FIRST DIVISION

[G.R. No. 124873. July 14, 1999.]

UNITED
BF
HOMEOWNER'S
ASSOCIATION,
and
HOME
INSURANCE AND GUARANTY CORPORATION , petitioners, vs. BF
HOMES, INC., respondent.

Veneranda Acayler-Cruz for United BF Homeowner's Association.

Roberto C. Abrajano for petitioner Home Insurance and Guaranty Corp.
Hector Danny D. Uy for respondents.
SYNOPSIS
The Securities and Exchange Commission (SEC) placed respondent BF Homes, Inc.
(BFHI) under receivership to undergo a ten-year (10) rehabilitation program due to
its nancial diculties. Petitioner UBFHAI was created and registered with the
Home Insurance and Guaranty Corporation (HIGC) in 1989, and recognized as the
sole representative of all the homeowners' association inside the BF Homes
Paraaque Subdivision. Respondent BFHI, through its receiver, turned over to
petitioner UBFHAI the administration and operation of the subdivision's clubhouse
and a strip of open space in 1989 and 1993, respectively. In 1994, the rst receiver
was relieved and a new committee of receivers, composed of respondent BFHI's
eleven (11) members of the board of directors was appointed. Petitioner UBFHAI
led with the HIGC a petition for mandamus with preliminary injunction against
respondent BFHI alleging that the committee of receivers illegally revoked their
security agreement with the previous receiver. Without ling an answer to the
petition with HIGC, respondent BFHI led with the Court of Appeals a petition for
prohibition for the issuance of preliminary injunction and temporary restraining
order, to enjoin HIGC from proceeding with the case. The Court of Appeals granted
respondent BFHI's petition for prohibition and also ordered HIGC's hearing ocer to
refrain from hearing and to dismiss it for lack of jurisdiction. Assailed in this petition
for review on certiorari is the decision and resolution of the Court of Appeals.
The Supreme Court held that Rule II, Section 1 (b) of HIGC's "Revised Rules of
Procedure in the Hearing of Homeowners' Disputes" is void, without ruling on the
validity of the rest of the rules. Neither can HIGC claim original and exclusive
jurisdiction over the petition for mandamus under the two other types of disputes
enumerated in PD 902-A and its revised rules. The dispute is not one involving the
members of the homeowners association nor is it one between any and/or all of the
members and the association of which they are members. The parties are the
homeowners' association and the owner-developer, acting at the same time as the
corporation's committee of receivers. The Court decision and resolution appealed
from were affirmed.

SYLLABUS
1.
COMMERCIAL LAW; CORPORATION CODE; HOME INSURANCE AND
GUARANTY CORPORATION (HIGC); POWERS AND FUNCTIONS THEREOF;
LIMITATIONS. Originally, administrative supervision over homeowners'
associations was vested by law with the Securities and Exchange Commission. On
May 3, 1979, pursuant to Executive Order 535, this function was delegated to the
Home Insurance and Guaranty Corporation (HIGC). Section 2 of Executive Order
535 provides: "2. In addition to the powers and functions vested under the Home
Financing Act, the Corporation, shall have among others, the following additional
powers; (a) To require submission of and register articles of incorporation of
homeowners associations and issue certicates of incorporation/registration, upon
compliance by the registering associations with the duly promulgated rules and
regulations thereon; maintain a registry thereof; and exercise all the powers,
authorities and responsibilities that are vested on the Securities and Exchange
Commission with respect to homeowners association, the provision of Act 1459, as
amended by P.D. 902-A, to the contrary notwithstanding;" By virtue of this
amendatory law, the HIGC not only assumed the regulatory and adjudicative
functions of the SEC over homeowners' associations, but also the original and
exclusive jurisdiction to hear and decide cases involving: "(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;
and between such corporation, partnership or association and the state insofar as it
concerns their individual franchise or right to exist as such entity." On December 21,
1989, the HIGC adopted its rules of procedure in the hearing of homeowners'
disputes. Section 1(b), Rule II enumerated the types of disputes over which the
HIGC has jurisdiction, and these include: "Section 1. Types of Disputes The HIGC
or any person, ocer, body, board, or committee duly designated or created by it
shall have jurisdiction to hear and decide cases involving the following: . . . (b)
Controversies arising out of intra-corporate relations between and among members
of the association, between any and/or all of them and the association of which they
are members, and insofar as it concerns its right to exist as a corporate entity,
between the association and the state/general public or other entity. " Therefore, in
relation to Section 5 (b), Presidential Decree 902-A, the HIGC's jurisdiction over
homeowners' disputes is limited to controversies that arise out of the following
intra-corporate relations: (1) between and among members of the association; (2)
between any or all of them and the association of which they are members or
associates; and (3) between such association and the state, insofar as it concerns
their individual franchise or right to exist as such entity.
2.
POLITICAL LAW; LEGISLATIVE ENACTMENT; AN ADMINISTRATIVE AGENCY
CANNOT AMEND AN ACT OF CONGRESS; RATIONALE; CASE AT BAR. As early as
1970, in the case of Teoxon vs. Members of the Board of Administrators (PVA) , 33
SCRA 585, 588 [1970], we ruled that the power to promulgate rules in the
implementation of a statute is necessarily limited to what is provided for in the
legislative enactment. Its terms must be followed for an administrative agency

