WACK WACK CONDOMINIUM CORPORATION, WELBILT CONSTRUCTION CORPORATION AND EUGENIO JUAN GONZALEZ, PETITIONERS, VS. THE COURT OF APPEALS, HON. JUANITO B. ALMOSA, JR., IN HIS CAPACIT…

This is a Petition for Review on certiorari questioning
the two Resolutions*
of the Court of Appeals affirming the orders of respondent Securities and
Exchange Commission (SEC) Hearing Officer denying petitioners’ Motion to
Dismiss SEC Case No. 2675.** Briefly, the undisputed facts are
as follows:

Private respondent Josefina Bayot (Bayot, for brevity) bought and
fully paid for a condominium unit in the Wack Wack Condominium building. Petitioner Welbilt Construction Corporation
(Welbilt, for brevity) is the developer of said condominium building, while the
petitioner Wack Wack Condominium Corporation (Wack Wack, for brevity) owns the
common areas of said building and is the manager of the condominium
project. Petitioner Eugenio Gonzalez is
the President of both the Welbilt and Wack Wack and, with Welbilt, holds the
controlling interest in Wack Wack, Bayot, having fully paid for her unit, was
issued Condominium Certificate of Title 727, and as such became a stockholder
of Wack Wack. Sometime in July, 1984,
the latter issued an undated Statement of Account in Bayot’s name listing
specified assessments against her and her unit, most of which assessments were
assailed by her as unreasonable, arbitrary and/or unauthorized in their
contract of sale. The total amount of
said assessments was P112,367.72. On
July 17, 1984, Wack Wack filed with the Sheriff of Pasig, a petition for
extrajudicial sale of Bayot’s unit to answer for the outstanding assessments
which had remained unpaid. The required
notices and publication were made, the sale being set for August 24, 1984. On August 23, 1984, Bayot, through counsel,
filed a petition before the SEC for Injunction and Damages with a prayer for a
preliminary injunction to restrain the Sheriff of Pasig from going on with the
sale. On that same date, and on motion
of private respondent, the SEC Hearing Officer issued a temporary restraining
order addressed to the said Sheriff.

On September 10, 1984, petitioners herein filed a petition for mandamus
before the Regional Trial Court (RTC) of Pasig to compel the Pasig Sheriff to
go on with the extrajudicial sale. On
October 5, 1984, said court issued an order to the effect that since the 20-day
period of the restraining order had already lapsed, “the same may now be
disregarded and the extrajudicial foreclosure given due course”. Bayot was completely unaware of the petition
for mandamus and the consequent order of the RTC because she was not
made a party thereto and thus received no notice thereof.

In the meantime, hearings on the preliminary injunction were
going on, with several postponements granted at the instance of herein
petitioners. On October 23, 1984, when
Bayot finished presentation of her evidence and both parties were present
before the SEC, counsel for petitioners herein again asked for postponement on
the ground that their main witness, petitioner Eugenio Gonzalez, was
abroad. After granting the
postponement, the hearing officer reset the hearing for November 16, 1984 at
9:30 o’clock in the morning. At that
hearing of October 23, 1984, counsel for petitioners said nothing about the
petition for mandamus although it had already been granted, and the writ
issued, on October 5, 1984. At this
stage, the SEC Hearing Officer and Bayot still had no knowledge of said mandamus.

Sometime after this last hearing, counsel for private respondent
received a second notice of extrajudicial foreclosure, and immediately filed a
motion with the SEC for another order to restrain the Pasig Sheriff from
proceeding with the extrajudicial sale. Notice of said motion was sent to petitioners with the statement that a
restraining order would be issued immediately upon receipt of said notice by
the said petitioners, which date fell on November 15, 1984.

On November 16, 1984, at 9:30 o’clock in the morning, the date
set for the next SEC hearing, counsel for petitioners did not appear but
instead sent a motion for postponement on the ground that their witness,
petitioner Eugenio Gonzalez, was still abroad. Over the strong objections of private respondent’s counsel, postponement
was granted on the condition that this would be the last. Hearing was reset for December 3, 1984. At 10:00 o’clock of the same day (November
16), in spite of the Pasig Sheriff’s receipt of the second restraining order,
the extrajudicial sale took place with the petitioners as the highest bidders.

On December 3, 1984, petitioners filed with the SEC a Motion to
Dismiss SEC Case No. 2675 on the ground that the same had become moot and
academic because of the foreclosure sale and that the SEC lacked
jurisdiction. On March 22, 1985, the
SEC denied the Motion to Dismiss and, after their Motion for Reconsideration
was also denied, the petitioners filed a Petition for Certiorari with
the Intermediate Appellate Court (now the Court of Appeals).

