Supreme Court: arbitration clause in association bylaws must be respected - International Law Office

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Litigation - Philippines

Supreme Court: arbitration clause in association bylaws must be respected

March 20 2012

Introduction
Facts
Decision


Introduction

By law, a dispute between a homeowners' association and its members should be resolved by the relevant government agency, unless the association's bylaws provide for arbitration.

Under Philippine law, disputes between a homeowners' association and its members should be filed with and resolved by the Housing and Land Use Regulatory Board, which has exclusive jurisdiction over such disputes. However, where the bylaws of the association contain a provision specifying arbitration as the mode of dispute resolution, a member must arbitrate its dispute with the homeowners' association.

Facts

In Maria Luisa Park Association v Almendras,(1) a member of a homeowners' association applied for a permit to construct a residence within a subdivision, for which application was approved. However, on inspection of the house under construction, the homeowners' association found that the member had violated the bylaws provision against multi-dwellings because the house had two water meters and there were two separate, independent entrances.

The member queried the notice of violation and filed suit to annul the provision in the association's articles of incorporation and bylaws. The association moved to dismiss on the grounds of lack of jurisdiction and failure to comply with the arbitration clause as provided in its bylaws.

Decision

The court dismissed the complaint, holding that the Housing and Land Use Regulatory Board had exclusive jurisdiction over the case. Under the law, controversies arising out of intra-corporate relations between members of a homeowners' association or between any member and the association should be filed with the board.

The Court of Appeal ruled that the trial court had jurisdiction and set aside the dismissal order.

On appeal, the Supreme Court held that the Court of Appeal had erred and that the Housing and Land Use Regulatory Board – not the court – had jurisdiction. However, taking into account the arbitration clause in the bylaws of the homeowners' association, the Supreme Court ruled that the dispute should be referred to arbitration. A mere exchange of correspondence would not suffice – much less satisfy – the requirement for arbitration. Since arbitration was the stipulated mode of dispute settlement between the parties, as expressly provided in the bylaws, it should be respected.

For further information on this topic please contact Eduardo de los Angeles at Romulo Mabanta Buenaventura Sayoc & De Los Angeles by telephone (+63 2 848 0114), fax (+63 2 815 3172) or email (eduardo.delosangeles@romulo.com).

Endnotes

(1) 588 SCRA 663.


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