SEC Adm. Case No. 04-05-24 ASB Realty Corporation vs. The Honorable Hearing Panel Vernette Umali-Paco, Armando Pan Jr., Michael Miranda, and BSA Mansion Condominum Corp.

Republic of the Philippines SECURITIES AND EXCHANGE COMMISSION

SEC Bldg. EDSA, Greenhills, Mandaluyong City

ASB REALTY CORPORATION. Petitioner.

-versus- SEC EB CASE NO. 04-05-24

ARMANDO PAN JR., MICHAEL THE HONORABLE HEARING PANEL VERNETTE G. UMALI-PACO, Petition for Review on Certiorari of the Hearing Panel's Order dated March 29,2005

MIRANDA, and BSA MANSION CONDOMINIUM CORP.

Respondents.

X

DECISION

respondent Hearing Panel, denying the petitioner's Motion for Issuance of TRO Corporation seeking the reversal of the Order dated March 29, 2005 issued by the and/or Preliminary Injunction against BSA Mansion Condominium Corporation and This refers to the Petition for Review on Certiorari filed by ASB Realty

the Registry of Deeds, Makati City.

The material facts of this case are as follows:

Petitioner ASB Realty Corporation ("ASBRC") is a corporation duly organized

estate and belongs to the ASB Group of Companies, which filed a Petition for Rehabilitation with this Commission on May 2, 2000 docketed as SEC Case No. 05- and existing under the laws of the Philippines. It is engaged in the business of real

October 10, 2000 and April 26, 2001, respectively. Rehabilitation Plan was approved by the Commission in its separate Orders dated 00-6609. On May 4, 2000, the Commission issued an Order suspending all actions for claims against ASB Group of Companies, and appointing the latter's interim receiver. The said Petition for Rehabilitation was given due course and the proposed

registered under its name; thus, included in the list of assets for -disposition St., Legaspi Village, Makati City, wherein the following twelve (12) units are still according to its approved Rehabilitation Plan: Among the projects of petitioner is the BSA Mansion located at 108 Benavidez

Decis ion Page 2 of 8 SEC EB CASE NO. 04-05-24

UNIt nO.

G-1 G-2 G-3 G-4 2003 2103 2201 2202 2203 2204 2205 2206 38858 38870 38880 38881 38882 38883 38606 38607 38608 38609 38884 38885

Condominium Corporation ("private respondent") caused the annotation by the On March 26, 2002, Atty. Renon V. Cruz, legal counsel of BSA Mansion

for non-payment by petitioner of overdue condominium fees for the four condo units: Register of Deeds of Makati City of a "Notice of Assessment" on the following CCT's

Unit No. G-1 2201 2204 2103 CCT No. 38606 38880 38883 38870 Amt. of Unpaid 907,288.09 361,305.86 965,040.83 911,922.08 Condo Fees As of February 2002 February 2002 February 2002 February 2002

On January 7. 2004, petitioner filed before the Hearing Panel of this

the following: Commission a Motion for Issuance of TRO and/or Preliminary Injunction praying for

a) To enjoin private respondent from enforcing penalties and interests on the unpaid association dues;

b) To enjoin the further annotation of a notice of lien on and/or

eventual foreclosure of the remaining seven (should be eight) units;

c) To restrain the Register of Deeds of Makati City from accepting. annotating and/or registering any such application for a notice of lien on or foreclosure of the remaining seven (should be eight) units; and

SEC EB CASE NO. 04-05-24 Decision Page 3 of 8

d) To recall, lift, set aside and/or nullify, as the case may be, the annotation of said notice of lien or certificate of foreclosure proceedings (in the event such acts have already been

accomplished when the instant Motion is filed) on the four units above-listed.

