common areas, master deed

REVELINA LIMSON,Petitioner, - versus - WACK WACK CONDOMINIUM CORPORATION, Respondent.

G.R. No. 188802
February 14, 2011
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On January 22, 1996, Revelina Limson[1] (Revelina) purchased from Conchita Benitez an apartment unit (Unit 703) at Wack Wack
Apartments, Wack Wack Road, Mandaluyong City.

Upon moving in, Revelina noticed defects in the electrical main panel located inside the unit, drawing her to report them, by letter of
February 22, 1996, to the Wack Wack Condominium Corporation (respondent), a non-stock corporation organized for the purpose of
holding title to and managing the common areas of Wack Wack Apartments

Racquel Gonzalez, who sits as Member of respondents Board of Directors, replied by letter of February 23, 1996 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.

By still another letter dated February 28, 1996, Revelina informed respondent 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.

Revelina 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 Revelinas request, the City Building Office conducted an inspection of Unit 703 following which a Report dated January 21, 1997
was accomplished with the following findings and recommendations:

Findings:

1. The load center consists of 100 A 2 pst main switch and fusible cut out Blocks with 16 circuits. 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.
2. The jumper cable from main safety switch to fusible cut-out blocks used 2 #10 wire (Capt. 60 amp) per phase.
This is undersized and would overheat.
3. The fusible current protective devise where all 30 Amp., sp., 240 v FOR 2 #12 TW (20 AMP. Capacity wire)
this does not comply with the provision of the Philippine Electrical Code that stipulates rating of the protective
devise shall be the same as the conductor ampacity especially on a multi outlet circuit.
4. Power supply for water heaters was tapped to small appliance for convenience outlet circuit.

Recommendation:

1. Replacement of fusible load center with panel board and circuit breaker components to correct the problem as
enumerated on items 2, 3, 4 of our findings.
2. Replace the embedded circular loom with conduit on moulding.
3. Check all grounded circuit for water heater lad.
4. Provide separate circuit for water heater lad.
5. Submit As Built Electrical Plan signed and sealed by a Professional Electrical Engineer together with the
previous approved Electrical Plan. (emphasis and underscoring supplied)

The Report was sent by then Mayor Benjamin Abalos, Sr. to respondent by letter dated January 31, 1997. On February 3,
1997, respondent, through Architect Eugenio Gonzalez, wrote Revelina to demand that repairs in line with the above-stated
recommendation of the City Building Office be undertaken within ten (10) days.

Before the deadline, respondents Board of Directors convened on February 7, 1997 and resolved to impose a daily fine
of P1,000.00 on Revelina and her husband Benjamin, to commence on February 14, 1997, should the latter fail to comply.

Revelina and her husband 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[2], AN ACT TO DEFINE CONDOMINIUM, ESTABLISH
REQUIREMENTS FOR ITS CREATION AND GOVERNMENT OF ITS INCIDENTS, the pertinent provision of which reads:

Sec. 6. Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the
incidents of a condominium grant are as follows:

a.) x x x The following are not part of the unit: bearing walls, columns, floors, roofs, foundations, and other
common structural elements of the buildings; lobbies, stairways, hallways and other areas of common use,
elevator equipment and shafts, central heating, central refrigeration and central air conditioning equipment,
reservoir, tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits wires and
other utility installations, wherever located, except the outlets thereof when located within the
unit. (emphasis and underscoring supplied)

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They argued that an electrical main panel is in the nature of a utility installation.

Meanwhile, Revelina and her husband 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 respondent would take charge of the repair of the utility
room and would bill her for the cost incurred therefor but respondent 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.

Respondent thereupon filed a complaint for specific performance and damages against Revelina and Benjamin before the
Securities and Exchange Commission (SEC) upon the following causes of action:

1. To compel the defendants (Spouses Limson) 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;

2. To seek payment of liquidated damages from the defendants in accordance with the Resolution of the Board of
Directors of plaintiff (respondent herein), starting February 15, 1997 until the defendants shall have complied
with the aforestated report and recommendation of the building officials; and

3. To seek payment of [sic] from the defendants for the damages they have caused to the common area of Wack
Wack Apartments due to their insistence to install in their unit an over-sized whirlpool.[3]

Pursuant to A.M. No. 00-11-03,[4] the complaint was transferred to the Regional Trial Court (RTC) of Mandaluyong City for
disposition.

As of June 30, 1997, the assessments and penalties charged against the spouses had reached P569,736.94. On July 17, 1997,
respondent 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 on August 28, 1997, respondent emerged as highest bidder and thereupon purchased Unit 703 in
the amount of P569,736.94, on account of which it was issued a Certificate of Sale on September 15, 1997.