Through two Resolutions, dated May 13, 1987 and November 25,
1986, the Court of Appeals upheld the SEC’s denial of petitioners’ Motion to
Dismiss SEC Case No. 2675. Now, this
Petition for Review on certiorari. In the meantime, Bayot died, her counsel withdrew and new counsel has
entered appearance on behalf of her heirs.

The main issues before Us are whether the extrajudicial sale of
the condominium unit in question has rendered moot and academic SEC Case No.
2675, and whether the foreclosure proceeding is within the SEC jurisdiction.

The dispute before the SEC arose due to the assessments which the
petitioners made against Bayot’s unit and which the latter refused to pay on
the ground that they were unreasonable, arbitrary and/or unauthorized by their
contract of sale. Under the Condominium
Act^[1]
and the by-laws^[2]
of the Wack Wack, assessments upon a condominium constitute a lien on such
condominium and may be enforced by judicial or extrajudicial foreclosure. The said Act and by­-laws were made part of
the contract of sale between the parties. When Bayot refused to pay said assessments, the petitioners sought to
enforce the lien on Bayot’s condominium by extrajudicial foreclosure. It was at this point that Bayot brought the
matter before the SEC which issued the two restraining orders under the
circumstances previously described. The
SEC has so far been prevented from deciding the issue of the validity of the
assessments due to the extrajudicial sale of the unit in question. And the dispute was aggravated and the
proceedings became protracted because of the various legal proceedings/motions
which the parties subsequently resorted to in order to resolve their dispute.

We agree with the Court of Appeals and the SEC that the dispute
as to the validity of the assessments is purely an intra-corporate matter
between Wack Wack and its stockholder, Bayot, and is thus within the exclusive
original jurisdiction of the SEC.^[3]
And since the extrajudicial sale was authorized by Wack Wack’s by-laws and was
the result of the non-payment of said assessments, the legality of such
foreclosure is necessarily an issue also within the exclusive original
jurisdiction of the SEC, contrary to petitioners’ contention that the SEC has
no jurisdiction over such foreclosure it being an action quasi?in-rem. Just because the property has already been
sold extrajudicially does not mean that the questioned assessments have now
become legal and valid or that they have become immaterial. In fact, the validity of the foreclosure
depends on the legality of the assessments and the issue must be determined by
the SEC if only to insure that the private respondent was not deprived of her
property without having been heard. If
there were no valid assessments, then there was no lien on the property, and if
there was no lien, what was there to foreclose? Thus, SEC Case No. 2675 has not become moot and academic and the
SEC retains its jurisdiction to hear and decide the case despite the
extrajudicial sale.

The private respondent assails the validity of the foreclosure on
the ground that it was in violation of the second restraining order issued by
the SEC. On the other hand, petitioners
claim that the second restraining order was beyond the authority of the SEC to
issue, and this contention was upheld by the Court of Appeals. We do not agree with the Court of Appeals. Said Court based its opinion on the
following provision:

“8.     Preliminary injunction
not granted without notice; issuance of restraining order. — No preliminary injunction shall be
granted without notice to the defendant. If it shall appear from the facts shown by affidavit or by the verified
complaint that great or irreparable injury would result to the applicant before
the matter can be heard on notice, the Court to which the application for
preliminary injunction was made, may issue a restraining order to be effective
only for a period of twenty days from date of its issuance. Within the said twenty-day period, the court
must cause an order to be served on the defendant, requiring him to show cause,
at a specified time and place, why the injunction should not be granted, and
determine within the same period whether or not the preliminary injunction
shall be granted, and shall accordingly issue the corresponding order. In the event that the application for preliminary
injunction is denied, the restraining order is deemed automatically vacated.

x x x.”^[4]

The above provision is silent as to a
second restraining order. However, the
reason behind the law is to prevent the preliminary injunction from becoming an
instrument of injustice, when it is issued without a hearing and is allowed to
continue for an indefinite period. Only
in case of probable irreparable injury to the petitioner may such a restraint
without hearing be granted, and only for a period of twenty days, at which time
it automatically terminates. Thus, this
Court has previously held that under the above provision, a temporary
restraining order cannot exist indefinitely.^[5]
On the other hand, the circumstances of the present case are unusual. To repeat, due to postponements at the
instance of Wack Wack, it was only on October 23, 1984 that counsel for the
private respondent was able to finish presenting his evidence in support of the
preliminary injunction. On said date,
when petitioners were supposed to present their evidence in opposition to the
preliminary injunction, their counsel again asked for postponement alleging
that their main witness was in the United States. It should be remembered that at that time, petitioners’ counsel
said nothing about the mandamus which it had obtained previously, i.e.,
on October 5, 1984. Both the SEC and
the private respondent’s counsel were completely unaware of said mandamus,
and were thus led to believe that the petitioners were willing to go on with
the hearings and to present their evidence in opposition to the preliminary
injunction. To top it all, at the
hearing on November 16, 1984, the same day of the extrajudicial sale, counsel
for petitioners, without personally appearing before the SEC, sent a motion for
another postponement on the ground that their witness was still abroad. All these circumstances strongly suggest a
premeditated plan to effect the extrajudicial sale with the least possible
opportunity on the part of Bayot to stop it by legal means.