The Statement of Accounts as of October 20041 shows that the accrued association dues, interests, penalties, water bills and special assessments ("SA") for the foilowing condominium units total Seven Miltion Twenty Three Thousand Six Hundred Fifty Nine Pesos and Thirty Four Centavos (P 7,023,659.34), computed as follows:

Unit Owner/ Kimberiy Melencio Ho Chi ASBRC GI-G44 Ho Chi 2201C 2204C Ho Chi TOTAL Units 2103 2003 3,005,824.142,016,054.571,989,336.8683,318.68[9,125.287,023,659.34 1,145,061.52 735,346.81 738,961.17 234,062.49 152,392.15 Dues 711,069.41 524,128.47 526,762.01 188,509.61 65,585.07 Interests 699,247.08 517,579.84 520,182.31 186,742.37 65,585.07 Penalties 3,265.86 Water 49.68 3.14 2,097.84 2,107.80 3,787.32 566.16 566.16 SA 1,779,202.63 2,559,165.33 1,791,279.16 609,883.77 284,128.45 Total

association dues, water bills and special assessments of the foregoing accounts, In a letter2 dated November 24, 2004, petitioner offered to pay the

excluding penalties and interest charges, in the amount of Three Million Eighteen Thousand Two Hundred Sixty Eight Pesos and Ten Centavos (P 3,018,268.10). It appears, however, that respondent declined petitioner's offer of payment and instead insisted on collecting at least 50% of the penalties and interest due.

On March 29, 2005, the respondent Hearing Panel issued an Order denying the January 7, 2004 Motion filed by petitioner.

assignment of errors: In the instant petition, petitioner assails the said Order based on the following

1. The respondent Hearing Panel failed to resolve petitioner's principal prayer for waiver of penalties and interests imposed by private respondent on the association dues;

2. The respondent Hearing Panel gravely abused its discretion amounting to lack or excess of jurisdiction when it denied

' Annex P of the Petition. 2 Annex O of the Petition.

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petitioner's prayer to enjoin private respondent from further annotating notice of lien on the seven (should be eight) condominium units specified; and

3. The respondent Hearing Panel gravely abused its discretion amounting to lack of jurisdiction in not giving due course to petitioner's prayer for the lifting of the notice of lien on four condominium units listed.

dismissal of the Petition for failure of the petitioner to show any substantial violations of law by the respondent Hearing Panel's issuance of the subject order. On June 15, 2005, private respondent filed its Comment praying for the

jurisprudence, we find the petition partly meritorious. After a careful evaluation of the facts and the pertinent Jaws and

In the questioned Order dated March 29, 2005, the respondent Hearing Panel denied the January 7, 2004 Motion, stating in part that:

of lien does not violate the provision of P.D. 902-A and the Interim property is allowed to be sold or disposed of by the registration of a to third parties dealing with the property that someone is claiming an interest on the same or a better right than the registered owner Rules on Corporate Rehabilitation because no claim is paid and nol notice of lien. As its name implies, a notice of claim is merely a notice "Contrary to Petitioners' claim, the act of annotating the notice

thereof..."

In support of this position, the Hearing Panel cited various jurisprudence3 on

lien, and only serves to give notice to all persons that the property in question is under litigation. lis pendens and adverse claims that, in essence, pronounce that the annotation of such notice of lis pendens or adverse claims does not create a nonexistent right or

We find that the cited cases on notice of /is pendens and adverse claims are not applicable in this case.

very lis mota of the pending litigation concerns directy the title or possession of a A notice of lis pendens may be invoked as a remedy only in cases where the

resorted to. Nor does it apply to a proceeding in which recovery of a money specific real property. If the property is affected only incidentally or indirectly by the pending litigation, the doctrine of /is pendens will not apply. Hence, if the case instituted is a real action, it does not necessarily follow that lis pendens may be

3 Somes v. Government of the Phitippines, 62 Phi. 432 (1935): Villanueva v. Court of Appeals, 28 1 SCRA 298 {1997};Gurbax Sing Pabla&Co.v.Reyes,92 Phi].177{1952}

SEC EB CASE NO. 4-05-24 Decis ion Page S of 8

judgment is sought, although the titie or right of possession to property may be incidentally affected.4

On the other hand, the remedy of annotating an adverse claim is available only when the claim asserted affects the title or is adverse to the title of the registered owner. The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owe

annotated therein was neither a notice of lis pendens nor of adverse claim, but a Notice of Assessment executed by Renon Y. Cruz, Legal Counsel of private A perusal of the four affected CCT's, however, reveal that what was

respondent BSA Mansion Condominium Corporation for the overdue condominium fees that have remained unpaid by petitioner.

