer or the SEC
en banc. The issue on these alleged unrendered repairs, which supposedly caused ALS' Unit to deteriorate, was
raised for the first time on appeal. The Court of Appeals did not pass upon the same.
Neither in the proceedings in the SEC nor in the appellate court did ALS present evidence to substantiate its
allegation that petitioner failed to render the repair services. Also, ALS failed to establish whether it claimed for
the costs of the repair because ALS advanced these expenses, or for the value of damages caused to the Unit by
the water leakage. ETHCDS
ALS is therefore barred at this late stage to interpose this claim. In Del Rosario v. Bonga, 37 the Court held:
"As a rule, no question will be entertained on appeal unless it has been raised in the court below. Points of law,
theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not
be, considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic
considerations of due process impel this rule."
As this claim was a separate cause of action which should have been raised in ALS' Answer with Counterclaim, ALS'
failure to raise this claim is deemed a waiver of the claim.
Third Issue: Remand of the case to the proper trial court.
Question of fact.
The Court of Appeals ruled that there is a need to remand the case considering that there is no sufficient evidence
on record to establish the amount of petitioner's claim against ALS for unpaid assessments and dues.
The question of whether petitioner's claim of P994,529.75 for unpaid assessments and dues against ALS is
supported by sufficient evidence is a purely factual issue and inevitably requires the weighing of evidence. This
Court is not a trier of facts, and it is not the function of this Court to re-examine the evidence submitted by the
parties. 38 In cases brought before this Court from the Court of Appeals under Rule 45 of the Rules of Court, this
Court's jurisdiction is limited to reviewing errors of law which must be distinctly set forth. 39 In this mode of
appeal, the findings of fact of the Court of Appeals and other courts of origin are conclusive. 40
Jurisprudence is settled that:
"(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals . . . is limited to the review
and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed
conclusive. As such this Court is not duty-bound to analyze and weigh all over again the evidence already
considered in the proceedings below." 41
This rule admits of several exceptions. This Court may review the findings of fact of the Court of Appeals:
"(a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises
or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment
of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to
the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion;
and, (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere
conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by
the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and
are contradicted by the evidence on record." 42
However, none of these exceptions exists in the instant case.
The SEC Hearing Officer found that, while petitioner is entitled to collect the unpaid assessments and dues from
ALS, petitioner has failed to establish clearly the basis for computing the correct amount of the unpaid
assessments and dues. Indeed, there is no evidence laying down the basis of petitioner's claim other than
allegations of previous demands and statements of accounts. Whether petitioner has sufficiently established its
claim by preponderance of evidence requires an examination of the probative weight of the evidence presented by
the parties. Evidently, this is a question of fact the resolution of which is beyond the purview of the petition for
review where only errors of law may be raised. On the other hand, the decision of the Court of Appeals, finding
insufficient evidence on record, was made under its power to review both questions of fact and law.
Remand to the proper trial court.
While we sustain the ruling of the Court of Appeals, the case can no longer be remanded to the SEC Hearing
Officer. Republic Act No. 8799, which took effect on August 8, 2000, transferred SEC's jurisdiction over cases
involving intra-corporate disputes to courts of general jurisdiction or the appropriate regional trial courts. Section
5.2 of R.A. No. 8799 reads:
"5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court; Provided, That the
Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise
jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this
Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as
of 30 June 2000 until finally disposed."
Based on the Resolution issued by this Court in AM No. 00-8-10-SC, 43 the Court Administrator and the Securities
and Exchange Commission should cause the transfer of the records of SEC-AC Nos. 377 and 378 to the proper
regional trial court for further reception of evidence and computation of the correct amount of assessments and
dues that ALS shall pay to petitioner.
Fourth Issue: Penalties prescribed in House Rule 26.2.