It is not surprising therefore that Bayot, taken aback by the
second notice of foreclosure, had no choice but to ask the SEC for a second
restraining order. Notice of the motion
for such order reached petitioners on November 15, 1984, a day before the date
set for the extrajudicial sale on November 16, 1984. In this connection, petitioners claim that the 3-day notice
required by law for motions was not complied with and that such lack of notice
rendered the second restraining order ineffective. Under the circumstances, We believe that the petitioners, by
their own objectionable conduct, had forfeited any right they may have had with
respect to the 3-day notice requirement. On the other hand, the Sheriff, despite having received the restraining
order, went ahead with the sale — perhaps feeling secure in his position
because of the order of the RTC giving due course to the extrajudicial
sale. Paranthetically, We should point
out that this Court has previously held that a court has no power to interfere
with a judgment or order of another co-equal court as this may lead to
confusion and may seriously hinder the administration of justice.^[6]
And as far as its judicial functions are concerned, the SEC is a co-equal body
with the Regional Trial Court. Thus,
the Pasig RTC should not have entertained the petition for mandamus.

Lastly, this Court cannot allow one of the parties in a case to
use the provisions of law and jurisprudence on the matter to shield him from
the effects of his objectionable acts intended to deceive the other party and
deprive the latter of his day in court. We therefore hold that under the peculiar circumstances of this case,
the second restraining order issued by the SEC Hearing Officer on November 15,
1984 was valid and effective.

WHEREFORE, the SEC order denying the Motion to Dismiss SEC
Case No. 2675 entitled “Josefina Bayot vs. Wack Wack Condominium Corporation,
Welbilt Construction Corporation and Eugenio Juan Gonzalez”, is AFFIRMED, and
the case is remanded to the SEC for further proceedings.

SO ORDERED.

Narvasa, C.J., (Chairman), Feliciano, Regalado, and Nocon, JJ., concur.

*
CA-G.R. SP No. 07740, dated November 25, 1986 and May 13, 1987, respectively,
both penned by Justice Fidel P. Purisima and concurred in by Justice Carolina
Griño-Aquino and Justice Vicente V. Mendoza and Justice Jorge Imperial,
respectively.

**
Josefina M. Bayot vs. Eugenio Juan Gonzalez, Wack Wack Condominium
Corporation, Welbilt Construction Corporation and Ms. Grace Belvis.

^[1]
RA 4726, Sec. 20 provides:

“Sec. 20. An assessment upon any condominium made in accordance with a duly
registered declaration of restrictions shall be an obligation of the owner
thereof at the time the assessment is made. The amount of any such assessment plus any other charges thereon, such
as interest, costs (including attorney’s fees) and penalties, as such may be
provided for in the declaration of restrictions, shall be and become a lien
upon the condominium assessed when the management body causes a notice of
assessment to be registered with the Register of Deeds of the city or province
where such condominium project is located, x x x.”

^[2]
Section 5 of Article 5 of the By-Laws of Wack Wack stipulates, inter alia,
that, in the event a member defaults in the payment of any assessment duly levied
in accordance with the Master Deed with Declaration of Restrictions of the
condominium project and their By-Laws, the Board of Directors may enforce
collection thereof by any of the remedies provided by the Condominium Act and
other pertinent laws.

^[3]
P.D. 902-A, Section 5 provides:

“Sec. 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission over corporations, partnerships and other
forms of associations registered with it as expressly granted under existing
laws and decrees, it shall have original and exclusive jurisdiction to hear and
decide cases involving:

x x x                                         xxx

b) Controversies arising out of
intra-corporate or partnership relations, between and among stockholders,
members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or
associates, respectively; x x x.”

^[4]
Interim Rules and Guidelines, dated January 11, 1983 implementing B.P. Blg.
224.

^[5]
See Dionisio vs. CFI of South Cotabato, Br. II, 124 SCRA 222 (1983) and
Board of Transportation vs. Castro, 125 SCRA 410 (1983).

^[6]
See Calderon vs. Gomez, 21 SCRA 1002 (1967).