G.R. No. 106705 - Philippine Dairy Products Corp. vs. Genilo

Petitioner: Province of Camarines Sur, represented by Gov. Luis Raymund F. Villafuerte, Jr.; Respondent: Bodega Glassware, represented by its owner Joseph D. Cabral.
Property: A 600-square-meter portion of land in Peñafrancia, Naga City covered by OCT No. 22 registered in the name of petitioner.
On September 28, 1966, petitioner, through then Governor Apolonio G. Maleniza, executed a Deed of Donation Inter Vivos in favor of Camarines Sur Teachers’ Association, Inc. (CASTEA); CASTEA accepted the donation in due form.

Use restriction: The donated portion shall be used solely for the construction of CASTEA’s building to house its offices and allied organizations (Naga City Teachers’ Association and Camarines Sur High School Alumni Association).
Alienation/encumbrance prohibition: CASTEA shall not sell, mortgage, or encumber the property and its improvements in favor of any party.
Construction timetable: Construction of the building(s) must commence within one year from execution of the donation.
Automatic revocation: The deed expressly provides that otherwise “this donation shall be deemed automatically revoked and voided and of no further force and effect.”

On August 15, 1995, CASTEA executed a Contract of Lease with Bodega for 20 years, commencing September 1, 1995 and ending September 15, 2015; monthly rent was P30,000.
Bodega took actual possession on September 1, 1995 and constructed/maintained a building on the property.

July 2005: Provincial Legal Officer wrote Bodega seeking proof of its legal basis for possession; Bodega failed to produce any; the Province tolerated continued possession.
October 4, 2007 letter (served November 11, 2007): Province stated Bodega’s occupation was by mere tolerance and demanded that Bodega vacate due to intended governmental developmental use; Bodega refused.
October 14, 2007: Province executed a Deed of Revocation of Donation, asserting CASTEA’s breach of conditions (particularly by leasing to Bodega) triggered automatic revocation; CASTEA did not contest the revocation.

March 13, 2008: The Province filed an unlawful detainer suit (MTC Naga City, Br. 2), seeking ejectment and P15,000 monthly as reasonable compensation from October 2007 until turnover.
December 11, 2008 (MTC): Ruled for Province, ordering Bodega to vacate and to pay P15,000/month from judicial demand; dismissed Bodega’s counterclaim.
May 13, 2009 (RTC Naga City, Br. 26): Reversed the MTC and dismissed the case for failure to substantiate the cause of action.
May 31, 2010 (CA): Affirmed RTC; October 12, 2010 (CA Resolution): Denied reconsideration.

CA reasoning: Because Bodega’s possession is grounded on its lease with CASTEA, and CASTEA claims ownership via the donation, the Province should have first filed an action for reconveyance against CASTEA; judicial intervention is necessary to ascertain validity/effectivity of an automatic revocation clause; relied on Roman Catholic Archbishop of Manila v. CA.
Prescription (CA view): 10-year prescriptive period under Art. 1144(1) for reconveyance ran from the lease date (September 1, 1995); the 2007 extrajudicial revocation and 2008 ejectment suit were both beyond 10 years.
Petitioner’s stance (Rule 45): Deeds with automatic revocation are self-executing upon breach; judicial review is necessary only if the donee challenges; unlawful detainer timely filed within one year of last demand.
Respondent’s stance: Lease with CASTEA valid; automatic revocation ineffective absent judicial declaration; Province’s actions prescribed.

Whether petitioner may recover physical possession (possession de facto) via unlawful detainer against respondent whose occupancy is grounded on a lease with CASTEA, in light of the Deed of Donation’s automatic revocation clause and the Province’s Deed of Revocation.

Corollary: Whether judicial action (e.g., reconveyance) is a prerequisite for the effectiveness of an automatic revocation clause in a donation inter vivos.
Corollary: Whether the court in ejectment may pass upon ownership to resolve possession.

Applicability of Art. 764 (revocation of donations), Art. 1144(1) (10-year period for actions upon written contracts), or the one-year period under Rule 70 and Art. 1147 for unlawful detainer.

Whether petitioner is entitled to damages (reasonable compensation/fair rental value) and in what amount.