G.R. No. 171072 - Goldcrest Realty Corp. vs. Cypress Gardens Condominium Corp.

Case Summary (G.R. No. 171072)

Genesis of the Controversy and HLURB Proceedings

After turnover in 1995, Cypress discovered that certain common areas under its control were being occupied and encroached upon by Goldcrest. In 1998, Cypress filed a complaint before the Housing and Land Use Regulatory Board (HLURB) seeking damages and relief aimed at compelling Goldcrest to vacate the allegedly encroached areas and to remove structures. Cypress sought removal of a door erected by Goldcrest along the stairway between the eighth and ninth floors, a door in front of the ninth floor elevator lobby, and the removal of a cyclone wire fence on the roof deck. Cypress also prayed that Goldcrest be made to pay damages for its occupation and for refusing to remove the structures.

Goldcrest responded that it had been granted exclusive use of the roof deck’s limited common area by Section 4(c) of the Master Deed. It asserted that the doors were built for privacy and security and that, in any case, the areas occupied were unusable and inaccessible to other condominium unit owners.

Upon the HLURB Arbiter’s directive, two ocular inspections were conducted. During the first inspection, it was found that Goldcrest enclosed and used the common area fronting the two elevators on the ninth floor as a storage room. It was likewise found that Goldcrest had constructed a permanent structure encroaching 68.01 square meters of the roof deck’s common area. During the second inspection, it was noted that Goldcrest failed to secure an alteration approval for the permanent structure.

Arbiter San Vicente’s Decision and Subsequent Administrative Review

In a decision dated December 2, 1999, Arbiter San Vicente ruled for Cypress. He required Goldcrest to remove structures, including those that inhibited free ingress and egress from the condominium’s limited and unlimited common areas. He also ordered Goldcrest to vacate the roof deck’s common areas and to pay actual damages for occupying the same. Additionally, he required Goldcrest to pay an administrative fine for constructing a second penthouse and for making an unauthorized alteration of the condominium plan.

On review, the HLURB Special Division modified the arbiter’s ruling. It deleted the award for actual damages on the ground that the encroached area had not been actually measured and that there was no evidentiary basis for the rate of compensation fixed by the arbiter. It also held that Cypress had no cause of action regarding the use of the roof deck’s limited common area because only Goldcrest had the right to use it. The dispositive portion ordered Goldcrest to remove structures obstructing stairway use and lobby passage, to remove structures impeding unlimited common areas, and to pay an administrative fine of P10,000.00 for addition of a second penthouse and/or unauthorized alteration. All other claims were dismissed.

Cypress appealed to the Office of the President, which dismissed the appeal and affirmed. The Office of the President agreed that the deletion of actual damages was proper because the exact encroached area was not determined. It also rejected Cypress’s argument that the assailed decision effectively allowed Goldcrest to erect structures on limited common areas and to lease them to third persons. It emphasized that the administrative ruling ordered removal of structures impairing unlimited common areas and imposed a fine for unauthorized alteration and construction on the roof deck.

Court of Appeals Ruling on Limited Common Areas and Structures

Cypress elevated the dispute to the Court of Appeals, which partly granted the appeal. The Court of Appeals ruled that Goldcrest’s right under Section 4(c) of the Master Deed to exclusive use of a portion of the roof deck did not carry an unrestricted right to build structures thereon or to lease the area to third persons. It therefore ordered removal of the permanent structures constructed on the roof deck’s limited common area.

After denial of motions for partial reconsideration by both parties, Goldcrest sought review by certiorari in the Supreme Court, raising two issues: whether the Court of Appeals erred in finding an office structure was built on a supposed encroached portion in the open space of the roof deck, and whether it erred in ruling that Goldcrest’s acts impaired the easement on the portion of the roof deck designated as a limited common area.

The First Issue: Measurement of Encroachment and Impossibility of Removal

Goldcrest contended that the Court of Appeals erred because the areas allegedly encroached were not actually measured during the earlier ocular inspections. It further argued that the directive to remove the permanent structures on the limited common area was impossible to implement.

The Court rejected these submissions. It noted that the failure to measure the encroached areas had become irrelevant at that stage because the controversy over actual damages was no longer in issue. The Court also found substantial evidentiary support for the Court of Appeals’ finding that Goldcrest built an office structure on the roof deck’s limited common area. It pointed to the ocular inspection reports submitted by HLURB Inspector Edwin D. Aquino; the fact that the second ocular inspection was intended to measure the actual area encroached; the fact that Goldcrest had already been fined for building a structure on the limited common area; and the circumstance that Goldcrest neither denied the existence of the structure nor denied its encroachment on the limited common area.

The Court likewise found no merit in the asserted impossibility of compliance. It reasoned that the roof deck’s limited common area was specifically identified by Section 4(c) of the Master Deed, which reserved “exclusive use of the portion of the roof deck (not shaded red in sheet 10 of Annex ‘B’) by the Penthouse unit on the roof deck.”

The Second Issue: Exclusive Use, Construction, and Impairment of the Easement

Goldcrest’s position on the second issue was that because the roof deck’s limited common area was for its exclusive use, it could build structures thereon and lease the area to third persons without impairing the easement. Cypress argued that these acts impaired the easement because they were beyond what the easement contemplated.

The Court framed the governing inquiry as a factual one. It held that determining whether a particular act impairs an easement required examining the act’s propriety in relation to the character and purpose of the easement.

