Arranza vs. B.F. Homes, Inc.

The HLURB has exclusive jurisdiction over complaints for specific performance of contractual and statutory obligations filed by subdivision lot buyers against a developer, even when the developer is under receivership before the SEC, because such claims are not pecuniary "claims" under Section 6(c) of P.D. No. 902-A and the HLURB is the agency equipped with the technical expertise to deal with matters involving subdivision development and homeowners' rights under P.D. No. 957.

Petitioners are homeowners' associations and individual homeowners in the BF Homes Parañaque Subdivision, a 765-hectare development spanning portions of Parañaque, Las Piñas, and Muntinlupa. Respondent BFHI is a domestic corporation engaged in developing subdivisions and selling residential lots. When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in BFHI, respondent filed a petition for rehabilitation with the SEC, which placed respondent under a management committee and later under a receiver. The regulatory framework involves P.D. No. 957 (The Subdivision and Condominium Buyers' Protective Decree), which was issued to correct pernicious practices of subdivision developers, and P.D. No. 902-A, which defines the SEC's jurisdiction over corporations under receivership.

Respondent BF Homes, Inc. (BFHI) is a domestic corporation engaged in developing subdivisions and selling residential lots, including the BF Homes Parañaque Subdivision, which sprawls across portions of Parañaque, Las Piñas, and Muntinlupa. When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in BFHI, respondent filed a petition for rehabilitation with the SEC. On 18 March 1985, the SEC placed respondent under a management committee, and upon that committee's dissolution on 2 February 1988, the SEC appointed Atty. Florencio B. Orendain as Receiver and approved a Revised Rehabilitation Plan.

As Receiver, Orendain instituted a central security system, unified the sixty-five homeowners' associations into the United BF Homeowners' Associations, Inc. (UBFHAI), and in 1989 turned over to UBFHAI control and administration of security, the Clubhouse, and open spaces along Concha Cruz Drive. Through the Philippine Waterworks and Construction Corporation (PWCC), respondent's managing company for waterworks, respondent entered into an agreement with UBFHAI for the annual collection of community assessment funds and for the purchase of eight new pumps to replace over-capacitated pumps in the old wells.

On 7 November 1994, Orendain was relieved by the SEC of his duties as 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. 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 the BF Parañaque Homeowners' Association, Inc. (BFPHAI) as the representative of all homeowners; took over the management of the Clubhouse; and deployed its own security guards in the subdivision.

Consequently, on 5 July 1995, 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. They alleged that the forty wells in the subdivision, with only twenty-seven productive, were the sources of the inter-connected water system; there was only one drainage and sewer system; there was one network of roads; there were eight entry and exit points; there was no security force for the entire subdivision until 1988; there were not enough open spaces; there were no zoning guidelines; and the BFPHAI had become "moribund" in 1980. Petitioners prayed for a cease-and-desist order against selling properties, forfeiture of respondent's bond, turnover of roads and open spaces to UBFHAI, reimbursement of UBFHAI's advances, restoration of 24-hour water supply, continuation of community development fund collection, withdrawal of guards, and payment of attorney's fees.

In its answer, respondent claimed that it had complied with its contractual obligations, that it could not be compelled to abide by agreements resulting from Orendain's ultra vires acts, and that petitioners were precluded from instituting the action on account of Section 6(c) of P.D. No. 902-A providing for suspension of all actions for claims against a corporation under receivership. Petitioners thereafter filed an urgent motion for a cease-and-desist/status quo order, and the HLURB Arbiter issued a 20-day TRO and subsequently an Order granting petitioners' prayer for preliminary injunction. Respondent then filed a petition for certiorari and prohibition with the Court of Appeals, which on 28 November 1997 annulled and set aside the writ of preliminary injunction, ruling that petitioners' action was a "claim" within the contemplation of P.D. No. 902-A that should be suspended.