ALS and Litonjua did not question before either the SEC or the Court of Appeals the validity of the penalties
prescribed in the Condominium's House Rule 26.2. Nevertheless, the Court of Appeals ruled that House Rule 26.2
prescribes grossly excessive penalties and interests. The resolution of this issue is not necessary in arriving at a
complete and just resolution of this case. At any rate, we find the interest and penalties prescribed under House
Rule 26.2 reasonable considering the premier location of the Condominium at the heart of Makati City. It is
inevitable that ALS' unpaid assessments and dues would escalate because ALS' delinquency started since 1986.
House Rule 26.2 clearly provides for a 24% interest and an 8% penalty, both running annually, on the total amount
due in case of failure to pay, to wit:
"26.2. Late payment of accounts of members shall be charged an interest rate of 24% per annum. In addition, a
penalty at the rate of 8% per annum shall be charged on delinquent accounts. The 24% interest shall be imposed
on unpaid accounts starting with the 21st day of the quarter until fully paid."
To reiterate, the Condominium Act expressly provides that the Master Deed may empower the management body
of the Condominium "to enforce the provisions of the declaration of restrictions." 44 The Master Deed authorizes
petitioner, as the management body, to enforce the provisions of the Master Deed in accordance with petitioner's
By-Laws. Thus, petitioner's Board of Directors is authorized to determine the reasonableness of the penalties and
interests to be imposed against those who violate the Master Deed. Petitioner has validly done this by adopting
the House Rules.
The Master Deed binds ALS since the Master Deed is annotated on the condominium certificate of title of ALS'
Unit. The Master Deed is ALS' contract with all Condominium members who are all co-owners of the common
areas and facilities of the Condominium. Contracts have the force of law between the parties and are to be
complied with in good faith. 45 From the moment the contract is perfected, the parties are bound to comply with
what is expressly stipulated as well as with what is required by the nature of the obligation in keeping with good
faith, usage and the law. 46 Thus, when ALS purchased its Unit from petitioner, ALS was bound by the terms and
conditions set forth in the contract, including the stipulations in the House Rules of petitioner, such as House Rule
26.2.
In sum, as a member of petitioner, ALS is indisputably bound by the Condominium's House Rules which are
authorized by the By-Laws, the Master Deed and the Condominium Act. ESTcIA
Award of attorney's fees.
The award of attorney's fees as damages is the exception rather than the rule. The general rule is that attorney's
fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right
to litigate. 47 Counsel's fees are not awarded every time a party prevails in a suit. 48 An award of attorney's fees
and expenses of litigation is proper under the instances provided for in Article 2208 of the Civil Code, one of which
is where the defendant acted in gross and evident bad faith. In this case, however, we find no cogent reason to
award attorney's fees in the absence of showing of gross and evident bad faith on the part of ALS in refusing to
satisfy petitioner's claim.
WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is SET ASIDE. ALS
Management & Development Corporation is ordered to pay Twin Towers Condominium Corporation all overdue
assessments and dues, including interest and penalties from date of default, as shall be determined by the proper
Regional Trial Court in accordance with this Decision. The proper Regional Trial Court shall complete the
computation within sixty (60) days from its receipt of this Decision and the records of SEC-AC Nos. 377 and 378.
Costs of suit against ALS Management & Development Corporation.
SO ORDERED.
[G.R. No. 95364. June 29, 1992.]

UNION BANK OF THE PHILIPPINES, petitioner, vs. HOUSING AND LAND USE REGULATORY BOARD, MARTHA S.
DAVID AND TERESITA T. QUAZON, assisted by her husband, ALFONSO MARIA QUAZON, respondents.
DECISION

GRIÑO-AQUINO, J p:
The issue presented by this petition for certiorari and prohibition with preliminary injunction is whether or not the
Housing and Land Use Regulatory Board (HLURB for brevity) has jurisdiction to hear and decide a condominium
buyer's complaint for: prLL
(a) annulment of a real estate mortgage constituted by the project owner without his consent and without the
prior written consent of the National Housing Authority;
(b) for annulment of the foreclosure sale; and
(c) for annulment of the condominium certificate of title that was issued to the highest bidder at the foreclosure
sale.
