Maria Luisa Park Association, Inc. vs. Samantha Marie T. Almendras and Pia Angela T. Almendras

The HLURB (formerly HIGC) has exclusive and original jurisdiction over controversies arising out of intra-corporate relations between a homeowners' association and its members, including disputes over compliance with a deed restriction; the regular courts cannot take cognizance of such a controversy merely because the complaint is denominated as one for declaratory relief or annulment. A member's dispute with the association must first be brought to arbitration under the by-laws; mere exchange of correspondence does not satisfy the arbitration requirement.

Maria Luisa Park Association, Inc. (MLPAI) is a homeowners' association in Maria Luisa Estate Park, Banilad, Cebu City, and respondents Samantha Marie T. Almendras and Pia Angela T. Almendras became members upon purchasing a residential lot in the subdivision from MRO Development Corporation. The regulatory backdrop is that administrative supervision over homeowners' associations was originally vested in the Securities and Exchange Commission; Executive Order No. 535 transferred the SEC's regulatory and adjudicative functions over homeowners' associations to the Home Insurance and Guaranty Corporation (HIGC), and Republic Act No. 8763 later transferred those powers to the Housing and Land Use Regulatory Board (HLURB). Presidential Decree No. 902-A, Section 5, and the HIGC Revised Rules define intra-corporate disputes, while Presidential Decree No. 957, Section 3, vests the National Housing Authority with exclusive jurisdiction to regulate the real estate trade and business. MLPAI's Deed of Restriction and by-laws, including an arbitration clause, governed the parties' relationship.

On February 6, 2002, respondents Samantha Marie T. Almendras and Pia Angela T. Almendras purchased from MRO Development Corporation a residential lot located in Maria Luisa Estate Park, Banilad, Cebu City. They later filed with petitioner Maria Luisa Park Association, Incorporated (MLPAI) an application to construct a residential house, which MLPAI approved on February 10, 2002. Respondents then commenced construction.

Upon ocular inspection of the house, MLPAI found that respondents had violated the prohibition against multi-dwelling stated in MLPAI's Deed of Restriction. On April 28, 2003, MLPAI sent respondents a letter demanding that they rectify the structure; otherwise, MLPAI would forfeit their construction bond and impose stiffer penalties. In a letter dated April 29, 2003, respondents, represented by their father Ruben D. Almendras, denied having violated MLPAI's Deed of Restriction.

On May 5, 2003, MLPAI replied and pointed out respondents' specific violations: (a) installation of a second water meter and tapping the subdivision's main water pipeline, and (b) construction of "two separate entrances that are mutually exclusive of each other." MLPAI reiterated its warning that failure to comply would result in more stringent measures.

In view of these events, respondents filed with the Regional Trial Court of Cebu City, Branch 7, a Complaint on June 2, 2003 for Injunction, Declaratory Relief, Annulment of Provisions of Articles and By-Laws with Prayer for Issuance of a Temporary Restraining Order/Preliminary Injunction. MLPAI moved to dismiss on the grounds of lack of jurisdiction and failure to comply with the arbitration clause in MLPAI's by-laws. The controversy centered on whether the house violated the Deed of Restriction's prohibition against multi-dwelling and whether respondents' challenge to the by-laws was properly cognizable by the regular courts; respondents admitted membership in MLPAI.

• Jurisdiction: Petitioner MLPAI contended that the HLURB has exclusive jurisdiction over the present controversy, it being a dispute between a subdivision lot owner and a subdivision association, where the latter aimed to compel respondents to comply with MLPAI's Deed of Restriction, specifically the provision prohibiting multi-dwelling.
• Void Proceedings: Petitioner raised whether there is no other relief and remedy available to it to avert the conduct of a void proceeding than the present recourse.

• Nature of Action: Respondents countered that the case they filed against MLPAI is one for declaratory relief and annulment of the provisions of the by-laws; hence, it is outside the competence of the HLURB to resolve.
• Discriminatory Rules: Respondents stated that MLPAI's rules and regulations are discriminatory and violative of their basic rights as members of the association.
• Illegality and Public Policy: Respondents argued that MLPAI's acts are illegal, immoral, and against public policy, and that they did not commit any violation of MLPAI's Deed of Restriction.

• Jurisdiction: Whether the Court of Appeals erred in ruling that the trial court and not the HLURB has jurisdiction over the case.
• Adequate Remedy: Whether petitioner has no other relief and remedy available to avert the conduct of a void proceeding than the present recourse.
• Arbitration: Whether the parties' dispute should first be submitted to arbitration under the MLPAI by-laws before filing the appropriate action.

