Sunset View Condominium Corporation vs. Campos, Jr.

A purchaser of a condominium unit who has not fully paid the purchase price is not a "holder of a separate interest" under Section 2 of the Condominium Act and is therefore not automatically a shareholder of the condominium corporation. Ownership of a unit is a condition sine qua non to being a shareholder in the condominium corporation, and since title is conveyed only upon full payment of the purchase price, an unpaid purchaser is not a stockholder, and disputes involving such purchaser are not intra-corporate controversies within the exclusive jurisdiction of the Securities & Exchange Commission.

Sunset View Condominium Corporation is a condominium corporation within the meaning of Republic Act No. 4726, the Condominium Act, in relation to a duly registered Amended Master Deed with Declaration of Restrictions of the Sunset View Condominium Project located at 2230 Roxas Boulevard, Pasay City. The petitioner is the Management Body holding title to all the common and limited common areas of the project. The two cases were consolidated by resolution of the Supreme Court dated March 17, 1980, because they involve similar facts and raise identical questions of law concerning the status of purchasers of condominium units who have not fully paid the purchase price and the proper forum for collection disputes.

Sunset View Condominium Corporation is a condominium corporation within the meaning of Republic Act No. 4726, holding title to all the common and limited common areas of the Sunset View Condominium Project at 2230 Roxas Boulevard, Pasay City, pursuant to a duly registered Amended Master Deed with Declaration of Restrictions. In G.R. No. L-52361, the private respondent Aguilar-Bernares Realty, a sole proprietorship owned and operated by spouses Emmanuel G. Aguilar and Zenaida B. Aguilar, is the assignee of a unit called "Solana" in the project, with La Perla Commercial, Incorporated as assignor, which had bought the unit on installment from Tower Builders, Inc. In G.R. No. L-52524, the private respondent Lim Siu Leng was assigned on July 11, 1977 a unit called "Alegria" by Alfonso Uy, who had entered into a "Contract to Buy and Sell" with Tower Builders, Inc. over the said unit on installment basis.

In G.R. No. L-52361, the petitioner filed a complaint dated June 22, 1979 for the collection of assessments levied on the "Solana" unit, docketed as Civil Case No. 7303-P of the Court of First Instance of Pasay City, Branch XXX. The private respondent filed a Motion to Dismiss on the grounds that the complaint does not state a cause of action, that the court has no jurisdiction over the subject matter, and that there is another action pending between the same parties for the same cause. The motion was granted on December 11, 1979 by the respondent Judge, who opined that the private respondent is, pursuant to Section 2 of Republic Act No. 4726, a "holder of a separate interest" and consequently a shareholder of the plaintiff condominium corporation, and that the case should properly be filed with the Securities & Exchange Commission which has exclusive original jurisdiction on controversies arising between shareholders of the corporation.

In G.R. No. L-52524, the petitioner filed its amended complaint dated July 16, 1979 docketed as Civil Case No. 14127 of Branch I of the City Court of Pasay City for the collection of overdue accounts on assessments and insurance premiums and the interest thereon amounting to P6,168.06 as of March 31, 1979 against Lim Siu Leng. The private respondent filed a motion to dismiss on the ground of lack of jurisdiction, alleging that the amount sought to be collected is an assessment, that she has automatically become, as a purchaser of the condominium unit, a stockholder of the petitioner pursuant to Section 2 of the Condominium Act, and that the dispute is intra-corporate and consequently under the exclusive jurisdiction of the Securities & Exchange Commission as provided in Section 5 of P.D. No. 902-A. The petitioner opposed, alleging that the private respondent who had not fully paid for the unit was not the owner thereof and consequently was not the holder of a separate interest which would make her a stockholder. The trial court denied the motion to dismiss on August 13, 1979, and denied reconsideration on September 19, 1979.

The private respondent in G.R. No. L-52524 then appealed to the Court of First Instance, where the appeal was docketed as Civil Case No. 7530-P. The petitioner filed a "Motion to Dismiss Appeal" on the ground that the order appealed from is interlocutory, but the motion was denied and the parties were ordered to submit memoranda. After the parties submitted their memoranda, the respondent Judge issued an order dated December 14, 1979 directing that the appeal be dismissed, the judgment of the lower court reversed, and the case dismissed, with the parties directed to ventilate their controversy with the Securities & Exchange Commission. The petitioner's motion for reconsideration was denied on January 14, 1980. It is admitted that the private respondents in both cases have not yet fully paid the purchase price of their units.