The Court upheld the consistent findings of the HLURB, the Office of the President, and the Court of Appeals that Goldcrest had no right to erect an office structure on the limited common area despite its exclusive right to use it. It emphasized that Goldcrest’s acts did not merely impair the easement; they also amounted to an illegal alteration of the condominium plan in violation of Section 22 of P.D. No. 957. Under the Court’s treatment of the governing easement restrictions, the dominant estate owner could not act in ways

Case Syllabus (G.R. No. 171072)

Goldcrest Realty Corporation (Goldcrest) developed Cypress Gardens, a ten-storey condominium project in Makati City, and initially retained control over condominium management and common areas until 1995.
Cypress Gardens Condominium Corporation (Cypress) managed the condominium and held title to the common areas after turnover in 1995, under the condominium project documents executed in 1977.
The dispute arose from Cypress’s discovery that Goldcrest occupied and encroached upon certain condominium common areas despite Goldcrest’s retained ownership of the penthouse unit.
The controversy ultimately reached the Supreme Court through a petition for review on certiorari of the Court of Appeals’ decision dated September 29, 2005 and resolution dated January 16, 2006 in CA G.R. SP No. 79924.
The Supreme Court denied the petition and affirmed the Court of Appeals’ ruling that Goldcrest could not construct an office structure on the roof deck’s limited common area reserved for Goldcrest’s exclusive use.

Parties and Procedural Posture

Goldcrest appeared as the petitioner before the Supreme Court.
Cypress appeared as the respondent before the Supreme Court.
Cypress first filed a complaint with the Housing and Land Use Regulatory Board (HLURB) in 1998 to compel Goldcrest to vacate and remove encroachments on common areas.
The HLURB conducted two ocular inspections following the directive of HLURB Arbiter San Vicente.
Arbiter San Vicente ruled in favor of Cypress on December 2, 1999, requiring removal of certain structures, vacation of roof deck common areas, payment of actual damages, and payment of an administrative fine.
The HLURB Special Division modified the arbiter’s decision by deleting the award for actual damages and by ruling that Cypress had no cause of action regarding use of the roof deck’s limited common area.
Cypress appealed to the Office of the President, which dismissed the appeal and affirmed the HLURB ruling as modified.
Cypress then elevated the matter to the Court of Appeals, which partly granted the appeal by directing removal of permanent structures constructed on the roof deck’s limited common area.
The Court of Appeals’ directive was contested by both parties through motions for partial reconsideration, which the courts denied, prompting Goldcrest’s present petition for review on certiorari.

Key Factual Allegations

Goldcrest executed a Master Deed and Declaration of Restrictions on April 26, 1977, which constituted Cypress Gardens into a condominium project and incorporated Cypress as the managing corporation and titleholder of common areas.
Title to the land where the condominium stood was transferred to Cypress under Transfer Certificate of Title No. S-67513.
Goldcrest retained ownership of the penthouse unit on the ninth and tenth floors under Condominium Certificate of Title (CCT) No. S-1079, and Goldcrest’s directors, officers, and assigns controlled condominium management until 1995.
After turnover of management in 1995, Cypress discovered alleged occupation and encroachment by Goldcrest over common areas.
Cypress alleged that Goldcrest enclosed and used the common area in front of two ninth-floor elevators as a storage room.
Cypress alleged that Goldcrest constructed a permanent structure on the roof deck that encroached 68.01 square meters of the roof deck’s common area, and that Goldcrest failed to secure the required alteration approval.
Cypress sought removal of structures including doors obstructing stairway use between the eighth and ninth floors, doors built in front of the ninth-floor elevator lobby, and a cyclone wire fence on the roof deck.
Goldcrest countered that it had been granted exclusive use of the roof deck’s limited common area under Section 4(c) of the Master Deed, and it claimed the contested doors were for privacy and security.
Goldcrest further claimed that the common areas it occupied were unusable and inaccessible to other unit owners.

HLURB Ocular Findings

The HLURB conducted a first ocular inspection during which Goldcrest’s enclosure of the common area fronting the two elevators on the ninth floor was found.
The first inspection also found that Goldcrest constructed a permanent structure encroaching 68.01 square meters of the roof deck’s common area.
A second ocular inspection was conducted to evaluate the encroachment, and it was noted that Goldcrest failed to secure alteration approval for the permanent structure.
The records reflected that HLURB made no distinction between the roof deck’s limited and unlimited common areas during the inspections where measurement issues arose.
Cypress relied on ocular inspection reports submitted by HLURB Inspector Edwin D. Aquino to support the existence and nature of Goldcrest’s structure.

Administrative and Governmental Rulings

Arbiter San Vicente ruled in favor of Cypress on December 2, 1999.
The arbiter ordered Goldcrest to remove structures obstructing the free ingress and egress from limited and unlimited common areas.
The arbiter required Goldcrest to vacate the roof deck’s common areas and to pay actual damages for occupying the same.
The arbiter further required an administrative fine for adding a second penthouse and for unauthorized alteration of the condominium plan.
On review, the HLURB Special Division modified the decision by deleting the actual damages award for lack of actual measurement of the encroached area and for lack of evidentiary basis for the compensation rate.
The HLURB Special Division also held that Cypress had no cause of action regarding the use of the roof deck’s lim