Opinion No. 11-35 RE : Membership in Condominium Corporation; Merger

Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong City Republic of the Philippines Department of Finance

Office of the General Counsel

12 August 2011

Re: Membership in Condominiuim Corporation; SEC-OGC Opinion No. 11-35 Merger

SALONGA, HERNANDEZ & MENDOZA 3/F Tower B, Gold Loop Towers, I Gold Loop Square, Ortigas Center, Pasig City

Attention: Atty. Roberto L. Mendoza

Gentlemen:

LV Locsin Condominium Corporation (`LV Locsin", for brevity). This refers to your 3 March 2011 letter requesting opinion on:membership in

in the name of Equitable PCI Banking Corporation (`EP$IB", which merged with Banco de Oro Corporation ("BDO"." According to you} BDO, as the surviving corporation, now seeks to be recognized as the new member of LV Liocsin, pursuant to the Articles of Merger. You mentioned that title to one of LV Locsin's condominium units!is registered

Thus, you ask:

1. Whether BDO should effect the transfer of the condominium it can enjoy the status of a unit-owner. certificate of title in its name with the Register of Deeds before

2. Stated differently, whether BDO, as the surviving corporation, can be automatically considered as a member of: the condominium corporation, pursuant to Section 8o of. the Corporation Code ('the Code'?.

Section 10 of the Condominium Act1 provides:

transferable separately from the condominium unit of which it is ian regardless of whether it is a stock or non-stock corporation, shall not be "Sec. 10 . : Membership in a condominium corporation,

'Republic Act No. 4726.

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the project in which the condominium corporation owns or holds the common areas, he shall automaticalty cease to be appurtenance. When a member or stockholder ceases stockholder of the condominium corporation." to own a unit ir a member

a unit is a shareholder or member in a condominium corporation. In fine, ownership of a unit is a condition sine qua non to being a shareholder or member in the inseparable from the unit to which it is only appurtenant, and that only the owner of condominium corporation. Thus, shareholding or membership in a condominium porationis

law, morals, or public policy regarding the right of any condominiuim owner to determination of when the shareholding or membership in the condominium likewise allows the Master Deed to provide any reasonable restriction not contrary to atienate or dispose of his condominium unit. corporation will be transferred to the purchaser of a unit.3 The same provision Section 4 of the Condominium Act leaves to! the Master Deed the

information only, the following are imparted. require a determination of ownership of the condominium unit in question, and, consequentiy, of one's status as member of the condominium corporation. Due to this, we cannot give a categorical and/or definitive opinionton the matter because as resolution of the question(s) would involve the substantive and contractual rights of private parties who would, in all probability, contest the same in court if the opinion on matters that would necessitate the determination of factual issues5, or that would necessarily require a review and interpretation of contracts, since this is?justiciable in nature and contract review catls for legal examination of cbntract on ia general basis and not on specific legal issues. However, for your guidance and for' purposes of a matter of policy, the Commission refrains from rendering opin'ioni where the turns out to be adverse to their inter At this juncture, we would like to note that to answer your query would Nor does the Commission render opinion

Subparagraph (a) of Part I, Section 6, of LV Locsin's Master Deed provides, thus: As to when and under what conditions ownership of a unit is acquired,

such Unit, subject to the terms and conditions of the instrument terms and conditions of any subsequent conveyance under conveying the Unit from the DEVELOPER to such purchaser and to the which the purchaser takes title to the Unit, and subject further to this Master Deed with Declaration of Restrictions; xxx." (Emphasis ours) "(a) The purchaser of a Unit shall acquire title to or ownership}of

4SEC Memorandum Circular No. 15, Series of 2003, par. 5.2 2Sunset View Condominium Corporation vs. Campos, et al., G.R. Nos. 52361and 52524, 27. April 198 1. SIbid, par. 5.8. 'Ibid. "Ibid, par. 5.3.

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condominium corporation's Master Deed that is substantially similar to the above quoted subparagraph (a) of Part I, Section 6, of LV Locsin's Master Deed, held that since the instrument conveying the unit is a mere Contract to Buy and Sell, the purchaser of the unit is not yet the owner thereof, not havihg fully paid the purchase price, and hence, cannot become a shareholder of the condominium corporation. Thus, in one case7, the Supreme Court, using as basis a provision in a

BDO was made through the merger of EPCIB with BDO. In the case at bar, the transfer or conveyance of ERCIB's unit in LV Locsin to

Section 80 of the Code provides:

consolidation, as provided in the preceding sections, shall have the following effects: "Sec. 80. Effects of merger or consolidation. The merger or