• Jurisdiction: Yes. The Court of Appeals erred; the HLURB (formerly HIGC) has exclusive and original jurisdiction over controversies arising out of intra-corporate relations between a homeowners' association and its members, and the regular courts cannot take cognizance of the dispute merely because the complaint is labeled as one for declaratory relief or annulment.
• Adequate Remedy: Yes. The petition for review on certiorari was granted, and the RTC order dismissing the complaint was reinstated, because the Court of Appeals had ordered the RTC to take jurisdiction over a matter falling within the HLURB's exclusive jurisdiction.
• Arbitration: Yes. The by-laws required the parties to submit their dispute to arbitration before filing the appropriate action; mere exchange of correspondence did not satisfy the arbitration clause.

• Jurisdiction: The controversy falls squarely within the exclusive and original jurisdiction of the HIGC, now HLURB. Administrative supervision over homeowners' associations was originally vested in the SEC; Executive Order No. 535 transferred to the HIGC the SEC's regulatory and adjudicative functions over homeowners' associations, including the SEC's original and exclusive jurisdiction under Section 5 of Presidential Decree No. 902-A over controversies arising out of intra-corporate or partnership relations between members, between members and the association, and between the association and the State insofar as its franchise or right to exist is concerned. The HIGC Revised Rules, Rule II, Section 1(b), likewise grant jurisdiction over controversies arising out of intra-corporate relations between members, between members and the association, and between the association and the State/general public or other entity insofar as its right to exist as a corporate entity is concerned. Republic Act No. 8763 later transferred these powers and responsibilities to the HLURB. Respondents are members of MLPAI, as they admitted, so the case involves a controversy between the homeowners' association and some of its members. Thus, exclusive and original jurisdiction lies with the HLURB. Section 3 of Presidential Decree No. 957 vests the National Housing Authority with exclusive jurisdiction to regulate the real estate trade and business, and the provisions were intended to encompass all questions regarding subdivisions and condominiums, with the HLURB having the technical know-how. Although the complaint was denominated as one for declaratory relief or annulment of contracts, the allegations reveal otherwise: respondents neither asked for the interpretation of the questioned by-laws nor alleged that the same is doubtful or ambiguous and requires judicial construction; what they really seek is to have a particular provision of the by-laws nullified and thereafter absolve them from violations. Under Kawasaki Port Service Corporation vs. Amores, where a declaratory judgment as to a disputed fact would be determinative of issues rather than a construction of definite stated rights, status, and other relations commonly expressed in a written instrument, the case is not one for declaratory judgment. Jurisdiction cannot be made to depend on the exclusive characterization of the case by one of the parties. While respondents question the validity or legality of the articles of incorporation and by-laws, they did not raise any legal ground to support nullification; the legality of the by-laws in its entirety was never an issue, but merely the provision prohibiting multi-dwelling, which respondents assert they did not violate. There is no justiciable controversy warranting declaratory relief or annulment of contracts. In jurisdictional issues, what determines the nature of an action are the allegations in the complaint and the nature of the relief sought, as stated in Capiral vs. Valenzuela. Under the doctrine of primary administrative jurisdiction, courts cannot or will not determine a controversy where the issues for resolution demand the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters of fact, as held in Pambujan Sur United Mine Workers vs. Samar Mining Co., Inc. The HLURB has the expertise to resolve the basic technical issue of whether the house built by respondents violated the Deed of Restriction, specifically the prohibition against multi-dwelling. As observed in C.T. Torres Enterprises, Inc. vs. Hibionada, administrative bodies now perform quasi-judicial functions by valid legislative authorization, and the Court has affirmed the competence of the HLURB to award damages.
• Adequate Remedy: The Court of Appeals Decision dated August 31, 2005 and Resolution dated February 13, 2006 were set aside, and the RTC Order dated July 31, 2003 was reinstated because the RTC correctly dismissed the complaint for lack of jurisdiction. Since the controversy falls within the HLURB's exclusive and original jurisdiction, the RTC had no jurisdiction to proceed, and the Court of Appeals erred in ordering the RTC to take cognizance of Civil Case No. CEB-29002. The petition for review on certiorari was the available recourse to correct the Court of Appeals' ruling.
• Arbitration: Article XII of the MLPAI by-laws provides that any member with a grievance, dispute, or claim against the Association or any of its officers and governors in connection with their function and/or position shall first endeavor to settle the same amicably; if amicable settlement fails, the dispute shall be brought to an arbitration panel composed of three arbitrators for final settlement, to the exclusion of all other fora. The arbitration award shall be valid and binding unless repudiated within five days from receipt on grounds that it was procured through fraud or violence, or that there are patent or gross errors in facts made the basis of the decision. The terms of Article XII clearly express the intention of the parties to bring first to arbitration all disputes between them before a party can file the appropriate action. The agreement to submit all disputes to arbitration is a contract; it binds the parties, as well as their assigns and heirs, as held in Heirs of Augusto L. Salas, Jr. vs. Laperal Realty Corporation. Respondents, being members of MLPAI, are bound by its by-laws and are expected to abide by them in good faith, as cited in Fiesta World Mall Corporation vs. Linberg Philippines, Inc. While both parties exchanged correspondence pertaining to the alleged violation of the Deed of Restriction, they made no earnest effort to resolve their differences in accordance with the arbitration clause. Mere exchange of correspondence will not suffice, much less satisfy the requirement of arbitration. Arbitration being the mode of settlement expressly provided for in the by-laws, it should be respected. Unless an arbitration agreement absolutely closes the doors of the courts against the parties, the courts should look with favor upon such amicable arrangements, as stated in Manila Electric Co. vs. Pasay Transportation Co. Arbitration is one of the alternative methods of dispute resolution now recognized worldwide, as noted in Sea-Land Service, Inc. vs. Court of Appeals; to brush aside a contractual agreement calling for arbitration would be a step backward.

