LPL Greenhills Condominium Corporation vs. Brouwer

A condominium corporation seeking to enforce its lien for unpaid dues through extrajudicial foreclosure must possess a special power of attorney to sell the unit, which may be granted through the deed of restrictions or by-laws but is not ipso facto conferred by Section 20 of the Condominium Act; absent such authority, the extrajudicial foreclosure sale is void.

Respondent Catharina Brouwer was the registered owner of two condominium units—Unit Nos. 16-I and 16-J—at the LPL Greenhills Condominium in San Juan City. Petitioner LPL Greenhills Condominium Corporation is the condominium corporation that assessed and sought to collect unpaid association dues and other assessments from respondent. The other petitioners—Spouses Clemartin Arboleda and Maria Angelita Arboleda, Mario Antoni Salazar, and Lauro S. Leviste II—were the successful bidders at the extrajudicial foreclosure sales of the two units. The governing legal framework includes Section 20 of Republic Act No. 4726 (the Condominium Act), which provides that liens for unpaid assessments may be enforced through judicial or extrajudicial foreclosure of mortgages of real property, and Act No. 3135, as amended by Act No. 4118, which requires a special power or authority to sell in extrajudicial foreclosure proceedings, as implemented by Supreme Court Administrative Matter No. 99-10-05-0 and Office of the Court Administrator Circular No. 7-2002.

Respondent Catharina Brouwer was the registered owner of two condominium units, Unit Nos. 16-I and 16-J, at the LPL Greenhills Condominium in San Juan City. She failed to settle her monthly association dues and other assessments, inclusive of penalties and interests. On October 23, 2007, LPL issued notices of assessment amounting to ₱181,241.10 per unit to respondent, which were also annotated on the respective Condominium Certificates of Title (CCTs) on November 21, 2007. Despite these notices, respondent's unpaid obligations continued to accrue, reaching ₱252,983.19 for Unit 16-I and ₱227,168.58 for Unit 16-J as of August 31, 2008.

On August 20, 2008, LPL filed separate petitions to sell in extrajudicial foreclosure the subject units pursuant to Section 20 of RA 4726 and Part II, Section 4(c)(e)(f) of LPL's Master Deed of Restrictions. The required notices of sale were posted for at least 20 days in at least three public places in San Juan City and published in the September 10, 17, and 24, 2008 issues of Star Forum Newspaper for Unit 16-I and The Manila Times for Unit 16-J. Sheriffs Elmer B. David and Bienvenido V. Calindas, Jr. conducted the extrajudicial foreclosure sales at the San Juan City Hall. Unit 16-I, covered by CCT No. 11113-R, was sold to Salazar and Leviste for ₱500,000.00, while Unit 16-J, covered by CCT No. 11114-R, was sold to Spouses Arboleda for ₱500,000.00. The corresponding certificates of sale, both dated November 12, 2008, were issued to the buyers and registered with the Registry of Deeds on November 28, 2008.

Respondent, through her attorney-in-fact Manfred De Koning, filed a complaint for declaration of nullity of foreclosure proceedings, quieting of title, and damages against petitioners. She argued that the extrajudicial foreclosure sales were void because LPL's Master Deed of Restrictions and By-Laws did not authorize the extrajudicial foreclosure as required by Act No. 3135, as amended; there was no board resolution from LPL authorizing the extrajudicial foreclosure; and the proceedings lacked proper notice. Petitioners countered, citing Chateau de Baie Condominium Corp. vs. Spouses Moreno, that a special authority from the unit owner is not required before a condominium corporation can initiate foreclosure proceedings for unpaid dues. In an Order dated May 2, 2012, the RTC limited the issue to whether the foreclosure proceedings and auction sales were valid, noting that no document existed and the Master Deed of Restrictions contained no provision designating LPL as respondent's attorney-in-fact to extrajudicially foreclose and sell the subject units. The parties agreed to submit the case for decision based on their respective position papers on September 30, 2015.

• Special Authority Not Required: Petitioners argued that under Section 20 of the Condominium Act, a special authority under Section 1 of Act No. 3135 is not necessary to enforce a lien arising from non-payment of condominium dues and other assessments by extrajudicial foreclosure, citing Chateau de Baie as having set forth a new rule dispensing with the requirement.
• Special Authority Present in Governing Documents: Assuming without conceding that a special authority is necessary, petitioners maintained that such authority is present in LPL's Master Deed of Restrictions and By-Laws, which they claimed were completely similar to the By-Laws of the petitioner condominium corporation in Welbilt Construction Corp. vs. Heirs of Cresenciano C. De Castro.
• Loss of Legal Personality of Counsel: Petitioners contended that upon the death of Manfred, respondent's attorney-in-fact, the law firm Gutierrez, Cortez & Partners lost its legal personality to represent respondent.

• Lack of Authority in Governing Documents: Respondent argued that LPL's Master Deed of Restrictions and By-Laws did not authorize the extrajudicial foreclosure of the units in favor of LPL, as required by Act No. 3135, as amended by Act No. 4118.
• No Board Resolution: Respondent maintained that there was no board resolution from LPL authorizing the extrajudicial foreclosure.
• Lack of Proper Notice: Respondent asserted that the extrajudicial foreclosure proceedings were void for lack of proper notice.

• Validity of Extrajudicial Foreclosure: Whether the CA erred in ruling that the extrajudicial foreclosure sales are null and void.
• Legal Personality of Counsel: Whether the CA erred in not finding that respondent's counsel lost its legal personality to represent respondent upon the death of the attorney-in-fact.

• Validity of Extrajudicial Foreclosure: No. The extrajudicial foreclosure sales were null and void because LPL lacked the special authority or power to sell required under Act No. 3135, as neither its Master Deed of Restrictions nor its By-Laws contained a provision designating LPL as respondent's attorney-in-fact for extrajudicial foreclosure.
• Legal Personality of Counsel: No. The death of the attorney-in-fact does not ipso facto extinguish the attorney-client relationship between respondent and her counsel of record, as the attorney-in-fact is not the real party-in-interest under Section 3, Rule 3 of the Rules of Court.

• Validity of Extrajudicial Foreclosure: The requirement of special authority to sell in extrajudicial foreclosure stems from the Latin maxim nemo dat quod non habet—one cannot give what one does not have. As the registered owner, only respondent could exercise jus disponendi over the subject units, to the exclusion of LPL, notwithstanding the latter's lien for unpaid dues. Under Article 1878 of the Civil Code, particularly paragraphs (5), (12), and (15), the transmission or acquisition of ownership of immovable property and any act of strict dominion require a special power of attorney. Section 20 of the Condominium Act merely prescribes the procedure by which unpaid assessments may be treated as a superior lien through annotation on the title and grants the option to enforce that lien through judicial or extrajudicial foreclosure, but does not by itself ipso facto authorize the corporation to foreclose. The governing law and rules—Act No. 3135, Section 1, as implemented by A.M. No. 99-10-05-0 and Circular No. 7-2002—require that the petition for extrajudicial foreclosure be supported by evidence of a special power or authority to sell. The Court distinguished Chateau de Baie, noting that the dismissal there rested on jurisdictional grounds (the case involved an intra-corporate dispute properly cognizable by the SEC), not on any abandonment of the special authority requirement. First Marbella and Welbilt were reaffirmed as controlling: both require evidence of special authority, and Welbilt found such authority in the condominium corporation's By-Laws—a circumstance absent here. The Court examined the provisions of LPL's Master Deed of Restrictions and By-Laws quoted by petitioners and found none akin to a special authority or power to sell designating LPL as respondent's attorney-in-fact. Section 5 of the By-Laws, stating that the Board may "enforce collection thereof by any of the remedies provided by the Condominium Act and other pertinent laws," was not a special authority to sell. Petitioners' contention that LPL's By-Laws were "completely similar" to those in Welbilt was rejected, as only a portion of one subsection was quoted in Welbilt. Furthermore, petitioners were barred by laches: they had agreed before the RTC to limit the issue to whether special authority was legally required, did not assail the RTC's factual finding that the Master Deed lacked the requisite provision, and submitted the case for decision on position papers. The belated assertion that the governing documents contained the authority raised a question of fact beyond the Court's jurisdiction under Rule 45. Without the required authority, LPL could not initiate extrajudicial foreclosure under Act No. 3135 and could only enforce its lien through an ordinary collection suit or judicial foreclosure under Rule 68.
• Legal Personality of Counsel: An attorney-in-fact is not the real party-in-interest. Under Section 3, Rule 3 of the Rules of Court, where an action is prosecuted by a representative in a fiduciary capacity, the beneficiary is deemed the real party-in-interest. Manfred's death therefore did not ipso facto cause the withdrawal of Gutierrez, Cortez & Partners as counsel of record. The attorney-client relationship existed between respondent and the law firm, not between respondent and Manfred. Respondent's counsel of record remained Gutierrez, Cortez & Partners notwithstanding the attorney-in-fact's death.

• Special Authority to Sell in Extrajudicial Foreclosure — A condominium corporation must possess a special power of attorney to sell the condominium unit before it can initiate extrajudicial foreclosure proceedings for unpaid dues. This requirement stems from the maxim nemo dat quod non habet and is mandated by Section 1 of Act No. 3135, as implemented by A.M. No. 99-10-05-0 and Circular No. 7-2002. The authority may be granted through a provision in the condominium's deed of restrictions or by-laws, but Section 20 of the Condominium Act does not ipso facto confer such authority. Without it, the extrajudicial foreclosure sale is void, and the corporation's recourse is an ordinary collection suit or judicial foreclosure under Rule 68.
• Laches Barred Raising Factual Issues on Appeal — A party who fails to timely assail a trial court's factual findings—particularly after agreeing to limit the issue and submitting the case for decision on position papers—cannot later raise those factual issues on appeal or in a petition for review on certiorari. Questions of fact are beyond the Supreme Court's jurisdiction under Rule 45, which is limited to questions of law.
• Attorney-in-Fact Not Real Party-in-Interest — An attorney-in-fact is not the real party-in-interest; the beneficiary is. The death of an attorney-in-fact does not extinguish the attorney-client relationship between the principal and counsel of record, as that relationship exists directly between the principal and the law firm.

