Title
Makati Tuscany Condominium Corp. vs. Multi-Realty Development Corp.
Case
G.R. No. 185530
Decision Date
Apr 18, 2018
Multi-Realty sought reformation of the Master Deed, claiming 98 parking slots were mistakenly designated as common areas. The Supreme Court ruled in favor, affirming the true intent was for Multi-Realty to retain ownership.
reformation of instrument
ownership of parking slots
condominium building

Case Summary (G.R. No. 185530)

Factual Background

Multi-Realty Development Corporation developed the Makati Tuscany condominium in 1974, comprising 160 residential units and 270 parking slots. The Master Deed and Declaration of Restrictions, executed by Multi-Realty on July 30, 1975 and registered in 1977, allocated parking: one slot per ordinary unit, two per penthouse unit, eight guest slots, and the remaining 98 slots described as common areas. Pursuant to Republic Act No. 4726, Multi-Realty incorporated Makati Tuscany Condominium Corporation (MATUSCO) in 1977 and executed a Deed of Transfer conveying the common areas to MATUSCO. Between 1977 and 1986, Multi-Realty sold 26 of the disputed 98 parking slots to unit owners. MATUSCO did not formally object to those sales and issued Certificates of Management covering the sold units and parking slots. MATUSCO’s board minutes show offers to acquire unassigned parking slots from Multi-Realty.

Trial Court Proceedings

Multi-Realty Development Corporation filed suit in 1990 for damages and reformation of instrument, arguing that only eight parking slots were intended as guest parking and that Multi-Realty intended to retain ownership of the remaining 98 slots but that this intention was mistakenly not reflected in the Master Deed and Deed of Transfer. The Regional Trial Court dismissed the complaint on October 29, 1993. The trial court found it unlikely that Multi-Realty mistakenly included the 98 slots among common areas because Multi-Realty itself prepared the Master Deed and Deed of Transfer. The trial court further held that reformation could not be granted absent fraud or inequitable conduct by MATUSCO and found Multi-Realty estopped by deed. The trial court awarded attorney’s fees, which were later modified by appellate courts.

Court of Appeals Proceedings

The Court of Appeals initially dismissed the appeals of both parties on August 21, 2000, on the ground of prescription. It held that an action for reformation must be brought within ten years from execution and dismissed MATUSCO’s counterclaim as prescribed. After this Court’s 2006 remand, the Court of Appeals denied the appeals on November 5, 2007, reading the Master Deed as clearly placing the 98 slots in the common areas and affirming estoppel findings. Upon reconsideration, however, the Court of Appeals issued an Amended Decision on April 28, 2008, reversing the November 5, 2007 outcome and ordering reformation of the Master Deed and Deed of Transfer to reflect that Multi-Realty retained ownership of the 98 extra parking slots. The Amended Decision denied damages and attorney’s fees. MATUSCO’s motion for reconsideration of the Amended Decision was denied in a December 4, 2008 Resolution.

Prior Supreme Court Determination on Prescription

In Multi-Realty Development Corporation v. The Makati Tuscany Condominium Corporation, 524 Phil. 318 (2006), this Court granted Multi-Realty’s petition and set aside the Court of Appeals’ August 21, 2000 Decision because the Court of Appeals had improperly resolved prescription motu proprio. This Court held that Multi-Realty’s cause of action for reformation accrued in 1989 when MATUSCO denied Multi-Realty’s ownership of the 98 slots, and therefore the 1990 complaint was timely. The 2006 ruling remanded the case to the Court of Appeals for resolution on the merits.

The Parties’ Contentions on Reformation and Estoppel

Makati Tuscany Condominium Corporation argued before the Supreme Court that the Master Deed and Deed of Transfer clearly expressed the parties’ agreement and that there was no mistake, fraud, inequitable conduct, or accident warranting reformation. MATUSCO contended that estoppel could not apply because Multi-Realty had no right to sell slots contrary to the Master Deed. MATUSCO also invoked the public and in rem effect of registered instruments.
Multi-Realty Development Corporation maintained that the Master Deed and Deed of Transfer failed to reflect the parties’ true intention to exclude 98 parking slots from the common areas, and that this failure was due to mistake arising from its inexperience with condominium documentation. Multi-Realty relied on subsequent and contemporaneous acts to prove intent: color-coded floor plans showing only eight guest slots as common, sales of 26 of the 98 slots without protest from MATUSCO, issuance by MATUSCO of Certificates of Management for those sold slots, and board minutes showing MATUSCO’s offers to buy unassigned slots.

Legal Principles Governing Reformation

The Court reiterated that reformation is an equitable remedy to revise a valid contract so that a written instrument expresses the parties’ true agreement. The basis for reformation is Article 1359 of the Civil Code, which permits reformation where a meeting of the minds existed but the instrument fails to express the true intention due to mistake, fraud, inequitable conduct, or accident. The requisites for reformation, as cited from precedent, are: (1) a meeting of the minds; (2) the instrument does not express the true intention; and (3) the failure is due to mistake, fraud, inequitable conduct or accident. The burden of proof rests upon the party seeking reformation to overcome the presumption that a written instrument expresses the parties’ intentions.

Supreme Court’s Analysis of the Factual Record

The Court examined Sections 5 and 7(d) of the Master Deed, which on a plain reading placed all parking areas not assigned under Section 5 among the common areas. The Court nonetheless emphasized that intentions are states of mind and therefore must be inferred from objective evidence, notably subsequent and contemporaneous acts. The Court found the evidentiary record unrebutted as to these acts. The Court identified several consistent indicia that the parties intended Multi-Realty to retain the 98 slots: color-coded plans reflecting only eight common guest slots; Multi-Realty’s sale of 26 slots from 1977 to 1986 without objection from MATUSCO and with issuance of Certificates of Management by MATUSCO; board minutes reflecting MATUSCO’s consideration of purchasing unassigned slots; and MATUSCO’s acceptance of the factual narrative in the earlier 2006 Supreme Court opinion. The Court concluded that the totality of these undisputed acts supported reformation because they demonstrated that the Master Deed and Deed of Transfer failed to capture the parties’ real agreement.

Estoppel and Equitable Considerations

The Court addressed MATUSCO’s estoppel argument and the contention that Multi-Realty should be bound by its admitted drafting mistake. The Court explained that the doctrine of estoppel rests on public policy, fair dealing, and equity; its purpose is to prevent a party from acting contrary to its representations to the injury of one who relied thereon. The Court found that both parties recognized and acted upon Multi-Realty’s retained ownership of the 98 slots for years. MATUSCO did not demonstrate detrimental reliance upon any false representation to claim estoppel against Multi-Realty. Given MATUSCO’s acquiescence in sales and its board’s conduct, the equitie

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