Manolet Lavidez vs. Polaris Condominium Corp.

[SEC-SICD * CASE NO. 4008. July 31, 1992.] MANOLET LAVIDEZ , complainant , vs . POLARIS CONDOMINIUM CORP. , respondent . D E C I S I O N This is an action for injunction, with prayer for a Temporary Restraining Order/Preliminary Injunction to prohibit or restrain respondent from proceeding with the auction sale of a condominium apartment unit on May 22, 1991, and to declare the extrajudicial foreclosure proceeding null and void. HDTSIE The auction sale of the said condominium apartment unit took place before receipt of the Restraining Order issued by this Hearing Officer, hence, the filing of an amended complaint. The subject matter of the present action is suite 3-A of the Polaris 40 Condominium Apartment covered by Condominium Certificate of Title No S-83 of the Registry of Deeds of Makati, Metro Manila, issued in the name of Modesto Ventura, now deceased, (Exh "B-1"") In 1981, the estate of the Deceased Modesto Ventura entered into a contract of mortgage over said condominium unit with complainant Manolet Lavidez, and because of the failure of the mortgagor to comply with the terms of the mortgage, herein complainant on July 9, 1984 caused the extrajudicial foreclosure of said condominium unit, where the complainant was the highest bidder. On November 5, 1985, the Regional Trial Court of Makati, Metro-Manila, Branch No. 134, granted in LRC Case No. M-719 complainant's petition for the issuance of a writ of possession over subject condominium unit (Exh. "D"), but the complainant failed to take physical possession of the condominium unit on the ground that a certain Taihee Han who occupied subject condominium unit as early as 1974 by virtue of a contract of lease with the deceased Modesto Ventura, filed a complaint docketed as Civil Case No. 14747 of the Regional Trial Court of Makati wherein she sought to enjoin the complainant herein from taking possession of the condominium unit in question. Complainant was placed in possession thereof only after the termination of the suit in a certiorari proceeding before the Court of Appeals on September 12, 1989. The complainant was assessed by respondent Polaris Condominium Corporation in the amount of P648,069.12 per its Summary of Outstanding Billings as of September 15, 1990 showing the following breakdown: Realty Taxes P30,434.88 Penalties 535,913.30 Electricity & Water 15,510.60 Insurance 5,502.95 Budget Assessment 60,707.39 which covers the period October 19, 1984 to September 10, 1990; respondent sent a letter dated November 27, 1990 to the complainant demanding payment of the aforesaid sum allegedly representing the latter's outstanding account to the former (Exh. "8") and on February 12, 1991, respondent filed with the Office of the Sheriff, Makati, Metro Manila, a petition for extrajudicial foreclosure of subject condominium unit (docketed as Foreclosure No. 91-065) pursuant to Section 20 R.A. 4726, otherwise known as the Condominium Act (Exh. "6"). Complainant contended that there is no showing from the records that complainant was served with copy of said petition or was furnished copy of the Notice of Assessment although the said notice is annotated in the Condominium Certificate of Title in question (Exh. "6-A-3"). Complainant received copy of the notice of Sheriff's Sale dated March 8, 1991 (Exh. "1") issued by Senior Deputy Sheriff Pablo L. Sy in Foreclosure No. 91-065 announcing that on May 22, 1991 at 10:00 o'clock in the morning, the condominium unit in question will be sold at public auction to satisfy respondent corporation its claim for unpaid assessment in the sum of P648,069.12 plus interest, attorney's fees, costs, advances and other fees and expenses of foreclosure. On May 22, 1991, this Hearing Officer issued a Temporary Restraining Order, which was served in the office of respondent Sheriffs in the afternoon of May 22, 1991 or after the auction-sale had taken place at 10:14 o'clock in the morning, as per the manifestation dated May 26, 1991, filed by said respondent Sheriffs, where respondent corporation was the highest bidder of the condominium unit in question. The amended complaint also prayed that respondent corporation be ordered to pay the amount of P2 million by way of actual or compensatory damages and the amount of P50,000.00 as and for attorney's fees. On the other hand, defendant corporation, in its amended answer, sought inter alia for the dismissal of the complaint and for judgment ordering the complainant to pay actual and consequential damages of P1 million and Attorney's fees of P50,000.00. Complainant raised the issues as follows: "1. Whether or not the respondent corporation has the authority under the Master Deed with Declaration of Restrictions and/or under the By-Laws to validly impose penalty for delinquent or unpaid account. llcd 2. Assuming arguendo that respondent corporation may impose, by way of penalty, liquidated damages for late or unpaid accounts, what is the legal effect thereof where the liquidated damages is plainly inequitous, unconscionable and unreasonable? 3. Whether or not the failure to serve on the complainant by R.A. 4726 will render such Notice of Assessment invalid to create an unenforceable lien on the condominium unit in question. 4. Whether or not a valid lien on the condominium unit may be validly enforced thru extra-judicial foreclosure sale under Act 3135, as amended, in the absence of any special power or a provision with the same effect in the Master Deed with Declaration of Restrictions or in the By-Laws." (Memorandum for Complainant) On the other hand, respondents raised the following issues: "1. Whether or not his relations with his tenant can exempt him from liabilities to the Condominium Corporation. 