XIII.

HLURB, PDs 957 & 1344; RA 4726-Condominium Law; RA 6552 (Maceda Law); Estoppel,
Easement

#1 UNITED OVERSEAS BANK OF THE PHILIPPINES, INC UOBP v. THE BOARD OF

COMMISSIONERS-HLURB, J.O.S. MANAGING BUILDERS, INC., AND EDUPLAN
PHILS., INC.
G.R. No. 182133, 23 June 2015

FACTS:

On August 15, 2001, the HLURB Arbiter rendered a decision declaring, that the mortgage
between J.O.S. Managing Builders and United Overseas Bank of the Philippines (UOBP) and the
foreclosure of the mortgage were null and void for being in violation of Section 18 of P.D. No. 957.

UOBP brought its petition for review to the HLURB Board of Commissioners, which, on
August 20, 2004, affirmed the HLURB Arbiters decision with modification.

UOBP elevated the case to the Court of Appeals (CA). CA affirmed the HLURB Board of
Commissioners.

The CA also denied UOBPs motion for reconsideration, observing that petitioner bank did
not exhaust administrative remedies due to its failure to appeal the decision of the HLURB Board of
Commissioners to the Office of the President before filing its petition for review in the CA.

ISSUE: Whether or not the mortgage constituted between petitioner bank and the
respondent developer is valid.

RULING:

No. Firstly, it says that this case presents a purely legal question whether failure to obtain
prior written approval of the HLURB would result to the nullification of the entire mortgage
contract that will eventually be decided by the courts. With the presence of such recognized
exception, the rule on exhaustion of administrative remedies need not strictly apply.

It insists about the legal issue that the HLURB erred in declaring the entire mortgage
executed between J.O.S. Managing Builders and UOBP null and void because although the
mortgage could be nullified if it was in violation of Section 18 of P.D. No. 957, the nullification
should apply only to the interest of the complaining buyer, and should not extend to the entire
mortgage considering that the buyer of a particular unit or lot has no standing to ask for the
nullification of the entire mortgage.

It explains that the principle of indivisibility of mortgage under Article 2089 of the Civil
Code cannot be applied herein because Section 18 of P.D. No. 957 expressly allows the
proportionate extinguishment of a mortgage upon payment of the debt corresponding to the lot or
unit of a particular buyer; that it follows that the mortgage can be partially nullified insofar as it
affects the complaining party; and that the mortgage executed and the succeeding foreclosure
proceedings between J.O.S. Managing Builders and UOBP were consequently null and void only
with respect to EDUPLANs Unit E at the 10th Floor of the Aurora Milestone Tower.

The general rule that a mortgage is an indivisible contract applies only between the
contracting parties where a debtor-creditor relationship exists.

Although the concept of indivisibility does not apply to the unit buyers of the condominium
project because they are not parties to the principal contract of loan and the mortgage, the
agreements that they enter into with the developer nevertheless affect the nature of the mortgage.

In consideration of the agreements and conformably with the governing law, Supreme Court
ruled that the mortgage contract between J.O.S. Managing Builders and United Overseas Bank is not
indivisible in this context.

To begin with, there are certain factors that may be considered to properly determine
whether an obligation is divisible or indivisible, namely: (1) the will or intention of the parties, which
may be express or presumed; (2) the objective or purpose of the stipulated prestation; (3) the nature
of the thing; and (4) provisions of law affecting the prestation.
In a real estate mortgage, the object or prestation does not refer to the lots or units
mortgaged, but to the security given by the debtor to the creditor to guarantee the fulfillment of the
principal obligation. However, unlike in the case of ordinary mortgage contracts, the provisions of
P.D. No. 957 are embedded in the mortgage contract between J.O.S. Managing Builders and United
Overseas Bank, particularly Section 18 which states:

Section 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 thereto.

It is easily discernible from Section 18 that the partial extinguishment of the mortgage
corresponding to a particular lot or unit that is meanwhile fully paid for is expressly permitted. As
such, Section 18 affects the prestation of the mortgage because it releases a portion that no longer
belongs to the mortgagor-developer and thus ceases to be the object of its mortgage. In short,
Section 18 of P.D. No. 957 renders mortgages of this nature divisible. By virtue of Section 18 of
P.D. No. 957, the parties of the mortgage become bound to respect the agreements from which the
rights of lot or unit buyers arise.
The possibility exists that the developers principal obligation with the financial institution
will eventually become unsecured should all unit buyers of the condominium project effect full
payment. In consideration of this possibility, the mortgage between J.O.S. Managing Builders and
United Overseas Bank should be construed as divisible instead of indivisible. Hence, the nullity of
the mortgage contract should be confined only to the interest of the complaining buyer,
EDUPLAN. I should stress that the right to set up the nullity of a void or nonexistent contract is
not limited to the parties, as in the case of annullable or voidable contracts. Under Article 1421 of
the Civil Code, the defense of the illegality of a contract is available to third persons whose interests
are directly affected.11 The interests of EDUPLAN, while not a party to the mortgage contract
between J.O.S. Managing Builders and United Overseas Bank, are directly affected if the mortgage
and its foreclosure were to be upheld. Even so, EDUPLAN, not being directly injured by the
foreclosure of the other units, has no right to bring an action in behalf of the other unit buyers
because its actionable interest is limited to its purchased unit.
Interest within the meaning of this rule means material interest, or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about the
question involved. Accordingly, a real party in interest is the party who, by the substantive law, has
the right sought to be enforced.

#2 EMETERIA LIWAG v. HAPPY GLEN LOOP HOMEOWNERS ASSOCIATION, INC.,

G.R. No. 189755, 04 July 2012

FACTS:

In 1978, F. G. R. Sales, the original developer of Happy Glen Loop, loaned from Ernesto
Marcelo, owner of T. P. Marcelo Realty Corporation. The former failed to settle its debts with the
latter, so, he assigned all his rights to Marcelo over several parcels of land in the Subdivision
including the receivables from the lots already sold.

As the successor-in-interest, Marcelo represented to lot buyers, the National Housing

Authority (NHA) and the Human Settlement Regulatory Commission (HSRC) that a water facility is
available in the subdivision. The said water facility has been the only source of water of the residents
for thirty (30) years.

In September 1995, Marcelo sold Lot 11, Block 5 to Hermogenes Liwag. As a result,
Transfer Certificate of Title (TCT) No. C-350099 was issued to the latter. In 2003, Hermogenes
died. Petitioner, wife of Hermogenes, subsequently wrote to the respondent Association demanding
the removal of the overhead water tank over the parcel of land. The latter refused and filed a case
before the Housing and Land Use Regulatory Board against T. P. Marcelo Realty Corporation,
petitioner and the surviving heirs of Hermogenes.

The HLURB ruling was in favor of the respondent Association. One of the things it
affirmed was the
existence of an easement for water system/facility or open space on Lot 11, Block 5 of TCT No. C-
350099 wherein the deep well and overhead tank are situated. However, on appeal before the
HLURB Board of Commissioners, the Board found that Lot 11, Block 5 was not an open space.

ISSUE: Whether or not Lot 11, Block 5 of the Happy Glen Loop is considered an open
space as defined in P. D. 1216.

RULING:
 YES. The parcel of land is considered an open space. The Court used the basic statutory
construction principle of ejusdem generis to determine whether the area falls under other similar
facilities and amenities since P. D. 1216 makes no specific mention of areas reserved for water
facilities.

Ejusdem generis states that where a general word or phrase follows an enumeration of
particular and specific words of the same class, the general word or phrase is to be construed to
include or to be restricted to things akin to or resembling, or of the same kind or class as, those
specifically mentioned. Applying that principle, the Court found out that the enumeration refers to
areas reserved for the common welfare of the community.

Therefore, the phrase other similar facilities and amenities should be interpreted in like
manner. It is without a doubt that the facility was used for the benefit of the community. Water is a
basic necessity, without which, survival in the community would be impossible.

#3 ORTIGAS & COMPANY, LIMITED PARTNERSHIP, v. COURT OF APPEALS

G.R. No. 129822, 20 June 2012

FACTS:

In 1994 respondent City of Pasig (the City) filed a complaint against Ortigas and Greenhills
Properties, Inc. (GPI) for specific compliance before the Regional Trial Court (RTC) of Pasig in a
civil case alleging that Ortigas failed to comply with Municipal Ordinance 5, Series of 1966 (MO 5)
which required it to designate appropriate recreational and playground facilities at its former Capitol
VI Subdivision (regarded as a residential site), now the Pasig City side of the Ortigas
Center. Further, the City alleged that despite the fact that the plan was only approved by the
Municipal Council as to layout, petitioner proceeded to develop the property without securing a final
approval.