By Decision of December 22, 2003, Branch 214 of the Mandaluyong RTC dismissed respondents complaint for lack of merit
in this wise:

Guided by the findings and recommendation of the building official of Mandaluyong City, it would appear
that the questioned electrical installations are to be considered as part of the common area and not of Unit 703,
though the same are necessarily found inside the said unit. As contained in Section 6, par. 1 of the Condominium
Act: a) The boundary of the Unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows
and doors thereof. The following are not part of the unit: bearing walls, columns, floors, roofs, foundations, and
other common structural elements of the buildings; lobbies, stairways, hallways and other areas of common use,
elevator equipment and shafts, central heating, central refrigeration and central air conditioning equipment,
reservoir, tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits wires and other
utility installations, wherever located, except the outlets thereof when located within the unit. (underscoring
supplied; emphasis in the original)[5]

On appeal, the Court of Appeals, by Decision of December 19, 2008,[6] 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 respondents account.

On the imposition of fine on the spouses Limson for failure to correct the faulty electrical wiring despite notice, the appellate court
upheld respondents authority to enforce the same. Finding, however, that the amount of P1,000 fine per day was excessive, it reduced
the same to P200.

Respecting respondents imposition of a fine of P1,000 per day on the spouses alleged failure to repair the 7th floor utility room, the
appellate court disallowed the same, however, it holding that respondent did not first seek reimbursement from them before
assessment.

Finally, the appellate court denied respondents prayer for actual damages in the amount of P5,000 representing repair expenses on the
utility room, it having failed to present receipts therefor.

Her Motion for Reconsideration having been denied, Revelina filed the present petition for review.

The Court finds for Revelina.

The pertinent provisions of the Wack Wack Apartments Master Deed follow:

Section 5. The Common Areas. The common elements or areas of the Project (herein referred to as the Common
Areas) shall comprise all parts of the Project other than the Units, including without limitation the following:

xxxx

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 (e) All central and appurtenant equipment and installations for common facilities and utilities such as power, light,
sewerage, drainage, garbage chute, and water connections (including all outlets, pipes, ducts, wires, cables and
conduits used in connection therewith, whether located in Common Areas or in Units); all elevators, elevator shafts,
tanks, pumps, motors, fans, compressors, and control equipment; all common utility spaces and areas;

(f) All other parts of the Project and all apparatus, equipment and installations therein which are for common use or
necessary or convenient for the existence, maintenance of safety of the Project. (emphasis and underscoring
supplied)

Section 3. Maintenance, Repairs and Alterations. (a) All maintenance of and repairs of any Unit (other than the
maintenance of and repairs to any of the Common Areas contained therein not necessitated by the act or
negligence of the owner, tenant or occupant of such Unit) shall be made [by], and at the expense of, the owner
of such unit. Each Unit owner shall be responsible for all damages to any other Unit and to the Common Areas
resulting from his failure to effect such maintenance and repairs. Each Unit owner shall also be responsible for
promptly reporting to the Condominium Corporation any defect or need for repairs in any of the Common
Areas in his Unit. (emphasis and underscoring supplied)

xxxx

Section 3 (e) of R.A. 4726 defines common areas as the entire project except all units separately granted or held or reserved. Section 6
(a) of the same law provides:

a.) x x x The following are not part of the unit: bearing walls, columns, floors, roofs, foundations, and other
common structural elements of the buildings; lobbies, stairways, hallways and other areas of common use,
elevator equipment and shafts, central heating, central refrigeration and central air conditioning equipment,
reservoir, tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits wires and
other utility installations, wherever located, except the outlets thereof when located within the
unit. (emphasis and underscoring supplied)

The electrical panels location inside the unit notwithstanding, it is not automatically considered as part of it. The above-quoted
pertinent provisions of the law and the master deed contemplate that common areas, e.g. utility installations, may be
situated within the unit.

Where a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempt to
interpret.[7] Verba legis non est recedendum, index animi sermo est. There should be no departure from the words of the statute, for
speech is the index of intention.

An explanation of the Apartments electrical supply system was presented by respondent, viz:

a.) x x x [T]he electrical system of the Apartments commences with a common main electrical line (main
line) provided by the Apartments, connected to a Meralco line outside the building. This common main line
runs to the ground floor of the building, where the common meter station is located; from where individual
secondary lines, are tapped to the common main line. There are as many individual secondary lines tapped
to the common main line, as there are units. EVERY SECONDARY LINE TRAVELS VERTICALLY TO
ITS DESIGNATED FLOOR AND LEADS TO AN INDIVIDUAL UNIT.