• "The 'special power' being referred to in Section 1 of Act No. 3135 is a special power of attorney to sell." — This passage defines the precise nature of the authority required for extrajudicial foreclosure, anchoring the requirement in civil law concepts of agency and strict dominion.
• "Clearly, Section 20 merely prescribes the procedure by which petitioner's claim may be treated as a superior lien — i.e., through the annotation thereof on the title of the condominium unit. While the law also grants petitioner the option to enforce said lien through either the judicial or extrajudicial foreclosure sale of the condominium unit, Section 20 does not by itself, ipso facto, authorize judicial as extra-judicial foreclosure of the condominium unit." — This is the canonical formulation distinguishing the lien-creating function of Section 20 from the separate requirement of special authority to foreclose, drawn from First Marbella and reaffirmed in this decision.
• "Without the required authority, LPL cannot initiate extrajudicial foreclosure proceedings under Act No. 3135. It may only enforce its lien through an ordinary collection suit or judicial foreclosure proceedings as provided under Rule 68 of the Rules of Court." — This states the practical consequence of lacking special authority, identifying the alternative remedies available to a condominium corporation.

• First Marbella Condominium Association, Inc. vs. Gatmaytan, 579 Phil. 432 (2008) — Controlling precedent. Held that a petition for extrajudicial foreclosure must be supported by evidence of special authority to foreclose, and that Section 20 of the Condominium Act does not grant such authority ipso facto. Reaffirmed and applied in this case.
• Chateau de Baie Condominium Corp. vs. Spouses Moreno, 659 Phil. 353 (2011) — Distinguished. Petitioners relied on this case to argue that special authority is unnecessary, but the Court clarified that the dismissal in Chateau de Baie turned on jurisdictional grounds (intra-corporate dispute cognizable by the SEC), not on any abandonment of the special authority doctrine.
• Welbilt Construction Corp. vs. Heirs of Cresenciano C. De Castro, 836 Phil. 547 (2018) — Followed and distinguished. Reiterated First Marbella's requirement of special authority but found such authority present in the condominium corporation's By-Laws in that case—a circumstance absent in LPL's governing documents.
• The Commoner Lending Corp. vs. Spouses Villanueva, G.R. No. 235260, August 27, 2020 — Cited as instructive. Held that a special power to sell is required in extrajudicial foreclosure and must be a special power of attorney to sell, finding support in civil law principles of agency.

• Section 20, Republic Act No. 4726 (Condominium Act) — Provides that unpaid assessments plus interest, costs, and penalties constitute a lien on the condominium when a notice of assessment is registered with the Register of Deeds, and that such liens may be enforced in the same manner provided by law for judicial or extrajudicial foreclosure of mortgages of real property. The Court held that this provision does not ipso facto grant the condominium corporation the authority to extrajudicially foreclose; it merely prescribes the procedure for constituting the lien and offers the option of foreclosure, subject to the requirements of the governing law.
• Section 1, Act No. 3135, as amended by Act No. 4118 — Requires that a special power or authority to sell be either inserted in or attached to the deed of real estate mortgage for extrajudicial foreclosure. Applied to require LPL to evidence a special power of attorney to sell before initiating extrajudicial foreclosure proceedings.
• Article 1878, Civil Code — Enumerates acts requiring special powers of attorney, including paragraph (5) entering into contracts transmitting ownership of immovables, paragraph (12) creating or conveying real rights over immovable property, and paragraph (15) any other act of strict dominion. Applied to support the requirement that the sale of a condominium unit through extrajudicial foreclosure necessitates a special power of attorney.
• Section 3, Rule 3, Rules of Court — Provides that where an action is prosecuted by a representative in a fiduciary capacity, the beneficiary shall be deemed the real party-in-interest. Applied to hold that the attorney-in-fact's death does not extinguish the attorney-client relationship between the principal and counsel of record.
• A.M. No. 99-10-05-0 and Circular No. 7-2002 — Implementing rules requiring that applications for extrajudicial foreclosure be supported by evidence of a special power or authority to foreclose, examined by the Clerk of Court as Ex-Officio Sheriff. Applied to confirm the mandatory documentary requirement for extrajudicial foreclosure proceedings.

Caguioa (Chairperson), Gaerlan, Dimaampao, and Singh, JJ., concur.