In answer, Ortigas alleged that its development plan for the subject land was for a
commercial subdivision, outside the scope of MO 5 that applied only to residential subdivisions; that
the City cannot assail the validity of that development plan after its approval 25 years ago. Its
development plan had been approved: (1) by the Department of Justice through the Land
Registration Commission on June 16, 1969; (2) by the Municipal Council of Pasig under Resolution
128 dated May 27, 1969; and (3) by the Court of First Instance of Rizal, Branch 25 in its Order dated
July 11, 1969. Ortigas further alleged that only in 1984, 15 years after the approval of its plan, that
the National Housing Regulatory Commission imposed the open space requirement for commercial
subdivisions through its Rules and Regulations for Commercial Subdivision and Commercial
Subdivision Development. Ortigas filed a motion to dismiss the case on the ground that the RTC
had no jurisdiction over it, such jurisdiction being in the Housing and Land Use Regulatory Board
(HLURB) for unsound real estate business practices.

On April 15, 1996 the RTC denied the motion to dismiss. It held that HLURBs jurisdiction
pertained to disputes arising from transactions between buyers, salesmen, and subdivision and
condominium developers. Ortigas filed a petition for certiorari before the Court of Appeals (CA) to
challenge the RTCs actions.
 On February 18, 1997 the CA rendered judgment, affirming the RTCs denial of the motion
to dismiss. The appellate court ruled that the City sought compliance with a statutory obligation
enacted to promote the general welfare (Section 16, Local Government Code) which invariably
includes the preservation of open spaces for recreational purposes. Since the City was not a buyer
or one entitled to refund for the price paid for a lot, the dispute must fall under the jurisdiction of
the RTC pursuant to Section 19 of The Judiciary Reorganization Act of 1980.

ISSUE: Whether or not the jurisdiction over the case against petitioner Ortigas filed by the
City regarding non-compliance with the Municipal Ordinance 5 which required petitioner to
designate appropriate recreational and playground facilities, lies with the HLURB and not
with the RTC

RULING:
No, the jurisdiction lies with the RTC. Not every case involving buyers and sellers of subdivision
lots or condominium units can be filed with the HLURB. Its jurisdiction is limited to those cases
filed by the buyer or owner of a subdivision lot or condominium unit and based on any of the
causes of action enumerated in Section 1 of P.D. 1344.

Ortigas maintains that the HLURB has jurisdiction over the complaint since a land developer's
failure to comply with its statutory obligation to provide open spaces constitutes unsound real estate
business practice that Presidential Decree (P.D.) 1344 prohibits. Executive Order 648 empowers
the HLURB to hear and decide claims of unsound real estate business practices against land
developers. Ultimately, whether or not the HLURB has the authority to hear and decide a case is
determined by the nature of the cause of action, the subject matter or property involved, and the
parties. Section 1 of P.D. 1344 vests in the HLURB the exclusive jurisdiction to hear and
decide the following cases:

(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 lots or condominium units against the
owner, developer, dealer, broker or salesman.

Unlike paragraphs (b) and (c) above, paragraph (a) does not state which party can file a claim
against an unsound real estate business practice. But, in the context of the evident objective
of Section 1, it is implicit that the unsound real estate business practice would, like the
offended party in paragraphs (b) and (c), be the buyers of lands involved in
development. The policy of the law is to curb unscrupulous practices in real estate trade and
business that prejudice buyers.

Obviously, the City had not bought a lot in the subject area from Ortigas which would give
it a right to seek HLURB intervention in enforcing a local ordinance that regulates the use of
private land within its jurisdiction in the interest of the general welfare. It has the right to
bring such kind of action but only before a court of general jurisdiction such as the RTC.
 #4 FEDMAN DEVELOPMENT CORPORATION v. FEDERICO AGCAOILI
G.R. No. 165025, 31 August 2011

FACTS:

Fedman Development Corporation (FDC) was the owner and developer in a condominium
project known as Fedman Suites Building (FSB) located in Makati.

On October 10, 1980, Interchem Laboratories Incorporated (Interchem), with FDCs

consent, transferred all its rights in Unit 411 to respondent Federico Agcaoili (Agcaoili). As
consideration for the transfer, Agcaoili agreed: (a) to pay Interchem 150,000.00 upon signing of the
deed of transfer; (b) to update the account by paying to FDC the amount of 15,473.17 through a 90
day post dated check; and (c) to deliver to FDC the balance of 137,286.83 in 135 equal monthly
instalments of 1,857.24 effective October 1980, inclusive of 12% interest per annum on the
diminishing balance. The obligations Agcaoili assumed totaled 302,760.00.

In December 1983, the centralized air-conditioning unit of FSBs fourth floor broke down.
He then informed FDC and FSCC that he was suspending the payment of his condominium dues
and monthly amortizations. FDC cancelled the contract to sell. Agcaoili was thus prompted to sue
FDC and FSCC in the RTC, Makati City, Branch 144 for injunction and damages.

The parties later executed a compromise agreement that the RTC approved through its
decision of August 26, 1985.