b.) The construction is such, that every secondary line is embedded within the wall of a unit, until it
surfaces from the wall, ready to supply electricity to that unit; the UNIT, in this case, has two (2) metal
boxes, inside the UNIT; both attached to the wall of the UNIT. The first of the two (2) metal boxes is
the main switch box. (Annex B and B-1 The main switch box has a hole, through which the secondary
line enters and is attached to the upper end of two (2) big fuses, located in the main switch box (Annex B-
1-a). The upper end of the two (2) big fuses, where the secondary line (tapped to the main line) ends are
indicated and marked as (Annex B-1-b and B-1-c)

c.) At the lower end of these two (2) big fuses, there are separate electrical wires (technically called jumper
cables). The jumper cables originate in the UNITs second metal box which is the fusible cutout box (fuse
box), and the jumper cables are connected to the lower end of the two (2) big fuses in the main switch
box to draw electricity to feed the fuse box. x x x [8] (capitalization and underscoring in the original)

In a multi-occupancy dwelling such as Apartments, limitations are imposed under R.A. 4726 [9] in accordance with the common
interest and safety of the occupants therein which at times may curtail the exercise of ownership. To maintain safe, harmonious and
secured living conditions, certain stipulations are embodied in the duly registered deed of restrictions, in this case the Master Deed,
and in house rules which the condominium corporation, like respondent, is mandated to implement. Upon acquisition of a unit, the
owner not only affixes his conformity to the sale; he also binds himself to a contract with other unit owners. [10]

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 units electrical line to the Apartments 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,[11] not to mention security and peace of
mind of the unit owners

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WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of December 19, 2008 is REVERSED and SET ASIDE.
The Decision of Branch 214 of the Mandaluyong Regional Trial Court dismissing the complaint of Wack Wack Condominium
Corporation against Revelina and Benjamin Limson is, in light of the foregoing discussions, REINSTATED.

SO ORDERED.

Master deeds

G.R. No. L-52361 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner, vs. THE HON. JOSE C. CAMPOS, JR. OF THE COURT OF
FIRST INSTANCE, BRANCH XXX, PASAY CITY and AGUILAR-BERNARES REALTY, respondents.

G.R. No. L-52524 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner, vs. THE HON. JOSE C. CAMPOS, JR., PRESIDING
JUDGE OF THE COURT OF FIRST INSTANCE, BRANCH XXX, PASAY CITY, and LIM SIU LENG, respondents.

ERNANDEZ, J.:

These two cases which involve similar facts and raise Identical questions of law were ordered consolidated by resolution of this Court
dated March 17, 1980. 1

The petitioner, Sunset View Condominium Corporation, in both cases, is a condominium corporation within the meaning of Republic
Act No. 4726 in relation to a duly registered Amended Master Deed with Declaration of Restrictions of the Sunset View
Condominium Project located at 2230 Roxas Boulevard, Pasay City of which said petitioner is the Management Body holding title to
all the common and limited common areas. 2

G.R. NO. 52361

The private respondent, Aguilar-Bernares Realty, a sole proprietorship with business name registered with the Bureau of Commerce,
owned and operated by the spouses Emmanuel G. Aguilar and Zenaida B. Aguilar, is the assignee of a unit, "Solana", in the Sunset
View Condominium Project with La Perla Commercial, Incorporated, as assignor. 3 The La Perla Commercial, Incorporated bought
the "Solana" unit on installment from the Tower Builders, Inc. 4 The petitioner, Sunset View Condominium Corporation, filed for the
collection of assessments levied on the unit against Aguilar-Bernares Realty, private respondent herein, a complaint dated June 22,
1979 docketed as Civil Case No. 7303-P of the Court of First Instance of Pasay City, Branch XXX. The private respondent filed a
Motion to Dismiss the complaint on the grounds (1) that the complaint does not state a cause of action: (2) that the court has no
jurisdiction over the subject or nature other action; and (3) that there is another action pending between the same parties for the same
cause. The petitioner filed its opposition thereto. The motion to dismiss was granted on December 11, 1979 by the respondent Judge
who opined that the private respondent is, pursuant to Section 2 of Republic Act No. 4726, a "holder of a separate interest" and
consequently, a shareholder of the plaintiff condominium corporation; and that "the case should be properly filed with the Securities &
Exchange Commission which has exclusive original jurisdiction on controversies arising between shareholders of the corporation." the
motion for reconsideration thereof having been denied, the petitioner, alleging grave abuse of discretion on the part of respondent
Judge, filed the instant petition for certiorari praying that the said orders be set aside.