In 1973, Martha David purchased from Fereit Realty Development Corporation (FRDC) a condominium unit,
Lorraine Flat 552, which was in the process of completion, with parking space No. S-12, in the condominium
project known as "Europa Condominium Villas" in Baguio City.
The agreed purchase price was P217,000. Martha David made a 20% down payment of P43,400 on the price,
leaving a balance of P173,600 (including interest of 1% per month) which was payable in 60 equal monthly
installments of P3,861.64 per installment.
In 1975, Martha David took possession, as owner, of the condominium unit, with notice to the management. As of
October, 1976, she had paid at least twenty-two (22) monthly installments of the price of the condominium unit.
On January 2, 1978, FRDC, without the knowledge of the condominium buyer David, and without the prior
approval of the National Housing Authority, mortgaged the condominium project to Bancom Development
Corporation (Bancom), predecessor-in-interest of the petitioner Union Bank of the Philippines (UBP), as security
for a loan of P40,000,000 (pp. 58-59, Rollo).
As FRDC failed to pay its obligation which, as computed by Bancom, amounted to P42,075,134.84 as of June 30,
1979, Bancom foreclosed the mortgage on 45 condominium units, including the unit of Martha David.
On March 4, 1980, the Sheriff executed a Certificate of Sale to Bancom and the Far East Bank and Trust Company
(FEBTC) as the highest bidder for the total price of P19,324,000. After the expiration of the redemption period,
UBP held out the units for sale (pp. 58-59, Rollo).
On June 26, 1989, Martha David and Teresita Quazon, the latter assisted by her husband, Alfonso Maria Quazon,
who had in the meantime, purchased Martha David's unit, filed a complaint in the HLURB, against FRDC, UBP and
FEBTC to annul the title of UBP and FEBTC over David's condominium unit and to order the issuance of a new
certificate of title in the name of Teresita Quazon. The complaint sought the following reliefs:
"a. Upon the filing of this complaint an order be issued allowing the complainants to deposit on consignation the
amount of P200,000.00 (to be deposited by and/or in the name of Teresita T. Quazon) to be paid to respondents
Union Bank and Far East Bank according to their respective interests:
"b. After hearing judgment be rendered —
"i. considering complainants to have fully paid the total purchase price of the condominium unit originally
purchased by the complainant David and assigned and/or sold to complainant Quazon;
"ii. ordering the cancellation of Condominium Certificate of Title No. 1117 in the name of Union Bank and Far East
Bank; and
"iii. ordering the issuance of a new Condominium Certificate of Title over the same condominium unit covered by
CCT No. 1117 in the name of complainant Teresita T. Quazon as the assignee of the unit from complainant David.
"Complainants further pray for such other reliefs as may be deemed just and proper in the premises." (pp. 20-21,
Rollo.)
On July 17, 1989, UBP and FEBTC filed their answer questioning the HLURB's jurisdiction over the case. UBP filed a
motion to dismiss on the same ground. LLpr
In an Order dated August 27, 1990, HLURB Arbiter, Cesar Manuel, denied the motion of UBP, on the ground that
the "motion will render nugatory the summary nature of proceedings before this Office" (Annex D, p. 40, Rollo).
HLURB ordered the parties to file their respective position papers within fifteen (15) days and thereafter the case
would be deemed submitted for resolution.
In due time, this petition for certiorari and prohibition with injunction was filed by UBP.
UBP's main argument is that the HLURB has no jurisdiction over the complaint for consignation which should have
been filed in the regular trial courts. Furthermore, as the HLURB was created in 1981 (E.O. No. 641), it has no
jurisdiction over contracts that took effect prior to 1981.
Those arguments deserve scant consideration. The issue in HLURB Case No. REM-062689-4077 is the validity of the
real estate mortgage of David's condominium unit that FRDC executed in favor of the Union Bank and Far East
Bank without prior approval of the National Housing Authority and the legality of the title which the mortgagee
banks acquired as highest bidder therefor in the extrajudicial foreclosure sale. The applicable provisions of P.D. No.
