G.R. No.
103338 January 4, 1994
FEDERICO SERRA, petitioner,
vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING
CORPORATION, respondents.
Andres R. Amante, Jr. for petitioner.
R.C. Domingo, Jr. & Associates for private respondent.
NOCON, J.:
A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable. An accepted unilateral promise to buy and sell a determinate thing for a
price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price. (Article 1479, New Civil Code) The first is the
mutual promise and each has the right to demand from the other the fulfillment of the
obligation. While the second is merely an offer of one to another, which if accepted,
would create an obligation to the offeror to make good his promise, provided the
acceptance is supported by a consideration distinct from the price.
Disputed in the present case is the efficacy of a "Contract of Lease with Option to
Buy", entered into between petitioner Federico Serra and private respondent Rizal
Commercial Banking Corporation. (RCBC).
Petitioner is the owner of a 374 square meter parcel of land located at Quezon St.,
Masbate, Masbate. Sometime in 1975, respondent bank, in its desire to put up a
branch in Masbate, Masbate, negotiated with petitioner for the purchase of the then
unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO
BUY was instead forged by the parties, the pertinent portion of which reads:
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby
accepts in lease, the parcel of land described in the first WHEREAS
clause, to have and to hold the same for a period of twenty-five (25)
years commencing from June 1, 1975 to June 1, 2000. The
LESSEE, however, shall have the option to purchase said parcel of
land within a period of ten (10) years from the date of the signing of
this Contract at a price not greater than TWO HUNDRED TEN
PESOS (P210.00) per square meter. For this purpose, the
LESSOR undertakes, within such ten-year period, to register said
parcel of land under the TORRENS SYSTEM and all expenses
appurtenant thereto shall be for his sole account.
If, for any reason, said parcel of land is not registered under the
TORRENS SYSTEM within the aforementioned ten-year period, the
LESSEE shall have the right, upon termination of the lease to be
paid by the LESSOR the market value of the building and
improvements constructed on said parcel of land.
The LESSEE is hereby appointed attorney-in-fact for the LESSOR
to register said parcel of land under the TORRENS SYSTEM in
case the LESSOR, for any reason, fails to comply with his
obligation to effect said registration within reasonable time after the
signing of this Agreement, and all expenses appurtenant to such
registration shall be charged by the LESSEE against the rentals
due to the LESSOR.
2. During the period of the lease, the LESSEE covenants to pay the
LESSOR, at the latter's residence, a monthly rental of SEVEN
HUNDRED PESOS (P700.00), Philippine Currency, payable in
advance on or before the fifth (5th) day of every calendar month,
provided that the rentals for the first four (4) months shall be paid by
the LESSEE in advance upon the signing of this Contract.
3. The LESSEE is hereby authorized to construct as its sole
expense a building and such other improvements on said parcel of
land, which it may need in pursuance of its business and/or
operations; provided, that if for any reason the LESSEE shall fail to
exercise its option mentioned in paragraph (1) above in case the
parcel of land is registered under the TORRENS SYSTEM within
the ten-year period mentioned therein, said building and/or
improvements, shall become the property of the LESSOR after the
expiration of the 25-year lease period without the right of
reimbursement on the part of the LESSEE. The authority herein
granted does not, however, extend to the making or allowing any
unlawful, improper or offensive used of the leased premises, or any
use thereof, other than banking and office purposes. The
maintenance and upkeep of such building, structure and
improvements shall likewise be for the sole account of the LESSEE.
1
The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.
Pursuant to said contract, a building and other improvements were constructed on the
land which housed the branch office of RCBC in Masbate, Masbate. Within three
years from the signing of the contract, petitioner complied with his part of the
agreement by having the property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232
was issued by the Register of Deeds of the Province of Masbate.
Petitioner alleges that as soon as he had the property registered, he kept on pursuing
the manager of the branch to effect the sale of the lot as per their agreement. It was
not until September 4, 1984, however, when the respondent bank decided to exercise
its option and informed petitioner, through a letter, 2 of its intention to buy the property
at the agreed price of not greater than P210.00 per square meter or a total of
P78,430.00. But much to the surprise of the respondent, petitioner replied that he is
no longer selling the property.3
Hence, on March 14, 1985, a complaint for specific performance and damages were
filed by respondent against petitioner. In the complaint, respondent alleged that during
the negotiations it made clear to petitioner that it intends to stay permanently on
property once its branch office is opened unless the exigencies of the business
requires otherwise. Aside from its prayer for specific performance, it likewise asked
for an award of P50,000.00 for attorney's fees P100,000.00 as exemplary damages
and the cost of the suit.4
A special and affirmative defenses, petitioner contended:
1. That the contract having been prepared and drawn by RCBC, it
took undue advantage on him when it set in lopsided terms.
2. That the option was not supported by any consideration distinct
from the price and hence not binding upon him.
3. That as a condition for the validity and/or efficacy of the option, it
should have been exercised within the reasonable time after the
registration of the land under the Torrens System; that its delayed
action on the option have forfeited whatever its claim to the same.
4. That extraordinary inflation supervened resulting in the unusual
decrease in the purchasing power of the currency that could not
reasonably be forseen or was manifestly beyond the contemplation
of the parties at the time of the establishment of the obligation, thus,
rendering the terms of the contract unenforceable, inequitable and
to the undue enrichment of RCBC. 5
and as counterclaim petitioner alleged that:
1. The rental of P700.00 has become unrealistic and unreasonable,
that justice and equity will require its adjustment.
2. By the institution of the complaint he suffered moral damages
which may be assessed at P100,000.00 and award of attorney's fee
of P25,000.00 and exemplary damages at P100,000.00.6
Initially, after trial on the merits, the court dismissed the complaint. Although it found
the contract to be valid, the court nonetheless ruled that the option to buy in
unenforceable because it lacked a consideration distinct from the price and RCBC did
not exercise its option within reasonable time. The prayer for readjustment of rental
was denied, as well as that for moral and exemplary damages.7
Nevertheless, upon motion for reconsideration of respondent, the court in the order of
January 9, 1989, reversed itself, the dispositive portion reads:
WHEREFORE, the Court reconsiders its decision dated June 6,
1988, and hereby renders judgment as follows:
1. The defendant is hereby ordered to execute and deliver the
proper deed of sale in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original
Certificate of Title 0-232 of the Registry of Deeds of Masbate for the
sum of Seventy Eight Thousand Five Hundred Forty Pesos
(P78,540,00), Philippine Currency;
2. Defendant is ordered to pay plaintiff the sum of Five Thousand
(P5,000.00) Pesos as attorney's fees;
3. The counter claim of defendant is hereby dismissed; and
4. Defendants shall pay the costs of suit.8
In a decision promulgated on September 19, 1991,9 the Court of Appeals affirmed the
findings of the trial court that:
1. The contract is valid and that the parties perfectly understood the
contents thereof;
2. The option is supported by a distinct and separate consideration
as embodied in the agreement;
3. There is no basis in granting an adjustment in rental.
Assailing the judgment of the appellate court, petitioner would like us to consider
mainly the following:
1. The disputed contract is a contract of adhesion.
2. There was no consideration to support the option, distinct from
the price, hence the option cannot be exercised.
