Title
Multi-Realty Development Corp. vs. Makati Tuscany Condominium Corp.
Case
G.R. No. 146726
Decision Date
Jun 16, 2006
Multi-Realty sought reformation of a 1975 Master Deed after MATUSCO claimed ownership of 72 parking slots in 1989. The Supreme Court ruled the 1990 complaint was timely, as the action accrued in 1989, not 1975.
ownership dispute
parking slots
legal battle
A

Case Summary (G.R. No. 146726)

Key Dates and Documentary Milestones

1970s — construction of Makati Tuscany and preparation of architect’s color-coded plans;
July 1975 — execution of Master Deed and Declaration of Restrictions (filed later with the Register of Deeds in 1977);
1977 — Deed of Transfer executed in favor of MATUSCO; 1977–1986 — Multi-Realty sold 26 of the unallocated parking slots to unit buyers;
1979 — MATUSCO board considered buying unassigned slots and later learned of a discounted offer from Multi-Realty;
September 1989 — MATUSCO denied Multi-Realty’s request to use two unallocated parking slots and, for the first time, asserted that the remaining unallocated parking slots were common areas owned by MATUSCO;
April 26, 1990 — Multi-Realty filed suit (Civil Case No. 90-1110) for damages and/or reformation of instrument;
August 21, 2000 — Court of Appeals (CA) dismissed Multi-Realty’s appeal on prescription grounds;
January 18, 2001 — CA denied petitioner’s motion for reconsideration.

Factual Background: Allocation and Sales of Parking Slots

Makati Tuscany contained 270 parking slots: 164 were expressly allotted (one per ordinary unit, two per penthouse), 8 on the ground floor were designated guest parking (common areas), and 98 were reserved by Multi-Realty for sale to unit owners seeking additional slots. Architect plans prepared by C.D. Arguelles and Associates used color-coding to indicate common areas (yellow) and owner-reserved areas (red), and the plans allegedly depicted only 8 common-area slots. Sections 5 and 7(d) of the Master Deed respectively reserved assigned parking for each unit and described common areas as “PARKING AREAS OTHER THAN THOSE ASSIGNED TO EACH UNIT.” The Master Deed and the Deed of Transfer did not explicitly identify the ownership of the 98 unassigned parking slots. Multi-Realty sold 26 of those unassigned slots between 1977 and 1986; certificates of title were later issued and MATUSCO issued Certificates of Management covering those sold slots. MATUSCO’s board later considered acquiring additional unallocated slots and, in 1989, refused Multi-Realty’s request to use two unallocated slots, asserting ownership of the remaining unallocated parking slots for the first time.

Trial Court Proceedings and Rulings

Multi-Realty filed a complaint for damages and reformation, alleging a mistake in the Master Deed that failed to reflect the parties’ true intention that the 98 unassigned parking slots remained the developer’s property. MATUSCO answered with a counterclaim alleging Multi-Realty had knowingly sold parking slots that were common areas and sought accounting and damages based on market value and rentals. The Regional Trial Court dismissed Multi-Realty’s complaint for failure to prove grounds for reformation and held Multi-Realty estopped by deed from claiming ownership of the common areas; the court also dismissed MATUSCO’s counterclaim for procedural reasons (not compulsory and no filing fee) but awarded attorney’s fees to MATUSCO.

Issues Presented on Appeal to the Court of Appeals

Multi-Realty assigned errors contending (i) the Master Deed should be reformed due to mistake; (ii) registration of the Master Deed did not estop Multi-Realty from asserting the true agreement; and (iii) MATUSCO was estopped from challenging ownership given its prior conduct (non-objection to sales, participation). MATUSCO cross-appealed the dismissal of its counterclaim and maintained that the 106 unassigned slots constituted common areas, that the Deed of Transfer unconditionally transferred common areas to it, that Multi-Realty sold some slots in bad faith, and that sale of common areas was contrary to Section 16 of RA 4726.

Court of Appeals Decision

The Court of Appeals dismissed Multi-Realty’s appeal on the ground that Multi-Realty’s action for reformation had already prescribed at the time the complaint was filed. The CA modified the trial court’s attorney’s fee award (deleting it) but otherwise affirmed the dismissal of both the complaint and the counterclaim. The CA invoked its authority to consider issues not assigned as errors where necessary for a just decision, citing prior jurisprudence.

Petitioner’s Motion for Reconsideration and Arguments

Multi-Realty argued that the CA violated Rule 51, Sec. 8 by deciding prescription when neither party raised it as an error, and that prescription should be counted from 1989 (the date of MATUSCO’s repudiation), not from the 1975 execution of the Master Deed. Multi-Realty relied on precedents (Tormon v. Cutanda; Veluz v. Veluz; Espaol v. Chairman, Philippine Veterans Administration) supporting accrual of a reformation cause of action upon repudiation or discovery of the mistake.

Supreme Court’s Review: Procedural Appropriateness of CA’s Action

The Supreme Court held that the CA erred in dismissing Multi-Realty’s appeal solely on the ground of prescription because prescription was not raised as an affirmative defense in the RTC, was not relied upon by the trial court, and was not assigned as error in the parties’ appellate briefs. While appellate courts possess authority to consider matters not assigned as errors when necessary for a just decision and when closely related to assigned errors, basic due process principles generally preclude resolving an unraised substantive issue to the prejudice of a party. Given the factual posture, the CA should have resolved the appeal on its merits rather than deciding, motu proprio, that the action had prescribed.

Supreme Court’s Legal Analysis on Prescription and Accrual of Right of Action

The Court reviewed the law on prescription: Article 1144 prescribes a ten-year period for actions upon a written contract; Article 1150 provides that the prescriptive period runs from the day an action can be brought (the accrual of the right of action). The right of action accrues only when all facts constituting the cause of action have occurred. For reformation of an instrument, equitable principles require that prescription does not run until the mistake has been discovered or should have been discovered, and, more pertinently, until there is an affirmative denial or repudiation by the opposing party—i.e., an overt adverse assertion of rights. The Court cited prior cases (Tormon v. Cutanda

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