• Intra-corporate jurisdiction of the HLURB (formerly HIGC) over homeowners' associations — The HIGC assumed the SEC's original and exclusive jurisdiction over controversies arising out of intra-corporate or partnership relations, including controversies between members and the association of which they are members, and between the association and the State insofar as its franchise or right to exist is concerned. These powers were later transferred to the HLURB under Republic Act No. 8763. In this case, because respondents were members of MLPAI, their dispute with MLPAI over the Deed of Restriction's prohibition against multi-dwelling was an intra-corporate controversy falling within the HLURB's exclusive and original jurisdiction.
• Doctrine of primary administrative jurisdiction — Courts cannot or will not determine a controversy where the issues for resolution demand the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters of fact. The Court applied this doctrine by holding that the HLURB has the expertise to resolve the technical issue of whether the house built by respondents violated the Deed of Restriction, specifically the prohibition against multi-dwelling.
• Nature of action determined by allegations and relief sought — In jurisdictional issues, the nature of an action for the purpose of ascertaining whether a court has jurisdiction is determined by the allegations in the complaint and the nature of the relief sought, not by the exclusive characterization of the case by one of the parties. The Court applied this by treating the complaint, though denominated as one for declaratory relief and annulment, as in substance a dispute over enforcement of the Deed of Restriction falling under the HLURB.
• Declaratory relief not proper where disputed fact is determinative — Where a declaratory judgment as to a disputed fact would be determinative of issues rather than a construction of definite stated rights, status, and other relations commonly expressed in a written instrument, the case is not one for declaratory judgment. The Court found that respondents did not seek interpretation of the by-laws but sought nullification of a provision and absolution from violations, so there was no justiciable controversy for declaratory relief or annulment.
• Arbitration clause as a binding contract — An agreement to submit all disputes to arbitration is a contract that binds the parties, as well as their assigns and heirs. Members of an association are bound by its by-laws and expected to abide by them in good faith. The Court applied this by holding that the parties failed to make earnest efforts to resolve their differences through arbitration; mere exchange of correspondence did not satisfy the arbitration requirement.

• "We agree with the trial court that the instant controversy falls squarely within the exclusive and original jurisdiction of the Home Insurance and Guaranty Corporation (HIGC), now HLURB." — This states the core jurisdictional holding of the decision.
• "Therefore, as correctly ruled by the trial court, the case involves a controversy between the homeowners’ association and some of its members. Thus, the exclusive and original jurisdiction lies with the HLURB." — This applies the intra-corporate jurisdiction doctrine to the facts, because respondents admitted membership in MLPAI.
• "Contrary to the observation of the Court of Appeals, jurisdiction cannot be made to depend on the exclusive characterization of the case by one of the parties." — This rejects the Court of Appeals' reliance on respondents' labeling of the complaint as one for declaratory relief and annulment.
• "The terms of Article XII of the MLPAI by-laws clearly express the intention of the parties to bring first to the arbitration process all disputes between them before a party can file the appropriate action." — This articulates the arbitration ruling and the requirement that the parties first submit their dispute to arbitration under the by-laws.

