TL;DR

The Supreme Court affirmed that homeowners in Bel-Air Village, represented by their association, can extend the lifespan of their Deed Restrictions by a majority vote. This decision clarifies that the power to amend restrictions includes the ability to extend the term of these rules, which govern property use within the village. Practically, this ruling empowers homeowners’ associations to adapt community regulations over time, ensuring continued governance and upholding property values according to the collective will of the majority. It reinforces the binding nature of deed restrictions on property owners within planned communities.

Can Community Rules Outlive Their Expiry Date? The Battle Over Bel-Air’s Deed Restrictions

This case revolves around the question of whether a homeowners’ association can extend the lifespan of deed restrictions—the rules governing property use in a residential village—beyond their original expiry date. Petitioners, property owners in Bel-Air Village, challenged the Bel-Air Village Association, Inc.’s (BAVA) move to extend the Deed Restrictions, initially set for 50 years. The core legal issue was whether the power to “amend…particular restrictions or parts thereof by majority rule,” as stated in the Deed Restrictions, included the authority to extend the term of the entire Deed. This legal battle traversed various levels of adjudication, ultimately reaching the Supreme Court to determine the extent of homeowners’ collective power to shape their community’s future.

The dispute began when BAVA, anticipating the expiry of the 50-year Deed Restrictions, sought to extend its term. A special membership meeting was convened where a majority voted in favor of the extension. However, a group of homeowners contested this extension, arguing that the term was not a “restriction” amendable by majority vote and that the proxies used in the meeting were invalid. Their complaint was initially upheld by the Housing and Land Use Regulatory Board (HLURB) Regional Field Office, which declared the extension null and void. This decision was later reversed by the HLURB Board of Commissioners, then again reversed by the Office of the President, only to be reinstated upon reconsideration by the Office of the President. The Court of Appeals eventually affirmed the Office of the President’s final resolution, leading to the petitioners’ appeal to the Supreme Court.

At the heart of the Supreme Court’s analysis was the interpretation of Article VI of the Deed Restrictions, titled “Term of Restrictions.” This provision stated the restrictions would last for 50 years but also included a clause allowing the Association to “amend or abolish particular restrictions or parts thereof by majority rule.” The Court applied the cardinal rule of contract interpretation: if the terms are clear, the literal meaning controls. It emphasized that the Deed Restrictions, as a whole, aimed to ensure “sanitation, security and the general welfare of the community.” The Court reasoned that limiting the power to amend only to specific restrictions, and excluding the term itself, would contradict the clear intention of granting homeowners the flexibility to govern their community effectively. The phrase “parts thereof” in Article VI, according to the Court, was broad enough to encompass the term of the restrictions.

The Supreme Court gave weight to the confirmation from Ayala Land, Inc., Makati Development Corporation’s successor-in-interest, stating that it was never the intention to deny homeowners the right to extend the Deed Restrictions. This reinforced the interpretation that the term was indeed considered a part of the restrictions subject to amendment. The Court agreed with the Court of Appeals that reading Article VI in its entirety showed the term was integral to the Deed and thus amendable. It cited established jurisprudence that when contractual language is clear, courts should apply its literal meaning.

Regarding the validity of proxies, the petitioners argued they should have been notarized because the meeting involved real rights over real properties. The Supreme Court disagreed, citing the Corporation Code which governs proxies in corporate settings. Section 58 of the Corporation Code only requires proxies to be in writing, signed, and filed with the corporate secretary. Furthermore, Section 47(4) allows corporate by-laws to specify proxy forms. Since BAVA’s by-laws had no specific form requirements beyond writing and signing, the Court held that the proxies were valid. The Court prioritized the Corporation Code, a special law governing corporations, over the general provisions of the Civil Code regarding agency and public documents.

Finally, the petitioners reiterated their objection to compulsory membership in BAVA, citing freedom of association. The Supreme Court firmly rejected this argument, referencing its precedent in Bel Air Village Association, Inc. v. Dionisio and PADCOM Condominium Corporation v. Ortigas Center Association, Inc. These cases established that compulsory membership in homeowners’ associations, when annotated on property titles, is a valid condition of property ownership and does not violate freedom of association. The Court emphasized that the constitutional right to freedom of association is primarily a protection against state action, not private contracts. By purchasing property in Bel-Air Village with the annotated Deed Restrictions, the homeowners voluntarily agreed to the terms, including mandatory association membership.

In conclusion, the Supreme Court’s decision in Cezar Yatco Real Estate Services, Inc. v. Bel-Air Village Association, Inc. provides a definitive ruling on the amendability of deed restriction terms and the validity of homeowners’ association governance within residential villages. It underscores the principle of majority rule in community associations and reinforces the binding nature of deed restrictions on property owners. The decision offers clarity and stability for homeowners’ associations seeking to adapt and extend community regulations to meet evolving needs and maintain property values.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.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: Cezar Yatco Real Estate Services, Inc. v. Bel-Air Village Association, Inc., G.R. No. 211780, November 21, 2018