Jesus Lim Arranza et al. v B.F. Homes, Inc. et al.
 Petitioners filed with HLURB a class suit “for and in behalf of the more than 7,000
June 19, 2000|Davide, Jr., C.J.| Administrative Procedure; Jurisdiction
Digester: Anna Mickaella Lingat
SUMMARY: Respondent BF Homes, Inc (BFHI), is a domestic corporation engaged
in developing subdivision and selling residential lots. With the withdrawal of substantial
investments in BFHI, respondent filed with the SEC a petition for rehabilitation. Atty
Florencio Orendain was appointed as receiver. He was later relieved by the SEC of his
duties as a Receiver. The new Board of Receivers revoked the authority given by
Orendain to use the open spaces at Concha Cruz Drive and to collect community
assessment funds; deferred the purchase of new pumps ; recognized BF Paranaque
Homeowners Association (BFPHAI) as the representative of all homeowners; took over
the management of the Clubhouse and deployed its own guards. Petitioners filed with
the HLURB a class suit “for and in behalf of the more than 7,000 homeowners” against
respondent BFHI et al to enforce the rights of purchasers of lots in BF Homes
Paranaque 3. Respondents asserts that the SEC, not the HLURB, has jurisdiction
arguing that the SEC, being the appointing authority should be the one to take
cognizance of controversies arising from the performance of the receiver’s duties. The
Court held that it is HLURB that has jurisdiction over the case, and not the SEC.
DOCTRINE: The SEC has authority over the operation of all kinds of corporations,
partnerships or associations with the end in view of protecting the interests of the
investing public and creditors. The HLURB has jurisdiction over matters relating to
observance of laws governing corporations engaged in the specific business of
development of subdivisions and condominiums.
FACTS:
 BF Homes, Inc. (BFHI) is domestic corporation engaged in developing
subdivisions and selling residential lots. One of the subdivisions that BFHI
developed was the BF Homes Parañaque Subd.
 When Central Bank ordered the closure of Banco Filipino, which had substantial
investments in BFHI, BFHI filed with the SEC a petition for rehabilitation and a
declaration that it was in a state of suspension of payment. SEC placed BFHI under
a management committee, appointed Atty. Florencio B. Orendain as a Receiver,
and approved a Revised Rehabilitation Plan.
 Orendain instituted a central security system and unified the 65 homeowner’s
associations into an umbrella homeowners association called “United BF
Homeowners Associations (UBFHAI).
 BFHI turned over to UBFHAI control and administration of security in the
subdivision, clubhouse and open spaces.
 Orendain was relieved by the SEC of his duties as a Receiver, and a new Board of
Receivers was appointed. The new Board revoked Orendain’s authority to use the
open spaces and to collect community assessment funds; deferred the purchase of
new pumps; recognized BF Parañaque Homeowners Association, Inc (BFPHAI) as
the representative of all homeowners in the subdivision; took over the management
of the Clubhouse; and deployed its own security guard in the subdivision.
homeowners in the subdivision” against BFHI, et al “to enforce the rights of
purchasers of lots in BF Homes Parañaque.
 In BFHI’s answer, it claimed that:
o It complied with its contractual obligations relative to the subdivisions
development
o It could not be compelled to abide by agreements resulting from Orendain’s
ultra vires acts
o Petitioners were precluded from instituting the instant action because of the
suspension of all actions for claims against a corporation under receivership.
HLURB
 Ruled in favor of the petitioners
 Enjoined BFHI:
o From taking over/administering Concha Garden Row
o From issuing stickers to residents and non-residents alike for free or with fees
o From preventing necessary improvements and repairs of infrastructures within
the authority and administration of UBFHAI
o From taking over security in the exit points of the subdivision
CA
 Reversed; set aside the writ of preliminary injuction issued by HLURB
 Petitioner’s action should be regarded as a “claim” within the contemplation of PD
No 902-A, which should be placed on equal footing with those of petitioners other
creditor or creditors and which should be filed with the Committee of Receivers.
 Petitioner’s action against BFHI, which is under receivership, should be suspended.
RULING: Decision of the Court of Appeals is hereby REVERSED and SET ASIDE.
This case is REMANDED to the Housing and Land Use Regulatory Board for
continuation of proceedings with dispatch as the Securities and Exchange Commission
proceeds with the rehabilitation of respondent BF Homes, Inc., through the Board of
Receivers. Thereafter, any and all monetary claims duly established before the HLURB
shall be referred to the Board of Receivers for proper disposition and thereafter, to the
SEC, if necessary. No costs.
Whether the HLRUB has the jurisdiction over the petitioner’s claims? – YES,
not the SEC.
 PETITIONER’S ARGUMENTS:
o The issues are within the jurisdiction of HLURB.
o Their complaint refers to rights of way, water, open spaces, road and perimeter
wall repairs, security and BFHI’s interlocking corporations that facilitated the
circumvention of its obligation involves unsound real estate practices.
o The action is for specific performance of a real estate developers obligations
under PD No 957 and the relief sought is revocation of the subdivision
projects registration certificate and license to sell.
 o Even if BFHI is under receivership, its obligations as a real estate developer
are not suspended.
o Suspension of all actions for claims refers solely to monetary claims which are
but incidental to their complaints against BFHI. If filed elsewhere than
HLURB, it would result to splitting of causes of action
o Acts enjoined by HLURB are not related to the disposition of BFHI’s assets as
a corporation undergoing its final phase of rehabilitation.