3. Respondent court gravely abused its discretion in not granting
currency adjustment on the already eroded value of the stipulated
rentals for twenty-five years.
The petition is devoid of merit.
There is no dispute that the contract is valid and existing between the parties, as
found by both the trial court and the appellate court. Neither do we find the terms of
the contract unfairly lopsided to have it ignored.
A contract of adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. These types of contracts are as binding as ordinary contracts.
Because in reality, the party who adheres to the contract is free to reject it entirely.
Although, this Court will not hesitate to rule out blind adherence to terms where facts
and circumstances will show that it is basically one-sided. 10
We do not find the situation in the present case to be inequitable. Petitioner is a highly
educated man, who, at the time of the trial was already a CPA-Lawyer, and when he
entered into the contract, was already a CPA, holding a respectable position with the
Metropolitan Manila Commission. It is evident that a man of his stature should have
been more cautious in transactions he enters into, particularly where it concerns
valuable properties. He is amply equipped to drive a hard bargain if he would be so
minded to.
Petitioner contends that the doctrines laid down in the cases of
Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca
13 were misapplied in the present case, because 1) the option given to the
respondent bank was not supported by a consideration distinct from the price; and 2)
that the stipulated price of "not greater than P210.00 per square meter" is not certain
or definite.
Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a
certain period to accept, the offer maybe withdrawn at anytime before acceptance by
communicating such withdrawal, except when the option is founded upon
consideration, as something paid or promised. On the other hand, Article 1479 of the
Code provides that an accepted unilateral promise to buy and sell a determinate thing
for a price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise before
the acceptance by the creditor, the transaction becomes a bilateral contract to sell
and to buy, because upon acceptance by the creditor of the offer to sell by the debtor,
there is already a meeting of the minds of the parties as to the thing which is
determinate and the price which is certain. 14 In which case, the parties may then
reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege existing only in
one party — the buyer. For a separate consideration paid, he is given the right to
decide to purchase or not, a certain merchandise or property, at any time within the
agreed period, at a fixed price. This being his prerogative, he may not be compelled
to exercise the option to buy before the time
expires. 15
On the other hand, what may be regarded as a consideration separate from the price
is discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts are almost
on all fours with the case at bar. The said case also involved a lease contract with
option to buy where we had occasion to say that "the consideration for the lessor's
obligation to sell the leased premises to the lessee, should he choose to exercise his
option to purchase the same, is the obligation of the lessee to sell to the lessor the
building and/or improvements constructed and/or made by the former, if he fails to
exercise his option to buy leased premises." 17
In the present case, the consideration is even more onerous on the part of the lessee
since it entails transferring of the building and/or improvements on the property to
petitioner, should respondent bank fail to exercise its option within the period
stipulated. 18
The bugging question then is whether the price "not greater than TWO HUNDRED
PESOS" is certain or definite. A price is considered certain if it is so with reference to
another thing certain or when the determination thereof is left to the judgment of a
specified person or persons. 19 And generally, gross inadequacy of price does not
affect a contract of sale. 20
Contracts are to be construed according to the sense and meaning of the terms which
the parties themselves have used. In the present dispute, there is evidence to show
that the intention of the parties is to peg the price at P210 per square meter. This was
confirmed by petitioner himself in his testimony, as follows:
Q. Will you please tell this Court what was the
offer?
A. It was an offer to buy the property that I have
in Quezon City (sic).
Q. And did they give you a specific amount?
xxx xxx xxx
A. Well, there was an offer to buy the property at
P210 per square meters (sic).
Q. And that was in what year?
A . 1975, sir.
Q. And did you accept the offer?
A. Yes, sir. 21
Moreover, by his subsequent acts of having the land titled under the Torrens System,
and in pursuing the bank manager to effect the sale immediately, means that he
understood perfectly the terms of the contract. He even had the same property
mortgaged to the respondent bank sometime in 1979, without the slightest hint of
wanting to abandon his offer to sell the property at the agreed price of P210 per
square meter. 22
Finally, we agree with the courts a quo that there is no basis, legal or factual, in
adjusting the amount of the rent. The contract is the law between the parties and if
there is indeed reason to adjust the rent, the parties could by themselves negotiate for
the amendment of the contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to the time of the commencement
of the present case in 1985, to be so great as to result in an extraordinary inflation.
Extraordinary inflation exists when there in an unimaginable increase or decrease of
the purchasing power of the Philippine currency, or fluctuation in the value of pesos
manifestly beyond the contemplation of the parties at the time of the establishment of
the obligation. 23
Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY"
between petitioner and respondent bank is valid, effective and enforceable, the price
being certain and that there was consideration distinct from the price to support the
option given to the lessee.
WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate
court is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.
#Footnotes
1 Annex "A" of the Complaint, Original Records, pp. 8-9.
2 Annex "C" of the Complaint, Original Records, p. 14.
3 Annex "D" of the Complaint, Original Records, p. 15.
4 Rizal Commercial Banking Corporation v. Federico A. Serra, Civil
Case No. 10054, Judge Ignacio M. Capulong, presiding judge,
Regional Trial Court, Branch 134, National Capital Judicial Region,
Makati.
5 Answer to the Complaint, Original Records, pp. 23-24.
6 Id. at 24.
7 Rollo, pp. 41, 44.
8 Rollo, p. 49.
9 CA-G.R. CV No. 25693, Justice Celso L. Magsino, ponente,
Justices Serafin Camilo and Artemon Luna, concurring, Rollo, pp.
50-63.
10 Pan American World Airways, Inc., v. Rapadas, G.R. No. 60673,
19 May 1992; BPI Credit Corporation v. Court of Appeals, G.R. No.
96755, 204 SCRA 601.
11 102 Phil. 948.
12 45 SCRA 368.
13 29 SCRA 1.
14 Padilla, Ambrosio; Civil Code, Vol. 3, 6th Ed., 1974 at pp. 179-
180, quoting from Aguirre v. Salazar, 13 CA rep 297.
15 Padilla, at p. 179, quoting from Filipinas Colleges Inc. v.
Timbang, et al, (CA) 52 O.G. 3624; De la Cevada v. Diaz, 37 Phil.
982; Villamor v. C.A., G.R. No. 97332, 202 SCRA 607.