957, otherwise known as "The Subdivision and Condominium Buyer's Protective Decree" are quoted hereunder as
follows:
"Sec. 3. NATIONAL HOUSING AUTHORITY. — The National Housing Authority shall have exclusive jurisdiction to
regulate the real estate trade and business in accordance with the provisions of this decree." (Emphasis supplied.)
"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."
P.D. No. 1344 of April 2, 1978 expanded the jurisdiction of the National Housing Authority (NHA) to include the
following:
"Sec. 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear
and decide cases of the following nature:
"A. Unsound real estate business practices:
"B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the
project owner, developer, dealer, broker, or salesman; and
"C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot
or condominium unit against the owner, developer, dealer, broker, or salesman." (VLD Vol. 52, pp. 51-52.)
On February 7, 1981, Executive Order No. 648 transferred the regulatory and quasi-judicial functions of the NHA to
the Human Settlements Regulatory Commission. llcd
"Sec. 8. TRANSFER OF FUNCTIONS. — The regulatory functions of the National Housing Authority pursuant to
Presidential Decrees No. 957, 1216, 1344 and other related laws are hereby transferred to the Commission,
together with such applicable personnel appropriation, records, equipment and property necessary for the
enforcement and implementation of such functions. Among these regulatory functions are:
"1. Regulation of the real estate trade and business;
"2. Registration of subdivision lots and condominium projects;
"3. Issuance of license to sell subdivision lots and condominium units in the registered units;
"4. Approval of performance bond and the suspension of license to sell;
"5. Registration of dealers, brokers, and salesmen engaged in the business of selling subdivision lots or
condominium units;
"6. Revocation of registration of dealers, brokers and salesmen;
"7. Approval of mortgage on any subdivision lot or condominium unit made by the owner or developer;
"8. Granting of permits for the alteration of plans and the extension of period for completion of subdivision or
condominium projects;
"9. Approval of the conversion to other purposes of roads and open spaces found within the project which have
been donated to the city or municipality concerned;
"10. Regulation of the relationship between lessors and lessees; and
"11. Hear and decide cases on unsound real estate business practices; claims involving refund filed against project
owners, developers, dealers, brokers or salesmen and cases of specific performance." (VLD Vol. 81, pp. 08-109.)
Executive Order No. 90 dated December 17, 1986 changed the name of the Human Settlements Regulatory
Commission to "Housing and Land Use Regulatory Board (HLURB).
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, David, who
has a cause of action for annulment of the mortgage, the mortgage foreclosure sale, and the condominium
certificate of title that was issued to UBP and FEBTC as highest bidders at the sale. The case falls within the
exclusive jurisdiction of the NHA (now (HLURB) as provided in P.D. No. 957 of 1976 and P.D. No. 1344 of 1978. prcd
The allegations of UBP that the contract between FRDC and David had been rescinded, that the installment
payments made by David had been forefeited, that it is FRDC who should refund the said installment payments to
David, are mere matters of defense which are not proper in a petition for certiorari (Planters Products Inc. vs. CA,
193 SCRA 563: Commercial Corp. vs. PNB, 175 SCRA 1).
In Solid Homes Inc. vs. Payawal, 177 SCRA 72), we struck down the exercise of jurisdiction by the Regional Trial
Court of Quezon City over a lot buyer's complaint for delivery of title against the subdivision owner.
In Antipolo Realty Corporation vs. NHA, 153 SCRA 399, this Court, citing PD Nos. 957 and 1344,upheld the
jurisdiction of the National Housing Authority to determine the rights of the parties under the contract to sell a
subdivision lot.
In the more recent case of CT Torres Enterprises vs. Hibionada, 191 SCRA 268, we affirmed the HLURB's jurisdiction
to hear and decide a complaint for specific performance of the seller's obligation to deliver the title of a
subdivision lot to the buyer, with damages.
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.
WHEREFORE, the instant petition is DISMISSED with costs against the petitioner.
SO ORDERED.
G.R. No. L-52361 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner, vs. THE HON. JOSE C. CAMPOS, JR. OF THE COURT OF
FIRST INSTANCE, BRANCH XXX, PASAY CITY and AGUILAR-BERNARES REALTY, respondents.