 RESPONDENT’S ARGUMENTS:
o SEC has the jurisdiction over petitioner’s complaint based on the contracts
entered into by the former receiver.
o SEC, being the appointing authority, should be he one tot take cognizance of
controversies arising from the performance of the receiver’s duties.
o Since BFHI’s properties are under SEC’s custodial egis, they are exempt from
any court processes.
COURT:
 PD No 957 (The Subdivision and Condominium Buyers Protective Decree) was
issued to answer to the popular call for correction of pernicious practices of
subdivision owners and/or developers that adversely affected the interests of
subdivision lot buyers.
 Sec 3 of PD No 957 empowered the National Housing Authority (NHA) with the
exclusive jurisdiction to regulate the real estate trade and business.
 Thereafter, the regulatory and quasi-judicial functions of the NHA were transferred
to the Human Settlements Regulatory Commission (HSRC) by virtue of EO No.
648. Sec 8 of said EO transferred NHA’s authority to hear and decide “cases on
unsound real estate business practices, claims involving refund filed against project
owners, developers, dealers, brokers or salesmen and cases of specific
performance” to HSRC.
 The boom in the real estate business all over the country resulted in more litigation
between subdivision owners/developers and lot buyers with the issue of the
jurisdiction of the NHA or the HLURB over such controversies as against that of
the regular courts.
 The Court has consistently ruled that NHA or 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 in a better place to
live in.
 In the present petition, petitioner’s complaint is for specific performance to enforce
their rights as purchasers of subdivision lots as regards rights of way, water, open
spaces, road and perimeter wall repairs, and security. The HLURB, then, has
jurisdiction over the complaint.
Assuming HLURB has jurisdiction, may the proceedings be suspended pending
the outcome of receivership before the SEC? - NO
 The fact that BFHI is under receivership does not divest the HLURB of that
jurisdiction.
 A receiver is a person appointed by the court, or in this instance, by a quasi-judicial
administrative agency, in behalf of all the parties for the purpose of preserving and
conserving the property and preventing its possible destruction or dissipation, if it
were left in the possession of any of the parties.
o It is the duty of the receiver to administer the assets of the receivership estate;
and in the management and disposition of the property committed to his
possession, he acts in a fiduciary capacity and with impartiality towards all interested
persons.
o The appointment of a receiver does not dissolve a corporation, nor does it
interfere with the exercise of its corporate rights.
 In this case where there appears to be no restraints imposed upon respondent as it
undergoes rehabilitation receivership, respondent continues to exist as a
corporation and hence, continues or should continue to perform its contractual and
statutory responsibilities to petitioners as homeowners.
 No violation of the SEC order suspending payments to creditors would result as far
as petitioners complaint before the HLURB is concerned. To reiterate, what
petitioners seek to enforce are respondents obligations as a subdivision developer.
Such claims are basically not pecuniary in nature although it could incidentally involve
monetary considerations.
 All that petitioners claims entail is the exercise of proper subdivision management
on the part of the SEC-appointed Board of Receivers towards the end that
homeowners shall enjoy the ideal community living that respondent portrayed they
would have when they bought real estate from it.
 In this case, under the complaint for specific performance before the HLURB,
petitioners do not aim to enforce a pecuniary demand. Their claim for
reimbursement should be viewed in the light of respondents alleged failure to
observe its statutory and contractual obligations to provide petitioners a "decent
human settlement" and "ample opportunities for improving their quality of life."
The HLURB, not the SEC, is equipped with the expertise to deal with that matter.
 For the SEC to acquire jurisdiction over any controversy under these provisions,
two elements must be considered:
o (1) the status or relationship of the parties; and
o (2) the nature of the question that is the subject of their controversy.
 The first element requires that the controversy must arise "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; and between such
corporation, partnership or association and the State in so far as it concerns their
individual franchises."
 In this case, petitioners are not stockholders, members or associates of respondent.
They are lot buyers and now homeowners in the subdivision developed by the
respondent.
 The second element requires that the dispute among the parties be intrinsically
connected with the regulation or the internal affairs of the corporation, partnership
 or association. The controversy in this case is remotely related to the "regulation"
of respondent corporation or to respondents "internal affairs."
 The main concern in this case is the issue of jurisdiction over petitioners complaint
against respondent for specific performance. P.D. No. 902~A, as amended, defines
the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of the
HLURB.
 These two quasi~judicial agencies exercise functions that are distinct from each
other.
o The SEC has authority over the operation of all kinds of corporations,
partnerships or associations with the end in view of protecting the interests of
the investing public and creditors.
o The HLURB has jurisdiction over matters relating to observance of laws
governing corporations engaged in the specific business of development of
subdivisions and condominiums.
 The HLURB and the SEC being bestowed with distinct powers and functions, the
exercise of those functions by one shall not abate the performance by the other of
its own functions. There is no contradiction between P.D. No. 902~A and P.D.
No. 957.