Indubitably, the claim asserted under the Notice of Assessment does not affect the title or possession of the condominium units. Likewise, such Notice of Assessment does not constitute a mere warning to the third parties. Instead, it is considered a lien or encumbrance on the property, as stated in Section 20 of Republic Act 4726 or otherwise known as "An Act to Define Condominium, Establish Requirements for its Creation, and Govern its Incidents," which provides that:

"SECTION 20. An assessment upon any condominium made in accordance with a duly registered declaration of restrictions shall be

thereon, such as interest, costs (including attorney's fees) and penalties, as such may be provided for in the declaration of assessed when the management body causes a notice of assessment to be registered with the Register of Deeds of the city or province an obligation of the owner thereof at the time the assessment is where such condominium project is located. The notice shall state the condominium unit against which same has been assessed, and the name of the registered owner thereof. Such notice shall be signed by management body shall cause to be registered a release of the lien. made. The amount of any such assessment plus any other charges restrictions, shall be and become a lien upon the condominium amount of such assessment and such other charges thereon as may be authorized by the declaration of restrictions, a description of the an authorized representative of the management body or as otherwise provided in the declaration of restrictions. Upon payment of said assessment and charges or other satisfaction thereof, the

real property tax liens and except that the declaration of restrictions subsequent to the registration of said notice of assessment except Such lien shall be superior to all other liens registered

4 LRC Consultas No. 32 & 34. Ysmael., et. al.v. Register of Deeds of Quezon City, February I 2, 1955.

SEC EB CASE NO. 04-05-24 Decision Page 6 of 8

may provide for the subordination thereof to any other liens and encumbrances.

by law for the judicial or extra-judicial foreclosure of mortgages of foreclosure sale. The condominium owner shall have the same right of real property. Unless otherwise provided for in the declaration of restrictions, the management body shall have power to bid at Such liens may be enforced in the same manner provided for

redemption as in cases of j udicial or extra-judicial foreclosure of mortgages."

Notice of Assessment, as a lien or encumbrance on the property of ASBRC, is that has been ordered suspended by the Commission in its Order dated May 4,2000 considered an "action or proceeding for claims" against the ASB Group of Companies An issue that needs to be resolved thus, is whether the annotation of the

We answer in the affirmative.

al.5, the Supreme Court stated that: In the case of Alemar's Sibal & Sons, Inc. v. Honorable Jesus M. Elbifias et

to preclude one_from obtaining an advantage or preference over another by themexpediency_of an attachment,_execution or otherwise. For what would prevent an alert creditor, upon learning of the receivership, from rushing of all actions for claims against Alemar's in order that all the assets of said petitioner could be inventoried and kept intact for the purpose of ascertaining an equitable scheme of distribution among its creditors. During rehabilitation posthaste to the courts to secure judgments for the satisfaction of its claims to the prejudice of the less alert creditors. receivership._ the assets are held in trust for the equal benefit of all creditors "It must be stressed that the SEC had earlier ordered the suspension

with the receiver who is a duly appointed officer of the SEC."e corporation threatened by bankruptcy is taken over..by a.receiver.all the with suits against the distressed firm, they are directed to file their claims creditors should stand on an egual footing. Not anyone_of them should be given any preference by paying_one or some of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the corporation under receivership. Instead of creditors vexing the courts As between creditors, the key phrase is "equality is equity." when a

bankruptcy petition in a voluntary, joint, or involuntary case, or the filing of an act to create, perfect, or enforce against property of the debtor any lien to the Investor Protection Act of 1970, operates as a stay, appficable to all entities, of any application for a protective decree under specified provisions of the Securities Likewise, established American jurisprudence dictates that, "the filing of a