G.R. No. L-52524 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner, vs. THE HON. JOSE C. CAMPOS, JR., PRESIDING JUDGE
OF THE COURT OF FIRST INSTANCE, BRANCH XXX, PASAY CITY, and LIM SIU LENG, respondents.

FERNANDEZ, J.:
These two cases which involve similar facts and raise Identical questions of law were ordered consolidated by
resolution of this Court dated March 17, 1980. 1
The petitioner, Sunset View Condominium Corporation, in both cases, is a condominium corporation within the
meaning of Republic Act No. 4726 in relation to a duly registered Amended Master Deed with Declaration of
Restrictions of the Sunset View Condominium Project located at 2230 Roxas Boulevard, Pasay City of which said
petitioner is the Management Body holding title to all the common and limited common areas. 2

G.R. NO. 52361

The private respondent, Aguilar-Bernares Realty, a sole proprietorship with business name registered with the
Bureau of Commerce, owned and operated by the spouses Emmanuel G. Aguilar and Zenaida B. Aguilar, is the
assignee of a unit, "Solana", in the Sunset View Condominium Project with La Perla Commercial, Incorporated, as
assignor. 3 The La Perla Commercial, Incorporated bought the "Solana" unit on installment from the Tower
Builders, Inc. 4 The petitioner, Sunset View Condominium Corporation, filed for the collection of assessments
levied on the unit against Aguilar-Bernares Realty, private respondent herein, a complaint dated June 22, 1979
docketed as Civil Case No. 7303-P of the Court of First Instance of Pasay City, Branch XXX. The private respondent
filed a Motion to Dismiss the complaint on the grounds (1) that the complaint does not state a cause of action: (2)
that the court has no jurisdiction over the subject or nature other action; and (3) that there is another action
pending between the same parties for the same cause. The petitioner filed its opposition thereto. The motion to
dismiss was granted on December 11, 1979 by the respondent Judge who opined that the private respondent is,
pursuant to Section 2 of Republic Act No. 4726, a "holder of a separate interest" and consequently, a shareholder
of the plaintiff condominium corporation; and that "the case should be properly filed with the Securities &
Exchange Commission which has exclusive original jurisdiction on controversies arising between shareholders of
the corporation." the motion for reconsideration thereof having been denied, the petitioner, alleging grave abuse
of discretion on the part of respondent Judge, filed the instant petition for certiorari praying that the said orders
be set aside.

G.R. NO. 52524

The petitioner filed its amended complaint dated July 16, 1979 docketed as Civil Case No. 14127 of Branch I of the
City Court of Pasay City for the collection of overdue accounts on assessments and insurance premiums and the
interest thereon amounting to P6,168 06 as of March 31, 1979 against the private respondent Lim Siu Leng 5 to
whom was assigned on July 11, 1977 a unit called "Alegria" of the Sunset. View Condominium Project by Alfonso
Uy 6 who had entered into a "Contract to Buy and Sell" with Tower Builders, Inc. over the said unit on installment
basis. 7
The private respondent filed a motion to dismiss on the ground of lack of jurisdiction, alleging that the amount
sought to be collected is an assessment. The correctness and validity of which is certain to involve a dispute
between her and the petitioner corporation; that she has automatically become, as a purchaser of the
condominium unit, a stockholder of the petitioner pursuant to Section 2 of the Condominium Act, Republic Act No.