2. Was there a valid assessment, and whether or not there was a valid foreclosure of Complainant's Apartment Unit under the law? 3. Whether the claim of Lavides is now moot and academic." (Memorandum for Respondent) As regards the question of whether or not respondent Polaris Condominium Corporation has the authority under the provisions of the Master Deed and Declaration of Restrictions to validly impose penalty for delinquent accounts, the Commission is in accord with the position taken by the complainant. Section 20 of R.A. 4726, known as the Condominium Act, states in part as follows: "SECTION 20. An assessment upon any condominium made in accordance with a duly registered declaration of restrictions shall be an obligation of the owner thereof at the time the assessment is made. The amount of any such assessment plus any other charges thereon, such as interests, costs (including attorney's fees ) and penalties, as such as may be provided for in the declaration of restrictions , shall be and become a lien upon the condominium assessed when the management body causes a notice of assessment to be registered with the Register of Deeds of the City or province where such condominium project is located. The notice shall state the amount of such assessment and such other charges thereon as may be authorized by the declaration of restrictions , a description of condominium unit against which same has been assessed, and the name of the registered owners thereof. . . ." The provisions of the "Master Deed with Declaration of Restrictions of Polaris 40 Condominium Townhouse (Exh. "5") failed to show such provision therein that would authorize the respondent corporation to impose penalty for delinquent accounts. While it is therein stated that "There may also be assessed against the unit owners, in the manner prescribed herein in the By-Laws of the Condominium Corporation, such other assessments as are specifically provided for herein", there is absolutely no provision in the declaration of restrictions that specifically prescribes penalty as an assessable item for delinquent accounts. The resolution contained in the Minutes of the Special Meeting of the Member/Unit Owners of Polaris 40 Condominium Corporation held on November 8, 1984 (Exh. "4") showing that the 4% monthly penalty on the balance of unpaid accounts is an assessable item against complainant's delinquent account, is without authority of law. It is an assessment not imposable under the Declaration of Restrictions. Under the By-Laws of respondent condominium corporation, the assessment that the Board of Directors is empowered to levy on the members are only such "as are provided in the Master Deed and Declaration of Restriction of the condominium project as well as those provided for in the By-Laws." (Section 3.4 (d) and Section 6.4, By-Laws) Thus, it would be an excess of authority for the Board to levy on the complainant penalty for his alleged unpaid accounts. Section 10, Part II of the Declaration of Restrictions which empowers the respondent corporation to impose, by way of penalty, liquidated damages is not applicable to the situation at bar. This is because this provision refers expressly to violations of conditions in the Declaration of Restrictions involving "obligations other than payment of money." Accordingly, respondent corporation's assessment as of September 15, 1990 for complainant's unpaid accounts for realty taxes, electricity and water, insurance and budget assessment is null and void. On the contention that the failure to serve copy of the Notice of Assessment on the owner of the condominium unit will invalidate the foreclosure proceeding initiated by the respondent corporation against him, it is not enough that the notice of assessment has been recorded in the Registry of Deeds in order that respondent corporation may validly enforce the lien created thereby through extra-judicial foreclosure of the condominium unit in question in accordance with the provision of Section 20 of R.A. 4726. The provision therein reads, thus: "Such liens may be enforced in the same manner provided for by law for the judicial or extra-judicial foreclosure of mortgages of real property. . . ." is not self operating. It must be enforced "in the same manner provided by law for judicial or extra- judicial foreclosure of mortgages of real property." As correctly stated by the complainant, the provision for the enforcement of the lien created by such notice of assessment must be read in relation to the provisions of the law concerning judicial and extra-judicial foreclosure of mortgages of real property. Act No. 3135, as amended by Act No. 4118 , is the law governing extra-judicial foreclosure of realty mortgage. To warrant an extra-judicial foreclosure proceedings pursuant to Act No. 3135 , as amended by Act No. 4118 , the law governing extra-judicial foreclosure of realty mortgage, a special power or any condition to that effect should either be inserted in or attached to the real estate mortgage. In the present case, such special power should be provided in the Master Deed with Declaration of Restrictions in order that respondent corporation may enforce the lien on the condominium unit by extra-judicial foreclosure. Since there is no such special power found in the Master Deed with declaration of Restrictions (Exh. "5") of respondent condominium corporation, the extra-judicial foreclosure of the condominium unit by the respondents and consequent auction sale made thereof are null and void. Contrary to respondents' suggestion, the registration of the Certificate of Sale and the payment of documentary stamp taxes do not render the foreclosure of the condominium unit moot and academic. The complainant has raised a valid issue on the illegality of the extra-judicial foreclosure which the Commission has resolved in his favor. Complainant, who was forced to litigate and to engage the services of counsel is entitled to an award of a reasonable amount of as and for attorney's fee. Complainant and respondent corporation have not satisfactorily established their entitlement to actual or compensatory damages prayed for in their respective pleadings. WHEREFORE, judgment is hereby rendered in favor of the complainant Manolet Lavides and against the respondent.: 1. Declaring the extra-judicial foreclosure of the above-described condominium unit of the complainant, the proceedings thereon, including the auction sale, and the Certificate of Sale (Exh. "14") as well as the registration thereof null and void; 2. In the event that the Condominium Certificate of Titles No. S-83 has been cancelled and another title, has been issued in lieu thereof in the name of the respondent corporation, the latter is ordered to execute the corresponding deed of reconveyance in favor of the complainant; 3. Declaring the assessment of penalty in the sum of P535,913.30 null and void; cDCaHA 4. Ordering respondent Polaris Condominium Corporation to pay the complainant the sum of P30,000.00 as attorney's fees. No pronouncement as to costs. SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer