G.R. No. 131683 June 19, 2000
JESUS LIM ARRANZA; LORENZO CINCO; QUINTIN TAN; JOSE ESCOBAR; ELBERT FRIEND; CLASSIC HOMES VILLAGE ASSOCIATION, INC.; BF NORTHWEST HOMEOWNERS' ASSOCIATION, INC.; and UNITED BF HOMEOWNERS' ASSOCIATIONS, INC., Petitioners, v. B.F. HOMES, INC. AND THE HONORABLE COURT OF APPEALS, Respondent.
DAVIDE, JR., C.J.:
For resolution in this petition is the issue of whether it is the Securities and Exchange Commission (SEC) or the Housing and Land Use Regulatory Board (HLURB) that has jurisdiction over a complaint filed by subdivision homeowners against a subdivision developer that is under receivership for specific performance regarding basic homeowners' needs such as water, security and open spaces.
Respondent BF Homes, Inc. (BFHI), is a domestic corporation engaged in developing subdivisions and selling residential lots. One of the subdivisions that respondent developed was the BF Homes Parañaque Subdivision, which now sprawls across not only a portion of the City of Parañaque but also those of the adjoining cities of Las Piñas and Muntinlupa.
When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in respondent BFHI, respondent filed with the SEC a petition for rehabilitation and a declaration that it was in a state of suspension of payments. On 18 March 1985, the SEC placed respondent under a management committee. Upon that committee's dissolution on 2 February 1988, the SEC appointed Atty. Florencio B. Orendain as a Receiver, and approved a Revised Rehabilitation Plan.
As a Receiver, Orendain instituted a central security system and unified the sixty-five homeowners' associations into an umbrella homeowners' association called United BF Homeowners' Associations, Inc. (UBFHAI), which was thereafter incorporated with the Home Insurance and Guaranty Corporation (HIGC). 1
In 1989, respondent, through Orendain, turned over to UBFHAI control and administration of security in the subdivision, the Clubhouse and the open spaces along Concha Cruz Drive. Through the Philippine Waterworks and Construction Corporation (PWCC), respondent's managing company for waterworks in the various BF Homes subdivisions, respondent entered into an agreement with UBFHAI for the annual collection of community assessment fund and for the purchase of eight new pumps to replace the over-capacitated pumps in the old wells.
On 7 November 1994, Orendain was relieved by the SEC of his duties as a Receiver, and a new Board of Receivers consisting of eleven members of respondent's Board of Directors was appointed for the implementation of Phases II and III of respondent's rehabilitation. 2 The new Board, through its Chairman, Albert C. Aguirre, revoked the authority given by Orendain to use the open spaces at Concha Cruz Drive and to collect community assessment funds; deferred the purchase of new pumps; recognized BF Parañaque Homeowners' Association, Inc., (BFPHAI) as the representative of all homeowners in the subdivision; took over the management of the Clubhouse; and deployed its own security guards in the subdivision.
Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit "for and in behalf of the more than 7,000 homeowners in the subdivision" against respondent BFHI, BF Citiland Corporation, PWCC and A.C. Aguirre Management Corporation "to enforce the rights of purchasers of lots" in BF Homes Parañaque 3. They alleged that:
Petitioners raised "issues" on the following basic needs of the homeowners: rights-of-way; water; open spaces; road and perimeter wall repairs; security; and the interlocking corporations that allegedly made it convenient for respondent "to compartmentalize its obligations as general developer, even if all of these are hooked into the water, roads, drainage and sewer systems of the subdivision." 4 Thus, petitioner prayed that:
In its answer, respondent claimed that (a) it had complied with its contractual obligations relative to the subdivision's development; (b) respondent could not be compelled to abide by agreements resulting from Orendain's ultra vires acts; and (c) petitioners were precluded from instituting the instant action on account of Section 6(c) of P.D. No. 902-A providing for the suspension of all actions for claims against a corporation under receivership. Respondent interposed counterclaims and grayed for the dismissal of the complaint. 6
Petitioners thereafter filed an urgent motion for a cease-and-desist/status quo order. Acting on this motion, HLURB Arbiter Charito M. Bunagan issued a 20-day temporary restraining order to avoid rendering nugatory and ineffectual any judgment that could be issued in the case; 7 and subsequently, an Order granting petitioners' prayer for preliminary injunction was issued
Respondent thus filed with the Court of Appeals a petition for certiorari and prohibition docketed as CA-G.R. SP No. 39685. It contended in the main that the HLURB acted "completely without jurisdiction" in issuing the Order granting the writ of preliminary injunction considering that inasmuch as respondent is under receivership, the "subject matter of the case is one exclusively within the jurisdiction of the SEC." 9
On 28 November 1997, the Court of Appeals rendered a decision 10 annulling and setting aside the writ of preliminary injunction issued by the HLURB. It ruled that private respondents' action may properly be regarded as a "claim" within the contemplation of PD No. 902-A which should be placed on equal footing with those of petitioners' other creditor or creditors and which should be filed with the Committee of Receivers. In any event, pursuant to Section 6(c) of P.D. No. 902-A and SEC's Order of 18 March 1985, petitioners' action against respondent, which is under receivership, should be suspended.