cannot amend an Act of Congress. The rule-making power must be conned to

details for regulating the mode or proceedings to carry into eect the law as it has
been enacted, and it cannot be extended to amend or expand the statutory
requirements or to embrace matters not covered by the statute." (Land Bank of the
Philippines vs. Court of Appeals, 285 SCRA 404, 407 [1996]). If a discrepancy occurs
between the basic law and an implementing rule or regulation, it is the former that
prevails. (Nasipit Lumber Company, Inc. vs. National Wages and Productivity
Commission, 289 SCRA 667, 681 [1981]). In the present case, the HIGC went
beyond the authority provided by the law when it promulgated the revised rules of
procedure. There was a clear attempt to unduly expand the provisions of
Presidential Decree 902-A. As provided in the law, insofar as the association's
franchise or corporate existence is involved, it is only the State, not the "general
public or other entity" that could question this. The appellate court correctly held
that: "The inclusion of the phrase GENERAL PUBLIC OR OTHER ENTITY is a matter
which HIGC cannot legally do . . . ." The rule-making power of a public
administrative body is a delegated legislative power, which it may not use either to
abridge the authority given it by Congress or the Constitution or to enlarge its
power beyond the scope intended. Constitutional and statutory provisions control
what rules and regulations may be promulgated by such a body, as well as with
respect to what elds are subject to regulation by it. It may not make rules and
regulations which are inconsistent with the provisions of the Constitution or a
statute, particularly the statute it is administering or which created it, or which are
in derogation of, or defeat, the purpose of a statute. Moreover, where the legislature
has delegated to an executive or administrative ocers and boards authority to
promulgate rules to carry out an express legislative purpose, the rules of
administrative ocers and boards, which have the eect of extending, or which
conict with the authority-granting statute, do not represent a valid exercise of the
rule-making power but constitute an attempt by an administrative body to legislate.
"A statutory grant of powers should not be extended by implication beyond what
may be necessary for their just and reasonable execution." It is axiomatic that a rule
or regulation must bear upon, and be consistent with, the provisions of the enabling
statute if such rule or regulation is to be valid.
DECISION
PARDO, J :
p

Assailed in this petition for review on certiorari is the decision 1 and resolution 2 of
the Court of Appeals granting respondent BFHI's petition for prohibition, and
ordering Atty. Roberto C. Abrajano, hearing ocer of the Home Insurance and
Guaranty Corporation, to refrain from hearing HIGC CASE NO. HOA-95-027 and to
dismiss it for lack of jurisdiction.
cdrep

The antecedent facts are as follows:

Petitioner United BF Homeowners' Association, Inc. (UBFHAI) is the umbrella

organization and sole representative of all homeowners in the BF Homes Paraaque

Subdivision, a seven hundred sixty ve (765) hectare subdivision located in the
south of Manila. Respondent BF Homes, Inc. (BFHI) is the owner-developer of the
said subdivision, which first opened in 1968. 3
In 1988, because of nancial diculties, the Securities and Exchange Commission
(SEC) placed respondent BFHI under receivership to undergo a ten-year (10)
rehabilitation program, and appointed Atty. Florencio B. Orendain receiver. The
program was composed of two stages: (1) payment of obligations to external
creditors; and (2) payment of obligations to Banco Filipino. 4
llcd

When Atty. Florencio B. Orendain took over management of respondent BFHI in

1988, several things were not in order in the subdivision. 5 Preliminary to the
rehabilitation, Atty. Orendain entered into an agreement with the two major
homeowners' associations, the BF Paraaque Homeowners Association, Inc.
(BFPHAI) and the Confederation of BF Homeowners Association, Inc. (CBFHAI), for
the creation of a single, representative homeowners' association and the setting up
of an integrated security program that would cover the eight (8) entry and exit
points to and from the subdivision. On December 20, 1988, this tripartite
agreement was reduced into a memorandum of agreement, and amended on March
1989.

Pursuant to these agreements, on May 18, 1989, petitioner UBFHAI was created
and registered with the Home Insurance and Guaranty Corporation (HIGC), 6 and
recognized as the sole representative of all the homeowners' association inside the
subdivision.
Respondent BFHI, through its receiver, turned over to petitioner UBFHAI the
administration and operation of the subdivision's clubhouse at #37 Pilar Banzon
Street, 7 and a strip of open space in Concha Cruz Garden Row, 8 on June 23, 1989
and May, 1993, respectively.
cdrep

On November 7, 1994, the rst receiver was relieved and a new committee of
receivers, composed of respondent BFHI's eleven (11) members of the board of
directors was appointed. 9
On April 7, 1995, based on BFHI's title to the main roads, the newly appointed
committee of receivers sent a letter to the dierent homeowners' association in the
subdivision informing them that as a basic requirement for BFHI's rehabilitation,
respondent BFHI would be responsible for the security of the subdivision in order to
centralize it and abate the continuing proliferation of squatters. 10
On the same day, petitioner UBFHAI led with the HIGC a petition for mandamus
with preliminary injunction against respondent BFHI. 11 In substance, petitioner
UBFHAI alleged that the committee of receivers illegally revoked their security
agreement with the previous receiver. They complained that even prior to said date,
the new committee of receivers committed the following acts: (1) deferred

petitioner UBFHAI's purchase of additional pumps; (2) terminated the collection

agreement for the community assessment forged by the petitioner UBFHAI with the
rst receiver; (3) terminated the administration and maintenance of the Concha
Cruz Garden Row; (4) sent a letter to petitioner UBFHAI stating that it recognized
BFPHAI 12 only, and that the subdivision's clubhouse was to be administered by it
only; and (5) took over the administration of security in the main avenues in the
subdivision.
cdphil

On April 11, 1995, the HIGC issued ex parte a temporary restraining order.
Particularly, respondent BFHI was enjoined from:
". . . taking over the Clubhouse located at 37 Pilar Banzon St., BF Homes
Paraaque, Metro Manila, taking over security in all the entry and exit points
and main avenues of BF Homes Paraaque Subdivision, impeding or
preventing the execution and sale at auction of the properties of BF
Paraaque Homeowners Association, Inc., in HIGC HOA-90-138 and
otherwise repudiating or invalidating any contract or agreement of petitioner
with the former receiver/BFHI concerning funding or delivery of community
services to the homeowners represented by the latter." 13

On April 24, 1995, without ling an answer to petitioner UBFHAI's petition with the
HIGC, respondent BFHI led with the Court of Appeals a petition for prohibition for
the issuance of preliminary injunction and temporary restraining order, to enjoin
HIGC from proceeding with the case. 14
On May 2, 1995, the HIGC issued an order deferring the resolution of petitioner
UBFHAI's application for preliminary injunction, until such time that respondent
BFHI's application for prohibition with the appellate court has been resolved. When
the twenty-day (20) eectivity of the temporary restraining order had lapsed, the
HIGC ordered the parties to maintain the status quo. 15
cda

Meanwhile, on November 27, 1995, the Court of Appeals promulgated its decision
granting respondent BFHI's petition for prohibition, as follows:

16

"WHEREFORE, premises considered, the petition is hereby GRANTED,

prohibiting the public respondent Roberto C. Abrajano from proceeding with
the hearing of HIGC CASE NO. HOA-95-027. Consequently, the public
respondent is hereby ordered to DISMISS HIGC CASE NO. HOA-95-027 for
lack of jurisdiction."
"SO ORDERED." 17

On April 24, 1996,

reconsideration. 18

the

appellate

court

Hence, this petition for review on certiorari.

denied

petitioner's

motion

for

LexLib

Petitioner UBFHAI raises two issues: (1) whether or not the Rules of Procedure
promulgated by the HIGC, specically Section 1(b), Rule II of the "Rules of
Procedure in the Settlement of Homeowners' Disputes" is valid; (2) whether or not

the acts committed by the respondent constitute an attack on petitioner's corporate

existence. 19 Corollary to these, petitioner questions the appellate court's
jurisdiction over the subject case.
Originally, administrative supervision over homeowners' associations was vested by
law with the Securities and Exchange Commission. On May 3, 1979, pursuant to
Executive Order 535, 20 this function was delegated to the Home Insurance and
Guaranty Corporation (HIGC). 21 Section 2 of Executive Order 535 provides:
"2.
In addition to the powers and functions vested under the Home
Financing Act, the Corporation, shall have among others, the following
additional powers;
Cdpr

(a)
To require submission of and register articles of incorporation of
homeowners
associations
and
issue
certicates
of
incorporation/registration, upon compliance by the registering associations
with the duly promulgated rules and regulations thereon; maintain a registry
thereof; and exercise all the powers, authorities and responsibilities that are
vested on the Securities and Exchange Commission with respect to
homeowners association, the provision of Act 1459, as amended by P.D.
902-A, to the contrary notwithstanding;"

By virtue of this amendatory law, the HIGC not only assumed the regulatory and
adjudicative functions of the SEC over homeowners' associations, but also the
original and exclusive jurisdiction to hear and decide cases involving:
"(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; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity." 22
cdll

On December 21, 1989, the HIGC adopted its rules of procedure in the hearing of
homeowners' disputes. Section 1(b), Rule II enumerated the types of disputes over
which the HIGC has jurisdiction, and these include:
"SECTION 1.
Types of Disputes . The HIGC or any person, ocer,
body, board, or committee duly designated or created by it shall have
jurisdiction to hear and decide cases involving the following:
xxx xxx xxx
(b)
Controversies arising out of intra-corporate relations between and
among members of the association, between any and/or all of them and the
association of which they are members, and insofar as it concerns its right
to exist as a corporate entity, between the association and the state/general
public or other entity." [emphasis supplied]
dctai

Therefore, in relation to Section 5 (b), Presidential Decree 902-A, the HIGC's

jurisdiction over homeowners' disputes is limited to controversies that arise out of

the following intra-corporate relations: (1) between and among members of the
association; (2) between any or all of them and the association of which they are
members or associates; and (3) between such association and the state, insofar as it
concerns their individual franchise or right to exist as such entity. (Emphasis
supplied.)
Though it would seem that Section 1(b), Rule II of the HIGC's revised rules of
procedure is just a reproduction of Section 5 (b), Presidential Decree 902-A, the rules
deviated from the provisions of the latter. If the provisions of the law would be
followed to the letter, the third type of dispute over which the HIGC has jurisdiction
should be limited only to a dispute between the state and the association, insofar as
it concerns the association's franchise or corporate existence. However, under the
HIGC's revised rules of procedure, the phrase "general public or other entity" 23 was
added.
It was on this third type of dispute, as provided in Section 1(b), Rule II of the HIGC's
revised rules of procedure that petitioner UBFHAI anchors its claim that the HIGC
has original and exclusive jurisdiction over the case. In the comment led by the
HIGC with the appellate court, it maintained that it has original and exclusive
jurisdiction over the dispute pursuant to the power and authority granted it in the
revised rules of procedure. Respondent BFHI disputes this, contending that the rules
or procedure relied upon by petitioner are not a valid implementation of Executive
Order No. 535, as amended, in relation to Presidential Decree 902-A.
prLL