4726; that the dispute is intra-corporate and is consequently under the exclusive jurisdiction of the Securities &
Exchange Commission as provided in Section 5 of P.D. No. 902-A. 8
The petitioner filed its opposition thereto, alleging that the private respondent who had not fully paid for the unit
was not the owner thereof, consequently was not the holder of a separate interest which would make her a
stockholder, and that hence the case was not an intra-corporate dispute. 9
After the private respondent had filed her answer to the opposition to the motion to dismiss 10 of the petitioner,
the trial court issued an order dated August 13, 1979 denying the motion to dismiss. 11 The private respondent's
motion for reconsideration thereof was denied by the trial court in its Order dated September 19, 1979. 12
The private respondent then appealed pursuant to Section 10 of Rule 40 of the Rules of Court to the Court of First
Instance, where the appeal was docketed as Civil Case No. 7530P. The petitioner filed its "Motion to Dismiss
Appeal" on the ground that the order of the trial court appealed from is interlocutory. 13
The motion to dismiss the appeal was denied and the parties were ordered to submit their respective
memorandum on the issue raised before the trial court and on the disputed order of the trial judge. 14 After the
parties had submitted their respective memoranda on the matter, the respondent Judge issued an order dated
December 14, 1979 in which he directed that "the appeal is hereby dismissed and d the judgment of the lower
court is reversed. The case is dismissed and the parties are directed to ventilate their controversy with the
Securities & Exchange Commission. 15 The petitioner's motion for reconsideration thereof was denied in an order
dated January 14, 1980. 16 Hence this petition for certiorari, alleging grave abuse of discretion on the part of the
respondent Judge.

Issues Common to Both Cases

It is admitted that the private respondents in both cases have not yet fully paid the purchase price of their units.
The Identical issues raised in both petitions are the following:
1. Is a purchaser of a condominium unit in the condominium project managed by the petitioner, who has not yet
fully paid the purchase price thereof, automaticaly a ,stockholder of the petitioner Condominium Corporation
2. Is it the regular court or the Securities & Exchange Commission that has jurisdiction over cases for collection of
assessments assessed by the Condominium Corporation on condominium units the full purchase price of which has
not been paid?
The private respondents in both cases argue that every purchaser of a condominium unit, regardless of whether or
not he has fully paid the purchase price, is a "holder of a separate interest" mentioned in Section 2 of Republic Act
No. 4726, otherwise known as "The Condominium Act" and is automatically a shareholder of the condominium
corporation.
The contention has no merit. Section 5 of the Condominium Act expressly provides that the shareholding in the
Condominium Corporation will be conveyed only in a proper case. Said Section 5 provides:
Any transfer or conveyance of a unit or an apartment, office or other space therein, shall include the transfer or
conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholding
in the condominium corporation ...
It is clear then that not every purchaser of a condominium unit is a shareholder of the condominium corporation.
The Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred
to the purchaser of a unit. Thus, Section 4 of said Act provides:
The provisions of this Act shall apply to property divided or to be divided into condominium only if there shall be
recorded in the Register of Deeds of the province or city in which the property lies and duly annotated in the
corresponding certificate of title of the land ... an enabling or master deed which shall contain, among others, the
following:
xxx xxx xxx
(d) Astatement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units
and in the common areas of the condominium project ...
The Amended Master Deeds in these cases, which were duly registered in the Register of Deeds, and which
contain, by mandate of Section 4, a statement of the exact nature of the interest acquired by a purchaser of a unit,
provide in Section 6 of Part 1:
(d) Each Unit owner shall, as an essential condition to such ownership, acquire stockholding in the Condominium
Corporation herein below provided ... 17
The Amended Master Deeds likewise provide in Section 7 (b), thus.
(b) All unit owners shall of necessity become stockholders of the Condominium Corporation. TOWER shall acquire
all the shares of stock of SUNSET VIEW and shall allocate the said shares to the units in proportion to the
appurtenant interest in the COMMON AREAS and LIMITED COMMON AREAS as provided in Section 6 (b) above.
Said shares allocated are mere appurtenances of each unit, and therefore, the same cannot be transferred,
conveyed, encumbered or otherwise disposed of separately from the Unit ... 18
It is clear from the above-quoted provisions of the Master Deeds that the shareholding in the Condominium
Corporation is inseparable from the unit to which it is only an appurtenant and that only the owner of a unit is a
shareholder in the Condominium Corporation.