Hence, petitioners filed the instant petition for review on certiorari. On 26 January 1998, the Court issued a temporary restraining order (TRO) enjoining respondent, its officers, representatives and persons acting upon its orders from
Respondent's motion to lift the TRO was denied.
At the hearing on 1 July 1998, the primary issue in this case was defined as "which body has jurisdiction over petitioners' claims, the Housing and Land Use Regulatory Board (HLURB) or the Securities and Exchange Commission (SEC)?" The collateral issue to be addressed is "assuming that the HLURB has jurisdiction, may the proceedings therein be suspended pending the outcome of the receivership before the SEC?"
For their part, petitioners argue that the complaint referring to rights of way, water, open spaces, road and perimeter wall repairs, security and respondent's interlocking corporations that facilitated circumvention of its obligation involves unsound real estate practices. The action is for specific performance of a real estate developers' obligations under P.D. No. 957, and the relief sought is revocation of the subdivision project's registration certificate and license to sell. These issues are within the jurisdiction of the HLURB. Even if respondent is under receivership, its obligations as a real estate developer under P.D. No. 957 are not suspended. Section 6(c) of P.D. No. 902-A, as amended by P.D. No. 957, on "suspension of all actions for claims against corporations" refers solely to monetary claims which are but incidental to petitioner's complaints against BFHI, and if filed elsewhere than the HLURB, it would result to splitting causes of action. Once determined in the HLURB, however, the monetary awards should be submitted to the SEC as established claims. Lastly, the acts enjoined by the HLURB are not related to the disposition of BFHI's assets as a corporation undergoing its final phase of rehabilitation.
On the other hand, respondent asserts that the SEC, not the HLURB, has jurisdiction over petitioners' complaint based on the contracts entered into by the former receiver. The SEC, being the appointing authority, should be the one to take cognizance of controversies arising from the performance of the receiver's duties. Since respondent's properties are under the SEC's custodia legis, they are exempt from any court process.
Jurisdiction is the authority to hear and determine a cause - the right to act in a case. 12 It is conferred by law and not by mere administrative policy of any court or tribunal. 1 It is determined by the averments of the complaint and not by the defense contained in the answer. 14 Hence, the jurisdictional issue involved here shall be determined upon an examination of the applicable laws and the allegations of petitioners' complaint before the HLURB.
Presidential Decree No. 957 (The Subdivision and Condominium Buyers' Protective Decree) was issued on 12 July 1976 in answer to the popular call for correction of pernicious practices of subdivision owners and/or developers that adversely affected the interests of subdivision lot buyers. Thus, one of the "whereas clauses" of P.D. No. 957 states:
Sec. 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with the "exclusive jurisdiction to regulate the real estate trade and business." On 2 April 1978, P.D. No. 1344 was issued to expand the jurisdiction of the NHA to include the following:
Thereafter, the regulatory and quasi-judicial functions of the NHA were transferred to the Human Settlements Regulatory Commission (HSRC) by virtue of Executive Order No. 648 dated 7 February 1981. Section 8 thereof specifies the functions of the NHA that were transferred to the HSRC including the authority to 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." Executive Order No. 90 dated 17 December 1986 renamed the HSRC as the Housing and Land Use Regulatory Board (HLURB). 15
The boom in the real estate business all over the country resulted in more litigation between subdivision owners/developers and lot buyers with the issue of the jurisdiction of the NHA or the HLURB over such controversies as against that of regular courts. In the cases 16 that reached this Court, the ruling has consistently been that the NHA or the HLURB has jurisdiction over complaints arising from contracts between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer to comply with its contractual and statutory obligations to make the subdivision a better place to live in.
