Leviste Management System, Inc. vs. Legaspi Towers 200, Inc

Articles 448 and 546 of the Civil Code on builders in good faith apply only where the owner of the land and the builder are two distinct persons who are not bound either by specific legislation on the subject property or by contract. In condominium settings governed by RA 4726, where the condominium corporation (landowner) and the unit owner (builder) are bound by the Condominium Act, the Master Deed, and the By-Laws, these Civil Code provisions do not apply.

The case involves the extent of ownership rights in a condominium setting, specifically whether a unit owner may claim ownership of the air space above its unit and construct additional floors thereon without the condominium corporation's consent. It clarifies the relationship between general property law (Civil Code) and special legislation (Condominium Act).

• RTC Makati (Civil Case No. 91-634): LEMANS filed a complaint for mandatory injunction to complete construction of Concession 4. Legaspi Towers filed a third-party complaint against the Building Official and DPWH Secretary to nullify the building permit. In its October 25, 2005 Decision, the RTC applied Article 448 and Depra v. Dumlao, ordering Legaspi Towers to exercise its option to appropriate the structure or lease the air space.
• CA (CA-G.R. CV No. 88082): In its May 26, 2011 Decision, the CA affirmed the RTC. It dismissed LEMANS' appeal for procedural defects (failure to comply with Section 13, Rule 44) and held that since LEMANS was a builder in good faith, Concession 4 could not be demolished.
• SC: Consolidated petitions for review under Rule 45. The SC reversed the CA and RTC.

• Legaspi Towers is a 7-storey commercial condominium with a roof deck and two levels above it (Concessions 2 and 3), governed by a Master Deed with Declaration of Restrictions.
• LEMANS purchased Concession 3 (a penthouse unit) on March 9, 1989.
• In 1990, LEMANS secured a building permit and commenced construction of Concession 4 on the roof deck directly above Concession 3.
• Legaspi Towers objected, asserting that the air space above the roof deck is a common area owned by the condominium corporation, not part of Concession 3.
• Legaspi Towers refused entry of construction materials and requested the Building Official (Irasga) to cancel the permit, but the request was denied.
• The Master Deed specified the building consisted of "seven (7) storeys with a basement, a ground floor, a deck roof, and two levels above the deck roof." It did not include Concession 4.
• LEMANS had an internal arrangement with the then-president of Legaspi Towers but did not secure approval from the Board of Directors or the required consent of registered owners to amend the Master Deed under Section 4 of RA 4726.

LEMANS (G.R. No. 199353): - The CA erred in refusing to apply the Depra v. Dumlao doctrine to determine the proper valuation (actual construction cost vs. fair market value) for purposes of Article 448. - The CA erred in disregarding evidence already submitted regarding valuation. - The RTC's interlocutory orders (May 24, 2002 and August 19, 2002) declaring Article 448 applicable had become final and binding on Legaspi Towers, which failed to assail them via certiorari. - LEMANS acted in good faith, having secured a building permit and dealt with the corporation's president.

Legaspi Towers (G.R. No. 199389): - It has the right to demolish Concession 4 as an illegal construction and nuisance under Article 699 of the Civil Code. - The building permit was invalidly issued because the construction violated the Condominium Act and the Master Deed. - LEMANS failed to obtain the consent of all registered owners required by Section 4 of RA 4726 to amend the Master Deed. - The construction violated the By-Laws, which require approval by members for extraordinary improvements involving structural modification. - Article 448 does not apply where there is a contractual relationship and specific legislation governing the parties.

• Procedural Issues:
  • Whether the CA properly dismissed LEMANS' appeal for failure to comply with procedural requirements (Section 13, Rule 44).
  • Whether the SC is bound by the RTC's interlocutory orders declaring Article 448 applicable.
• Substantive Issues:
  • Whether Articles 448 and 546 of the Civil Code apply to a condominium corporation and a unit owner who constructs a building on a common area.
  • Whether Legaspi Towers has the right to demolish Concession 4.

• Procedural:

  • The SC is not bound by the RTC's interlocutory orders or the CA's prior decision in the certiorari case (CA-G.R. SP No. 73621). Interlocutory orders are not appealable under Rule 41, Section 1; the proper remedy is certiorari under Rule 65 or to raise the issue in the appeal of the final judgment. Legaspi Towers properly chose the latter.
  • The SC may review legal conclusions in interlocutory orders when resolving the consolidated appeals under Rule 45, as these petitions seek to correct errors of judgment, not jurisdiction.