G.R. NO. 52524

The petitioner filed its amended complaint dated July 16, 1979 docketed as Civil Case No. 14127 of Branch I of the City Court of
Pasay City for the collection of overdue accounts on assessments and insurance premiums and the interest thereon amounting to
P6,168 06 as of March 31, 1979 against the private respondent Lim Siu Leng 5 to whom was assigned on July 11, 1977 a unit called
"Alegria" of the Sunset. View Condominium Project by Alfonso Uy 6 who had entered into a "Contract to Buy and Sell" with Tower
Builders, Inc. over the said unit on installment basis. 7

The private respondent filed a motion to dismiss on the ground of lack of jurisdiction, alleging that the amount sought to be collected
is an assessment. The correctness and validity of which is certain to involve a dispute between her and the petitioner corporation; that
she has automatically become, as a purchaser of the condominium unit, a stockholder of the petitioner pursuant to Section 2 of the
Condominium Act, Republic Act No. 4726; that the dispute is intra-corporate and is consequently under the exclusive jurisdiction of
the Securities & Exchange Commission as provided in Section 5 of P.D. No. 902-A. 8

The petitioner filed its opposition thereto, alleging that the private respondent who had not fully paid for the unit was not the owner
thereof, consequently was not the holder of a separate interest which would make her a stockholder, and that hence the case was not an
intra-corporate dispute. 9

After the private respondent had filed her answer to the opposition to the motion to dismiss 10 of the petitioner, the trial court issued an
order dated August 13, 1979 denying the motion to dismiss. 11 The private respondent's motion for reconsideration thereof was denied
by the trial court in its Order dated September 19, 1979. 12

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The private respondent then appealed pursuant to Section 10 of Rule 40 of the Rules of Court to the Court of First Instance, where the
appeal was docketed as Civil Case No. 7530P. The petitioner filed its "Motion to Dismiss Appeal" on the ground that the order of the
trial court appealed from is interlocutory. 13

The motion to dismiss the appeal was denied and the parties were ordered to submit their respective memorandum on the issue raised
before the trial court and on the disputed order of the trial judge. 14 After the parties had submitted their respective memoranda on the
matter, the respondent Judge issued an order dated December 14, 1979 in which he directed that "the appeal is hereby dismissed and d
the judgment of the lower court is reversed. The case is dismissed and the parties are directed to ventilate their controversy with the
Securities & Exchange Commission. 15 The petitioner's motion for reconsideration thereof was denied in an order dated January 14,
1980. 16 Hence this petition for certiorari, alleging grave abuse of discretion on the part of the respondent Judge.

Issues Common to Both Cases

It is admitted that the private respondents in both cases have not yet fully paid the purchase price of their units. The Identical issues
raised in both petitions are the following:

1. Is a purchaser of a condominium unit in the condominium project managed by the petitioner, who has not yet fully paid the
purchase price thereof, automaticaly a ,stockholder of the petitioner Condominium Corporation

2. Is it the regular court or the Securities & Exchange Commission that has jurisdiction over cases for collection of assessments
assessed by the Condominium Corporation on condominium units the full purchase price of which has not been paid?

The private respondents in both cases argue that every purchaser of a condominium unit, regardless of whether or not he has fully paid
the purchase price, is a "holder of a separate interest" mentioned in Section 2 of Republic Act No. 4726, otherwise known as "The
Condominium Act" and is automatically a shareholder of the condominium corporation.

The contention has no merit. Section 5 of the Condominium Act expressly provides that the shareholding in the Condominium
Corporation will be conveyed only in a proper case. Said Section 5 provides:

Any transfer or conveyance of a unit or an apartment, office or other space therein, shall include the transfer or
conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholding in
the condominium corporation ...

It is clear then that not every purchaser of a condominium unit is a shareholder of the condominium corporation. The Condominium
Act leaves to the Master Deed the determination of when the shareholding will be transferred to the purchaser of a unit. Thus, Section
4 of said Act provides:

The provisions of this Act shall apply to property divided or to be divided into condominium only if there shall be
recorded in the Register of Deeds of the province or city in which the property lies and duly annotated in the
corresponding certificate of title of the land ... an enabling or master deed which shall contain, among others, the
following:

xxx xxx xxx

(d) Astatement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units
and in the common areas of the condominium project ...

The Amended Master Deeds in these cases, which were duly registered in the Register of Deeds, and which contain, by mandate of
Section 4, a statement of the exact nature of the interest acquired by a purchaser of a unit, provide in Section 6 of Part 1:

(d) Each Unit owner shall, as an essential condition to such ownership, acquire stockholding in the Condominium
Corporation herein below provided ... 17

The Amended Master Deeds likewise provide in Section 7 (b), thus.

(b) All unit owners shall of necessity become stockholders of the Condominium Corporation. TOWER shall acquire
all the shares of stock of SUNSET VIEW and shall allocate the said shares to the units in proportion to the
appurtenant interest in the COMMON AREAS and LIMITED COMMON AREAS as provided in Section 6 (b)
above. Said shares allocated are mere appurtenances of each unit, and therefore, the same cannot be transferred,
conveyed, encumbered or otherwise disposed of separately from the Unit ... 18

It is clear from the above-quoted provisions of the Master Deeds that the shareholding in the Condominium Corporation is inseparable
from the unit to which it is only an appurtenant and that only the owner of a unit is a shareholder in the Condominium Corporation.

