G.R. No. L-55372 - Hahn vs. Court of Appeals

Forbes Park Association, Inc. (FPA) is a non-profit, non-stock corporation organized to promote and safeguard the interests of residents and lot owners of Forbes Park Subdivision.
Membership in the FPA is automatic for subdivision lot owners, who are bound by the Association’s rules and regulations and restrictions annotated on their titles.
Cariday Investment Corporation (Cariday) owns a residential building within Forbes Park and is thus a member of FPA.

Subject to easements for drainage, sewerage, and public facilities.
For 50 years from January 1, 1949, land use restricted only for residential purposes.
Not more than one single-family residential building may be constructed on the lot, except separate servants’ quarters.

One residential building per lot, used only for residential purposes.
Only one single-family residential building allowed; separate garage, servants’ quarters, and bathhouses for pools allowed.
If multiple lots owned, residence astride the lots considered as one parcel for setback rules.

Houses and improvements inside the subdivision are exclusively for residence of owners, bona fide residents, families, guests, staff, and domestics.
Use for commercial, business, or office purposes (e.g., hotels, restaurants, motels, stores) is prohibited.
Violations may lead to disconnection of water service after notice and subject to conditions for reconnection.

In June 1986, Cariday made repairs to its building with notice to FPA.
FPA’s civil engineer reported deviations from approved plans, including additions/deletions and design allowing occupancy by more than one family.
Cariday admitted the building externally resembled a single-family residence but was internally designed for two families.
FPA demanded corrections, which Cariday did not make.
On July 1, 1987, Cariday leased one portion to James Duvivier (English tenant).
On August 1, 1987, Cariday leased the other half to Procter and Gamble for an American executive, Robert Haden.
FPA advised Cariday that leasing to multiple tenants violated the "one single-family residential" restriction and threatened to disconnect water service.
Haden was denied entry on September 18, 1987, by FPA’s security guards.
Cariday filed a complaint for injunction and damages to restrain FPA from disconnecting water and preventing tenants’ entry (Trial Court Case No. 17933).

Trial court issued a writ of preliminary injunction in favor of Cariday.
FPA appealed to the Court of Appeals (CA), which annulled the injunction, holding:

The “one single-family residential building” restriction limits not only the building but occupancy to one family.
Leasing to more than one tenant violates this restriction.
FPA’s actions, including water disconnection and preventing tenant entry, were within its powers.

Cariday sought Supreme Court review, arguing no explicit prohibition against leasing to multiple tenants.

The Supreme Court majority affirmed the CA’s ruling, interpreting the restriction as to both construction and occupancy by a single family, aimed at preserving subdivision peace, aesthetics, preventing overcrowding, and safeguarding facilities.
Two dissenting opinions by Justices Gutierrez, Jr. and Medialdea rejected this interpretation as overly restrictive of property rights and argued that the restriction applied only to the structure, not use by multiple families.
The dissenters underscored constitutional social justice principles, questioned the true purpose of the restriction, and called for a more liberal and reasonable interpretation.

Whether the “one single-family residential building” restriction includes a prohibition against the use and occupancy of the building by more than one family after construction.

Whether the Forbes Park Association can enforce its rules by disconnecting water service and preventing entry to tenants in violation of the subdivision’s deed restrictions and rules.

Whether Cariday Investment Corporation’s leasing of the building to more than one tenant family violates the Deed of Restrictions and the Association’s rules.