16 Supra.
17 Ibid., at p. 4-5.
18 As explicitly stated in the provision #3 of the contract :
". . . provided, that if for any reason the LESSEE shall fail to
exercise its option mentioned in paragraph (1) above in case the
parcel of land is registered under the TORRENS SYSTEM within
the ten-year period mentioned therein, said building and/or
improvements, shall become the property of the LESSOR after the
expiration of the 25-year lease period without right of
reimbursement on the part of the LESSEE."
19 Article 1469, New Civil Code.
20 Article 1470, New Civil Code.
21 TSN, July 28, 1986 - pp. 4-5.
22 TSN, July 28, 1986, p. 13.
23 Filipino Pipe and Foundry Corp. v. NAWASA, G.R. No. L-43446,
161 SCRA 32.
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII,
LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.
Leovigildo Vallar for private respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to
restrain respondent Judge from proceeding further with Civil Case No. 4091, entitled
Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied
petitioner's Motion to Dismiss the complaint, and the Motion for Reconsideration of
said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and
Rogelio Tiro, a contractor by professions, bought tickets Nos. 0011736 and 011737
for Voyage 90 on December 31, 1971 at the branch office of petitioner, a shipping
company transporting inter-island passengers and cargoes, at Cagayan de Oro City.
Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for
Tagbilaran City via the port of Cebu. Upon learning that the vessel was not
proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to M/S "Sweet
Town". Because the said vessel was already filled to capacity, they were forced to
agree "to hide at the cargo section to avoid inspection of the officers of the Philippine
Coastguard." Private respondents alleged that they were, during the trip," "exposed to
the scorching heat of the sun and the dust coming from the ship's cargo of corn grits,"
and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not
honored and they were constrained to pay for other tickets. In view thereof, private
respondents sued petitioner for damages and for breach of contract of carriage in the
alleged sum of P10,000.00 before respondents Court of First Instance of Misamis
Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This
motion was premised on the condition printed at the back of the tickets, i.e., Condition
No. 14, which reads:
14. It is hereby agreed and understood that any and all actions
arising out of the conditions and provisions of this ticket,
irrespective of where it is issued, shall be filed in the competent
courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order
of denial, but no avail. 5 Hence, this instant petition for prohibition for preliminary
injunction, 'alleging that the respondent judge has departed from the accepted and
usual course of judicial preoceeding" and "had acted without or in excess or in error of
his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from
proceeding further with the case and required respondent to comment. 7 On January
18, 1974, We gave due course to the petition and required respondent to answer. 8
Thereafter, the parties submitted their respesctive memoranda in support of their
respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all
appearances, is one of first impression, to wit — Is Condition No. 14 printed at the
back of the petitioner's passage tickets purchased by private respondents, which
limits the venue of actions arising from the contract of carriage to theCourt of First
Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier
engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of
carriage should be filed only in a particular province or city, in this case the City of
Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private
respndents acceded to tit when they purchased passage tickets at its Cagayan de
Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran,
Bohol — that the condition of the venue of actions in the City of Cebu is proper since
venue may be validly waived, citing cases; 10 that is an effective waiver of venue,
valid and binding as such, since it is printed in bold and capital letters and not in fine
print and merely assigns the place where the action sing from the contract is
institution likewise citing cases; 11 and that condition No. 14 is unequivocal and
mandatory, the words and phrases "any and all", "irrespective of where it is issued,"
and "shag" leave no doubt that the intention of Condition No. 14 is to fix the venue in
the City of Cebu, to the exclusion of other places; that the orders of the respondent
Judge are an unwarranted departure from established jurisprudence governing the
case; and that he acted without or in excess of his jurisdiction in is the orders
complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that
the same is not an essential element of the contract of carriage, being in itself a
different agreement which requires the mutual consent of the parties to it; that they
had no say in its preparation, the existence of which they could not refuse, hence,
they had no choice but to pay for the tickets and to avail of petitioner's shipping
facilities out of necessity; that the carrier "has been exacting too much from the public
by inserting impositions in the passage tickets too burdensome to bear," that the
condition which was printed in fine letters is an imposition on the riding public and
does not bind respondents, citing cases; 13 that while venue 6f actions may be
transferred from one province to another, such arrangement requires the "written
agreement of the parties", not to be imposed unilaterally; and that assuming that the
condition is valid, it is not exclusive and does not, therefore, exclude the filing of the
action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by
petitioner and private respondents and that the passage tickets, upon which the latter
based their complaint, are the best evidence thereof. All the essential elements of a
valid contract, i.e., consent, cause or consideration and object, are present. As held in
Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger
boards a ship for transportation from one place to another he is
issued a ticket by the shipper which has all the elements of a
written contract, Namely: (1) the consent of the contracting parties
manifested by the fact that the passenger boards the ship and the
shipper consents or accepts him in the ship for transportation; (2)
cause or consideration which is the fare paid by the passenger as
stated in the ticket; (3) object, which is the transportation of the
passenger from the place of departure to the place of destination
which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions
— one of which is "Condition No. 14" which is in issue in this case — printed at the
back of the passage tickets, these are commonly known as "contracts of adhesion,"
the validity and/or enforceability of which will have to be determined by the peculiar
circumstances obtaining in each case and the nature of the conditions or terms
sought to be enforced. For, "(W)hile generally, stipulations in a contract come about
after deliberate drafting by the parties thereto, ... there are certain contracts almost all
the provisions of which have been drafted only by one party, usually a corporation.
Such contracts are called contracts of adhesion, because the only participation of the
party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills
of lading, contracts of make of lots on the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into —
namely, that it is drafted only by one party, usually the corporation, and is sought to
be accepted or adhered to by the other party, in this instance the passengers, private
respondents, who cannot change the same and who are thus made to adhere thereto
on the "take it or leave it" basis — certain guidelines in the determination of their
validity and/or enforceability have been formulated in order to that justice and fan play
characterize the relationship of the contracting parties. Thus, this Court speaking
through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance
Co., 17 and later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held
— because even the latter was filed to capacity.
