Title
ASB Realty Corp. vs. Ortigas and Company Limited Partnership
Case
G.R. No. 202947
Decision Date
Dec 9, 2015
Ortigas sued ASB for breaching covenants in a land sale, seeking rescission. SC ruled ASB, not party to original deed, wasn’t bound; Ortigas lacked cause of action.
land dispute
rescission
ruling
A

Case Summary (G.R. No. 202947)

Contractual Framework and Annotation of Restrictions

On June 29, 1994, Ortigas entered into a Deed of Sale with Amethyst involving a parcel of land measuring 1,012 square meters for the consideration of P2,024,000.00. The Deed contained covenants and restrictions governing the intended development and use of the lot. Among the provisions material to the dispute were requirements as to building works and specifications, submission of plans, and construction and completion within a prescribed period. The Deed also contained restrictions relating to the nature of commercial activities and advertisements, and it provided for a “Unilateral Cancellation” mechanism under paragraph “N,” which Ortigas invoked as the basis to claim that violations by the vendee empowered it to cancel the sale and have the property revert to Ortigas upon payment of the amount paid less indicated items. The covenants were later annotated on the title in the name of Amethyst and subsequently carried over to the title issued in ASB’s name.

Transfers of Title: From Ortigas to Amethyst, and from Amethyst to ASB

After the Deed of Sale was executed, the Register of Deeds cancelled TCT No. 65118 and issued TCT No. PT-94175 in the name of Amethyst. The covenants in the Deed were annotated as encumbrances on TCT No. PT-94175. On December 28, 1996, Amethyst executed a Deed of Assignment in Liquidation in favor of ASB, transferring the property to its sole stockholder, ASB, in consideration of 10,000 shares of ASB’s outstanding capital stock. The subsequent issuance of TCT No. PT-105797 in ASB’s name reflected the same annotated encumbrances that had been carried on TCT No. PT-94175.

Ortigas’ Complaint in the RTC

Ortigas filed its action on July 7, 2000 for specific performance against ASB, docketed as Civil Case No. 67978. Ortigas later amended its complaint and alleged that ASB violated multiple terms of the 1994 Deed, including that (a) the lot was restricted to “office and residential purposes” but ASB introduced constructions of a commercial nature; (b) the commercial structures allegedly violated setbacks; (c) ASB allegedly failed to submit final plans within the stipulated time and failed to complete construction within the contractual period; and (d) it allegedly violated restrictions on advertisements and commercial signs. Ortigas sought reconveyance of the subject property, or alternatively, demolition of the structures and improvements, together with penalties, attorney’s fees, and costs.

RTC Decision: Dismissal Based on Laches, Misapplication of “VENDEE,” and Absence of Proper Parties

After trial, the RTC dismissed the complaint in a decision promulgated on December 14, 2009. The RTC reasoned that Ortigas had sold the property to Amethyst on June 29, 1994, with the construction completion period expiring by December 31, 1995, yet Ortigas did not initiate action against Amethyst within a reasonable time. The RTC characterized Ortigas’ inaction as laches, relying on Tijam v. Sibonghanoy, L-21450, April 15, 1968. The RTC further observed that the restrictions annotated on the titles repeatedly and consistently referred to the term “VENDEE,” and concluded that the term referred to Amethyst Pearl Corporation, not ASB, because the referenced construction completion period corresponded to the vendee under the Deed of Sale. Thus, the RTC held that reconveyance of the property to Ortigas necessarily implied rescission of the sale or transfer, yet Amethyst was not impleaded, which the RTC treated as a fatal defect under the theory of reconveyance from subsequent transferees. It also found that the failure to comply with the plaintiff’s own restrictions indicated a lack of intention to enforce them.

First CA Decision (September 6, 2011): Affirmance and Estoppel from Unequal or Obsolete Enforcement

On appeal, the CA initially affirmed the RTC in a decision promulgated on September 6, 2011. The CA held that Ortigas could no longer enforce the restrictions against ASB. It focused on Ortigas’ failure to actively pursue compliance, particularly against the original vendee Amethyst, and noted that Ortigas did not file suit or make demand before the lapse of the construction completion period. The CA also stressed that Ortigas’ conduct appeared inconsistent with its asserted intent to implement the controlled real estate development scheme uniformly. It treated Ortigas’ non-enforcement against other owner-corporations within the same Ortigas area as tolerance of non-compliance, and viewed Ortigas’ selective action against ASB as suspect, effectively barring enforcement through estoppel. Although the CA recognized that ASB was bound by restrictions annotated on its title, it held that Ortigas was effectively estopped from enforcing the restriction due to its prior inaction and silence.