• HLURB Jurisdiction: Petitioners argued that their complaint referring to rights of way, water, open spaces, road and perimeter wall repairs, security, and respondent's interlocking corporations involves unsound real estate practices, and the action is for specific performance of a real estate developer's obligations under P.D. No. 957, with the relief sought being revocation of the subdivision project's registration certificate and license to sell — all within the jurisdiction of the HLURB.
• Non-Suspension of Obligations: Petitioners maintained that even if respondent is under receivership, its obligations as a real estate developer under P.D. No. 957 are not suspended.
• Scope of Section 6(c): Petitioners argued that Section 6(c) of P.D. No. 902-A on "suspension of all actions for claims against corporations" refers solely to monetary claims which are but incidental to their complaint, and if filed elsewhere than the HLURB, it would result in splitting causes of action.
• Referral of Monetary Awards: Petitioners contended that once determined in the HLURB, monetary awards should be submitted to the SEC as established claims.
• Nature of Enjoined Acts: Petitioners argued that 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.

• SEC Jurisdiction: Respondent asserted that the SEC, not the HLURB, has jurisdiction over petitioners' complaint based on the contracts entered into by the former receiver, since the SEC, being the appointing authority, should take cognizance of controversies arising from the performance of the receiver's duties.
• Custodia Legis: Respondent argued that since its properties are under the SEC's custodia legis, they are exempt from any court process.
• Suspension of Actions: Respondent claimed that petitioners were precluded from instituting the 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.

• Jurisdiction over the Complaint: Whether the HLURB or the SEC has jurisdiction over petitioners' complaint for specific performance filed by subdivision homeowners against a subdivision developer under receivership.
• Suspension of HLURB Proceedings: Whether, assuming the HLURB has jurisdiction, the proceedings therein may be suspended pending the outcome of the receivership before the SEC.

• Jurisdiction over the Complaint: The HLURB has jurisdiction. Petitioners' complaint is for specific performance to enforce their rights as purchasers of subdivision lots regarding rights of way, water, open spaces, road and perimeter wall repairs, and security, which falls squarely within the HLURB's exclusive jurisdiction under P.D. No. 957, P.D. No. 1344, and E.O. No. 648. The fact that respondent is under receivership does not divest the HLURB of that jurisdiction.
• Suspension of HLURB Proceedings: No. Petitioners' claims are not "claims" within the meaning of Section 6(c) of P.D. No. 902-A, which refers to debts or demands of a pecuniary nature. The HLURB proceedings should not be suspended notwithstanding that respondent is under receivership.

• Jurisdiction over the Complaint: Jurisdiction is determined by the averments of the complaint and not by the defense contained in the answer. P.D. No. 957 was issued to correct pernicious practices of subdivision owners and developers that adversely affected the interests of subdivision lot buyers. Section 3 of P.D. No. 957 empowered the NHA with exclusive jurisdiction to regulate the real estate trade and business, and P.D. No. 1344 expanded this jurisdiction to include cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots against the owner, developer, dealer, broker, or salesman. These functions were later transferred to the HSRC by E.O. No. 648 and renamed the HLURB by E.O. No. 90. The Court noted that in cases such as Antipolo Realty Corporation vs. National Housing Authority and Alcasid vs. Court of Appeals, 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. In this case, 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, making the HLURB's jurisdiction indisputable.
• Effect of Receivership: The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. 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. Since there appear to be no restraints imposed upon respondent as it undergoes rehabilitation receivership, respondent continues to exist as a corporation and should continue to perform its contractual and statutory responsibilities to petitioners as homeowners. No violation of the SEC order suspending payments to creditors would result from the HLURB proceedings because what petitioners seek to enforce are respondent's obligations as a subdivision developer, which are basically not pecuniary in nature although they could incidentally involve monetary considerations.
• Meaning of "Claim" under Section 6(c): Citing Finasia Investments and Finance Corporation vs. Court of Appeals, the Court defined "claim" in Section 6(c) of P.D. No. 902-A as referring to "debts or demands of a pecuniary nature" — "the assertion of a right to have money paid." Petitioners do not aim to enforce a pecuniary demand; their claim for reimbursement should be viewed in 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 life." The HLURB, not the SEC, is equipped with the expertise to deal with that matter.
• SEC Jurisdiction Distinguished: For the SEC to acquire jurisdiction under Section 5 of P.D. No. 902-A, 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 controversy. Petitioners are not stockholders, members, or associates of respondent — they are lot buyers and homeowners. The controversy is remotely related to the "regulation" of respondent corporation or to respondent's "internal affairs." P.D. Nos. 902-A and 957 are laws in pari materia, and should be construed in harmony with each other. The HLURB should take jurisdiction over petitioners' complaint because it pertains to matters within the HLURB's competence and expertise, and should view the issue of whether the Board of Receivers correctly revoked the agreements from the perspective of the homeowners' interests.
• Suspension of HLURB Proceedings: Since petitioners' claims are not pecuniary "claims" under Section 6(c) of P.D. No. 902-A, the HLURB proceedings should not be suspended. 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. The TRO issued by the Court should continue until such time as the HLURB shall have resolved the controversy.