• Sta. Clara Homeowners’ Association vs. Gaston, G.R. No. 141961, January 23, 2002, 374 SCRA 396 — Cited for the rule that the HIGC exercises limited jurisdiction over homeowners' disputes, confined to controversies arising from intra-corporate relations between members, between members and the association, and between the association and the State insofar as its right to exist as a corporate entity is concerned.
• Metro Properties, Inc. vs. Magallanes Village Association, Inc., G.R. No. 146987, October 19, 2005, 473 SCRA 312 — Cited as recognizing the HIGC's "Revised Rules of Procedure in the Hearing of Home Owner's Disputes," particularly the types of disputes triable by the HIGC.
• Kawasaki Port Service Corporation vs. Amores, G.R. No. 58340, July 16, 1991, 199 SCRA 230 — Cited for the rule that where a declaratory judgment as to a disputed fact would be determinative of issues rather than a construction of definite stated rights, status, and other relations commonly expressed in a written instrument, the case is not one for declaratory judgment.
• C.T. Torres Enterprises, Inc. vs. Hibionada, G.R. No. 80916, November 9, 1990, 191 SCRA 268 — Cited to support the exercise of quasi-judicial functions by administrative bodies pursuant to valid legislative authorization, and the competence of the HLURB to award damages.
• Capiral vs. Valenzuela, G.R. No. 152886, November 15, 2002, 391 SCRA 759 — Cited for the rule that in jurisdictional issues, what determines the nature of an action for the purpose of ascertaining whether a court has jurisdiction are the allegations in the complaint and the nature of the relief sought.
• Pambujan Sur United Mine Workers vs. Samar Mining Co., Inc., 94 Phil. 932 (1954) — Cited for the doctrine of primary administrative jurisdiction, under which courts cannot or will not determine a controversy where the issues demand the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal.
• Heirs of Augusto L. Salas, Jr. vs. Laperal Realty Corporation, G.R. No. 135362, December 13, 1999, 320 SCRA 610 — Cited for the rule that an agreement to submit all disputes to arbitration is a contract that binds the parties thereto, as well as their assigns and heirs.
• Fiesta World Mall Corporation vs. Linberg Philippines, Inc., G.R. No. 152471, August 18, 2006, 499 SCRA 332 — Cited for the rule that members of an association are bound by its by-laws and are expected to abide by them in good faith.
• Manila Electric Co. vs. Pasay Transportation Co., 57 Phil. 600 (1932) — Cited for the principle that unless an arbitration agreement absolutely closes the doors of the courts against the parties, the courts should look with favor upon such amicable arrangements.
• Sea-Land Service, Inc. vs. Court of Appeals, G.R. No. 126212, March 2, 2000, 327 SCRA 135 — Cited for the recognition of arbitration as one of the alternative methods of dispute resolution now recognized worldwide.

• Executive Order No. 535, Section 2 — Transferred to the HIGC the SEC's powers, authorities, and responsibilities with respect to homeowners' associations, and empowered it to regulate and supervise the activities and operations of all houseowners associations registered in accordance therewith. The Court used this to establish that the HIGC, and later the HLURB, had regulatory and adjudicative authority over homeowners' associations.
• Presidential Decree No. 902-A, Section 5 — Vested in the SEC original and exclusive jurisdiction to hear and decide cases involving controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any and/or all of them and the corporation, partnership, or association; and between such corporation, partnership, or association and the State insofar as it concerns their individual franchise or right to exist. The Court applied this to hold that the dispute between MLPAI and its members was intra-corporate in nature.
• HIGC Revised Rules of Procedure in the Hearing of Home Owner’s Disputes, Rule II, Section 1(b) — Provides that the HIGC or any person, officer, body, board, or committee duly designated or created by it shall have jurisdiction to hear and decide cases involving controversies arising out of intra-corporate relations between and among members of the association, between any or all of them and the association of which they are members, and between such association and the State/general public or other entity insofar as it concerns its right to exist as a corporate entity. The Court cited this to confirm the HLURB's jurisdiction over the dispute.
• Republic Act No. 8763 — Transferred the above-mentioned powers and responsibilities vested in the HIGC with respect to homeowners' associations to the HLURB. The Court relied on this to identify the HLURB as the agency with exclusive and original jurisdiction.
• Presidential Decree No. 957, Section 3 — Provides that the National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of the Decree. The Court cited this to support the conclusion that all questions regarding subdivisions and condominiums, including the enforcement of contractual rights, fall within the HLURB's jurisdiction.
• Article XII, MLPAI By-Laws (Mode of Dispute Resolution) — Requires any member with a grievance, dispute, or claim against the Association or its officers and governors to first endeavor to settle the matter amicably; if amicable settlement fails, the dispute shall be brought to an arbitration panel of three arbitrators for final settlement, to the exclusion of all other fora. The Court applied this to hold that the parties failed to comply with the arbitration clause before filing the appropriate action.

Consuelo Ynares-Santiago, Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, and Arturo D. Brion.