The courts cannot ignore that nowadays, monopolies, cartels and
concentration of capital endowed with overwhelm economic power,
manage to impose upon parties d with them y prepared
'agreements' that the weaker party may not change one whit his
participation in the 'agreement' being reduced to the alternative 'to
take it or leave it,' labelled since Raymond Saleilles 'contracts by
adherence' (contracts d' adhesion) in contrast to those entered into
by parties bargaining on an equal footing. Such contracts (of which
policies of insurance and international bill of lading are prime
examples) obviously cap for greater strictness and vigilance on the
part of the courts of justice with a view to protecting the weaker
party from abuses and imposition, and prevent their becoming traps
for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this
kind, the protection of the disadvantaged is expressly enjoined by the New Civil Code
—
In all contractual property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence,
ignorance indigence, mental weakness, tender age and other
handicap, the courts must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances
Prevailing in the inter-island ship. ping industry in the country today, We find and hold
that Condition No. 14 printed at the back of the passage tickets should be held as
void and unenforceable for the following reasons first, under circumstances obligation
in the inter-island ship. ping industry, it is not just and fair to bind passengers to the
terms of the conditions printed at the back of the passage tickets, on which Condition
No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public
policy on transfer of venue of proceedings of this nature, since the same will prejudice
rights and interests of innumerable passengers in different s of the country who,
under Condition No. 14, will have to file suits against petitioner only in the City of
Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is
a dearth of and acute shortage in inter- island vessels plying between the country's
several islands, and the facilities they offer leave much to be desired. Thus, even
under ordinary circumstances, the piers are congested with passengers and their
cargo waiting to be transported. The conditions are even worse at peak and/or the
rainy seasons, when Passengers literally scramble to whatever accommodations may
be availed of, even through circuitous routes, and/or at the risk of their safety — their
immediate concern, for the moment, being to be able to board vessels with the hope
of reaching their destinations. The schedules are — as often as not if not more so —
delayed or altered. This was precisely the experience of private respondents when
they were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the
scorching heat of the sun and the dust coming from the ship's cargo of corn grits, "
Under these circumstances, it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, more often than not
during rush hours, for conditions that may be printed much charge them with having
consented to the conditions, so printed, especially if there are a number of such
conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the
petitioner, respondents had no say in its preparation. Neither did the latter have the
opportunity to take the into account prior to the purpose chase of their tickets. For,
unlike the small print provisions of contracts — the common example of contracts of
adherence — which are entered into by the insured in his awareness of said
conditions, since the insured is afforded the op to and co the same, passengers of
inter-island v do not have the same chance, since their alleged adhesion is presumed
only from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of
certificates of public convenience and therefore, posses a virtual monopoly over the
business of transporting passengers between the ports covered by their franchise.
This being so, shipping companies, like petitioner, engaged in inter-island shipping,
have a virtual monopoly of the business of transporting passengers and may thus
dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of
the fact that the bulk of those who board these inter-island vested come from the low-
income groups and are less literate, and who have little or no choice but to avail of
petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For,
although venue may be changed or transferred from one province to another by
agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such
an agreement will not be held valid where it practically negates the action of the
claimants, such as the private respondents herein. The philosophy underlying the
provisions on transfer of venue of actions is the convenience of the plaintiffs as well
as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in
the City of Cebu, he would most probably decide not to file the action at all. The
condition will thus defeat, instead of enhance, the ends of justice. Upon the other
hand, petitioner has branches or offices in the respective ports of call of its vessels
and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI
of Misamis Oriental, as was done in the instant case, will not cause inconvenience to,
much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against the public
good ... 22 Under this principle" ... freedom of contract or private dealing is restricted
by law for the good of the public. 23 Clearly, Condition No. 14, if enforced, will be
subversive of the public good or interest, since it will frustrate in meritorious cases,
actions of passenger cants outside of Cebu City, thus placing petitioner company at a
decided advantage over said persons, who may have perfectly legitimate claims
against it. The said condition should, therefore, be declared void and unenforceable,
as contrary to public policy — to make the courts accessible to all who may have
need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order
issued on November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against
petitioner.
Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.
Antonio, J., reserves his vote.
Separate Opinions
BARREDO, J., concurring:
I concur in the dismissal of the instant petition.
Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R.
No. L-44351, promulgated May 18, 1978, We made it clear that although generally,
agreements regarding change of venue are enforceable, there may be instances
where for equitable considerations and in the better interest of justice, a court may
justify the laying of, the venue in the place fixed by the rules instead of following
written stipulation of the parties.
In the particular case at bar, there is actually no written agreement as to venue
between the parties in the sense contemplated in Section 3 of Rule 4, which governs
the matter. I take it that the importance that a stipulation regarding change of the
venue fixed by law entails is such that nothing less than mutually conscious
agreement as to it must be what the rule means. In the instant case, as well pointed
out in the main opinion, the ticket issued to private respondents by petitioner
constitutes at best a "contract of adhesion". In other words, it is not that kind of a
contract where the parties sit down to deliberate, discuss and agree specifically on all
its terms, but rather, one which respondents took no part at all in preparing, since it
was just imposed upon them when they paid for the fare for the freight they wanted to
ship. It is common knowledge that individuals who avail of common carriers hardly
read the fine prints on such tickets to note anything more than the price thereof and
the destination designated therein.
Under these circumstances, it would seem that, since this case is already in
respondent court and there is no showing that, with its more or less known resources
as owner of several inter-island vessels plying between the different ports of the
Philippines for sometime already, petitioner would be greatly inconvenienced by
submitting to the jurisdiction of said respondent court, it is best to allow the
proceedings therein to continue. I cannot conceive of any juridical injury such a step
can cause to anyone concerned. I vote to dismiss the petition.
Separate Opinions
BARREDO, J., concurring:
I concur in the dismissal of the instant petition.
Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R.
No. L-44351, promulgated May 18, 1978, We made it clear that although generally,
agreements regarding change of venue are enforceable, there may be instances
where for equitable considerations and in the better interest of justice, a court may
justify the laying of, the venue in the place fixed by the rules instead of following
written stipulation of the parties.
In the particular case at bar, there is actually no written agreement as to venue
between the parties in the sense contemplated in Section 3 of Rule 4, which governs
the matter. I take it that the importance that a stipulation regarding change of the
venue fixed by law entails is such that nothing less than mutually conscious
agreement as to it must be what the rule means. In the instant case, as well pointed
out in the main opinion, the ticket issued to private respondents by petitioner
constitutes at best a "contract of adhesion". In other words, it is not that kind of a
contract where the parties sit down to deliberate, discuss and agree specifically on all
its terms, but rather, one which respondents took no part at all in preparing, since it
was just imposed upon them when they paid for the fare for the freight they wanted to
ship. It is common knowledge that individuals who avail of common carriers hardly
read the fine prints on such tickets to note anything more than the price thereof and
the destination designated therein.
Under these circumstances, it would seem that, since this case is already in
respondent court and there is no showing that, with its more or less known resources
as owner of several inter-island vessels plying between the different ports of the
Philippines for sometime already, petitioner would be greatly inconvenienced by
submitting to the jurisdiction of said respondent court, it is best to allow the
proceedings therein to continue. I cannot conceive of any juridical injury such a step
can cause to anyone concerned. I vote to dismiss the petition.
[G.R. No. 126699. August 7, 1998]
AYALA CORPORATION, petitioner, vs. RAY BURTON DEVELOPMENT
CORPORATION, respondent.