Subparagraph (a) of Part 1, Section 6, of the Master Deeds determines when and under what conditions ownership of a unit is acquired
by a purchaser thus:

(a) The purchaser of a unit shall acquire title or ownership of such Unit, subject to the terms and conditions of the
instrument conveying the unit to such purchaser and to the terms and conditions of any subsequent conveyance
under which the purchaser takes title to the Unit, and subject further to this MASTER DEED ... 19

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The instrument conveying the unit "Solana" in G.R. NO. 52361 is the "Contract to Buy and Sell" dated September 13, 1977, Annex
"D", while that conveying the unit "Alegria" in G.R. NO. 52524 is the "Contract to Buy and Sell" dated May 12, 1976, Annex "C". In
both deeds of conveyance, it is provided:

4. Upon full payment by the BUYER of the total purchase price and full compliance by the BUYER of an its
obligations herein, the SELLER will convey unto the BUYER, as soon as practicable after completion of the
construction, full and absolute title in and to the subject unit, to the shares of stock pertaining thereto and to an rights
and interests in connection therewith ... 20

The share of stock appurtenant to the unit win be transferred accordingly to the purchaser of the unit only upon full payment of the
purchase price at which time he will also become the owner of the unit. Consequently, even under the contract, it is only the owner of
a unit who is a shareholder of the Condominium Corporation. Inasmuch as owners is conveyed only upon full payment of the purchase
price, it necessarily follows that a purchaser of a unit who has not paid the full purchase price thereof is not The owner of the unit and
consequently is not a shareholder of the Condominium Corporation.

That only the owner of a unit is a stockholder of the Condominium Corporation is inferred from Section 10 of the Condominium Act
which reads:

SEC. 10. ... Membership in a condominium corporation, regardless of whether it is a stock or non-stock corporation,
shall not be transferable separately from the condominium unit of which it is an appurtenance When a member or
stockholder ceases is to own a unit in the project in which the condominium corporation owns or holds the common
areas, he shall automatically cease to be a member or stockholder of the condominium corporation.

Pursuant to the above statutory provision, ownership of a unit is a condition sine qua non to being a shareholder in the condominium
corporation. It follows that a purchaser of a unit who is not yet the owner thereof for not having fully paid the full purchase price, is
not a shareholder By necessary implication, the "separate interest" in a condominium, which entitles the holder to become
automatically a share holder in the condominium corporation, as provided in Section 2 of the Condominium Act, can be no other than
ownership of a unit. This is so because nobody can be a shareholder unless he is the owner of a unit and when he ceases to be the
owner, he also ceases automatically to be a shareholder.

The private respondents, therefore, who have not fully paid the purchase price of their units and are consequently not owners of their
units are not members or shareholders of the petitioner condominium corporation,

Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant case for collection
cannot be a "controversy arising out of intracorporate or partnership relations between and among stockholders, members or
associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or
associates, respectively" which controversies are under the original and exclusive jurisdiction of the Securities & Exchange
Commission, pursuant to Section 5 (b) of P.D. No. 902- A. The subject matters of the instant cases according to the allegations of the
complaints are under the jurisdiction of the regular courts: that of G.R. NO. 52361, which is for the collection of P8,335.38 with
interest plus attorney's fees equivalent to the principal or a total of more than P10,000.00 is under the jurisdiction of the Court of First
Instance; and that of G.R. NO. 52524, which is for the collection of P6,168-06 is within the jurisdiction of the City Court.

In view of the foregoing, it is no longer necessary to resolve the issue raised in G.R. NO. 52524 of whether an order of the City Court
denying a motion to dismiss on the ground of lack of jurisdiction can be appealed to the Court of First Instance.

WHEREFORE, the questioned orders of the respondent Judge dated December 11, 1979 and January 4, 1980 in Civil Case No. 7303-
P, subject matter of the Petition in G.R. No. 52361, are set aside and said Judge is ordered to try the case on the merits. The orders
dated December 14, 1979 and January 14, 1980 in Civil Case No. 7530-P, subject matter of the petition in G.R. No. 52524 are set
aside and the case is ordered remanded to the court a quo, City Court of Pasay City, for trial on the merits, with costs against the
private respondents.

SO ORDERED.

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purpose of certificate of registration

SPOUSES HOWARD T. CO CHIEN and SUSAN Y. CO CHIEN, - versus - STA. LUCIA REALTY & DEVELOPMENT,
INC., and ALSONS LAND CORPORATION,

G.R. No. 162090

This case is a Petition for Certiorari under Rule 45 of the Revised Rules of Court appealing the decision of the Court of Appeals in CA
G.R. SP No. 78161 entitled Spouses Howard T. Co Chien & Susan Y. Co Chien v. Sta. Lucia Realty & Development, Inc. and Alsons
Land Corporation.

