161 - Arranza V Bf Homes.docx

Jesus Lim Arranza et al. v B.F. Homes, Inc. et al. June 19, 2000|Davide, Jr., C.J.| Administrative Procedure; Jurisdiction Digester: Anna Mickaella Lingat SUMMARY: Respondent BF Homes, Inc (BFHI), is a domestic corporation engaged in developing subdivision and selling residential lots. With the withdrawal of substantial investments in BFHI, respondent filed with the SEC a petition for rehabilitation. Atty Florencio Orendain was appointed as receiver. He was later relieved by the SEC of his duties as a Receiver. The new Board of Receivers revoked the authority given by Orendain to use the open spaces at Concha Cruz Drive and to collect community assessment funds; deferred the purchase of new pumps ; recognized BF Paranaque Homeowners Association (BFPHAI) as the representative of all homeowners; took over the management of the Clubhouse and deployed its own guards. Petitioners filed with the HLURB a class suit “for and in behalf of the more than 7,000 homeowners” against respondent BFHI et al to enforce the rights of purchasers of lots in BF Homes Paranaque 3. Respondents asserts that the SEC, not the HLURB, has jurisdiction arguing that the SEC, being the appointing authority should be the one to take cognizance of controversies arising from the performance of the receiver’s duties. The Court held that it is HLURB that has jurisdiction over the case, and not the SEC. DOCTRINE: The SEC has authority over the operation of all kinds of corporations, partnerships or associations with the end in view of protecting the interests of the investing public and creditors. The HLURB has jurisdiction over matters relating to observance of laws governing corporations engaged in the specific business of development of subdivisions and condominiums. FACTS:  BF Homes, Inc. (BFHI) is domestic corporation engaged in developing subdivisions and selling residential lots. One of the subdivisions that BFHI developed was the BF Homes Parañaque Subd.  When Central Bank ordered the closure of Banco Filipino, which had substantial investments in BFHI, BFHI filed with the SEC a petition for rehabilitation and a declaration that it was in a state of suspension of payment. SEC placed BFHI under a management committee, appointed Atty. Florencio B. Orendain as a Receiver, and approved a Revised Rehabilitation Plan.  Orendain instituted a central security system and unified the 65 homeowner’s associations into an umbrella homeowners association called “United BF Homeowners Associations (UBFHAI).  BFHI turned over to UBFHAI control and administration of security in the subdivision, clubhouse and open spaces.  Orendain was relieved by the SEC of his duties as a Receiver, and a new Board of Receivers was appointed. The new Board revoked Orendain’s authority to use the open spaces and to collect community assessment funds; deferred the purchase of new pumps; recognized BF Parañaque Homeowners Association, Inc (BFPHAI) as the representative of all homeowners in the subdivision; took over the management of the Clubhouse; and deployed its own security guard in the subdivision.

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Petitioners filed with HLURB a class suit “for and in behalf of the more than 7,000 homeowners in the subdivision” against BFHI, et al “to enforce the rights of purchasers of lots in BF Homes Parañaque. In BFHI’s answer, it claimed that: o It complied with its contractual obligations relative to the subdivisions development o It could not be compelled to abide by agreements resulting from Orendain’s ultra vires acts o Petitioners were precluded from instituting the instant action because of the suspension of all actions for claims against a corporation under receivership.

HLURB  Ruled in favor of the petitioners  Enjoined BFHI: o From taking over/administering Concha Garden Row o From issuing stickers to residents and non-residents alike for free or with fees o From preventing necessary improvements and repairs of infrastructures within the authority and administration of UBFHAI o From taking over security in the exit points of the subdivision CA  Reversed; set aside the writ of preliminary injuction issued by HLURB  Petitioner’s action should be regarded as a “claim” within the contemplation of PD No 902-A, which should be placed on equal footing with those of petitioners other creditor or creditors and which should be filed with the Committee of Receivers.  Petitioner’s action against BFHI, which is under receivership, should be suspended. RULING: Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. This case is REMANDED to the Housing and Land Use Regulatory Board for continuation of proceedings with dispatch as the Securities and Exchange Commission proceeds with the rehabilitation of respondent BF Homes, Inc., through the Board of Receivers. Thereafter, any and all monetary claims duly established before the HLURB shall be referred to the Board of Receivers for proper disposition and thereafter, to the SEC, if necessary. No costs. Whether the HLRUB has the jurisdiction over the petitioner’s claims? – YES, not the SEC.  PETITIONER’S ARGUMENTS: o The issues are within the jurisdiction of HLURB. o Their complaint refers to rights of way, water, open spaces, road and perimeter wall repairs, security and BFHI’s interlocking corporations that facilitated the circumvention of its obligation involves unsound real estate practices. o The action is for specific performance of a real estate developers obligations under PD No 957 and the relief sought is revocation of the subdivision projects registration certificate and license to sell.