DECISION
MARTINEZ, J.:
Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located in
Makati City. The said estate was originally a raw land which was subdivided for sale
into different lots devoted for residential, commercial and industrial purposes. The
development of the estate consisted of road and building construction and installation
of a central sewerage treatment plant and drainage system which services the whole
Ayala Commercial Area.
On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought from
AYALA a piece of land identified as Lot 26, Block 2 consisting of 1,188 square
meters, located at what is now known as H.V. de la Costa Street, Salcedo Village,
Makati City. The said land, which is now the subject of this case, is more particularly
described as follows:
A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC] Psd-6086, being a
portion of Block D, described as plan [LRC] Psd-5812 LRC [GLRO] Rec. No. 2029)
situated in the Municipality of Makati, Province of Rizal, Is. of Luzon. Bounded on the
NE., points 2 to 3 by Lot 31, Block 2 (Creek 6.00 m. wide) of the subdivision plan, on
the SE., points 3 to 4 by Lot 27, Block 2 of the Subdivision plan; on the SW, points 4
to 5, by proposed Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5 to 1 by
Street Lot 2 (17.00 m. wide) of the subdivision plan. On the NW, points 1 to 2 by Lot
25, Block 2 of the subdivision plan. x x x beginning, containing an area of ONE
THOUSAND ONE HUNDRED EIGHTY EIGHT (1,188) SQUARE METERS.
The transaction was documented in a Deed of Salei[1] of even date, which provides,
among others, that the vendee would comply with certain special conditions and
restrictions on the use or occupancy of the land, among which are -
Deed Restrictions:ii[2]
a) The total height of the building to be constructed on the lot shall not be more than
forty-two (42) meters, nor shall it have a total gross floor area of more than five (5)
times the lot area; and
b) The sewage disposal must be by means of connection into the sewerage system
servicing the area.
Special Conditions:iii[3]
a) The vendee must obtain final approval from AYALA of the building plans and
specifications of the proposed structures that shall be constructed on the land;
b) The lot shall not be sold without the building having been completed; and
c) Any breach of the stipulations and restrictions entitles AYALA to rescission of the
contract.
As a result of the sale, a Transfer Certificate of Title No. 132086iv[4] was issued in the
name of KARAMFIL. The said special conditions and restrictions were attached as an
annex to the deed of sale and incorporated in the Memorandum of Encumbrances at
the reverse side of the title of the lot as Entry No. 2432/T-131086.
On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and Realty
Corporation (PALMCREST) under a Deed of Absolute Salev[5] of even date. This
deed was submitted to AYALA for approval in order to obtain the latters waiver of the
special condition prohibiting the resale of the lot until after KARAMFIL shall have
constructed a building thereon. AYALA gave its written conformity to the sale but
reflecting in its approval the same special conditions/restrictions as in the previous
sale. AYALAs conformity was annotated on the deed of sale.vi[6] PALMCREST did
not object to the stipulated conditions and restrictions.vii[7]
PALMCREST in turn sold the lot to Ray Burton Development Corporation (RBDC),
now respondent, on April 11, 1988, with the agreement that AYALA retains
possession of the Owners Duplicate copy of the title until a building is erected on said
parcel of land in accordance with the requirements and/or restrictions of AYALA.viii[8]
The Deed of Absolute Saleix[9] executed on the said date was also presented to
AYALA for approval since no building had yet been constructed on the lot at the time
of the sale. As in the KARAMFIL-PALMCREST transaction, AYALA gave its
conformity to the sale, subject to RBDCs compliance with the special
conditions/restrictions which were annotated in the deed of sale, thus:
With our conformity, subject to the compliance by the Vendees of the Special
Conditions of Sale on the reverse side of the Deed of Sale dated March 20, 1984 per
Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of the Notary Public Silverio
Aquino.x[10]
The conditions and restrictions of the sale were likewise entered as encumbrances at
the reverse side of the Transfer Certificate of Title No. 155384 which was later issued
in the name of RBDC.xi[11] Like PALMCREST, RBDC was not also averse to the
aforesaid conditions and restrictions.xii[12]
Sometime in June of 1989, RBDC submitted to AYALA for approval a set of
architectural plans for the construction of a 5-storey office building on the subject lot,
with a height of 25.85 meters and a total gross floor area of 4,989.402 square
meters.xiii[13] The building was to be known as Trafalgar Tower but later renamed
Trafalgar Plaza. Since the building was well within the 42-meter height restriction,
AYALA approved the architectural plans.
Upon written requestxiv[14] made by RBDC, AYALA likewise agreed to release the
owners copy of the title covering the subject lot to the China Banking Corporation as
guarantee of the loan granted to RBDC for the construction of the 5-storey building.
Meanwhile, on November 28, 1989, RBDC, together with the Makati Developers
Association, Inc. (MADAI), of which RBDC is a member, and other lot owners, filed a
complaint against AYALA before the Housing and Land Use Regulatory Board
(HLRB), docketed as HLRB Case No. REM-A-0818 (OAALA-REM-111489-4240).
The complaint sought the nullification of the very same Deed Restrictions
incorporated in the deeds of sale of the lots purchased by the complainants from
AYALA and annotated on their certificates of title, on the grounds, inter alia, that said
restrictions purportedly: (a) place unreasonable control over the lots sold by AYALA,
thereby depriving the vendees of the full enjoyment of the lots they bought, in violation
of Article 428 of the Civil Code; (b) have been superseded by Presidential Decree No.
1096 (the National Building Code) and Metro Manila Commission Zoning Ordinance
No. 81-01; (c) violate the constitutional provision on equal protection of the laws,
since the restrictions are imposed without regard to reasonable standards or
classifications; and (d) are contracts of adhesionxv[15] since AYALA would not sell
the lots unless the buyers agree to the deed restrictions. The complaint also alleged
that AYALA is in estoppel from enforcing the restrictions in question when it allowed
the construction of other high-rise buildings in Makati City beyond the height and floor
area limits. AYALA was further charged with unsound business practice.
Early in June of 1990, RBDC made another set of building plans for Trafalgar Plaza
and submitted the same for approval, this time to the Building Official of the Makati
City Engineers Office,xvi[16] not to AYALA. In these plans, the building was to be 26-
storey high, or a height of 98.60 meters, with a total gross floor area of 28,600
square meters. After having obtained the necessary building permits from the City
Engineers Office, RBDC began to construct Trafalgar Plaza in accordance with these
new plans.
