The Supreme Court held that a condominium corporation needs explicit authorization to initiate extrajudicial foreclosure proceedings for unpaid dues. This decision underscores that, without a specific grant of authority detailed in the condominium’s governing documents, the corporation cannot unilaterally foreclose on a unit owner’s property. This ruling safeguards the rights of condominium owners by ensuring strict adherence to legal procedures before their properties can be subjected to foreclosure, providing clarity and protection against potential overreach by condominium corporations.

Unpaid Dues, Foreclosed Dreams: Can Condo Associations Act as Their Own Banks?

In LPL Greenhills Condominium Corporation v. Catharina Brouwer, the central issue revolved around whether LPL Greenhills Condominium Corporation (LPL) validly foreclosed on two condominium units owned by Catharina Brouwer due to unpaid association dues. Brouwer, represented by her attorney-in-fact, Manfred De Koning, contested the foreclosure, arguing that LPL lacked the necessary authority under Act No. 3135 to conduct the extrajudicial foreclosure. She also claimed that there was no board resolution authorizing the foreclosure and that proper notice was not given.

The central legal question was whether a condominium corporation requires a special authority or power from the unit owner before initiating extrajudicial foreclosure proceedings for unpaid dues and assessments. The petitioners, LPL, argued that Section 20 of the Condominium Act (RA 4726) does not necessitate a special authority, citing the case of Chateau de Baie Condominium Corp. v. Spouses Moreno to support their claim. However, the Supreme Court clarified that a special authority is indeed required, and the Chateau de Baie case did not set a precedent to the contrary.

The Supreme Court meticulously examined the provisions of the Condominium Act, Act No. 3135 (the law governing extrajudicial foreclosure), and relevant jurisprudence. It emphasized that while Section 20 of the Condominium Act allows for the enforcement of liens through extrajudicial foreclosure, it does not, by itself, grant condominium corporations the power to conduct such foreclosures without a specific authorization. This interpretation aligns with the principle that statutory provisions must be construed harmoniously to give effect to the legislative intent.

The Court relied heavily on its prior ruling in First Marbella Condominium Association, Inc. v. Gatmaytan, which established that a petition for extrajudicial foreclosure must be supported by evidence that the petitioner holds a special power or authority to foreclose. This requirement is rooted in the principle of agency under the Civil Code, which dictates that an agent needs a special power of attorney to perform acts of strict dominion, such as selling real property. The court underscored that, without such authority, LPL could only enforce its lien through an ordinary collection suit or judicial foreclosure proceedings.

The special authority requirement stems from the legal maxim “nemo dat quod non habet,” meaning one cannot give what one does not have. Since the right to dispose of property (jus disponendi) belongs solely to the owner, Catharina Brouwer, LPL needed explicit authorization to act on her behalf in foreclosing the property. This authorization could be included in the condominium’s deed of restrictions or by-laws, but in this case, it was absent.

Petitioners insisted that LPL’s Master Deed of Restrictions and By-Laws contained the requisite special authority. However, the Court found that the provisions cited by LPL did not grant the corporation the power to act as Brouwer’s attorney-in-fact for foreclosure purposes. The Court also noted that LPL had agreed to limit the issue before the RTC to whether a special authority was required, thus precluding them from arguing that such authority existed in their governing documents.

Furthermore, the Supreme Court addressed the petitioners’ argument that the death of Brouwer’s attorney-in-fact, Manfred De Koning, extinguished the legal personality of her counsel, Gutierrez, Cortez & Partners. The Court dismissed this argument, clarifying that the attorney-client relationship existed between Brouwer and her counsel, not De Koning. Thus, De Koning’s death did not affect the validity of the legal representation.

The Supreme Court reiterated its role as a court of law, not a trier of facts. It emphasized that its jurisdiction under Rule 45 is limited to questions of law. Thus, factual issues not properly raised and proven before the lower courts cannot be considered on appeal. This principle ensures that the Court’s decisions are based on a solid foundation of evidence and legal arguments presented at the appropriate stage of the proceedings.

In conclusion, the Supreme Court upheld the Court of Appeals’ decision, affirming that the extrajudicial foreclosure sales of Brouwer’s condominium units were null and void. The ruling reinforces the importance of adhering to the procedural requirements for extrajudicial foreclosure and underscores the necessity of a special authority or power to sell before a condominium corporation can initiate such proceedings. This provides significant protection to condominium owners against potential abuse and ensures that their property rights are respected.

FAQs

What was the key issue in this case?	The key issue was whether LPL Greenhills Condominium Corporation had the legal authority to extrajudicially foreclose on Catharina Brouwer’s condominium units due to unpaid association dues. The core question was whether a condominium corporation needs special authorization for such foreclosures.
What did the Supreme Court rule?	The Supreme Court ruled that LPL did not have the authority to foreclose on Brouwer’s units because it lacked a specific grant of authority (a special power of attorney) to do so. This authority must be explicitly stated in the condominium’s governing documents.
Why is a “special authority” required for extrajudicial foreclosure?	A “special authority” is required because extrajudicial foreclosure involves the sale of property, which is an act of ownership. Only the owner, or someone with explicit authorization from the owner, can perform such an act.
Where should this “special authority” be documented?	This “special authority” or “power of attorney” should be documented in the condominium’s deed of restrictions or by-laws. These documents serve as the governing rules for the condominium corporation and its unit owners.
What law governs extrajudicial foreclosures?	Extrajudicial foreclosures in the Philippines are governed by Act No. 3135, as amended. This law outlines the procedures and requirements for foreclosing on a property outside of court.
Does Section 20 of the Condominium Act grant special authority?	The Supreme Court clarified that Section 20 of the Condominium Act does not, by itself, grant condominium corporations the authority to conduct extrajudicial foreclosures. It merely provides a mechanism for enforcing liens.
What options does a condo corp have if it lacks special authority?	If a condominium corporation lacks the special authority to extrajudicially foreclose, it can pursue other legal avenues such as an ordinary collection suit or a judicial foreclosure proceeding.
What was the significance of the First Marbella case?	The First Marbella case was crucial because it established the requirement that a petition for extrajudicial foreclosure must be supported by evidence that the petitioner holds a special power or authority to foreclose.
What happened to the attorney who represented Brouwer?	The death of Brouwer’s attorney-in-fact, Manfred De Koning, did not affect the legal personality of Gutierrez, Cortez & Partners as Brouwer’s counsel of record. The attorney-client relationship was between Brouwer and the law firm, not De Koning.

This case highlights the importance of due process and adherence to legal procedures in property foreclosure. Condominium corporations must ensure they have the requisite authority before initiating foreclosure proceedings to protect the rights of unit owners. The ruling provides clear guidance on the requirements for valid extrajudicial foreclosure, reinforcing the need for explicit authorization and proper documentation.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: LPL Greenhills Condominium Corporation, G.R. No. 248743, September 07, 2022