Notably, in Antipolo Realty Corporation v. National Housing
Similarly, in Alcasid v. Court of Appeals, 18 the Court ruled that the HLURB, not the RTC, has jurisdiction over the complaint of lot buyers for specific performance of alleged contractual and statutory obligations of the defendants, to wit, the execution of contracts of sale in favor of the plaintiffs and the introduction in the disputed property of the necessary facilities such as asphalting and street lights.
In the case at bar, petitioners' complaint is for specific performance to enforce their rights as purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security. Indisputably then, the HLURB has jurisdiction over the complaint.
The fact that respondent is under receivership does not divest the HLURB of that jurisdiction. A receiver is a person appointed by the court, or in this instance, by a quasi-judicial administrative agency, in behalf of all the parties for the purpose of preserving and conserving the property and preventing its possible destruction or dissipation, if it were left in the possession of any of the parties. 19 It is the duty of the receiver to administer the assets of the receivership estate; and in the management and disposition of the property committed to his possession, he acts in a fiduciary capacity and with impartiality towards all interested persons. 20 The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. 21 In this case where there appears to be no restraints imposed upon respondent as it undergoes rehabilitation receivership, 22 respondent continues to exist as a corporation and hence, continues or should continue to perform its contractual and statutory responsibilities to petitioners as homeowners.
Receivership is aimed at the preservation of, and at making more secure, existing rights; it cannot be used as an instrument for the destruction of those rights. 2
No violation of the SEC order suspending payments to creditors would result as far as petitioners' complaint before the HLURB is concerned. To reiterate, what petitioners seek to enforce are respondent's obligations as a subdivision developer. Such claims are basically not pecuniary in nature although it could incidentally involve monetary considerations. All that petitioners' claims entail is the exercise of proper subdivision management on the part of the SEC-appointed Board of Receivers towards the end that homeowners shall enjoy the ideal community living that respondent portrayed they would have when they bought real estate from it.
Neither may petitioners be considered as having "claims" against respondent within the context of the following proviso of Section 6 (c) of P.D. No. 902-A, as amended by P.D. Nos. 1653, 1758 and 1799, to warrant suspension of the HLURB proceedings:
In Finasia Investments and Finance Corporation v. Court of Appeals, 24 this Court defined and explained the term "claim" in Section 6 (c) of P.D. No. 902-A, as amended, as follows:
Hence, in Finansia Investments, the Court held that a civil case to nullify a special power of attorney because the principal's signature was forged should not be suspended upon the appointment of a receiver of the mortgagee to whom a person mortgaged the property owned by such principal. The Court ruled that the cause of action in that civil case "does not consist of demand for payment of debt or enforcement of pecuniary liability." It added:
In this case, under the complaint for specific performance before the HLURB, petitioners do not aim to enforce a pecuniary demand. Their claim for reimbursement should be viewed in the light of respondent's alleged failure to observe its statutory and contractual obligations to provide petitioners a "decent human settlement" and "ample opportunities for improving their quality of
On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902-A, as amended, as follows:
For the SEC to acquire jurisdiction over any controversy under these provisions, two elements must be considered: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their
The second element requires that the dispute among the parties be intrinsically connected with the regulation or the internal affairs of the corporation, partnership or association. 29 The controversy in this case is remotely related to the "regulation" of respondent corporation or to respondent's "internal affairs."