• Status of Purchaser: Petitioner argued that a purchaser of a condominium unit who has not fully paid the purchase price is not the owner thereof, consequently is not the holder of a separate interest which would make her a stockholder, and hence the case was not an intra-corporate dispute.
• Jurisdiction of Regular Courts: Petitioner maintained that the collection cases are within the jurisdiction of the regular courts — the Court of First Instance for the claim exceeding P10,000.00 in G.R. No. L-52361, and the City Court for the claim of P6,168.06 in G.R. No. L-52524.
• Grave Abuse of Discretion: Petitioner alleged grave abuse of discretion on the part of the respondent Judge in dismissing the complaints and directing the parties to the Securities & Exchange Commission.

• Automatic Shareholding: Private respondents argued that every purchaser of a condominium unit, regardless of whether or not he has fully paid the purchase price, is a "holder of a separate interest" mentioned in Section 2 of Republic Act No. 4726 and is automatically a shareholder of the condominium corporation.
• Exclusive SEC Jurisdiction: Private respondents contended that the disputes are intra-corporate controversies arising between stockholders and the corporation, and are consequently under the exclusive original jurisdiction of the Securities & Exchange Commission pursuant to Section 5 of P.D. No. 902-A.

• Status of Unpaid Purchaser: Whether a purchaser of a condominium unit in the condominium project managed by the petitioner, who has not yet fully paid the purchase price thereof, is automatically a stockholder of the petitioner Condominium Corporation.
• Jurisdiction Over Collection Cases: Whether it is the regular court or the Securities & Exchange Commission that has jurisdiction over cases for collection of assessments assessed by the Condominium Corporation on condominium units the full purchase price of which has not been paid.

• Status of Unpaid Purchaser: No. A purchaser of a condominium unit who has not fully paid the purchase price is not a shareholder of the condominium corporation. Section 5 of the Condominium Act provides that shareholding in the condominium corporation will be conveyed only in a proper case, and Section 10 provides that ownership of a unit is a condition sine qua non to being a shareholder.
• Jurisdiction Over Collection Cases: The regular courts have jurisdiction. Since the private respondents are not shareholders of the petitioner condominium corporation, the collection cases cannot be "controversies arising out of intra-corporate or partnership relations" under the exclusive original jurisdiction of the Securities & Exchange Commission pursuant to Section 5(b) of P.D. No. 902-A. The subject matters of the cases, according to the allegations of the complaints, are under the jurisdiction of the regular courts.

• Status of Unpaid Purchaser: Section 5 of the Condominium Act expressly provides that the shareholding in the Condominium Corporation will be conveyed only in a proper case, stating that any transfer or conveyance of a unit shall include the transfer or conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholding in the condominium corporation. The Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred to the purchaser of a unit, as provided in Section 4 which requires the master deed to contain a statement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units and in the common areas. The Amended Master Deeds in these cases provide in Section 6(d) that each unit owner shall, as an essential condition to such ownership, acquire stockholding in the Condominium Corporation, and in Section 7(b) that all unit owners shall of necessity become stockholders, with the shares allocated being mere appurtenances of each unit that cannot be transferred separately from the unit. Subparagraph (a) of Part 1, Section 6, of the Master Deeds determines that the purchaser of a unit shall acquire title or ownership of such Unit subject to the terms and conditions of the instrument conveying the unit. The "Contract to Buy and Sell" in both cases provides that upon full payment by the BUYER of the total purchase price and full compliance of all obligations, the SELLER will convey unto the BUYER full and absolute title in and to the subject unit, to the shares of stock pertaining thereto and to all rights and interests in connection therewith. Thus, the share of stock appurtenant to the unit will be transferred to the purchaser only upon full payment of the purchase price, at which time he will also become the owner of the unit. Section 10 of the Condominium Act provides that membership in a condominium corporation shall not be transferable separately from the condominium unit of which it is an appurtenance, and when a stockholder ceases to own a unit, he shall automatically cease to be a stockholder. Pursuant to this statutory provision, ownership of a unit is a condition sine qua non to being a shareholder in the condominium corporation. By necessary implication, the "separate interest" in a condominium, which entitles the holder to become automatically a shareholder in the condominium corporation as provided in Section 2 of the Condominium Act, can be no other than ownership of a unit, because nobody can be a shareholder unless he is the owner of a unit and when he ceases to be the owner, he also ceases automatically to be a shareholder.

