Padcom Condominium Corporation vs. Ortigas Center Association, Inc.

A property owner is bound by an automatic membership clause annotated on the certificate of title, and this obligation is transmitted to successors-in-interest, because such annotation constitutes a lien in rem that is inseparable from the property regardless of ownership changes.

Tierra Development Corporation (TDC) acquired a lot from Ortigas & Company, Limited Partnership (OCLP) in 1974 under a Deed of Sale containing a covenant requiring the owner and successors to become members of an association to be formed. This covenant was annotated on the Transfer Certificate of Title (TCT). TDC subsequently transferred the property to PADCOM in 1975, subject to the annotated encumbrances. The Ortigas Center Association, Inc. was organized in 1982 and demanded membership dues from PADCOM, which accumulated to ₱639,961.47. Despite initially acknowledging the demands and proposing a settlement scheme, PADCOM eventually refused payment, disclaiming membership.

• The Deed of Sale and Annotation: OCLP sold a lot to TDC in 1974. Paragraph (G) of the covenants, conditions, and restrictions in the Deed of Sale required the owner and its successors-in-interest to become members of an association to be formed, and to abide by its rules and pay assessments which shall constitute a lien on the property. This stipulation was annotated at the back of TCT No. 457308 issued to TDC.
• Transfer to PADCOM: TDC transferred the lot to PADCOM via a Deed of Transfer dated 25 February 1975. The deed expressly stated that the property was conveyed free from all liens and encumbrances, except those already annotated on the TCT.
• Association Formation and Demands: The Ortigas Center Association, Inc. was organized in 1982. It sought collection of monthly membership dues of ₱2,724.40 from PADCOM. Corporate books showed PADCOM owed ₱639,961.47 representing dues, interests, and penalties from April 1983 to June 1993.
• PADCOM's Conduct: Letters between the parties showed repeated demands for payment from the Association. PADCOM acknowledged the demands, requested and was granted repeated extensions, and even proposed a settlement scheme in September 1990. However, PADCOM eventually refused to pay, disclaiming membership.
• Trial Proceedings: The Association presented its accountant as a lone witness. PADCOM did not present evidence and instead filed a motion to dismiss by way of demurrer to evidence, claiming the Association failed to prove its right to relief.

• Freedom of Association: Compelled membership violates the constitutional right to freedom of association.
• By-laws Requirement: The Association's By-laws require an application for membership and acceptance by the Board of Directors; automatic membership is not contemplated.
• Anticipatory Clause: The automatic membership clause was merely anticipatory in 1975 because the Association did not yet exist at the time of the purchase.
• Lack of Board Resolution: The Association has no basis to collect monthly dues absent a board resolution defining and prescribing the amount to be paid.

• Binding Automatic Membership: The Deed of Sale between OCLP and TDC clearly stipulates automatic membership for lot owners and their successors-in-interest; the filing of applications and board acceptance are mere formalities that can be dispensed with.
• Supremacy of Title Annotation: The By-laws cannot alter or modify the automatic membership clause imposed on a property owner by virtue of an annotation of encumbrance on the title.
• Obligation to Pay Dues: Membership necessitates the payment of assessments for the common expenses of the homeowners, as authorized by the Board of Directors.

• Compelled Membership: Whether PADCOM can be compelled to join the Association pursuant to the automatic membership clause in the Deed of Sale and the annotation on the TCT.
• Validity of Dues Assessment: Whether the Association can collect monthly dues absent a formal board resolution defining the fees.

• Compelled Membership: The automatic membership clause was deemed binding on PADCOM as a successor-in-interest. Under the Torrens system, a lien annotated on a certificate of title binds the holder and the whole world as a right in rem inseparable from the property, subsisting notwithstanding a change in ownership. Under Article 1311 of the Civil Code, contracts bind assigns and heirs, transmitting the stipulation on automatic membership to PADCOM. The By-laws' requirement of board acceptance was characterized as a ministerial function for lot owners. Freedom of association was not violated because PADCOM voluntarily purchased the property with notice of the annotated condition; it could have avoided the membership by not buying the land. Furthermore, estoppel was applied against PADCOM due to its conduct of acknowledging demands, requesting extensions, and proposing a settlement.
• Validity of Dues Assessment: The collection of dues was validated even absent a formal board resolution defining the exact amount. Even assuming non-membership, payment cannot be evaded without violating quasi-contract principles under Article 2142 of the Civil Code, PADCOM having benefited from the Association's activities promoting area welfare. Moreover, PADCOM was barred from belatedly questioning the assessment authority after proposing a payment scheme without prior protest, the assessment being supported by a 1982 resolution of the incorporating directors and the By-laws.

• In Rem Character of Annotated Liens — A lien annotated on a certificate of title is inseparable from the property, constituting a right in rem that subsists notwithstanding changes in ownership. The personality of the owner is disregarded, and the burden binds the whole world.
• Relativity of Contracts — Contracts take effect between the parties, their assigns, and heirs. Successors-in-interest are bound by stipulations in the original deed of sale.
• Estoppel — A person who by act or conduct induces another to act in a particular manner is barred from adopting an inconsistent position, attitude, or course of conduct that causes loss or injury to another. Applied against PADCOM for acknowledging demands and proposing settlement while later denying membership.
• Quasi-Contracts / Unjust Enrichment — Certain lawful, voluntary, and unilateral acts give rise to the juridical relation of quasi-contract to prevent unjust enrichment at another's expense. Applied to require PADCOM to pay for benefits received from the Association's activities, even absent formal membership.

• "Such lien is inseparable from the property as it is a right in rem, a burden on the property whoever its owner may be. It subsists notwithstanding a change in ownership; in short, the personality of the owner is disregarded."
• "PADCOM was never forced to join the association. It could have avoided such membership by not buying the land from TDC. Nobody forced it to buy the land when it bought the building with the annotation of the condition or lien on the Certificate of Title thereof and accepted the Deed. PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join the Association."

• Ligon v. Court of Appeals, 244 SCRA 693 (1995) — Followed. Cited to support the rule that liens annotated on previous certificates of title are carried over to new titles and constitute a right in rem inseparable from the property.
• Cruz v. Court of Appeals, 293 SCRA 239 (1998) — Followed. Cited for the definition and elements of estoppel.

• Section 44, Presidential Decree No. 1529 (Property Registration Decree) — Mandates that a registered owner holds the title free from all encumbrances except those noted on the certificate. Applied to bind PADCOM to the automatic membership clause annotated on the TCT.
• Article 1311, Civil Code — Provides that contracts take effect between the parties, their assigns, and heirs. Applied to bind PADCOM, as successor-in-interest, to the stipulations of the Deed of Sale between OCLP and TDC.
• Article 1159, Civil Code — Obligations arising from contracts have the force of law and must be complied with in good faith. Applied to enforce PADCOM's obligation to pay membership dues incidental to its membership.
• Article 2142, Civil Code — Certain lawful, voluntary, and unilateral acts give rise to quasi-contracts to prevent unjust enrichment. Applied alternatively to require PADCOM to pay for benefits received from the Association.

Puno, Kapunan, Ynares-Santiago, and Austria-Martinez, JJ.