On July 11, 1990, the majority of the lot owners in the Makati City area, including the
Salcedo and Legaspi Village areas, in a general assembly of the Makati Commercial
Estate Association, Inc. (MACEA), approved the revision of the Deed Restrictions,
which revision was embodied in the Consolidated and Revised Deed
Restrictionsxvii[17] (Revised Deed Restrictions) wherein direct height restrictions
were abolished in favor of floor area limits computed on the basis of floor area ratios
(FARs). In the case of buildings devoted solely to office use in Salcedo Village such
as the Trafalgar Plaza the same could have a maximum gross floor area of only eight
(8) times the lot area. Thus, under the Revised Deed Restrictions, Trafalgar Plaza
could be built with a maximum gross floor area of only 9,504 square meters (1,188 sq.
m. the size of the subject lot multiplied by 8). Even under the Revised Deed
Restrictions, Trafalgar would still exceed 19,065 square meters of floor area on the
basis of a FARs of 8:1. RBDC did not vote for the approval of the Revised Deed
Restrictions and, therefore, it continued to be bound by the original Deed Restrictions.
In the meantime, on August 22, 1990, the HLRB En Banc rendered a decisionxviii[18]
(a) upholding the Deed Restrictions; (b) absolving AYALA from the charge of unsound
business practice; and (c) dismissing HLRB Case No. REM-A-0818. MADAI and
RBDC separately appealed the decision to the Office of the President, which appeal
was docketed as O.P. Case No. 4476.
While the appeal was pending before the Office of the President, the September 21,
1990 issue of the Business World magazinexix[19] featured the Trafalgar Plaza as a
modern 27-storey structure which will soon rise in Salcedo Village, Makati City.
Stunned by this information, AYALA, through counsel, then sent a letterxx[20] to
RBDC demanding the latter to cease the construction of the building which
dimensions do not conform to the previous plans it earlier approved. RBDC, through
counsel, replied with a series of lettersxxi[21] requesting for time to assess the merits
of AYALAs demand.
For failing to heed AYALAs bidding, RBDC was sued on January 25, 1991 before the
Regional Trial Court of Makati City (Branch 148). AYALAs complaint for Specific
Performance or Rescission, docketed as Civil Case No. 91-220, prayed inter alia that
judgment be rendered
xxx xxx xxx
b. Ordering the defendant to comply with its contractual obligations and to remove or
demolish the portions or areas of the Trafalgar Tower/Plaza Building constructed
beyond or in excess of the approved height as shown by building plans approved by
the plaintiff, including any other portion of the building constructed not in accordance
with the building plans and specifications submitted to and approved by plaintiff.
c. Alternatively, in the event specific performance becomes impossible:
i) Ordering the cancellation and rescission of the Deed of Sale dated March 20, 1984
(Annex A hereof) and ordering defendant to return to plaintiff Lot 26, Block 2 of
Salcedo Village;
ii) Ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of
defendant) and directing the Makati Register of Deeds to issue a new title over the Lot
in the name of plaintiff; and
d. Ordering defendant to pay plaintiff attorneys fees in the amount of P500,000.00,
exemplary damages in the amount of P5,000.00 and the costs of the instant
suit..xxii[22]
In its answer (with counterclaim) to the complaint, RBDC denied having actual or
constructive notice of the Deed Restrictions imposed by AYALA on the subject lot.
RBDC alleged in essence that even if said deed restrictions exist, the same are not
economically viable and should not be enforced because they constitute
unreasonable restrictions on its property rights and are, therefore, contrary to law,
morals, good customs, public order or public policy. Moreover, RBDC claimed that the
enforcement of the deed restrictions has also been arbitrary or discriminatory since
AYALA has not made any action against a number of violators of the deed
restrictions.
Meantime, the appeal of MADAI in O.P. Case No. 44761 was considered resolved
when it entered into a compromise agreement with AYALA wherein the latter adopted
and acknowledged as binding the Revised Deed Restrictions of July 11, 1990.xxiii[23]
On the other hand, RBDCs appeal was dismissed in an Order dated February 13,
1992, for the reason that, insofar as the disposition of the appealed (HLRB) decision
is concerned, there is virtually no more actual controversy on the subject of the Deed
Restrictions because the same has been overriden by the Revised (Deed)
Restrictions which the appellee Ayala Corporation has in fact acknowledged as
binding and in full force and effect x x x.xxiv[24] Accordingly, aside from dismissing
RBDCs appeal, the Order of February 13, 1992 also set aside the appealed HLRB
decision. From this order, AYALA sought a reconsideration or clarification, noting,
inter alia, that while the said order has ruled that AYALA can no longer enforce the
Deed Restrictions against RBDC, it does not expressly state that RBDC is bound by
the Revised Deed Restrictions. Clarifying this matter, the Office of the President
issued a Resolution dated April 21, 1992,xxv[25] modifying the February 13, 1992
order, ruling: (1) that RBDC is bound by the original Deed Restrictions, but it has the
option to accept and be bound by the Revised Deed Restrictions in lieu of the former;
and (2) that the HLRB decision dated 22 August 1990, to the extent that it absolved
Ayala from the charge of unsound business practice, subject of the basic complaint, is
affirmed. This time RBDC moved for a reconsideration of the April 21, 1992 Order, but
the motion was denied in a Resolution dated October 15, 1993.xxvi[26] Another
Resolution of March 21, 1994xxvii[27] was issued denying with finality RBDCs second
motion for reconsideration.
AYALA then filed a Manifestationxxviii[28] in Civil Case No. 91-220, informing the trial
court of the pertinent rulings/resolutions in the proceedings before the HLRB and the
Office of the President, which rulings, AYALA suggested, amount to res judicata on
the issue of the validity and enforceability of the Deed Restrictions involved in the said
civil case.
After trial on the merits, the trial court rendered a Decision on April 28, 1994 in favor
of RBDC, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
defendant and against the plaintiff, and as a consequence:
1. The instant case is hereby dismissed;
2. The motion/application for the annotation of the lis pendens is hereby
DENIED;
3. The motion/application to hold defendant in continuing contempt is
hereby also DENIED;
4. No damages is awarded to any of the parties;
5. Plaintiff is hereby ordered to pay the defendant P30,000.00 for and as
attorneys fees and litigation expenses;
With costs against plaintiff.
SO ORDERED.xxix[29]
The trial courts decision is based on its findings that: (1) RBDC had neither actual nor
constructive notice of the 42-meter height limitation of the building to be constructed
on the subject lot; (2) even if the Deed Restrictions did exist, AYALA is estopped from
enforcing the same against RBDC by reason of the formers failure to enforce said
restrictions against other violators in the same area; (3) the Deed Restrictions partake
of the nature of a contract of adhesion; (4) since the Trafalgar Plaza building is in
accord with the minimum requirements of P.D. No. 1096 (The National Building
Code), the Deed Restrictions may not be followed by RBDC; and (5) the rulings of the
HLRB and the Office of the President do not have binding effect in the instant case.
Dissatisfied, AYALA appealed to the Court of Appeals which affirmed the judgment of
the trial court in a Decisionxxx[30] dated February 27, 1996 in CA-G.R. CV No.