It should be stressed that the main concern in this case is the is the issue of jurisdiction over petitioners' complaint against respondent for specific performance. P.D. No. 902-A, as amended, defines the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two quasi-judicial agencies exercise functions that are distinct from each other. The SEC has authority over the operation of all kinds of corporations, partnerships or associations with the end in view of protecting the interests of the investing public and creditors. On the other hand, the HLURB has jurisdiction over matters relating to observance of laws governing corporations engaged in the specific business of development of subdivisions and condominiums. The HLURB and the SEC being bestowed with distinct powers and functions, the exercise of those functions by one shall not abate the performance by the other of its own functions. As respondent puts it, "there is no contradiction between P.D. No. 902-A and P.D. No. 957." 30
What complicated the jurisdictional issue in this case is the fact that petitioners are primarily praying for the retention of respondent's obligations under the Memorandum of Agreement that Receiver Orendain had entered into with them but which the present Board of Receivers had revoked.
In Figueroa v. SEC, 31 this Court has declared that the power to overrule or revoke the previous acts of the management or Board of Directors of the entity under receivership is within a receiver's authority, as provided for by Section 6 (d) (2) of P.D. No. 902-A. Indeed, when the acts of a previous receiver or management committee prove disadvantageous or inimical to the rehabilitation of a distressed corporation, the succeeding receiver or management committee may abrogate or cast aside such acts. However, that prerogative is not absolute. It should be exercised upon due consideration of all pertinent and relevant laws when public interest and welfare are involved. The business of developing subdivisions and corporations being imbued with public interest and welfare, any question arising from the exercise of that prerogative should be brought to the proper agency that has technical know-how on the matter.
P.D. No. 957 was promulgated to encompass all questions regarding subdivisions and condominiums. It is aimed at providing for an appropriate government agency, the HLURB, to which all parties aggrieved in the implementation of its provisions and the enforcement of contractual rights with respect to said category of real estate may take recourse. Nonetheless, the powers of the HLURB may not in any way be deemed as in derogation of the SEC's authority. P.D. Nos. 902-A and 957, as far as both are concerned with corporations, are laws in pari materia. P.D. No. 902-A relates to all corporations, while P.D. No. 957 pertains to corporations engaged in the particular business of developing subdivisions and condominiums. Although the provisions of these decrees on the issue of jurisdiction appear to collide when a corporation engaged in developing subdivisions and condominiums is under receivership, the same decrees should be construed as far as reasonably possible to be in harmony with each other to attain the purpose of an expressed national policy. 32
Hence, the HLURB should take jurisdiction over petitioners' complaint because it pertains to matters within the HLURB's competence and expertise. The HLURB should view the issue of whether the Board of Receivers correctly revoked the agreements entered into between the previous receiver and the petitioners from the perspective of the homeowners' interests, which P.D. No. 957 aims to protect. Whatever monetary awards the HLURB may impose upon respondent are incidental matters that should be addressed to the sound discretion of the Board of Receivers charged with maintaining the viability of respondent as a corporation. Any controversy that may arise in that regard should then be addressed to the SEC.
It is worth noting that the parties agreed at the 1 July 1998 hearing that should the HLURB establish and grant petitioners' claims, the same should be referred to the SEC. Thus, the proceedings at the HLURB should not be suspended notwithstanding that respondent is still under receivership. The TRO that this Court has issued should accordingly continue until such time as the HLURB shall have resolved the controversy. The present members of the Board of Receivers should be reminded of their duties and responsibilities as an impartial Board that should serve the interests of both the homeowners and respondent's creditors. Their interests, financial or otherwise, as members of respondent's Board of Directors should be circumscribed by judicious and unbiased performance of their duties and responsibilities as members of the Board of Receivers. Otherwise, respondent's full rehabilitation may face a bleak future. Both parties should never give full rein to acts that could prove detrimental to the interests of the homeowners and eventually jeopardize respondent's rehabilitation.
WHEREFORE, the questioned Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. This case is REMANDED to the Housing and Land Use Regulatory Board for continuation of proceedings with dispatch as the Securities and Exchange Commission proceeds with the rehabilitation of respondent BF Homes, Inc., through the Board of Receivers. Thereafter, any and all monetary claims duly established before the HLURB shall be referred to the Board of Receivers for proper disposition and thereafter, to the SEC, if necessary. No costs.
Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.
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