HLC CONSTRUCTION AND DEVELOPMENT CORPORATION AND HENRY LOPEZ CHUA, PETITIONERS, VS. EMILY HOMES SUBDIVISION HOMEOWNERS ASSOCIATION (EHSHA), LUCIO ABBOT, JAIME ABRIS, MARINA ACUÑ…

HLC Construction versus Emily Homes Subdivision Homeowners Association

The Case

This is a petition for certiorari brought by HLC Construction and Development Corporation and its officer Henry Lopez Chua against the Emily Homes Subdivision Homeowners Association and its one hundred fifty individual members. The homeowners sued the developers for breach of contract, damages, and attorney's fees, complaining that their low-cost houses were built with substandard materials and deviated from the approved plans. The developers moved to dismiss, arguing that the trial court had no jurisdiction because the dispute belonged to the Housing and Land Use Regulatory Board, and that the certificate against forum shopping was defective because only the association president signed it. The case matters because it settles two recurring bar questions at once: which body has jurisdiction over a subdivision buyer's complaint about defective housing units, and when may one plaintiff sign the certificate against forum shopping for all the rest.

Procedural History

The homeowners filed a civil action for breach of contract, damages, and attorney's fees with the Regional Trial Court of Davao del Sur, Branch 19. The developers moved to dismiss on two grounds: lack of jurisdiction, since the Housing and Land Use Regulatory Board had exclusive jurisdiction, and a defective certification against forum shopping, signed only by the association president and not by all one hundred fifty members. The trial court denied the motion, holding that the case fell within its jurisdiction and that the certification substantially complied with the rules. It also denied the developers' motion for reconsideration. The developers then went straight to the Supreme Court by petition for certiorari under Rule 65, alleging grave abuse of discretion amounting to lack or excess of jurisdiction. The Supreme Court gave the petition due course and decided it in September 2003.

Facts

The homeowners, residents of Emily Homes Subdivision, bought low-cost housing units from the developers. They later discovered that the units were built with substandard materials, including coco lumber and termite-infested door jambs. The construction also departed from the approved house plans: the ceiling lines were sagging, and there were deviations from the plumb line of the mullions, door jambs, and concrete columns.

The homeowners asked the developers to repair the defective units, but the developers refused or failed to act. The homeowners then repaired the units using their own funds. On October 21, 1998, the association and its one hundred fifty members, represented by their president, Samaon Buat, filed a complaint for breach of contract, praying for actual and moral damages, exemplary damages, and attorney's fees. The certificate against forum shopping was signed by Buat alone.

The developers moved to dismiss, and the trial court denied the motion. Hence the petition before the Supreme Court.

Issues

• Whether or not the Regional Trial Court had jurisdiction over the homeowners' complaint for breach of contract arising from defective housing units, or whether jurisdiction belonged exclusively to the Housing and Land Use Regulatory Board.
• Whether or not the certificate against forum shopping, signed only by the association president on behalf of all one hundred fifty plaintiffs, was defective and warranted dismissal of the complaint.

Applicable Provisions

Presidential Decree Number 957, the Subdivision and Condominium Buyers' Protective Decree, as amended by Presidential Decree Number 1344, confers on the Housing and Land Use Regulatory Board exclusive jurisdiction over the following cases:

(a) unsound real estate business practices; (b) claims involving refunds and any other claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker or salesman; and (c) cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman.

This provision is decisive because the homeowners' claim for reimbursement of repair expenses is a claim by subdivision buyers against the developer, which falls squarely within the Board's exclusive jurisdiction and removes the case from the trial court.

Rule 7, Section 5 of the 1997 Rules of Civil Procedure governs the certificate against forum shopping, and the Court treats its requirement as mandatory but open to substantial compliance under justifiable circumstances.

Ruling

On the first issue, the Court ruled for the developers. The trial court had no jurisdiction; the Housing and Land Use Regulatory Board had exclusive jurisdiction over the complaint. The homeowners' action was for reimbursement of expenses incurred in repairing defective housing units built by the developers, and that is a claim by subdivision buyers against the project owner and developer. The Court quoted its earlier ruling in Arranza versus B.F. Homes:

the HLURB has jurisdiction over complaints arising from contracts between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer to comply with its contractual and statutory obligations to make the subdivision a better place to live in.

The fact that the subject matter involved defective housing units did not remove the complaint from the Board's jurisdiction, because delivering habitable houses was the developers' responsibility under their contract.

On the second issue, the Court ruled against the developers. The general rule is that the certificate must be signed by all plaintiffs, and the signature of only one is insufficient. But the rules on forum shopping were designed to promote the orderly administration of justice and should not be interpreted with absolute literalness. The Court applied its ruling in Cavile versus the Heirs of Clarita Cavile: where plaintiffs share a common interest and file as a collective raising one common cause of action, one plaintiff may sign for all. Here the homeowners sued as a group, represented by their association president, who was himself a plaintiff; they raised one cause of action, breach of contract, and shared a common interest as aggrieved residents. The signature of the president was therefore a valid substantial compliance.

Doctrine

First, the Housing and Land Use Regulatory Board has exclusive jurisdiction over claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker, or salesman, including claims for refunds and reimbursement and actions for specific performance of contractual and statutory obligations. A complaint for reimbursement of expenses for repairing defective housing units falls within that jurisdiction, not that of the trial court.

Second, while the certificate against forum shopping must as a general rule be signed by all plaintiffs, the Court allows substantial compliance where it is highly impractical to require all plaintiffs to sign, provided one plaintiff acting as representative signs and the plaintiffs share a common interest in the subject matter or filed the case as a collective raising only one common cause of action or defense.

Disposition

The petition was granted; the trial court's order denying the motion to dismiss was annulled, and the civil case was dismissed for lack of jurisdiction, without prejudice to refiling the complaint with the Housing and Land Use Regulatory Board.

Remember This

Memorize this line: defective housing units sold by a subdivision developer are a matter for the Housing and Land Use Regulatory Board, not the trial court, and one plaintiff may sign the certificate against forum shopping for a collective sharing a common interest. Examiners use this case to test jurisdiction over subdivision buyer complaints and the substantial compliance exception to the forum shopping certificate.