46488. AYALAs motion for reconsideration was likewise denied in the
Resolutionxxxi[31] of October 7, 1996.
AYALA now interposes the present petition for review on certiorari, citing several
errors in the decision of the Court of Appeals, some of which involve questions of
fact.
The resolution of factual issues raised in the petition would certainly call for a review
of the Court of Appeals findings of fact. As a rule, the re-examination of the evidence
proffered by the contending parties during the trial of the case is not a function that
this Court normally undertakes inasmuch as the findings of fact of the Court of
Appeals are generally binding and conclusive on the Supreme Court.xxxii[32] The
jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law.xxxiii[33] A
reevaluation of factual issues by this Court is justified when the findings of fact
complained of are devoid of support by the evidence on record, or when the assailed
judgment is based on misapprehension of facts.xxxiv[34]
The present petition has shown that certain relevant facts were overlooked by the
Court of Appeals, which facts, if properly appreciated, would justify a different
conclusion from the one reached in the assailed decision.
The principal error raised here by petitioner AYALA pertains to the Court of Appeals
finding that RBDC did not have actual or constructive notice of the 42-meter height
restriction, since what was annotated on its (RBDCs) title is the erroneous 23-meter
height limit which, according to AYALAs own witness, Jose Cuaresma, was not
applicable to RBDC.xxxv[35] Thus, the Court of Appeals concluded, RBDC has the
right to enjoy the subject property as if no restrictions and conditions were
imposed thereon.xxxvi[36]
The above finding and conclusion of the Court of Appeals, AYALA submits, are based
on surmises and conjectures which are contrary to the evidence on record and
(RBDCs) own admissions.xxxvii[37]
There is merit in AYALAs submission.
The erroneous annotation of the 23-meter height restriction in RBDCs title was
explained by Jose Cuaresma, AYALAs Assistant Manager for Marketing and Sales.
Cuaresma testified that when the deed of sale between PALMCREST and RBDC was
submitted to the Register of Deeds of Makati and the corresponding title was issued
in the name of RBDC, the Register of Deeds annotated the wrong height limit in Entry
No. 2432 on the said title, but he emphasized that the incorrect annotation does not
apply to RBDC.xxxviii[38]
Jose Cuaresma further clarified that the correct height restriction imposed by AYALA
on RBDC was 42 meters.xxxix[39] This height ceiling, he said, is based on the
deed of restrictions attached as annex to the deed of sale,xl[40] and the same
has been uniformly imposed on the transferees beginning from the original
deed of sale between AYALA and KARAMFIL.xli[41]
This clarificatory statement of Jose Cuaresma should have cautioned the Court of
Appeals from making the unfounded and sweeping conclusion that RBDC can do
anything it wants on the subject property as if no restrictions and conditions were
imposed thereon, on the mistaken premise that RBDC was unaware of the correct
42-meter height limit. It must be stressed that Cuaresmas testimony is bolstered by
documentary evidence and circumstances of the case which would show that RBDC
was put on notice about the 42-meter height restriction.
The record reveals that the subject Lot 26 was first sold by AYALA to KARAMFIL
under a deed of sale (Exhibit "A") dated March 20, 1984 and duly notarized by Notary
Public Silverio Aquino. Attached to the deed of sale is an appendix of special
conditions/restrictions (deed restrictions), which provides, inter alia, that the building
to be constructed on the lot must have a total height of not more than 42 meters, and
that any building plans and specifications of the proposed structures must have the
approval of AYALA. The deed restrictions were incorporated in the memorandum of
encumbrances at the reverse side of the title of the lot as Entry No. 2432. When the
lot was sold by KARAMFIL to PALMCREST, the deed of sale (Exhibit "B") on this
transaction bears an annotation of AYALA's conformity to the transfer, with the
condition that the approval was "subject to the compliance by the vendee of the
special conditions of sale on the reverse side of the deed of sale dated March 20,
1984, per Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of Notary Public
Silverio F. Aquino" (Exhibit "B-1"). PALMCREST later resold the lot to RBDC by virtue
of a deed of sale (Exhibit "C"), to which AYALA's approval was also annotated therein
(Exhibit "C-1"), but with the same explicit inscription that RBDC, as vendee, must
comply with the special deed restrictions appended to the AYALA-KARAMFIL
deed of sale of March 20, 1984. All these three (3) deeds of sale and the
accompanying special deed restrictions imposing a 42-meter height limit, were duly
registered with the Register of Deeds. Thus, RBDC cannot profess ignorance of the
42-meter height restriction and other special conditions of the sale.
Verily, the deed restrictions are integral parts of the PALMCREST-RBDC deed of
sale, considering that AYALA's required conformity to the transfer, as annotated
therein, was conditioned upon RBDC's compliance of the deed restrictions.
Consequently, as a matter of contractual obligation, RBDC is bound to observe the
deed restrictions which impose a building height of not more than 42 meters.
Moreover, RBDC was fully aware that it was bound by the 42-meter height limit. This
is shown by the fact that, pursuant to the special conditions/restrictions of the sale, it
submitted to AYALA, for approval, building plans for a 5-storey structure with a height
of 25.85 meters. Certainly, RBDC would not have submitted such plans had it truly
believed that it was restricted by a lower 23-meter height ceiling, in the same manner
that RBDC did not seek AYALAs approval when it later made another set of building
plans for the 26-storey Trafalgar Plaza, knowing that the same would be
disapproved for exceeding the 42-meter height restriction. The fact that RBDC was
later issued a building permit from the Makati City Engineer's Office for the
construction of the Trafalgar Plaza is not a valid justification to disregard the
stipulated contractual restriction of 42 meters.
Another error which AYALA claims to have been committed by the Court of Appeals is
the latters finding that AYALA, under the principle of estoppel, is now barred from
enforcing the deed restrictions because it had supposedly failed to act against other
violators of the said restrictions. AYALA argues that such finding is baseless and is
contrary to the Civil Code provisions on estoppel and applicable jurisprudence.
We agree with the petitioner.