The facts are undisputed.

Sometime in December 1995, private respondents Sta. Lucia Realty & Development, Inc. (Sta. Lucia) and Alsons Land Corporation
(Alsons) offered for sale to the general public parcels of land and golf shares to the Eagle Ridge Golf and Residential Estates (Eagle
Ridge) in General Trias, Cavite.[1]Sta. Lucia, as the developer, owns 60% of Eagle Ridge while Alsons, the owner of the land, owns
the remaining 40% by virtue of a joint venture agreement. Fil-Estate Realty Corporation (Fil-Estate) was commissioned to sell the
subdivision lots and/or golf shares under an Exclusive Marketing Agreement executed on December 5, 1995.[2]

On December 20, 1995, Sta. Lucia and Alsons entered into a Contract to Sell, including an addendum to the same, with the petitioners,
spouses Howard T. Co Chien and Susan Y. Co Chien (Spouses Co Chien). According to the Contract to Sell, Spouses Co Chien shall
purchase Lot No. 16, Block No. 1, Phase I of Eagle Ridge with an area of three hundred one (301) square meters for a lump sum price
of one million two hundred ninety three thousand three hundred pesos (P1,293,300.00), with one half of the purchase price as down
payment to be paid upon signing the contract and the balance upon delivery of the title to the land to Spouses Co Chien. The
petitioners were also given a 10% discount on the purchase price and thereafter they paid a down payment of five hundred eighty one
thousand five hundred thirty five pesos (P581,535.00), after the discount. It was also agreed in the addendum to the Contract to Sell
that the 10% discount deducted from the down payment shall be forfeited and added to the balance, should Spouses Co Chien fail to
pay the said balance within seven (7) days from notice that the title to the subject property is ready for delivery.[3]

At the time the Contract to Sell was executed, the private respondents did not possess a License to Sell and a Certificate of
Registration from the Housing and Land Use Regulatory Board (HLURB) as required under Sections 4 and 5 of Presidential Decree
No. 957 (P.D. 957). The License and Certificate were issued only in July 1997, one year and six months after the execution of the
Contract to Sell between the petitioners and the private respondents.[4]

On January 19, 1998, Sta. Lucia informed the petitioners that the title to the property was ready for delivery and demanded the
payment of the balance of the purchase price. Instead of paying the balance, Spouses Co Chien tried to negotiate for a further discount
or, in the alternative, to exchange the property for a better lot in Eagle Ridge. When Spouses Co Chien failed to pay within seven days
from notice of the availability of the title, the private respondents forfeited the 10% discount previously given to the petitioners in
accordance with the contract and its addendum.[5]

On June 16, 1999, Spouses Co Chien sent a written demand to Sta. Lucia for the refund of their down payment on the ground that the
Contract to Sell was void for the reason that at the time of its execution, December 20, 1995, the private respondents had no
Certificate of Registration and License to Sell as required by Sections 4 and 5 of P.D. 957. [6] On July 6, 1999, failing to receive a
favorable response from the private respondents, Spouses Co Chien filed a complaint with the HLURB. [7]

On May 30, 2001, the HLURB Arbiter ruled in favor of Spouses Co Chien ordering Sta. Lucia and Alsons to refund the down
payment with legal interest from July 6, 1999 and to further pay the petitioners P10,000.00 as attorneys fees. The HLURB Arbiter
ruled that the lack of Certificate of Registration and License to Sell at the time of execution of the Contract to Sell resulted in the
nullification of the contract.[8]

On appeal, the HLURB Board of Commissioners (the HLURB Board) reversed the HLURB Arbiters decision and held that the
Contract to Sell was valid and ordered Spouses Co Chien to pay the private respondents the balance of P646,150.00 without penalty
interest. The HLURB Board also ordered Sta. Lucia and Alsons to pay jointly and severally an administrative fine of P20,000.00 for
two counts of violation of Section 4 of P.D. 957 and another P20,000.00 for two counts of violation of Section 5 of the same decree. [9]

Spouses Co Chien then appealed to the Office of the President.In a decision dated June 10, 2003, the Office of the President affirmed
the decision of the HLURB Board in toto. Not satisfied with the aforementioned ruling, Spouses Co Chien filed a Petition for Review
with the Court of Appeals.[10]

On February 10, 2004, the Court of Appeals denied the petition and affirmed the decision of the Office of the President.[11]

Hence, this petition.

The primary issues in this case are as follows: (1) whether the absence of the Certificate of Registration and License to Sell at the time
of execution rendered the Contract to Sell and its addendum null and void; and (2) whether the petitioners are guilty of laches or
estoppel.

