Case Summary (G.R. No. 134284)
Factual Background
Ayala Corporation owned Lot 7, Block 1, Salcedo Village, Makati, covered by TCT No. 233435, area 840 square meters. On April 20, 1976 Ayala sold the lot to Manuel Sy and Sy Ka Kieng under a Deed of Sale that contained Special Conditions of Sale and Deed Restrictions, including time limits to submit plans and to commence and complete construction, a prohibition on resale, and limits on gross floor area and total height. The original vendees failed to construct within the specified period. In April 1989, with Ayala’s approval, the original vendees sold the lot to Rosa-Diana Realty and Development Corporation, which on July 27, 1989 executed an Undertaking to abide by the special conditions and deed restrictions; Ayala thereupon released title and TCT No. 165720 issued to Rosa-Diana, annotated with the restrictions.
Building Plans and Violation
Rosa-Diana submitted to Ayala building plans for a seven‑storey, 24‑meter condominium with a gross floor area of 3,968.56 square meters that complied with the deed restrictions. Rosa-Diana thereafter submitted a different set of plans to the Makati building official envisioning a 38‑storey building approximately 91.65 meters high with a gross floor area of 23,305.09 square meters, and the constructed Peak building reached 133.65 meters and a gross floor area recorded as 23,305.09 square meters or, by some permits, 32,208 square meters, violating the deed restrictions substantially.
Trial Court Proceedings
Ayala Corporation filed for specific performance and injunctive relief with alternative prayer for rescission before the RTC of Makati. The trial court denied injunctive relief, later sustained Rosa-Diana’s Demurrer to Evidence, and held that Ayala had abandoned enforcement and was estopped from insisting on the restrictions. The trial court relied on Ayala’s prior conduct, including allowing resale by the original vendees and inconsistent enforcement in Salcedo Village, to find discrimination and unfairness in Ayala’s selective enforcement.
Court of Appeals Ruling
The Court of Appeals affirmed the trial court, reasoning that the appeal was "sealed" by the law of the case as expressed in an earlier appellate decision concerning the propriety of a lis pendens annotation, and it cited a separate appellate decision, Ayala Corporation vs. Ray Burton Development Corporation, as jurisprudential under stare decisis in concluding that Ayala was barred by waiver and estoppel from enforcing the deed restrictions against Rosa-Diana.
Prior Related Decisions and Doctrinal Distinctions
The Supreme Court reviewed distinctions among law of the case, stare decisis, and obiter dicta. The Court observed that the earlier appellate determination on the propriety of lis pendens concerned only whether an action for specific performance or rescission was a real action affecting title, and that the appellate court’s further pronouncement that Ayala was estopped was unnecessary to that disposition and thus amounted to obiter dicta, not binding precedent under stare decisis. The Court referenced its judgment in Ayala Corporation vs. Ray Burton Development Corporation, wherein it had held that an appellate finding of estoppel in the Rosa‑Diana lis pendens context was immaterial and made in excess of jurisdiction.
Parties' Contentions on Review
Ayala Corporation argued that the Court of Appeals erred in applying prior appellate pronouncements as binding and in failing to address the specific errors assigned, and that Ayala had not waived or been estopped from enforcing the deed restrictions. Rosa-Diana Realty and Development Corporation maintained that its building plans bore the approval of the Makati building official and that the Undertaking executed by its officers did not validly bind the corporation, as the trial court found an absence of board authorization.
Supreme Court’s Review of Facts and Contractual Obligations
The Supreme Court found ample evidence that Rosa-Diana acted in bad faith by submitting two different sets of plans, one to obtain Ayala’s approval and title and a second to obtain municipal permits for a substantially taller and larger building. The Court held that Rosa-Diana had freely contracted to be bound by the deed restrictions and the July 27, 1989 Undertaking, and that Rosa-Diana did not plead or prove lack of authority of its president and chairman to sign the Undertaking. The Court noted that contractual obligations have the force of law between parties and invoked Article 1159 to reiterate the duty of good faith in performance.
On Waiver, Estoppel and Remedy
The Supreme Court accepted that Ayala had effectively waived its right to rescind the original sale because it had consented to the resale by the original vendees despite their breach and had long delayed asserting rescission. The Court further recognized that specific performance and rescission were no longer feasible remedies because the Peak building had been completed, occupied, and in existence for years. The Court therefore adopted the remedy applied in the Court’s prior Ray Burton decision: damages measured by development charges under the Consolidated and Revised Deed Restrictions as a fair substit
...continue reading
Case Syllabus (G.R. No. 134284)
Parties and Procedural Posture
- Ayala Corporation filed a petition for review on certiorari seeking reversal of the Court of Appeals decision in C.A. G.R. C.V. No. 4598 dismissing its action against Rosa-Diana Realty and Development Corporation.
- Ayala Corporation was the original registered owner of the parcel covered by Transfer Certificate of Title No. 233435 prior to sale to spouses Manuel Sy and Sy Ka Kieng.
- The trial court in Makati, Branch 139, adjudicated Ayala's suit for specific performance with an alternative prayer for rescission and denied injunctive relief.
- The Court of Appeals affirmed the trial court's dismissal on grounds that Ayala waived and was estopped from enforcing the deed restrictions, and declined to address certain assignments of error.
- The Supreme Court granted review to resolve whether prior appellate pronouncements and trial findings barred Ayala from relief and to determine the appropriate remedy.
Key Factual Allegations
- Ayala Corporation sold Lot 7, Block 1, Salcedo Village, Makati to Manuel Sy and Sy Ka Kieng on April 20, 1976 subject to Special Conditions of Sale and Deed Restrictions.
- The Special Conditions of Sale required submission of building plans by September 30, 1976, commencement by March 30, 1977, completion before 1979, nonregistration of deed and nonrelease of title prior to completion, and a prohibition on resale.
- The Deed Restrictions limited gross floor area to not more than five times the lot area and limited total height to forty-two meters, with expiration in 2025.
- The original vendees failed to construct within the required period but transferred the lot to Rosa-Diana in April 1989 with Ayala's apparent approval.
- Rosa-Diana executed an Undertaking on July 27, 1989 promising to abide by the special conditions and submitted building plans to Ayala consistent with the deed restrictions.
- Rosa-Diana later submitted materially different plans to the Makati building official that grossly exceeded the approved height and gross floor area, and completed the building substantially beyond the approved dimensions.
Contractual Terms and Undertaking
- The sale contract between Ayala Corporation and the original vendees incorporated Special Conditions of Sale and Deed Restrictions that bound subsequent purchasers as encumbrances on title.
- Rosa-Diana expressly executed an Undertaking accepting obligation to construct in accordance with the special conditions and to be bound by the deed restrictions as annotated on title.
- The parties' contractual obligations were governed by Article 1159 of the New Civil Code, which provides that obligations arising from contracts have the force of law between the contracting parties.
- The deed restrictions were annotated on the title later issued to Rosa-Diana as encumbrances, thereby placing notice on subsequent dealings with the lot.
Trial Court Proceedings
- Ayala Corporation sought specific performance and, alternatively, rescission and provisional relief to enforce the deed restrictions and the building plans previously approved by Ayala.
- The trial court denied injunctive relief and later sustained Rosa-Diana's demurrer to evidence on the ground that Ayala had abandoned enforcement and was estopped from complaining.
- The trial court found that Ayala had not acted uniformly to enforce the restrictions against other developers in Salcedo Village and had previously approved the resale to Rosa-Diana, facts the court deemed to support waiver and estoppel.
- The trial court also held that the 38-storey construction was not prohibited by the National Building Code and was not contrary to public policy.