XXX XXX XXX

4. xxx; and ail property, real or personal, and all receivables due on whatever account including subscriptions to shares and other interest of, or belonging to; or due to each constituent and vested in such surviving or consoiidated corporation without further act or deed; xxx." (Emphasis ours) corporation, shall be taken and deemed to be transferred to :

transfer of all assets and the assumption of debts and liabilities of the absorbed issue a certificate of merger, at which time the merger ishall be effective, if it is satisfied that the same is not inconsistent with the provisions of: thle Code and existing laws.9 corporation by the acquiring corporation. In return for the transfer of all assets and assumption of the liabilities of the absorbed corporation, the acquiring entity issues a block of shares equal to the net asset value transferred,Iwhich stocks are in turn distributed to the stockhoiders of the absorbed corporatio'n. The Commission shalf Merger as actually observed and practiced in the Philippines' necessitates a

Thereof), provides: Sale of Subdivision Lots and Condominiums, Providingl Penalties: For Violations As to registration with the Register of Deeds, P.D. No. 957 (Regulating the

deliver the title of the lot or unit to the buyer upon full payment of the lot or unit . . ." (Emphasis supplied) "SECTION 25. Issuance of Title. -- The owner or developer shall

9 November 1961. "Supra, Note 2. 'Hector S. De Leon, The Corporation Code of the Philippines Annotated 561](1993), citing SEC Opinion dated Corporation Code, Section 79.

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On the other hand, Section 18 of the Condominium Act provides

and the transferee shali be entitled to the issuance Of!a condominium, the Register of Deeds shall, upon payment of the proper fees, enter and annotate the conveyance on the certificate of title covering the land included within the project 'condominium owner's' copy of the pertinent portion of such certificate of title. Said icondominium owner's' copy need rot annotated with respect to other condominiums in the project. A copylof the description of the land, a brief description of the condominium would be sufficient for purposes of the `condominium owher's' copy of the certificate of title. No conveyance of condominiums or part thereof, of the project, shall be registered uniess accompanied by!a certificate of the management body of the project that such declaration of restrictions of such project." (Emphasis supplied) reproduce the ownership status or series of transactions in force lor conveyed, name and personal circumstances of the condominium owrier subsequent to the original conveyance thereof from the owner conveyance is in accordance with the provisions of! the "Sec. 18. Upon registration of an instrument conveying a

the corporation is non-existent as far as the corporation is concerned.} As betweer the number of shares transferred."1 the corporation on the one hand, and its shareholders and third persons on the shareholders are. It is only when the transfer has been recorded in the stock and transfer book that a corporation may rightfully regard the transferee as one of its other, the corporation looks only to its books for the purpose of determining who its stockholders. This is the import of Section 63 of the Code which states that "No transfer, however, shall be valid, except between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate oricertificates and A transfer of shares of stock not recorded in the stock and transfer book of

condominium corporation. 12 Condominium Certificate of Title ('CCT'? issued upon full payment of the unit.11 The presumption is that holders of duly issued cCT are considered members of the Thus, membership in a condominium corporation is evidenced by a

name of EPCIB, not that of BDO. As you represented, there is a CCT covering subject! unit, albeit it is still in the

Locsin, which states: In this connection, please note Section 3, ArticlelII of the By-Laws of LV

issued a certificate of membership which shall be in such form as the "Section 3. Certificates of Membership. Each unit owner shall {be

11SEC-OGC Opinion No. 3 1-03 dated 26 May 2003 addressed to Jose Oscar M. Salazar. 1Vicente Ponce vs. Alsons Cement Corp., et al., G.R. No. 139802, 10 Dece 12SEC Opinion dated 2 October 1992 addressed to Atty. Angel R. Quimpo ber 200

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Board of Director may determine and prescribe. It shall be signed by the President or Vice President and countersigned by the Secretary or an Assistant Secretary and sealed with the corporate seal. xkx.

his unit, shall surrender to the Secretary for cancellation his certificatelof membership. A new certificate shall thereupon be issued|by the Secretary to the purchaser or transferee of the unit. A unit owner, upon the sate, transfer, conveyance or dispositionJof

surrender of the mutilated certificate or in case of loss or destruction, mutilation of his certificate of membership, and the Board of Directors may cause to be issued to him a new certificate of membership upon the upon satisfactory proof of such loss or destruction." A member shall notify the Corporation of the loss, destruction lor

Board of Directors of LV Locsin can reasonably be expected to require, las it should, proof of ownership of BDO of the unit, before issuing a certificate of membership in condominium corporation is inseparable from ownership of a condominium unit, the the corporation in favor of BDO. Considering all of the foregoing, especially the fact that membership in a

Commission in other cases or upon the courts.13 If, upoh investigation, it wil! be foregoing shall not be used in the nature of a standing rule binding upon the disclosed that the facts relied upon are different, this Opinion shall bel rehdered void. solely to the particular issues raised therein. It shall likewi$e be understood that the This opinion is based solely on the facts disclosed in the query and relevant

Please be guided accordingly.

Very truly yours?

VESPER JUTIUS B. GARCIA Officer{IhfCharge

13Supra, Note 4, par. 7.