Subparagraph (a) of Part 1, Section 6, of the Master Deeds determines when and under what conditions ownership
of a unit is acquired by a purchaser thus:
(a) The purchaser of a unit shall acquire title or ownership of such Unit, subject to the terms and conditions of the
instrument conveying the unit to such purchaser and to the terms and conditions of any subsequent conveyance
under which the purchaser takes title to the Unit, and subject further to this MASTER DEED ... 19
The instrument conveying the unit "Solana" in G.R. NO. 52361 is the "Contract to Buy and Sell" dated September
13, 1977, Annex "D", while that conveying the unit "Alegria" in G.R. NO. 52524 is the "Contract to Buy and Sell"
dated May 12, 1976, Annex "C". In both deeds of conveyance, it is provided:
4. Upon full payment by the BUYER of the total purchase price and full compliance by the BUYER of an its
obligations herein, the SELLER will convey unto the BUYER, as soon as practicable after completion of the
construction, full and absolute title in and to the subject unit, to the shares of stock pertaining thereto and to an
rights and interests in connection therewith ... 20
The share of stock appurtenant to the unit win be transferred accordingly to the purchaser of the unit only upon
full payment of the purchase price at which time he will also become the owner of the unit. Consequently, even
under the contract, it is only the owner of a unit who is a shareholder of the Condominium Corporation. Inasmuch
as owners is conveyed only upon full payment of the purchase price, it necessarily follows that a purchaser of a
unit who has not paid the full purchase price thereof is not The owner of the unit and consequently is not a
shareholder of the Condominium Corporation.
That only the owner of a unit is a stockholder of the Condominium Corporation is inferred from Section 10 of the
Condominium Act which reads:
SEC. 10. ... Membership in a condominium corporation, regardless of whether it is a stock or non-stock
corporation, shall not be transferable separately from the condominium unit of which it is an appurtenance When
a member or stockholder ceases is to own a unit in the project in which the condominium corporation owns or
holds the common areas, he shall automatically cease to be a member or stockholder of the condominium
corporation.
Pursuant to the above statutory provision, ownership of a unit is a condition sine qua non to being a shareholder in
the condominium corporation. It follows that a purchaser of a unit who is not yet the owner thereof for not having
fully paid the full purchase price, is not a shareholder By necessary implication, the "separate interest" in a
condominium, which entitles the holder to become automatically a share holder in the condominium corporation,
as provided in Section 2 of the Condominium Act, can be no other than ownership of a unit. This is so because
nobody can be a shareholder unless he is the owner of a unit and when he ceases to be the owner, he also ceases
automatically to be a shareholder.
The private respondents, therefore, who have not fully paid the purchase price of their units and are consequently
not owners of their units are not members or shareholders of the petitioner condominium corporation,
Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant
case for collection cannot be a "controversy arising out of intracorporate or partnership relations between and
among stockholders, members or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates, respectively" which controversies are under
the original and exclusive jurisdiction of the Securities & Exchange Commission, pursuant to Section 5 (b) of P.D.
No. 902- A. The subject matters of the instant cases according to the allegations of the complaints are under the
jurisdiction of the regular courts: that of G.R. NO. 52361, which is for the collection of P8,335.38 with interest plus
attorney's fees equivalent to the principal or a total of more than P10,000.00 is under the jurisdiction of the Court
of First Instance; and that of G.R. NO. 52524, which is for the collection of P6,168-06 is within the jurisdiction of
the City Court.
In view of the foregoing, it is no longer necessary to resolve the issue raised in G.R. NO. 52524 of whether an order
of the City Court denying a motion to dismiss on the ground of lack of jurisdiction can be appealed to the Court of
First Instance.
WHEREFORE, the questioned orders of the respondent Judge dated December 11, 1979 and January 4, 1980 in
Civil Case No. 7303-P, subject matter of the Petition in G.R. No. 52361, are set aside and said Judge is ordered to
try the case on the merits. The orders dated December 14, 1979 and January 14, 1980 in Civil Case No. 7530-P,
subject matter of the petition in G.R. No. 52524 are set aside and the case is ordered remanded to the court a quo,
City Court of Pasay City, for trial on the merits, with costs against the private respondents.
SO ORDERED.