• Jurisdiction Determined by the Averments of the Complaint — Jurisdiction is the authority to hear and determine a cause, conferred by law and not by mere administrative policy of any court or tribunal. It is determined by the averments of the complaint and not by the defense contained in the answer. The Court applied this principle in determining that the HLURB, not the SEC, had jurisdiction over petitioners' complaint based on its allegations of specific performance of statutory and contractual obligations under P.D. No. 957.
• "Claim" under Section 6(c) of P.D. No. 902-A — The word "claim" as used in Section 6(c) of P.D. No. 902-A refers to debts or demands of a pecuniary nature; it means "the assertion of a right to have money paid." The Court applied this definition to hold that petitioners' complaint for specific performance, which seeks enforcement of respondent's obligations as a subdivision developer, is not a pecuniary claim and therefore the HLURB proceedings should not be suspended.
• Receivership Does Not Dissolve a Corporation — The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. 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. The Court applied this principle to hold that respondent continues to exist as a corporation and should continue to perform its contractual and statutory responsibilities to petitioners as homeowners.
• Two-Element Test for SEC Jurisdiction — For the SEC to acquire jurisdiction over any controversy under Section 5 of P.D. No. 902-A, 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 controversy. The first element requires that the controversy arise out of intra-corporate or partnership relations; the second requires that the dispute be intrinsically connected with the regulation or internal affairs of the corporation. The Court applied this test to find that petitioners, being lot buyers and homeowners rather than stockholders, and the controversy being remotely related to respondent's internal affairs, the SEC did not have jurisdiction.
• Laws in Pari Materia — 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.

• "Jurisdiction is the authority to hear and determine a cause — the right to act in a case. It is conferred by law and not by mere administrative policy of any court or tribunal. It is determined by the averments of the complaint and not by the defense contained in the answer." — This passage establishes the foundational principle for determining jurisdiction, which the Court applied to examine the applicable laws and the allegations of petitioners' complaint before the HLURB.
• "The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. 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." — This passage articulates the Court's reasoning for why respondent's receivership status does not divest the HLURB of jurisdiction or suspend respondent's obligations to homeowners.
• "We agree with the public respondent that the word 'claim' as used in Sec. 6 (c) of P.D. 902-A, as amended, refers to debts or demands of a pecuniary nature. It means 'the assertion of a right to have money paid.'" — This quotation from Finasia Investments and Finance Corporation vs. Court of Appeals defines the controlling interpretation of "claim" under Section 6(c) of P.D. No. 902-A, which the Court applied to hold that petitioners' complaint is not a pecuniary claim warranting suspension.
• "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." — This passage articulates the principle of harmonious construction of P.D. Nos. 902-A and 957, supporting the Court's conclusion that the HLURB should proceed with the case while the SEC continues with respondent's rehabilitation.