The question now is whether HIGC, in promulgating the above-mentioned rules of

procedure, went beyond the authority delegated to it and unduly expanded the
provisions of the delegating law. In relation to this, the question is whether or not
the revised rules of procedure are valid.
As early as 1970, in the case of Teoxon vs . Members of the Board of Administrators
(PVA), 24 we ruled that the power to promulgate rules in the implementation of a
statute is necessarily limited to what is provided for in the legislative enactment. Its
terms must be followed for an administrative agency cannot amend an Act of
Congress. 25 "The rule-making power must be conned to details for regulating the
mode or proceedings to carry into eect the law as it has been enacted, and it
cannot be extended to amend or expand the statutory requirements or to embrace
matters not covered by the statute." 26 If a discrepancy occurs between the basic
law and an implementing rule or regulation, it is the former that prevails. 27
In the present case, the HIGC went beyond the authority provided by the law when
it promulgated the revised rules of procedure. There was a clear attempt to unduly
expand the provisions of Presidential Decree 902-A. As provided in the law, insofar
as the association's franchise or corporate existence is involved, it is only the State,
not the "general public or other entity" that could question this. The appellate court
correctly held that: "The inclusion of the phrase GENERAL PUBLIC OR OTHER
ENTITY is a matter which HIGC cannot legally do . . . " 28 The rule-making power of a
public administrative body is a delegated legislative power, which it may not use
either to abridge the authority given it by Congress or the Constitution or to enlarge

its power beyond the scope intended. Constitutional and statutory provisions control
what rules and regulations may be promulgated by such a body, as well as with
respect to what elds are subject to regulation by it. It may not make rules and
regulations which are inconsistent with the provisions of the Constitution or a
statute, particularly the statute it is administering or which created it, or which are
in derogation of, or defeat, the purpose of a statute. 29
cdrep

Moreover, where the legislature has delegated to an executive or administrative

ocers and boards authority to promulgate rules to carry out an express legislative
purpose, the rules of administrative ocers and boards, which have the eect of
extending, or which conict with the authority-granting statute, do not represent a
valid exercise of the rule-making power but constitute an attempt by an
administrative body to legislate. 30 "A statutory grant of 'powers should not be
extended by implication beyond what may be necessary for their just and
reasonable execution." 31 It is axiomatic that a rule or regulation must bear upon,
and be consistent with, the provisions of the enabling statute if such rule or
regulation is to be valid. 32
Thus, we hold that Rule II, Section 1(b) of HIGC's "Revised Rules of Procedure in the
Hearing of Homeowners' Disputes" is void, without ruling on the validity of the rest
of the rules.
Neither can the HIGC claim original and exclusive jurisdiction over the petition for
mandamus under the two other types of disputes enumerated in Presidential
Decree 902-A and in the revised rules. The dispute is not one involving the
members of the homeowners' association nor is it one between any and/or all of the
members and the association of which they are members. The parties are the
homeowners' association and the owner-developer, acting at the same time as the
corporation's committee of receivers.
Cdpr

To reiterate, the HIGC exercises a very limited jurisdiction over homeowners'

disputes. The law conned this authority to controversies that arise out of the
following intra-corporate relations: (1) between and among members of the
association; (2) between any and/or all of them and the association of which they
are members; and (3) insofar as it concerns its right to exist as a corporate entity,
between the association and the state. None of the parties to the litigation can
enlarge or diminish it or dictate when it shall attach or when it shall be removed. 33
Jurisdiction is dened as the power and authority of a court to hear, try and decide a
case. Jurisdiction over the subject matter is conferred by the Constitution or by law.
Nothing can change the jurisdiction of the court over the subject matter. That power
is a matter of legislative enactment which none but the legislature may change. 34
In light of the foregoing, we do not see the need to discuss the second issue.
Whether or not the acts committed or threatened to be committed by the
respondent against the petitioner would constitute an attack on the latter's
corporate existence would be immaterial. The HIGC has no jurisdiction to hear and

resolve the dispute.