We will discuss the issues seriatim.

It is the contention of the petitioners that the lack of Certificate of Registration (the Certificate) and License to Sell (the License) on
the part of the private respondents at the time the contract was executed rendered the Contract to Sell null and void, thus, entitling
them to a refund of their down payment.Spouses Co Chien aver that the use of the words shall not and the phrase unless he shall have
first obtained a license to sell within two weeks from the registration of such project in Section 5 of P.D. 957 indicate that the absence

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of the Certificate and License render the contract null and void. [12] The private respondents, on the other hand, state that the provision
of law invoked by Spouses Co Chien does not provide that the absence of the Certificate and License at the time the contract was
executed would automatically invalidate the contract.[13] The private respondents assert that the Sec. 5, P.D. 957 is merely directory as
it does not affect substantial rights, does not relate to the essence of a sale and compliance therewith is simply a matter of
administrative convenience.[14]

Sections 4 and 5 of P.D. 957 state:

Sec. 4. Registration of Projects

....
The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or
condominium project shall register the project with the Authority by filing therewith a sworn registration
statement containing the following information:

....
The subdivision project of the condominium project shall be deemed registered upon completion of the above
publication requirement. The fact of such registration shall be evidenced by a registration certificate to be
issued to the applicant-owner or dealer.

Sec. 5. License to Sell. - Such owner or dealer to whom has been issued a registration certificate shall not,
however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall
have first obtained a license to sell the project within two weeks from the registration of such project.

The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered project a
license to sell the project if, after an examination of the registration statement filed by said owner or dealer and all
the pertinent documents attached thereto, he is convinced that the owner or dealer is of good repute, that his
business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the
public would not be fraudulent.[15]

The same decree further states:

Sec. 38. Administrative Fines. - The Authority may prescribe and impose fines not exceeding ten thousand pesos
for violations of the provisions of this Decree or of any rule or regulation thereunder. Fines shall be payable to the
Authority and enforceable through writs of execution in accordance with the provisions of the Rules of Court.

Sec. 39. Penalties. - Any person who shall violate any of the provisions of this Decree and/or any rule or regulation
that may be issued pursuant to this Decree shall, upon conviction, be punished by a fine of not more than twenty
thousand (P20,000.00) pesos and/or imprisonment of not more than ten years: Provided, That in the case of
corporations, partnership, cooperatives, or associations, the President, Manager or Administrator or the person who
has charge of the administration of the business shall be criminally responsible for any violation of this Decree
and/or the rules and regulations promulgated pursuant thereto. [16]

P.D. 957 is a law that seeks to regulate the sale of subdivision lots and condominiums in view of the increasing number of
incidents wherein real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations
and obligations to provide and maintain properly[17] the basic requirements and amenities, as well as reports of alarming
magnitudeof swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and
operators.[18] As such, P.D. 957 requires the registration not just of the developers, sellers, brokers and/or owners of the
project but also of the project itself.[19] Upon registration of the project, a license to sell must be obtained prior to the sale of
the subdivision lots or condominium units therein.[20] The law also provides for the suspension and revocation of the
registration and license in certain instances, as well as the procedure to be observed in the event thereof.[21]Finally, the law
provides for administrative fines and other penalties in case of violation of, or non-compliance with its provisions.[22]

A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and condominium
units without prior issuance of a Certificate of Registration and License to Sell by the HLURB, it does not provide that the absence
thereof will automatically render a contract, otherwise validly entered, void. The penalty imposed by the decree is the general penalty
provided for the violation of any of its provisions. [23] It is well-settled in this jurisdiction that the clear language of the law shall
prevail.[24] This principle particularly enjoins strict compliance with provisions of law which are penal in nature, or when a penalty is
provided for the violation thereof. With regard to P.D. 957, nothing therein provides for the nullification of a contract to sell in the
event that the seller, at the time the contract was entered into, did not possess a certificate of registration and license to sell.[25] Absent
any specific sanction pertaining to the violation of the questioned provisions (Secs. 4 and 5), the general penalties provided in the law
shall be applied. The general penalties for the violation of any provisions in P.D. 957 are provided for in Sections 38 and 39. As can
clearly be seen in the aforequoted provisions, the same do not include the nullification of contracts that are otherwise validly entered.

