G.R. No. 268143 , August 12, 2024
GOLDLAND TOWER CONDOMINIUM CORPORATION, PETITIONER, VS. EDWARD L. LIM AND HSIEH HSIU-PING, RESPONDENTS.

FACTS

Respondent Hsieh Hsiu-Ping, owner of a condominium unit, became delinquent in paying association dues to petitioner Goldland Tower Condominium Corporation (Goldland). Goldland annotated its lien for the unpaid dues on the condominium’s certificate of title (CCT No. 4007-R). Due to Hsieh’s nonpayment of real estate taxes, the City Treasurer of San Juan levied and sold the unit at a public auction to respondent Edward Lim. After the redemption period lapsed, a deed of conveyance was issued to Lim. Goldland then filed a complaint for judicial foreclosure against Lim and Hsieh to collect the unpaid association dues and foreclose its lien. Lim argued, among other defenses, that Goldland had no cause of action as it failed to send him an extrajudicial demand, making the action premature. The parties agreed during pre-trial to limit the issue to the legal effect of the tax sale on Goldland’s lien. The Regional Trial Court (RTC) ruled in favor of Goldland, ordering Lim to pay the dues and authorizing foreclosure upon default. The Court of Appeals (CA) initially affirmed the RTC but, upon reconsideration, issued an Amended Decision dismissing Goldland’s complaint. The CA found that while the tax sale did not discharge Goldland’s registered lien, the foreclosure action was premature due to Goldland’s failure to allege or prove that it made a prior demand on Lim for payment of the dues.

ISSUE

Whether the Court of Appeals erred in ruling that Goldland’s judicial foreclosure suit cannot prosper due to the absence of a prior demand on respondent Lim.

RULING

The Supreme Court granted the petition and reversed the Amended Decision of the Court of Appeals. The Court held that a prior extrajudicial demand is not a condition precedent for filing an action for judicial foreclosure of a mortgage. The ruling distinguished between the concepts of “demand” and “notice.” Demand is a factual act required to place a debtor in default for the purpose of incurring delay and liability for damages. Notice, whether actual or constructive, pertains to knowledge of an existing claim or encumbrance. The Court found that Goldland’s annotation of its lien on the certificate of title constituted constructive notice to the whole world, including Lim, of the existence of the debt secured by the mortgage. Since a judicial foreclosure action is precisely the remedy to demand payment and enforce the mortgage, the filing of the complaint itself served as the judicial demand. Therefore, Goldland’s action was not premature. The case was remanded to the RTC to determine the correct amount due, including legal interest from the filing of the complaint, and for further proceedings.