• Jurisdiction Over Collection Cases: Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant cases for collection cannot be "controversies arising out of intra-corporate or partnership relations between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively," which controversies are under the original and exclusive jurisdiction of the Securities & Exchange Commission pursuant to Section 5(b) of P.D. No. 902-A. The subject matters of the instant cases according to the allegations of the complaints are under the jurisdiction of the regular courts: that of G.R. No. L-52361, which is for the collection of P8,335.38 with interest plus attorney's fees equivalent to the principal or a total of more than P10,000.00, is under the jurisdiction of the Court of First Instance; and that of G.R. No. L-52524, which is for the collection of P6,168.06, is within the jurisdiction of the City Court. In view of the foregoing, it is no longer necessary to resolve the issue raised in G.R. No. L-52524 of whether an order of the City Court denying a motion to dismiss on the ground of lack of jurisdiction can be appealed to the Court of First Instance.

• Ownership as Condition Sine Qua Non to Shareholding in a Condominium Corporation — Under Section 10 of the Condominium Act, membership in a condominium corporation shall not be transferable separately from the condominium unit of which it is an appurtenance, and when a stockholder ceases to own a unit, he automatically ceases to be a stockholder. The Court applied this doctrine to hold that a purchaser of a condominium unit who has not fully paid the purchase price is not the owner of the unit and consequently is not a shareholder of the condominium corporation, since title is conveyed only upon full payment.

• "Separate Interest" Under Section 2 of the Condominium Act — The "separate interest" in a condominium, which entitles the holder to become automatically a shareholder in the condominium corporation, can be no other than ownership of a unit. The Court reasoned that nobody can be a shareholder unless he is the owner of a unit, and when he ceases to be the owner, he also ceases automatically to be a shareholder.

• Master Deed as Determinant of Shareholding Transfer — The Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred to the purchaser of a unit, pursuant to Section 4 which requires the master deed to contain a statement of the exact nature of the interest acquired or to be acquired by the purchaser. The Court applied the provisions of the Amended Master Deeds and the Contracts to Buy and Sell, which both provided that shareholding is transferred only upon full payment of the purchase price.

• "It is clear then that not every purchaser of a condominium unit is a shareholder of the condominium corporation. The Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred to the purchaser of a unit." — This passage articulates the Court's interpretation of the Condominium Act, establishing that shareholding is not automatic upon purchase but is determined by the Master Deed.

• "Pursuant to the above statutory provision, ownership of a unit is a condition sine qua non to being a shareholder in the condominium corporation. It follows that a purchaser of a unit who is not yet the owner thereof for not having fully paid the full purchase price, is not a shareholder." — This excerpt states the ratio decidendi of the case, defining the controlling doctrine that ownership is a prerequisite to shareholding in a condominium corporation.

• "By necessary implication, the 'separate interest' in a condominium, which entitles the holder to become automatically a share holder in the condominium corporation, as provided in Section 2 of the Condominium Act, can be no other than ownership of a unit." — This passage defines the canonical interpretation of "separate interest" under Section 2 of the Condominium Act, equating it with ownership of a unit.

N/A — The decision does not cite any prior case law.

• Section 2, Republic Act No. 4726 (The Condominium Act) — The Court interpreted the provision on "holder of a separate interest" to mean only the owner of a unit, not a purchaser who has not fully paid the purchase price.
• Section 4, Republic Act No. 4726 (The Condominium Act) — The Court applied this provision requiring the master deed to contain a statement of the exact nature of the interest acquired by the purchaser, and held that the Condominium Act leaves to the Master Deed the determination of when shareholding will be transferred.
• Section 5, Republic Act No. 4726 (The Condominium Act) — The Court applied this provision providing that shareholding in the condominium corporation will be conveyed only in a proper case, upon transfer or conveyance of a unit.
• Section 10, Republic Act No. 4726 (The Condominium Act) — The Court applied this provision providing that membership in a condominium corporation shall not be transferable separately from the condominium unit, and that when a stockholder ceases to own a unit, he automatically ceases to be a stockholder, establishing ownership as a condition sine qua non to shareholding.
• Section 5(b), P.D. No. 902-A — The Court applied this provision defining the exclusive original jurisdiction of the Securities & Exchange Commission over controversies arising out of intra-corporate or partnership relations, and held that since the private respondents were not shareholders, the collection cases were not within SEC jurisdiction.

Teehankee (Chairman), Makasiar, Guerrero, and Melencio-Herrera, JJ., concurred.

N/A — No dissenting opinions are noted in the case text.