G.R. No. 126260 - South Pachem Development Corp. vs. Court of Appeals

South Pachem Development, Inc. purchased, on July 25, 1973, two adjoining parcels of land (designated as Lots Nos. 7 and 8, Block No. 5) located in Legaspi Village, Makati from Ayala Corporation.
The purchase was subject to deed restrictions that were duly annotated on the titles of the properties.

The deed restrictions, attached to and forming part of the contract of sale, provided that the buyer or its successor-in-interest automatically becomes a member of the Makati Commercial Estate Association, Inc.
The restrictions mandated the payment of annual association dues (with penalty and interest for any default), which would constitute a lien on the property (subject only to governmental tax liens and voluntary mortgages entered in good faith).
The deed further enumerated additional conditions, such as the provision allowing rescission and cancellation of the sale upon breach of any stipulated conditions, including a clause requiring the reimbursement of amounts paid less certain expenses.

In 1984, the petitioner (South Pachem Development, Inc.) stopped paying association dues, including interest and penalty, asserting that the association (private respondent) was not properly performing the services it promised (e.g. garbage collection, road maintenance, and the maintenance of peace and order in Makati).
The petitioner argued that paying association fees for a period of 47 years constituted an illegal perpetual imposition on the property, curtailing its right to enjoy and dispose of the property as provided under Article 428 of the Civil Code.
On June 16, 1988, private respondent instituted a complaint in the Regional Trial Court of Makati, Branch 60, seeking collection of the unpaid dues along with interest, penalties, and attorney’s fees.
The trial court rendered a judgment on November 5, 1990, ordering the petitioner to pay:

The Court of Appeals affirmed the trial court’s decision, prompting the petitioner to file the present petition for review on certiorari.

The petitioner later sought to file a third-party complaint against China Banking Corporation based on a separate compromise agreement related to the case, which was denied by the trial court.
The petitioner contended that:

The 47-year period for payment of association dues imposed a perpetual and illegitimate burden on the property, effectively restricting the right to alienate or enjoy the property.
The inclusion of such a provision in the deed restrictions was contrary to morals, public policy, and due process as provided under the Constitution.
The rescission clause further deprived the petitioner of its property rights without sufficient notice or judicial process.

Is the deed restriction, which mandates automatic membership in the Makati Commercial Estate Association, Inc. and imposes the payment of association dues for a period of 47 years, a valid and binding contractual condition?
Does the extended imposition of dues constitute an impermissible perpetual burden in violation of the petitioner’s property rights under Article 428 of the Civil Code?

Does the contractual clause imposing association fees amount to a stipulation pour autrui?
Can the restriction be classified as part of a contract of adhesion, and if so, should any ambiguity be construed against the party that drafted the agreement?

Whether the petitioner’s prolonged acceptance and performance (i.e., payment of dues from 1973 to 1984) estop it from subsequently raising issues regarding the validity of the deed restrictions.
Whether the principle “one who sleeps on his rights shall not be heard to complain” applies in precluding the petitioner’s challenge.

Whether the failure of the association to perform its promised services (such as road maintenance and garbage collection) affects the enforceability of the dues payment stipulated in the deed restrictions.
Whether the petitioner’s contentions regarding non-performance can justify rescission or modification of the agreed contract terms.