Case Summary (G.R. No. 133705)
Factual Background
On September 24, 1977, petitioner executed a deed of donation conveying a 41,117-square-meter parcel in Canlubang, Calamba, Laguna to respondent, a religious corporation, and the title under TCT No. T-82803 in petitioner’s name was cancelled and replaced by TCT No. T-91348 in respondent’s name. The deed expressly required that so much of the land as necessary be used to construct and maintain a home for the aged and infirm, ordained a fifteen-meter green belt, allowed residual land to be used for agricultural support of the home or, with the donor’s written consent, for commercial leases whose rentals were to be applied first to the home’s expenses, and prohibited use other than as provided without prior written consent of the donor, on pain of reversion in trust. Beginning about 1980 the donee leased portions of the property three times to third persons—first to Martin Gomez for sugar cane, then to Jose Bostre for a ranch, and later to Rudy Caballes for cattle fattening—each lease having been entered into without the donor’s prior written consent and each, according to the donee, intended to generate funds for construction and protection of the nucleus building called Casa dela Merced.
Donor’s Revocation and Commencement of Suit
On September 20, 1990, petitioner, by board resolution and through its president, notified respondent of revocation of the donation on account of material breaches of the deed’s conditions and demanded turnover of TCT No. T-91348. Respondent denied material breach by letter dated November 5, 1990 and refused to reconvey title. Thereafter petitioner filed an action in the RTC, Calamba, Laguna on November 19, 1990 praying for judicial revocation of the deed of donation and reconveyance of the property.
Trial Court Proceedings and Judgment
Respondent answered alleging efforts to comply with the deed’s purposes, asserting that the leases had the express though unwritten consent of a member of the donor family and pleading that any right of revocation had prescribed because the donor knew of the leases since 1980. On December 22, 1995, the trial court found for petitioner, declared the deed of donation revoked, affirmed the donor’s revocation letter dated September 20, 1990, ordered the defendant and those claiming under it to vacate and to surrender possession, directed cancellation of TCT No. T-91348 and issuance of a new title in favor of petitioner, with costs against respondent.
Court of Appeals Ruling
Respondent appealed to the Court of Appeals. In its Decision dated December 19, 1997 the appellate court reversed the trial court and upheld the donation. The Court of Appeals concluded that the donation was onerous and therefore governed by the rules on contracts under Article 733; it agreed that respondent had entered leases without the donor’s prior written consent and that such acts were breaches of the deed, but it characterized those breaches as casual and not substantial. The Court of Appeals held that the leases did not detract from the donation’s purpose of establishing a home for the aged and infirm and therefore did not justify rescission under Article 1191. The Court of Appeals also accepted the trial court’s view that prescription would be ten years under Article 1144 rather than four years under Article 764, but found the action timely in any event. The CA denied reconsideration in its April 30, 1998 Resolution.
Issues Presented to the Supreme Court
Petitioner’s sole submission to this Court was that the Court of Appeals erred in holding that the revocation was improper and that the donations should nonetheless be revoked despite respondent’s breaches of the deed’s conditions.
Parties’ Contentions on Appeal
Petitioner relied on authorities such as Central Philippine University vs. Court of Appeals to argue that prolonged failure to perform the burden of the donation justified revocation. Respondent maintained that the leases were undertaken to generate funds for the construction and maintenance of the home for the aged, that the deeds of lease were therefore in furtherance of the donation’s purpose, and that any lack of prior written consent was at most a technical or casual breach. Respondent also argued that the bishop’s communications seeking authority to sell or exchange the property reflected concern for preserving the donation’s purpose in the face of proposed industrialization, rather than abandonment.
Supreme Court Ruling
The Supreme Court denied the petition for review and affirmed the decision of the Court of Appeals in toto. The Court made no pronouncement as to costs.