6 Emphasis added. 5 G.R. No. 75414. June 4, 1990

SEC EB CASE NO. 04-05-24 Decision Page 7 of 8

bankruptcy case."? extent that such lien secures a claim that arose before the commencement of the

attaching, and creating, perfecting or enforcing any tien against the debtor's corporation through the means of an execution or foreclosure, but also from properties. rehabilitation are precluded not only from exacting payment from the debtor From the foregoing, it is clear that the creditors of a corporation undergoing

attachment, we find that both are considered a lien or encumbrance, and have the same effect on the property of the debtor corporation. Thus, the annotation of a While it may be argued that a Notice of Assessment is different from an

Notice of Assessment on the CCT's of the subiect units is prohibited during the rehabilitation proceedings, particularly upon the appointment of the management committee, rehabilitation receiver, board or body, as the case may be.

respondent from further annotating on the CCT's' of the remaining eight condominium units and from foreclosing the same. Thus, we hereby grant the relief prayed for by petitioner to enjoin private

ways by which liens and encumbrances on titles may be cancelled, namely: (1) by Assessment on the four condominium units. Under Act No. 4966.8 there are two registering the instrument extinguishing or releasing such liens or encumbrances or, (2) in the absence thereof, by order of the court which may be obtained in proper cases under Section 112 of the said Act. Hence, where there is no instrument However, we cannot lift, set aside or nullify the annotation of Notice of

extinguishing or releasing an annotated encumbrance, the cancellation thereof falls within the power of the court under Section 112 of Act No. 496 (now Section 108 of P.D. No. 1529).

by private respondent on the condominium dues, we find the waiver not justified. On the prayer of petitioner for the waiver of penalties and interests imposed

rehabilitation plan of ASB Group of Companies should govern. accrued condominium dues of ASBRC is proper, the provisions of the approved In determining whether the imposition of penalties and interests on the

A reading of the said rehabilitation plan reveals that the creditors of ASBRC are mainly classified as secured and unsecured creditors.

Based on the rehabilitation plan, "(S)ecured creditors' claims amounting to

creditors have been asked to waive all penalties and other charges. Php 5.192 billion will be paid in full including interest up to April 30, 2000. Secured

Phitippine Islands." 8 Otherwise known as "An Act to Provide for the Adjudication and Registration of Tities to Lands in the 7 $1437 9A Am Jur 2d citing i1 USCS S 362{a}{5]

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and paid after all the principal obligations have been paid from the residual cash, if any." provides that "Interest at the rate of six percent (6%) per annum shall be accrued Certificates ("CPC's") and paid within the term of said certificates. The plan also On the other hand, unsecured creditors shall be issued Creditors' Participation

From the foregoing, it is evident that petitioner itself, as part of the ASB Group of Companies, committed to pay interest to its secured and unsecured creditors in accordance with the provisions of the rehabilitation plan. Thus, petitioner cannot now justify its prayer for a waiver of penalties and interests based on the fact that it is suffering from financial reverses. Contrary to the allegation of petitioner. the suspension of payment of claims by the petitioner does not result in the suspension of the accrual of penalties and interests on the claims of petitioner's creditors.

WHEREFORE, i premises considered, we hereby render judgment

other persons acting in its behalf from annotating a Notice of Lien or Assessment on ENJoINING the private respondent, its agents, representatives or assignees or any

the remaining eight condominium units, with CCT Nos. 38607, 38608, 38609, 38858 38881, 38882, 38884 and 38885. However. we hereby DENY the prayers of

condominium units and the waiver of penalties and interests on the association dues petitioner for the lifting of the Notice of Lien or Assessment on the four

imposed by private respondent.

SO ORDERED.

Mandaluyong City, Philippines, 21 October 2010.

FE B. BARIN* Chairperson

MA. JUANItA'E. CUEStO RAUL J. PALABRICA

Officer-in-Charge Commissioner Commissioner

M

MAnuel H? Commissioner B. GAITE ELADIQ M. JALA Comntissioner

On official travel.