The Supreme Court affirmed that a condominium corporation must possess a specific grant of authority from the unit owner before it can initiate extrajudicial foreclosure proceedings for unpaid dues. This authority, typically a special power of attorney, empowers the corporation to act as the owner’s agent in selling the property. Without this explicit authorization detailed in the condominium’s governing documents, the corporation cannot legally pursue extrajudicial foreclosure. This ruling protects condominium owners from potentially unwarranted property seizures, ensuring their rights are safeguarded by requiring clear and demonstrable consent for such actions.

Unpaid Dues and Foreclosure: Can a Condo Corp Sell Your Unit Without Explicit Consent?

In LPL Greenhills Condominium Corporation v. Catharina Brouwer, the central issue revolved around the validity of extrajudicial foreclosure sales of condominium units due to unpaid association dues. Catharina Brouwer owned two units in LPL Greenhills Condominium and failed to pay her dues, leading LPL to initiate foreclosure proceedings. Brouwer contested the sales, arguing that LPL lacked the necessary authority to foreclose extrajudicially. The case reached the Supreme Court, which had to determine whether a condominium corporation needs explicit authorization from the unit owner to conduct an extrajudicial foreclosure for unpaid dues.

The petitioners, LPL Greenhills Condominium Corporation, relied heavily on Section 20 of the Condominium Act (Republic Act No. 4726), arguing that it provides sufficient basis for initiating foreclosure proceedings without needing a separate special authority from the unit owner. They also cited the case of Chateau de Baie Condominium Corp. v. Spouses Moreno, suggesting it established a precedent where condominium corporations do not require special authority to initiate foreclosure for unpaid dues. Petitioners also contended that, even if a special authority was necessary, LPL’s Master Deed of Restrictions and By-Laws contained sufficient provisions to satisfy this requirement, drawing a comparison to the By-Laws in Welbilt Construction Corp. v. Heirs of Cresenciano C. De Castro.

However, the Supreme Court found these arguments unconvincing. The Court clarified that Chateau de Baie did not eliminate the requirement for special authority. It emphasized that Chateau de Baie involved an intra-corporate dispute and did not overrule the established doctrine in First Marbella Condominium Association, Inc. v. Gatmaytan, which mandates that a petition for extrajudicial foreclosure must be supported by evidence that the petitioner holds a special power or authority to foreclose.

Building on this principle, the Court emphasized that Section 20 of the Condominium Act outlines the procedure for treating unpaid assessments as a superior lien but does not, on its own, grant the condominium corporation the authority to foreclose. To underscore this point, the Supreme Court quoted First Marbella:

Clearly, Section 20 merely prescribes the procedure by which petitioner’s claim may be treated as a superior lien — i.e., through the annotation thereof on the title of the condominium unit. While the law also grants petitioner the option to enforce said lien through either the judicial or extrajudicial foreclosure sale of the condominium unit, Section 20 does not by itself, ipso facto, authorize judicial as extra-judicial foreclosure of the condominium unit. Petitioner may avail itself of either option only in the manner provided for by the governing law and rules. As already pointed out, A.M. No. 99-10-05-0, as implemented under Circular No. 7-2002, requires that petitioner furnish evidence of its special authority to cause the extrajudicial foreclosure of the condominium unit.

The necessity of a special authority stems from the fundamental legal principle of “nemo dat quod non habet,” meaning one cannot give what one does not have. Only the registered owner, in this case, Brouwer, possesses the jus disponendi, the right to dispose of the property. For LPL to act on Brouwer’s behalf, it needed a clear, special power of attorney.

Article 1878 of the Civil Code reinforces this requirement, specifying that special powers of attorney are necessary to enter into contracts that transmit or acquire ownership of immovable property, create or convey real rights over immovable property, or perform any other act of strict dominion. A special power of attorney to sell is indispensable in extrajudicial foreclosure, as the mortgagee acts as the agent of the mortgagor-owner. In the absence of such authority, the sale is void.