Amended CA Decision (January 9, 2012): Recognition of Prescription and Rejection of Estoppel Based on Lack of Elements

Acting on Ortigas’ motion for reconsideration, the CA promulgated an amended decision on January 9, 2012. It reversed the CA’s prior affirmance of the RTC. The CA ruled that the action was timely. It applied Article 1144 of the Civil Code, which governed the prescriptive period for actions based on obligations under the Deed of Sale, and concluded that Ortigas had ten (10) years from the time its right of action accrued, calculated from the failure to complete construction by December 31, 1995, making July 7, 2000 a filing within the prescriptive period. The CA rejected ASB’s argument that it could not have complied because the construction period had already lapsed when ASB acquired the property in 1996. It held that the transfer by assignment did not defeat Ortigas’ vested right to enforce within the prescriptive period. It also rejected estoppel, reasoning that it was based on Ortigas’ discretion to initiate or not initiate actions against violators, and emphasizing that estoppel could not stand in doubtful inference without the conclusive proof of its essential elements.

CA Resolution (July 26, 2012): Denial of Motion for Reconsideration

The CA later denied ASB’s motion for reconsideration through a resolution promulgated on July 26, 2012, for being filed out of time. ASB argued that its motion was timely.

Issues Raised on Appeal

ASB elevated the matter to the Supreme Court, presenting two issues: first, whether its motion for reconsideration against the amended CA decision was timely filed; and second, whether the amended CA decision dated January 9, 2012 should be reversed and the earlier September 6, 2011 decision reinstated. Underlying these procedural and timing arguments, the controlling substantive concern was whether Ortigas validly rescinded the Deed of Sale and demanded reconveyance or demolition against ASB due to alleged non-compliance with the covenants and restrictions after the property had been transferred to ASB.

Supreme Court Ruling on Timeliness of the Motion for Reconsideration

The Court granted ASB’s petition and held that the CA’s finding that the motion for reconsideration had been filed three days late was unwarranted. It ruled that ASB had carried the burden of proof to establish its asserted receipt date of the amended decision through documentary support: an affidavit attesting to the request for certification of the date of receipt and a certification from the post office indicating delivery and receipt on January 18, 2012. Consequently, the Court treated ASB’s January 30, 2012 filing as timely.

The Core Substantive Ruling: No Cause of Action for Rescission Against ASB

The Court then addressed the decisive merits. It held that Ortigas could not validly demand reconveyance of the property, or demolition of structures, through rescission, because Ortigas lacked a cause of action against ASB. The Court anchored this conclusion on the nature and scope of ASB’s acquisition under the Deed of Assignment in Liquidation between Amethyst and ASB. It observed that the express terms of the assignment showed Amethyst transferred to ASB only the tangible asset—the parcel of land covered by TCT No. PT-94175—and that Amethyst did not assign the rights or duties it had assumed under the 1994 Deed of Sale. Thus, the Court ruled that ASB became vested with ownership “free from any lien or encumbrance except those duly annotated,” but ASB did not thereby step into Amethyst’s contractual position as obligor under the Deed of Sale.

The Court also treated Ortigas’ recognition of the issuance of the new certificates of title and the subsequent transfer by assignment as conduct that gave rise to estoppel. It reasoned that Ortigas had apparently acquiesced to the issuance of the new title in Amethyst’s name and then the subsequent transfer to ASB, and therefore was estopped from assailing ASB’s acquisition and ownership of the property. The Court explained that estoppel served public policy and fair dealing by preventing a party from contradicting its own acts or omissions to the injury of another who reasonably relied on them.

Effect of Title Annotations: Notice of Encumbrance but Not Automatic Assumption of Contractual Obligations

The Court then distinguished between the effect of annotation and the extent of liability arising from annotation. It agreed that the annotations on TCT No. PT-105797 bound ASB as to notice of the covenants, as required under Section 39 of Act No. 496. It explained that an encumbrance is anything that impairs the use or transfer of property or creates a burden on title, and that annotations exist to charge the purchaser with notice of the burden or clai

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