Legal Basis and Reasoning
The Court agreed with the Court of Appeals that the deed created an onerous donation because it imposed a reciprocal obligation on the donee to establish and operate a home for the aged and infirm. Pursuant to Article 733, the Court held that the law on contracts controls the rights and obligations of the parties in an onerous donation. The Court explained that rescission of a contract for breach requires a substantial breach that defeats the primary purpose of the agreement as contemplated by Article 1191 and established jurisprudence. The Court relied on its decision in Republic vs. Silim, which recognized that an exchange of donated property, or other acts that further the donation’s purpose, do not necessarily violate the condition attached to a donation. Applying that principle, the Court found that the three leases at issue were entered into to generate funds and to protect and develop Casa dela Merced and thus furthered, rather than defeated, the donation’s objective. The Court held that the absence of the donor’s prior written consent rendered the leases technical breaches only; such casual breaches did not justify rescission because they did not substantially impair th
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Case Syllabus (G.R. No. 133705)
Parties and Procedural Posture
- C-J Yulo & Sons, Inc. filed an action for revocation of donation with reconveyance of title against Roman Catholic Bishop of San Pablo, Inc. in the Regional Trial Court, Calamba, Laguna.
- The trial court rendered judgment for C-J Yulo & Sons, Inc., ordering revocation of the deed of donation and reconveyance of the property to the donor.
- Roman Catholic Bishop of San Pablo, Inc. appealed to the Court of Appeals in CA-G.R. CV No. 45392, which reversed the trial court in a Decision dated December 19, 1997 and denied reconsideration in a Resolution dated April 30, 1998.
- C-J Yulo & Sons, Inc. brought a petition for review on certiorari to the Supreme Court, which issued the present decision denying the petition and affirming the Court of Appeals.
Key Facts
- On September 24, 1977, C-J Yulo & Sons, Inc. donated a 41,117 square meter parcel in Canlubang, Calamba, Laguna to Roman Catholic Bishop of San Pablo, Inc., originally covered by TCT No. T-82803.
- The deed of donation contained conditions requiring that part of the land be used for a home for the aged and infirm, a 15-meter green belt be established, agricultural use for sustaining the home be permitted, and that prior written consent of the donor be obtained for uses other than those specified.
- Pursuant to the deed, the donor’s TCT was cancelled and replaced by TCT No. T-91348 in the name of the donee.
- Beginning circa 1980 the donee leased portions of the property three times to private lessees—Martin Gomez (sugar cane), Jose Bostre (ranch), and Rudy Caballes (cattle fattening)—without the donor’s prior written consent.
- The donee explained that the leases were intended to generate funds for perimeter fencing, electrification, protection against vandals, and construction of a nucleus building named Casa dela Merced.
- By letter dated September 20, 1990, C-J Yulo & Sons, Inc. notified the donee of revocation for material breach and demanded turnover of TCT No. T-91348, to which the donee replied on November 5, 1990, denying material breach and refusing turnover.
Deed Terms and Conditions
- The deed expressly required that so much of the land as necessary be used for a home for the aged and infirm, with admission provisions and a priority for local residents.
- The deed mandated establishment of a 15-meter wide green belt along the highway-facing side of the property as a condition.
- The deed expressly allowed agricultural use of nonessential portions to feed residents and permitted commercial leasing with prior written consent of the donor under specified charitable-use priorities for proceeds.
- The deed contained a reversion clause stating that, except with prior written consent of the donor or its successor, the donee shall not use, sell or dispose of the land other than as provided, and violation would cause the land to revert in trust to the donor for disposition to another charitable organization.
Chronology of Leases
- The first lease to Martin Gomez was entered circa 1980 and ended in 1985, with the land planted to sugar cane.
- The second lease to Jose Bostre occurred in 1986 and was explained as for ranch use, electrification of Casa dela Merced, and protection of premises.
- The third lease to Rudy Caballes followed the Bostre lease and involved cattle fattening.
- None of the three leases were preceded by the prior written consent of the donor as required by the deed.