Condominium Corporation Disputes: When Are They Intra-Corporate Controversies?

Medical Plaza Makati Condominium Corporation v. Cullen (G.R. No. 181416, November 11, 2013) settles an important question for condominium owners and corporations alike: when a unit owner challenges the validity of association dues and the corporation's decision to bar him from voting, is the case an ordinary civil action or an intra-corporate controversy?

The Supreme Court ruled that such disputes are intra-corporate controversies. They must be filed before a Regional Trial Court (RTC) designated as a special commercial court—not an ordinary RTC branch and not the Housing and Land Use Regulatory Board (HLURB).

The Dispute

Robert H. Cullen purchased a condominium unit in Medical Plaza Makati from developer Meridien Land Holding, Inc. In 2002, the condominium corporation, through its corporate secretary, demanded payment of alleged unpaid association dues and assessments amounting to P145,567.42. The corporation claimed the obligation was a carry-over from the developer.

Cullen disputed this. He had been a director and president of the corporation and claimed he had religiously paid his dues. Because he was labeled a delinquent member, he was barred from voting and from running for the Board of Directors. When the developer claimed the obligation had already been settled, Cullen demanded an explanation from the corporation. Receiving none, he filed a complaint for damages.

The Jurisdictional Question

The corporation moved to dismiss the case, arguing that the dispute was an intra-corporate controversy. The developer, for its part, argued that the HLURB had exclusive jurisdiction. The trial court agreed with both and dismissed the complaint. The Court of Appeals reversed, holding that the case was an ordinary action for damages that belonged in the regular courts.

The Supreme Court reversed the Court of Appeals and sided with the corporation.

The Two Tests for Intra-Corporate Controversies

The Court applied two tests to determine whether a dispute is intra-corporate:

The relationship test. An intra-corporate controversy exists when the dispute arises from any of these relationships: between the corporation and the public; between the corporation and the State; between the corporation and its stockholders, partners, members, or officers; or among the stockholders, partners, or associates themselves.

The nature of the controversy test. The controversy must not only be rooted in an intra-corporate relationship, but must also pertain to the enforcement of the parties' rights and obligations under the Corporation Code and the corporation's internal rules.

Applying both tests, the Court found that the case was intra-corporate. Cullen was a stockholder and member of the condominium corporation. The case principally concerned the propriety of the assessment of dues and the validity of the corporation's act in preventing him from participating in the election of the Board of Directors. The demand for damages was merely incidental to these corporate issues.

Why Not the HLURB?

The Court also addressed the argument that the HLURB should hear the case. While Republic Act No. 9904 (the Magna Carta for Homeowners and Homeowners' Associations) empowers the HLURB to hear disputes concerning homeowners' associations, the Court found that the law does not cover condominium corporations. The legislative deliberations showed that lawmakers deliberately excluded condominium corporations from the law's coverage, intending to address their concerns in a separate measure. Condominium corporations remain governed by Republic Act No. 4726, the Condominium Act.

Where to File

Under Presidential Decree No. 902-A, the Securities and Exchange Commission originally had exclusive jurisdiction over intra-corporate controversies. When Republic Act No. 8799 (the Securities Regulation Code) took effect, this jurisdiction was transferred to RTCs designated by the Supreme Court as special commercial courts.

Because the case was an intra-corporate controversy, it should have been filed with a special commercial court. The RTC branch where Cullen filed his case was not so designated. The Court therefore ordered the dismissal of the complaint and remanded the case for re-raffle among the designated special commercial courts.

Practical Takeaways

• Disputes over association dues are usually intra-corporate. If a unit owner challenges the validity of an assessment, the case is likely an intra-corporate controversy, not an ordinary civil action.
• Jurisdiction is determined by the allegations in the complaint. The nature of the action is determined by the body of the complaint, not its title. Labeling a case as an "action for damages" does not make it an ordinary civil action if the allegations involve corporate matters.
• File intra-corporate cases in the right court. Intra-corporate controversies must be filed with an RTC designated as a special commercial court. Filing in a regular RTC branch risks dismissal for lack of jurisdiction.
• The HLURB does not handle condominium corporation disputes. RA 9904 covers homeowners' associations, not condominium corporations. The Condominium Act governs the latter.
• Know your venue before filing. The cost of filing in the wrong court is delay and expense. Confirm the designation of the RTC branch before filing an intra-corporate case.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.