• Substantive:

  • Articles 448 and 546 do not apply. The Condominium Act (RA 4726) is a special law that prevails over the general provisions of the Civil Code (generalia specialibus non derogant).
• The Civil Code provisions on builders in good faith presuppose that the landowner and builder are distinct persons not bound by specific legislation or contract. Here, the parties are bound by:
  • RA 4726 (Condominium Act)
  • The Master Deed
  • The By-Laws of the condominium corporation
  • Under Section 6 of RA 4726, a unit consists only of the interior surfaces of perimeter walls, ceilings, windows, and doors; roofs and structural elements are common areas. The air space above Concession 3 is part of the common areas owned by Legaspi Towers.
  • LEMANS, as a unit owner, is automatically a member/stockholder of the condominium corporation (Section 10, RA 4726), creating a relationship of co-ownership governed by special law, not the accidental co-ownership contemplated by Article 448.
  • LEMANS violated Section 4 of RA 4726 (failure to amend Master Deed with consent of registered owners) and the By-Laws (failure to get approval for extraordinary improvements).
  • Applying Article 448 would be iniquitous: it would force the condominium corporation to either appropriate an illegal structure threatening structural integrity or allow its continuance upon payment of rent.
  • Legaspi Towers has the right to abate the violation and order demolition of Concession 4 at LEMANS' expense under the By-Laws and the Condominium Act.
  • The validity of the building permit is immaterial to the right to abate.

• Generalia Specialibus Non Derogant — A special law (Condominium Act) prevails over a general law (Civil Code) on the same subject matter. The SC applied this to exclude Article 448 from condominium disputes.
• Builder in Good Faith (Article 448) — Applies only to cases where the landowner and builder are distinct persons without contractual relations or specific legislation binding them. The SC established that in condominiums, the unit owner and corporation are bound by the Condominium Act, Master Deed, and By-Laws, removing the application of Article 448.
• Interlocutory Orders — Orders that do not finally dispose of a case (e.g., orders applying Article 448 pending trial) are not appealable. The remedy is certiorari under Rule 65, or the error may be raised in the appeal of the final judgment.
• Accession — The principle that the accessory follows the principal underlies Article 448, but it yields to the Condominium Act's specific provisions on common areas.
• Corporate Authority (Condominium Corporation) — A condominium corporation acts only through its Board of Directors (Corporation Code, Section 23). An internal arrangement with the corporation's president does not bind the corporation unless approved by the Board.
• Condominium Act Incidents — Under Section 6, RA 4726, the boundaries of a unit are strictly limited to interior surfaces; roofs, foundations, and structural elements are common areas. Section 3(d) defines common areas as the entire project excepting units separately granted.

• "The Civil Code provisions on builders in good faith presuppose that the owner of the land and the builder are two distinct persons who are not bound either by specific legislation on the subject property or by contract."
• "Articles 448 and 546 of the Civil Code on builders in good faith are therefore inapplicable in cases covered by the Condominium Act where the owner of the land and the builder are already bound by specific legislation on the subject property (the Condominium Act), and by contract (the Master Deed and the By-Laws of the condominium corporation)."
• "The application of Article 448 to the present situation is highly iniquitous, in that an owner, also found to be in good faith, will be forced to either appropriate the illegal structure (and impliedly be burdened with the cost of its demolition) or to allow the continuance of such an illegal structure that violates the law and the Master Deed, and threatens the structural integrity of the condominium building upon the payment of rent."

• Depra v. Dumlao — Cited by lower courts as controlling precedent for applying Article 448. The SC distinguished this case, noting it involved a simple landowner-builder relationship without the condominium framework.
• Crispino v. Tansay — Cited for the rule that the remedy against an interlocutory order is certiorari under Rule 65, or questioning it in the appeal of the final judgment.
• Investments, Inc. v. Court of Appeals — Cited for the proposition that interlocutory orders may be questioned as part of an appeal from the final judgment.
• Communities Cagayan, Inc. v. Nanol — Cited for the rule that Article 448 does not apply where there is a contractual relation between the parties.
• Limson v. Wack Wack Condominium Corp. — Cited to establish that acquisition of a condominium unit binds the purchaser to a contract with other unit owners and the corporation.
• Tuatis v. Escol — Cited for the rationale of Article 448: to prevent the impracticability of forced co-ownership.

• Republic Act No. 4726 (The Condominium Act), Sections 2, 3(d), 4, 6, and 10 — Govern the creation of condominiums, definition of common areas, amendment of Master Deeds, incidents of ownership, and the condominium corporation as management body.
• Civil Code, Articles 448 and 546 — Provisions on builders in good faith and indemnity; held inapplicable to the case.
• Civil Code, Article 699 — Remedies against nuisance (abatement without judicial proceedings).
• Rules of Court, Rule 41, Section 1 — Non-appealability of interlocutory orders.
• Corporation Code, Section 23 — Exercise of corporate powers by the Board of Directors.

N/A — Justice Del Castillo wrote the opinion for the Court. Justices Del Castillo, Jardeleza, and Tijam concurred; Chief Justice Sereno was on leave. No separate concurring opinions were noted.

N/A — No dissenting opinions were recorded in the decision.