RTC rendered judgment in favor of Agcaoili, FDC appealed, but the CA affirmed the RTC.

ISSUE: Whether or not the ruling in the RTC is void because the jurisdiction over the
subject matter of the action pertained to the HLURB, and that both RTC and CA erred in
ruling

RULING:

FDC is now barred from asserting that the HLURB, not the RTC, had jurisdiction over the
case. As already stated, Agcaoili filed a complaint against FDC in the RTC on February 28, 1985
after FDC disconnected the electric supply of Unit 411. Agcaoili and FDC executed a compromise
agreement on August 16, 1985. The RTC approved the compromise agreement through its decision
of August 26, 1985. In all that time, FDC never challenged the RTCs jurisdiction nor invoked the
HLURBs authority.

On the contrary, FDC apparently recognized the RTCs jurisdiction by its voluntary
submission of the compromise agreement to the RTC for approval. Also, FDC did not assert the
HLURBs jurisdiction in its answer to Agcaoilis second complaint (filed on March 6, 1987). Instead,
it even averred in that answer that the decision of August 26, 1985 approving the compromise
agreement already barred Agcaoili from filing the second complaint under the doctrine of res judicata.
FDC also thereby sought affirmative relief from the RTC through its counterclaim.
 FDC invoked HLURBs authority only on September 10, 1990,[34] or more than five years
from the time the prior case was commenced on February 28, 1985, and after the RTC granted
Agcaoilis motion to enjoin FDC from cancelling the contract to sell.[35]

The principle of estoppel, which is based on equity and public policy,[36] dictates that FDCs
active participation in both RTC proceedings and its seeking therein affirmative reliefs now
precluded it from denying the RTCs jurisdiction. Its acknowledgment of the RTCs jurisdiction and
its subsequent denial of such jurisdiction only after an unfavorable judgment were inappropriate and
intolerable. The Court abhors the practice of any litigant of submitting a case for decision in the trial
court, and then accepting the judgment only if favorable, but attacking the judgment for lack of
jurisdiction if it is not.

#5 REVELINA LIMSON v. WACK WACK CONDOMINIUM CORPORATION

G.R. No. 188802, 14 February 2011

FACTS:

Spouses Limson purchased an apartment unit at Wack Wack Apartments. Upon moving in,
she noticed defects in the electrical main panel located inside the unit, drawing her to report them,
by letter, to Wack Wack Condominium Corporation, a non-stock corporation organized for the
purpose of holding title to and managing the common areas of Wack Wack Apartments. Gonzalez,
who sits as Member of the corporations Board of Directors, replied by letter, 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. Another letter was sent by Limson informing the Wack Wack
Corporation 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. She 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 Ravelinas request, the City Building Office conducted an inspection of Unit 703. In its
report, it was found out that 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. For its recommendation, it suggests for the replacement of the fusible load
center, replace the embedded circular loom, check all grounded circuit and provide separate circuit
for water heater lad, and o submit a built electrical plan. The report was sent by then Mayor Abalos
to Wack Wack Corporation. The corporation through Architect Gonzalez, wrote Limson
demanding the repairs stated in the report. Before the deadline, the corporations Board of
Directors convened and resolved to impose a daily fine of P1,000.00 on Spouses Limson, should the
latter fail to comply.

Spouses Limson 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,
"An Act to Define Condominium, Establish Requirements for its Creation and Government of its
Incidents. They argued that an electrical main panel is in the nature of a utility installation.

Meanwhile, the Spouses 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 Wack Wack Corporation would take charge of the repair
of the utility room and would bill her for the cost incurred therefor but the latter 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.

Wack Wack Corporation filed a complaint for specific performance and damages against the
Spouses Limson before the SEC, to compel them 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, to seek payment of the
fines from the Spouses until they have complied with the report and recommendation, and to seek
payment for the damages they have caused to the common area ofWack Wack Apartments due to
their insistence to install in their unit an over-sized whirlpool. The complaint was later on
transferred to the RTC of Mandaluyong City pursuant to A.M. No. 00-11-03.

Since Spouses Limson still failed and refused to do repairs as stated in the report, as well as
to pay the fine imposed to them due to their refusal, the Wack Wack Corporation 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, the corporation emerged as highest bidder
and thereupon purchased Unit 703.

The RTC rendered its decision dismissing the complaint of Wack Wack Corporation for lack
of merit. On appeal, the Court of Appeals 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 the corporations 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.

ISSUE: Whether or not Spouses Limson is the one liable for the repairs stated in the reports
recommendation

RULING:

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, not to mention security and peace
of mind of the unit owners.