Even if BFHI is under receivership, its obligations as a real estate developer are not suspended. o Suspension of all actions for claims refers solely to monetary claims which are but incidental to their complaints against BFHI. If filed elsewhere than HLURB, it would result to splitting of causes of action o Acts enjoined by HLURB are not related to the disposition of BFHI’s assets as a corporation undergoing its final phase of rehabilitation.  RESPONDENT’S ARGUMENTS: o SEC has the jurisdiction over petitioner’s complaint based on the contracts entered into by the former receiver. o SEC, being the appointing authority, should be he one tot take cognizance of controversies arising from the performance of the receiver’s duties. o Since BFHI’s properties are under SEC’s custodial egis, they are exempt from any court processes. COURT:  PD No 957 (The Subdivision and Condominium Buyers Protective Decree) was issued to answer to the popular call for correction of pernicious practices of subdivision owners and/or developers that adversely affected the interests of subdivision lot buyers.  Sec 3 of PD No 957 empowered the National Housing Authority (NHA) with the exclusive jurisdiction to regulate the real estate trade and business.  Thereafter, the regulatory and quasi-judicial functions of the NHA were transferred to the Human Settlements Regulatory Commission (HSRC) by virtue of EO No. 648. Sec 8 of said EO transferred NHA’s authority to hear and decide “cases on unsound real estate business practices, claims involving refund filed against project owners, developers, dealers, brokers or salesmen and cases of specific performance” to HSRC.  The boom in the real estate business all over the country resulted in more litigation between subdivision owners/developers and lot buyers with the issue of the jurisdiction of the NHA or the HLURB over such controversies as against that of the regular courts.  The Court has consistently ruled that NHA or the HLURB has jurisdiction over complaints arising from contracts between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer to comply with its contractual and statutory obligations to make the subdivision in a better place to live in.  In the present petition, petitioner’s complaint is for specific performance to enforce their rights as purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security. The HLURB, then, has jurisdiction over the complaint. o

Assuming HLURB has jurisdiction, may the proceedings be suspended pending the outcome of receivership before the SEC? - NO  The fact that BFHI is under receivership does not divest the HLURB of that jurisdiction.

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A receiver is a person appointed by the court, or in this instance, by a quasi-judicial administrative agency, in behalf of all the parties for the purpose of preserving and conserving the property and preventing its possible destruction or dissipation, if it were left in the possession of any of the parties. o It is the duty of the receiver to administer the assets of the receivership estate; and in the management and disposition of the property committed to his possession, he acts in a fiduciary capacity and with impartiality towards all interested persons. o The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. In this case where there appears to be no restraints imposed upon respondent as it undergoes rehabilitation receivership, respondent continues to exist as a corporation and hence, continues or should continue to perform its contractual and statutory responsibilities to petitioners as homeowners. No violation of the SEC order suspending payments to creditors would result as far as petitioners complaint before the HLURB is concerned. To reiterate, what petitioners seek to enforce are respondents obligations as a subdivision developer. Such claims are basically not pecuniary in nature although it could incidentally involve monetary considerations. All that petitioners claims entail is the exercise of proper subdivision management on the part of the SEC-appointed Board of Receivers towards the end that homeowners shall enjoy the ideal community living that respondent portrayed they would have when they bought real estate from it. In this case, under the complaint for specific performance before the HLURB, petitioners do not aim to enforce a pecuniary demand. Their claim for reimbursement should be viewed in the light of respondents alleged failure to observe its statutory and contractual obligations to provide petitioners a "decent human settlement" and "ample opportunities for improving their quality of life." The HLURB, not the SEC, is equipped with the expertise to deal with that matter. For the SEC to acquire jurisdiction over any controversy under these provisions, two elements must be considered: o (1) the status or relationship of the parties; and o (2) the nature of the question that is the subject of their controversy. The first element requires that the controversy must arise "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; and between such corporation, partnership or association and the State in so far as it concerns their individual franchises." In this case, petitioners are not stockholders, members or associates of respondent. They are lot buyers and now homeowners in the subdivision developed by the respondent. The second element requires that the dispute among the parties be intrinsically connected with the regulation or the internal affairs of the corporation, partnership

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or association. The controversy in this case is remotely related to the "regulation" of respondent corporation or to respondents "internal affairs." The main concern in this case is the issue of jurisdiction over petitioners complaint against respondent for specific performance. P.D. No. 902~A, as amended, defines the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two quasi~judicial agencies exercise functions that are distinct from each other. o The SEC has authority over the operation of all kinds of corporations, partnerships or associations with the end in view of protecting the interests of the investing public and creditors. o The HLURB has jurisdiction over matters relating to observance of laws governing corporations engaged in the specific business of development of subdivisions and condominiums. The HLURB and the SEC being bestowed with distinct powers and functions, the exercise of those functions by one shall not abate the performance by the other of its own functions. There is no contradiction between P.D. No. 902~A and P.D. No. 957.