As found by the Court of Appeals, in the case at bar, the requirements of Sections 4 and 5 of P.D. 957 do not go into the validity of the
contract, such that the absence thereof would automatically render the contract null and void. It is rather more of an administrative
convenience in order to allow for a more effective regulation of the industry. [26] While it is the intent of the prohibition in Section 5 of
P.D. 957 to prevent cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium
sellers and operators[27] and to ensure that penalties be imposed on fraudulent practices and manipulations committed in connection
therewith,[28] such does not obtain in this case, as it is undisputed that the title to the subject property has been available for more than
a year, and the Eagle Ridge project was almost 100% completed, before Spouses Co Chien decided to have the Contract declared void
and to seek a refund of their down payment. Contrary to Spouses Co Chiens bare allegations of bad faith on the part of the private
respondents, the Court of Appeals found that at the time the Contract to Sell was executed, the applications for the Certificate and the
License were already pending with the HLURB but were only issued several months thereafter. [29] More importantly, when Spouses

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Co Chien received notice of the availability of the title to the subject property, the private respondents had long since been issued the
Certificate and License. It was in fact Spouses Co Chien who, instead of paying the balance as required in the contract, sought to
renegotiate the same, and failing therein, sought to nullify the contract a year and a half after notice that the title to the subject
property, free from any liens and encumbrance, was already available for delivery.

One of the purposes of P.D. 957 is to discourage and prevent unscrupulous owners, developers, agents and sellers from reneging on
their obligations and representations to the detriment of innocent purchasers. The law mandates HLURB to closely regulate, supervise
and monitor the real estate industry, particularly residential developments such as subdivisions and condominium projects. To this end,
P.D. 957 provides for the issuance, suspension, revocation and even the outright denial of registration and license to developers, agents
and the project itself, as well as penalties for the non-compliance with the requirements provided therein. It does not, however, provide
for the nullification of a contract, due to the lack of registration and license at the moment of execution, which in this case was
thereafter undisputedly issued by HLURB. As correctly averred by respondent Alsons, the requirement for registration and license is
primarily directed at preventing fraudulent schemes from being perpetrated on the public who seek to have their own abode. [30] No
fraud has been alleged, much less proven, by Spouses Co Chien in the present case. The lack of certificate and registration, without
more, while penalized under the law, is not in and of itself sufficient to render a contract void. Such a deficiency, however, together
with other relevant factors may be duly considered in nullifying a contract, should the circumstances so demand.

The second issue in the instant petition is whether or not estoppel bars the claim of Spouses Co Chien. There are generally three kinds
of estoppel: (1) estoppel in pais; (2) estoppel by deed; and (3) estoppel by laches. In the first classification, a person is considered in
estoppel if by his conduct, representations or admissions or silence when he ought to speak out, whether intentionally or through
culpable negligence, causes another to believe certain facts to exist and such other rightfully relies and acts on such belief, as a
consequence of which he would be prejudiced if the former is permitted to deny the existence of such facts. [31] Estoppel by deed, on
the other hand, occurs when a party to a deed and his privies are precluded from denying any material fact stated in the said deed as
against the other party and his privies.[32]Estoppel by laches is considered an equitable estoppel wherein a person who failed or
neglected to assert a right for an unreasonable and unexplained length of time is presumed to have abandoned or otherwise declined to
assert such right and cannot later on seek to enforce the same, to the prejudice of the other party, who has no notice or knowledge that
the former would assert such rights and whose condition has so changed that the latter cannot, without injury or prejudice, be restored
to his former state.[33]

In the present case, Spouses Co Chien only demanded a refund and alleged the nullity of the Contract due to lack of the Certificate and
License after it failed to renegotiate for a better lot or a bigger discount, or three and a half (3-1/2) years after the execution of the
contract, and one and a half (1-1/2) years from notice of the availability of the title and the demand for full payment. Due to the
unexplained delay in the assertion of their rights despite the opportunity to do so, Spouses Co Chien are now estopped from raising the
issue of lack of the Certificate and License, particularly since the same have long since been issued to the private respondents. In fact,
there is nothing left for the fulfillment of the obligations set forth in the Contract to Sell and its addendum, except for the payment of
the balance by Spouses Co Chien so that the title to the property can finally be transferred in their name. Further, the act of
renegotiating the Contract to Sell may be considered a tacit ratification of whatever defect the contract allegedly suffers from.

It is well-settled that the terms of a contract have the force of law between the parties. [34] As such, the terms thereof shall govern their
relationship, rights and obligations in connection with the same. Obligations arising from contracts should be complied with in good
faith. Unless the stipulations in the contract are contrary to law, morals, good customs, public order or public policy, the same are
binding as between the parties.[35] In the instant case, as previously discussed, the Contract to Sell between Spouses Co Chien and
private respondents Sta. Lucia and Alsons has all the essential requisites of a valid and binding contract. While there is non-
compliance with the requirements in Sections 4 and 5 of P.D. 957 due to the lack of the Certificate and License at the moment of
execution, such defect does not affect the intrinsic validity of the contract, particularly in this case wherein the said Certificate and
License have been issued prior to the demand for the payment of the balance of the purchase price and the project is almost 100%
complete and operational.

IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 78161 is
AFFIRMED in toto.

Costs against petitioners.

SO ORDERED.

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