Case Summary (G.R. No. 210286)
Factual Background
The subject property consisted of Condominium Unit No. 802 of the Wack Wack Apartment Building, registered in the name of the late Cresenciano C. De Castro and covered by Condominium Certificate of Title No. 2826. Petitioners, as developer, condominium corporation and unit owners, caused the annotation of a lien for unpaid assessments and other dues in the amount of P79,905.41 as of July 31, 1986 on August 14, 1986 pursuant to the Master Deed with Declaration of Restrictions of the condominium project.
Extra-Judicial Foreclosure Proceedings
For continued nonpayment, petitioners filed a petition for extra-judicial foreclosure with the Office of the Ex-Officio Sheriff of Pasig City on October 27, 1986. Publication and posting requirements were complied with and a notice of sale was received by De Castro on January 29, 1987. A public auction occurred on February 10, 1987, at which petitioners were the highest bidders for P88,809.94. A certificate of sale issued in their favor on February 10, 1987, and the sale was registered with the Register of Deeds of Pasig City and annotated at the back of CCT No. 2826 on April 2, 1987. De Castro failed to redeem the property.
SEC Petition and the Parties’ Contentions
De Castro filed a petition for annulment of the foreclosure proceedings before the Securities and Exchange Commission, contending that petitioners lacked legal personality to invoke the Condominium Act, that the annotation of assessment dues and issuance of the certificate of sale were irregular and without factual or legal basis, that the assessments were excessive and arbitrary, and that no special power of attorney or agreement authorized petitioners to foreclose. Petitioners countered that the foreclosure complied with the Master Deed and By-Laws to which De Castro was bound as a unit owner, that the assessment was uniform and reasonable, and that De Castro had received notice yet made no opposition or appearance at the foreclosure sale. De Castro died during the pendency of the SEC case in February 1992 and his heirs were substituted as respondents.
Ruling of the Regional Trial Court
The Regional Trial Court of Mandaluyong City, Branch 211 rendered judgment on March 31, 2009, dismissing De Castro’s petition for lack of merit and dismissing petitioners’ counterclaims. The RTC found that De Castro was aware of his unpaid dues and penalties, that he was bound by the Master Deed which authorized petitioners to levy assessments, and that the By-Laws empowered the Board of Directors to enforce collection by any remedy provided in the Condominium Act and other pertinent laws, including foreclosure. The RTC characterized the Master Deed and By-Laws as the contract between unit owner and condominium corporation and upheld the extra-judicial foreclosure as valid to enforce the lien.
Ruling of the Court of Appeals
The Court of Appeals reversed the RTC in its September 30, 2013 Decision and set aside the extra-judicial foreclosure as null and void on the sole ground that petitioners failed to prove they possessed sufficient authority or a special power to foreclose. The CA relied principally upon First Marbella Condominium Association, Inc. v. Gatmaytan, and administrative guidance in Circular No. 7-2002 implementing A.M. No. 99-10-05-0, which require that an application for extra-judicial foreclosure be supported by evidence of a special power of attorney authorizing foreclosure. The CA held that neither the condominium By-Laws nor Section 20 of the Condominium Act by itself vested petitioners with authority to extra-judicially foreclose.
Issue Presented
Whether the Court of Appeals erred in declaring the extra-judicial foreclosure proceedings null and void for lack of proof that petitioners held special authority to foreclose.
Supreme Court Ruling
The Court granted the petition for review on certiorari. It reversed and set aside the Decision and Resolution of the Court of Appeals and reinstated the RTC Decision dated March 31, 2009 in SEC Case No. MC-01-002. The Supreme Court concluded that the CA erred in finding petitioner lacked authority to institute extra-judicial foreclosure.
Legal Basis and Reasoning
The Court examined Section 20 of the Condominium Act, observing that the provision makes assessments an obligation of the unit owner, prescribes that assessments and related charges constitute a lien to be registered, and states that such liens “may be enforced in the same manner provided for by law for the judicial or extra-judicial foreclosure of mortgage of real property.” The Court explained that Section 20 does not by itself confer singular authority to foreclose but adopts the foreclosure procedures provided by law. The Court acknowledged that Act No. 3135, as read with Circular No. 7-2002 and A.M. No. 99-10-05-0, requires proof of a special power of attorney authorizing extra-judicial foreclosure when the foreclosure proceeds under the mechanics of Act No. 3135. The Court distinguished First Marbella Condominium Association, Inc. v. Gatmaytan, emphasizing that in First Marbella the only basis for foreclosure was an annotated notice of assessment and nothing in the record established delegated authority to foreclose. By contrast, in the present case petitioners relied not solely on the notice of assessment but also on the Master Deed and the condominium By
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Parties and Procedural Posture
- Welbilt Construction Corporation and Wack Wack Condominium Corporation were the developer and management body of Wack Wack Apartments Building, respectively.
- Spouses Eugenio Juan Gonzalez and Matilde Gonzalez were unit owners and acted in official capacities for the condominium corporation.
- Cresenciano C. De Castro was the registered owner of Condominium Unit No. 802 covered by CCT No. 2826 and his Heirs of Cresenciano C. De Castro were substituted following his death.
- The petition was filed under Rule 45, Rules of Court, assailing the Court of Appeals Decision dated September 30, 2013 and Resolution dated December 4, 2013.
- The Regional Trial Court of Mandaluyong City, Branch 211 rendered a Decision dated March 31, 2009 in SEC Case No. MC-01-002 that the petitioners' extra-judicial foreclosure was valid.
- The Court of Appeals reversed the RTC on September 30, 2013 and set aside the foreclosure for lack of proof of authority to foreclose.
- The Supreme Court, through an opinion penned by TIJAM, J., granted the petition, reversed the CA Decision and reinstated the RTC Decision.
Key Factual Allegations
- De Castro failed to pay assessment dues amounting to P79,905.41 as of July 31, 1986 despite demand.
- Petitioners annotated a lien for unpaid assessments at the back of CCT No. 2826 on August 14, 1986 pursuant to Section 4 of the Master Deed.
- Petitioners filed a petition for extra-judicial foreclosure with the Office of the Ex-Officio Sheriff of Pasig City on October 27, 1986, and complied with publication and posting requirements.
- De Castro received a copy of the foreclosure notice on January 29, 1987, and the public auction occurred on February 10, 1987.
- Petitioners were the highest bidder at P88,809.94 and a certificate of sale issued in their favor was registered with the Register of Deeds on April 2, 1987.
- De Castro did not redeem the property and filed a petition for annulment of foreclosure proceedings before the SEC asserting lack of legal personality, irregularities, and absence of authority to foreclose.
- During the pendency of the SEC case, De Castro died and his heirs were substituted as respondents.
Procedural History
- De Castro instituted a petition for annulment of foreclosure with the SEC during the period when the SEC had jurisdiction over intra-corporate disputes.
- The RTC, in a Decision dated March 31, 2009, dismissed the petition for lack of merit and upheld the foreclosure.
- The Court of Appeals, in a Decision dated September 30, 2013, reversed the RTC and set aside the extra-judicial foreclosure on the sole ground that petitioners lacked sufficient authority to foreclose.
- The Court of Appeals relied on First Marbella Condominium Association, Inc. v. Gatmaytan, 579 Phil. 432 (2008), and on Circular No. 7-2002 implementing A.M. No. 99-10-05-0 in finding that proof of a special power was mandatory.
- The Supreme Court reviewed the CA decision by certiorari under Rule 45 and resolved the case in favor of petitioners.
Issues Presented
- Whether the Court of Appeals erred in declaring the extra-judicial foreclosure proceedings null and void for lack of proof of authority to foreclose.
Statutory Framework
- Section 20, Condominium Act (RA 4726) provides that assessments made in accordance with a duly registered declaration of restrictions shall be a lien on the condominium and prescribes that such liens may be enforced in the same manner provided by law for judicial or extra-judicial foreclosure of mortgage of real pr