The Court further explained that this special power need not be in a specific form but must unequivocally demonstrate the owner’s intent to authorize the corporation to sell the property in case of default. The Supreme Court cited the case of The Commoner Lending Corp. v. Spouses Villanueva:

x x x [I]n extrajudicial foreclosure of real estate mortgage, a special power to sell the property is required which must be either inserted in or attached to the deed of mortgage. Apropos is Section 1 of Act No. 3135, as amended by Act No. 4118 x x x.

x x x x

The special power or authority to sell finds support in civil law. Foremost, in extrajudicial foreclosure, the sale is made through the sheriff by the mortgagees acting as the agents of mortgagors­-owners. Hence, there must be a written authority from the mortgagor-owners in favor of the mortgagees. Otherwise, the sale would be void. Moreover, a special power of attorney is necessary before entering “into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration.” Thus, the written authority must be a special power of attorney to sell.

Consequently, since LPL lacked the requisite special authority, the Court affirmed that it could only enforce its lien through an ordinary collection suit or judicial foreclosure proceedings under Rule 68 of the Rules of Court.

Petitioners were also deemed to have been barred by laches from raising the issue of whether the Master Deed of Restrictions and By-Laws contained the necessary special authority because they failed to timely challenge the RTC’s factual findings on this matter. The Court emphasized that issues not brought to the trial court cannot be raised for the first time on appeal, as doing so would violate due process.

Moreover, the Court noted that the interpretation of the Master Deed and By-Laws involved questions of fact, which are generally outside the scope of a Rule 45 petition. Even if the Court were to consider these documents, the provisions cited by LPL did not resemble a special authority to sell the properties. The Supreme Court differentiated this case from Welbilt, where the condominium corporation did possess such authority within its governing documents.

Finally, the Court dismissed the argument that the death of Brouwer’s attorney-in-fact, Manfred De Koning, terminated the legal representation of Gutierrez, Cortez & Partners. The Court clarified that De Koning was merely a representative, and the attorney-client relationship existed between Brouwer and her counsel. Therefore, De Koning’s death did not automatically terminate the legal representation.

FAQs

What was the key issue in this case?	The key issue was whether a condominium corporation needs a special authority or power from the unit owner to initiate extrajudicial foreclosure proceedings for unpaid condominium dues.
What is a special power of attorney in the context of foreclosure?	A special power of attorney is a legal document authorizing another person or entity (in this case, the condominium corporation) to act on behalf of the property owner, specifically to sell the property in case of default.
What is “jus disponendi” and why is it important?	Jus disponendi is the right to dispose of property. It’s important because only the owner of the property has this right, unless they specifically grant that right to someone else via special power of attorney.
Does Section 20 of the Condominium Act grant condominium corporations the power to foreclose?	No, Section 20 outlines the procedure for treating unpaid dues as a lien but does not, by itself, grant the power to foreclose. It simply provides the option to enforce the lien through judicial or extrajudicial means.
What is the legal basis for requiring a special power of attorney for extrajudicial foreclosure?	The legal basis comes from Article 1878 of the Civil Code and the principle of “nemo dat quod non habet,” which means one cannot give what one does not have.
What happens if a condominium corporation forecloses without a special power of attorney?	The foreclosure sale is considered void, and the unit owner retains ownership of the property. The corporation can pursue other legal avenues, such as a collection suit or judicial foreclosure.
What is “laches” and how did it affect this case?	Laches is the failure to assert one’s rights in a timely manner. In this case, the petitioners were barred by laches from raising the factual issue of whether the Master Deed contained a special authority because they failed to raise the issue at the trial court level.
How does this ruling protect condominium owners?	This ruling protects condominium owners by ensuring that they retain control over their property and that a condominium corporation cannot initiate extrajudicial foreclosure without their explicit consent, as demonstrated through a specific grant of authority.
What options does a condominium corporation have if it cannot pursue extrajudicial foreclosure?	The condominium corporation can pursue other legal options, such as filing an ordinary collection suit or initiating judicial foreclosure proceedings under Rule 68 of the Rules of Court.

In conclusion, the Supreme Court’s decision underscores the importance of explicit authorization when a condominium corporation seeks to enforce its lien for unpaid dues through extrajudicial foreclosure. This ruling serves as a critical safeguard for condominium owners, ensuring their property rights are protected and that they are not subjected to foreclosure without clear and demonstrable consent.

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 v. Catharina Brouwer, G.R. No. 248743, September 07, 2022