Goldland Tower Condominium Corporation vs. Lim

The filing of a complaint for judicial foreclosure constitutes the judicial demand required by Article 1169 of the Civil Code; a prior extrajudicial demand is not a prerequisite for such an action to prosper.

The case involves the enforcement of a condominium corporation's statutory lien for unpaid association dues against a subsequent purchaser of the unit. The core legal tension was between the concepts of "demand" (to place a debtor in default) and "notice" (to affect knowledge and good faith) in the context of foreclosure.

• Filed in RTC (Pasig City, Branch 160) as a complaint for judicial foreclosure.
• RTC ruled in favor of Goldland, ordering Lim to pay the dues or face foreclosure.
• Lim appealed to the CA.
• The CA initially affirmed the RTC but, on reconsideration, issued an Amended Decision dismissing the complaint for lack of prior demand.
• Goldland elevated the case to the SC via a Petition for Review on Certiorari.

• Respondent Hsieh Hsiu-Ping owned a unit in Goldland Tower and was delinquent in association dues (PHP 4,362,208.14).
• Goldland annotated its lien for the dues on the Condominium Certificate of Title (CCT) on August 10, 2011.
• Due to non-payment of real estate taxes, the City Treasurer levied and sold the unit at public auction to respondent Edward Lim in 2012. A deed of conveyance was issued to Lim after the redemption period lapsed.
• On February 14, 2012, Goldland filed a complaint for judicial foreclosure against Lim and Hsieh, praying for payment or, in default, sale of the unit at public auction.
• Lim argued the tax lien was superior and extinguished Goldland's lien, and that no extrajudicial demand was made on him.

• The annotated lien on the CCT served as constructive notice to Lim, who assumed the obligation to pay the dues upon purchase.
• The filing of the complaint for judicial foreclosure constituted the demand required by law.
• The CA erred in confusing the distinct concepts of "notice" and "demand."

• No extrajudicial demand was made on Lim prior to filing the suit, so he was never in default and the action was premature.
• The annotation on the CCT and the act of filing the suit did not satisfy the legal requirement for demand.
• The tax sale extinguished Goldland's lien, which was subordinate to the government's tax lien.

• Procedural Issues: N/A
• Substantive Issues:
  1. Whether the CA erred in ruling that Goldland's judicial foreclosure suit cannot prosper due to the absence of a prior extrajudicial demand.
  2. Whether Goldland's claim annotated as a lien on the CCT constituted the demand required by law.

• Procedural: N/A
• Substantive:
  1. Yes. The CA erred. The SC held that an extrajudicial demand is not a precondition for filing a judicial action. Under Article 1169 of the Civil Code, a creditor may make a judicial demand by filing a complaint. The filing of the foreclosure suit was itself the judicial demand.
  2. No. The annotated lien served as constructive notice to Lim of the existing obligation, which is a distinct legal concept from demand. Notice affects knowledge and good faith; demand is required to place a debtor in default. The lien did not constitute demand, but the complaint did.

• Distinction Between Notice and Demand — Notice (actual or constructive) pertains to knowledge and good faith. Constructive notice, like an annotated lien, creates a legal presumption of knowledge. Demand is a question of fact requiring proof of service and receipt to place a debtor in default. The SC emphasized these are separate concepts and one cannot substitute for the other.
• Judicial vs. Extrajudicial Demand (Article 1169, Civil Code) — The SC clarified that while an extrajudicial demand can trigger default and entitlement to interest from that date, a creditor has the unconditional right to file a judicial action (judicial demand) without first making an extrajudicial demand. The filing of the complaint is the judicial demand.
• Foreclosure as an Alternative Remedy — An action for judicial foreclosure is an alternative to a personal action for collection of a sum of money. It is a consequence of non-payment of a secured obligation. Filing for foreclosure is a valid mode of enforcing the debt.

• "Notice, whether actual or constructive, play into a party's allegations of knowledge and good faith... On the other hand, demand is always a question of fact because the creditor must prove its due service to and receipt by the debtor for it to have legal effect."
• "Article 1169 of the Civil Code does not require a creditor to precede a judicial demand with an extrajudicial prior demand."
• "Petitioner's filing of a complaint for judicial foreclosure, in itself, constituted demand for the payment of respondent Lim's debt."

• Pineda v. De Vega — The SC followed this case, which held that the filing of a complaint for payment or foreclosure constitutes the judicial demand under Article 1169.
• Development Bank of the Philippines v. Licuanan — Cited to distinguish that demand is a question of fact, while the necessity of demand is a legal question.
• BIR v. TICO Insurance Co., Inc. — Cited for the principle that prior annotation of a lien creates a preference, as registration is the operative act that binds the property.
• Ferndale Homes Homeowners Association v. Spouses Abayon — Cited to support that a condominium corporation's lien for unpaid assessments survives a tax sale.

• Article 1169, Civil Code — Defines delay and states that judicial or extrajudicial demand is generally required to put an obligor in default, unless an exception applies.
• Article 2087, Civil Code — Provides that when the principal obligation becomes due, the thing mortgaged may be alienated for payment to the creditor (basis for foreclosure).
• Section 20, Republic Act No. 4726 (The Condominium Act) — Grants the condominium management body a special property lien on units for unpaid assessments, enforceable via judicial or extrajudicial foreclosure.
• Rule 68, Rules of Court — Governs judicial foreclosure proceedings, including the judgment for sum due and the order for sale if not paid within a specified period (90-120 days).
• Section 59, Presidential Decree No. 1529 (Property Registration Decree) — Mandates that subsisting encumbrances be carried over to a new certificate upon transfer.