• Antipolo Realty Corporation vs. National Housing Authority, 153 SCRA 399 [1987] — Followed as controlling precedent; the Court held that a complaint filed by homeowners for the failure of the developer to develop the subdivision in accordance with its undertakings under the contract to sell was within the jurisdiction of the NHA.
• Alcasid vs. Court of Appeals, 217 SCRA 437 [1993] — Followed; the Court ruled that the HLURB, not the RTC, has jurisdiction over a complaint of lot buyers for specific performance of alleged contractual and statutory obligations of the defendants.
• Finasia Investments and Finance Corporation vs. Court of Appeals, 237 SCRA 446 [1994] — Followed; the Court defined "claim" in Section 6(c) of P.D. No. 902-A as referring to debts or demands of a pecuniary nature, and held that a civil case to nullify a special power of attorney should not be suspended upon the appointment of a receiver.
• Figueroa vs. SEC, 162 SCRA 689 [1988] — Followed; the Court declared that the power to overrule or revoke the previous acts of the management or Board of Directors of an entity under receivership is within a receiver's authority under Section 6(d)(2) of P.D. No. 902-A, but that prerogative is not absolute and should be exercised upon due consideration of pertinent laws when public interest and welfare are involved.
• Viray vs. Court of Appeals, 191 SCRA 308 [1990] — Cited for the two-element test for SEC jurisdiction under Section 5 of P.D. No. 902-A.
• Lozano vs. De los Santos, 274 SCRA 452 [1997] — Cited for the two-element test for SEC jurisdiction and the requirement that the controversy arise out of intra-corporate or partnership relations.
• Cudia vs. Court of Appeals, 348 Phil. 190 [1998] — Cited for the principle that jurisdiction is conferred by law and not by mere administrative policy of any court or tribunal.
• Chico vs. Court of Appeals, 348 Phil. 37 [1998] — Cited for the principle that jurisdiction is determined by the averments of the complaint and not by the defense contained in the answer.
• Commodities Storage & Ice Plant Corporation vs. Court of Appeals, 274 SCRA 439 [1997] — Cited for the definition of a receiver as a person appointed by the court or quasi-judicial agency to preserve and conserve property.
• Ysasi vs. Hon. Fernandez, 132 Phil. 526 [1968] — Cited for the principle that receivership is aimed at the preservation of existing rights and cannot be used as an instrument for their destruction.
• C&C Commercial Corporation vs. National Waterworks & Sewerage Authority, 129 Phil. 227 [1967] — Cited for the principle that laws in pari materia should be construed in harmony with each other.

• Section 6(c), P.D. No. 902-A, as amended by P.D. Nos. 1653, 1758, and 1799 — Provides for the suspension of all actions for claims against corporations under management or receivership. The Court held that petitioners' complaint for specific performance is not a "claim" within the meaning of this provision because it does not involve debts or demands of a pecuniary nature.
• Section 5, P.D. No. 902-A, as amended — Defines the SEC's original and exclusive jurisdiction over cases involving fraud and misrepresentation, intra-corporate controversies, and election controversies. The Court applied the two-element test to find that the SEC did not have jurisdiction over petitioners' complaint because petitioners are not stockholders and the controversy is not intrinsically connected with respondent's internal affairs.
• Section 3, P.D. No. 957 — Empowered the NHA with exclusive jurisdiction to regulate the real estate trade and business. The Court traced the transfer of this jurisdiction to the HLURB through subsequent issuances.
• Section 1, P.D. No. 1344 — Expanded the NHA's jurisdiction to include cases involving unsound real estate business practices, claims involving refund and other claims filed by subdivision lot buyers against the project owner or developer, and cases involving specific performance of contractual and statutory obligations filed by buyers against the owner, developer, dealer, broker, or salesman.
• Section 8, E.O. No. 648 — Transferred the NHA's regulatory and quasi-judicial functions to the HSRC, including the authority to hear and decide cases on unsound real estate business practices, claims involving refund, and cases of specific performance.
• Section 1(c), E.O. No. 90 — Renamed the HSRC as the Housing and Land Use Regulatory Board (HLURB).
• Section 6(d)(2), P.D. No. 902-A — Cited in Figueroa vs. SEC for the receiver's authority to overrule or revoke previous acts of the management or Board of Directors of an entity under receivership.

Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concurred.