LLphil

Having dispensed with the question of jurisdiction, there is no need for the HIGC to
proceed with the hearing of HIGC-HOA 95-027. It would just be an exercise in
futility since it has no jurisdiction.
Furthermore, it was apparent that the board of directors of respondent BFHI, acting
as the committee of receivers, was only trying to nd ways and means to
rehabilitate the corporation so that it can pay o its creditors. The revocation of the
security agreements and the removal of administration and maintenance of certain
property that are still under the name of respondent BFHI, were acts done in
pursuance of the rehabilitation program. All the security agreements and
undertakings were contractual in nature, which respondent BFHI, acting as a
committee of receivers and being the successor of the former receiver, could very
well alter or modify.
WHEREFORE, the Court DENIES the petition for review on certiorari, for lack of
merit. The decision and resolution appealed from in CA-G.R. SP. NO. 37072 are
AFFIRMED.
cdll

No costs.
SO ORDERED.

Davide, Jr., C.J ., Melo, Kapunan and Ynares-Santiago, JJ ., concur.

Footnotes
1.

Associate Justice B. A. Adefuin-De la Cruz, ponente, concurred in by Associate

Justices Jorge S. Imperial and Lourdes K. Tayao-Jaguros, Rollo, pp. 30-36.

2.

In CA-G.R. SP No. 37072, Ninth Division, promulgated on April 24, 1996;

Resolution, Rollo, p. 9.

3.

Rollo, pp. 11-26.

4.

The same group of people who own BFHI owned this corporation.

5.

There was no centralized security system for the whole village; there were sixty
ve (65) satellite homeowners' associations averaging 130 homeowners per
association, and two major associations, BF Paraaque Homeowners Association,
Inc. and the Confederation of BF Homeowners Association, Inc.; no zoning
guidelines to regulate the construction and proliferation of business
establishments inside the subdivision; nine (9) of the eighteen (18) water wells
were not functioning and water supply was becoming scarce; Rollo, p. 97.

6.

Rollo, p. 75.

7.

Rollo, p. 98.

8.

Rollo, p. 100.

9.
10.

Rollo, p. 15.
Rollo, pp. 127-128.

11.

Docketed as United BF Homeowners' Association, Inc. vs. BF Homes Inc., HIGC

Case No. HOA 95-027.

12.

This is the original homeowners association and stands for BF Paraaque

Homeowners Association, Inc. It is one of the two major homeowners' association
within the BF Homes Paraaque Subdivision under the umbrella organization of the
United BF Homeowners' Associations, Inc.; Rollo, pp. 167-173.

13.
14.

Rollo, p. 114.
Docketed as BF Homes, Inc. vs. Home Insurance and Guaranty Corporation, et
al., CA-G.R. SP No. 37072.

15.

Rollo, pp. 221-223.

16.

Rollo, pp. 30-36.

17.

Rollo, p. 36.

18.

Rollo, p. 9.

19.

Petition for Review by Certiorari, Rollo, p. 11.

20.

Amending the Charter of the Home Financing Commission, Renaming it as Home

Financing Corporation, Enlarging its Powers, and for other Purposes, May 3, 1979.

21.

The Home Insurance and Guaranty Corporation was created pursuant to

Republic Act 580, as amended by Executive Order 535. It was initially called Home
Financing Commission, and renamed as Home Financing Corporation, until it came
to be known as Home Insurance and Guaranty Corporation.

22.

Section 5 (b), Presidential Decree 902-A.

23.

Emphasis supplied.

24.

33 SCRA 585, 588 [1970].

25.

Supra.

26.

Land Bank of the Philippines vs. Court of Appeals , 285 SCRA 404, 407 [1996].

27.

Nasipit Lumber Company, Inc. vs. National Wages and Productivity Commission ,
289 SCRA 667, 681 [1998].

28.

Court of Appeals Decision, CA-G.R. SP. NO. 37072, Rollo, p. 35.

29.

Conte vs. Commission on Audit, 264 SCRA 19, 30-31 [1996].

30.

People vs. Maceren, 79 SCRA 450, 462 [1977].

31.

Nasipit Lumber Company, Inc. vs. National Wages and Productivity Commission ,
289 SCRA 667, 681.

32.

Lina, Jr. vs. Cario, 221 SCRA 515, 531 [1993].

33.

Zamora vs. Court of Appeals , 183 SCRA 279 [1990].

34.

Zamora vs. Court of Appeals , supra.