In support of its finding that estoppel operates against AYALA, the Court of Appeals
merely cited its decision dated November 17, 1993, in CA-G.R. SP No. 29157,
entitled Rosa-Diana Realty and Development Corporation, Petitioner vs. Land
Registration Authority and Ayala Corporation, Respondents, and reiterated its findings
therein, to wit:
Also, Ayala is barred from enforcing the deed of restrictions in question, pursuant to
the doctrines of waiver and estoppel. Under the terms of the deed of sale, the vendee
Sy Ka Kieng assumed faithful compliance with the special conditions of sale and with
the Salcedo Village deed of restrictions. One of the conditions was that a building
would be constructed within one year. Ayala did nothing to enforce the terms of the
contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of the
petitioner realty in 1989, or thirteen (13) years later. We, therefore, see no justifiable
reason for Ayala to attempt to enforce the terms of the conditions of the sale against
the petitioner. It should now be estopped from enforcing the said conditions through
any means.
xxx xxx xxx
Even assuming that petitioner RDR violated the floor area and height restrictions, it is
markedly significant that Ayala disregarded the fact that it had previously allowed and
tolerated similar and repeated violations of the same restrictive covenants by property
owners which it now seeks to enforce against the herein petitioner. Some examples of
existing buildings in Salcedo Village that greatly exceeded the gross floor area (5
times lot area) and height (42 meters) limitations are (Rollo, p. 32):
(1) Pacific Star (Nauru Center Building 29 stories and 112.5 meters high)
(2) Sagittarius Building 16 stories
(3) Shell House Building 14 stories
(4) Eurovilla Building 15 stories
(5) LPL Plaza Building 18 stories
(6) LPL Tower Building 24 stories.xlii[42]
An examination of the decision in the said Rosa Diana case reveals that the sole
issue raised before the appellate court was the propriety of the lis pendens
annotation. However, the appellate court went beyond the sole issue and made
factual findings bereft of any basis in the record to inappropriately rule that AYALA is
in estoppel and has waived its right to enforce the subject restrictions. Such ruling
was immaterial to the resolution of the issue of the propriety of the annotation of the
lis pendens. The finding of estoppel was thus improper and made in excess of
jurisdiction.
Moreover, the decision in CA-G.R. SP No. 29157 is not binding on the parties herein,
simply because, except for Ayala, RBDC is not a party in that case. Section 49, Rule
39 of the Revised Rules of Court (now Sec. 47, Rule 39 of the 1997 Rules of Civil
Procedure) provides in part:
Sec. 49. Effect of judgments. The effect of a judgment or final order rendered by a
court or judge of the Philippines, having jurisdiction to pronounce the judgment or
order, may be as follows:
(a) x x x;
(b) In other cases the judgment or order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by title subsequent
to the commencement of action or special proceeding, litigating for the same thing
and under the same title and in the same capacity; (emphasis supplied)
(c) x x x.
The clear mandate of the above-quoted rule is that a final judgment or order of a court
is conclusive and binding only upon the parties to a case and their successors in
interest. Both the present case and the Rosa-Diana case, however, involve different
parties who are not litigating for the same thing nor under the same title and in the
same capacity. Hence, the Rosa-Diana decision cannot have binding effect against
either party to the instant case.
In any case, AYALA asserts that a few gross violators of the deed restrictions have
been, or are being, proceeded against.xliii[43] AYALA admits, though, that there are
other violations of the restrictions but these are of a minor nature which do not detract
from substantial compliance by the lot owners of the deed restrictions. AYALA
submits that minor violations are insufficient to warrant judicial action, thus:
As a rule, non-objection to trivial breaches of a restrictive covenant does not result in
loss of the right to enforce the covenant by injunction, and acquiescence in violations
of a restrictive covenant which are immaterial and do not affect or injure one will not
preclude him from restraining violations thereof which would so operate as to cause
him to be damaged. (20 Am Jur. 2d Sec. 271, p. 835; underscoring provided).
Occasional and temporary violations by lot owners of a covenant forbidding the use of
property for mercantile purposes are not sufficient as a matter of law to warrant a
finding of a waiver or abandonment of the right to enforce the restriction. A waiver in
favor of one person and for a limited purpose is not a waiver as to all persons
generally. (id., at 836; underscoring provided).xliv[44]
It is the sole prerogative and discretion of AYALA to initiate any action against
violators of the deed restrictions. This Court cannot interfere with the exercise of such
prerogative/discretion.
How AYALA could be considered in estoppel as found by both the trial court and the
Court of Appeals, was not duly established. Under the doctrine of estoppel, an
admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon. A party may
not go back on his own acts and representations to the prejudice of the other party
who relied upon them.xlv[45] Here, we find no admission, false representation or
concealment that can be attributed to AYALA relied upon by RBDC.
What is clear from the record, however, is that RBDC was the party guilty of
misrepresentation and/or concealment when it resorted to the fraudulent scheme of
submitting two (2) sets of building plans, one (1) set conformed to the Deed
Restrictions, which was submitted to and approved by AYALA,xlvi[46] while another
set violated the said restrictions, and which it presented to the Makati City Building
Official in order to secure from the latter the necessary building permit.xlvii[47] It is
noteworthy that after the submission of the second set of building plans to the
Building Official, RBDC continued to make representations to AYALA that it would
build the five-storey building in accordance with the first set of plans approved by
AYALA, obviously for the purpose of securing the release of the title of the subject lot
to obtain bank funding. AYALA relied on RBDC's false representations and released
the said title. Hence, RBDC was in bad faith.
AYALA further assigns as error the finding of the respondent court that, while the
Deed of Sale to Ray Burton (RBDC) did not appear to be a contract of adhesion,
however, the subject Deed Restrictions annotated therein appeared to be
one.xlviii[48] The only basis for such finding is that the Deed Restrictions and Special
Conditions were pre-printed and prepared by AYALA, and that RBDCs participation
thereof was only to sign the Deed of Sale with the said restrictions and
conditions.xlix[49]
The respondent court erred in ruling that the Deed Restrictions is a contract of
adhesion.
A contract of adhesion in itself is not an invalid agreement. This type of contract is as
binding as a mutually executed transaction. We have emphatically ruled in the case of
Ong Yiu vs. Court of Appeals, et. al.l[50] that contracts of adhesion wherein one
party imposes a ready-made form of contract on the other x x x are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres he gives his consent. This ruling was reiterated in Philippine
American General Insurance Co., Inc. vs. Sweet Lines, Inc., et. al.,li[51] wherein
we further declared through Justice Florenz Regalado that not even an allegation of
ignorance of a party excuses non-compliance with the contractual stipulations since
the responsibility for ensuring full comprehension of the provisions of a contract of
carriage (a contract of adhesion) devolves not on the carrier but on the owner,
shipper, or consignee as the case may be.
Contracts of adhesion, however, stand out from other contracts (which are bilaterally
drafted by the parties) in that the former is accorded inordinate vigilance and scrutiny
by the courts in order to shield the unwary from deceptive schemes contained in
ready-made covenants. As stated by this Court, speaking through Justice J.B.L.
Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd.:lii[52]
The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital, endowed with overwhelming economic power, manage to impose upon
parties dealing with them cunningly prepared agreements that the weaker party
may not change one whit, his participation in the agreement being reduced to the
alternative to take it or leave it labeled since Raymond Saleilles contracts by
adherence (contracts d adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies of insurance and
international bill of lading are prime examples) obviously call for greater strictness and
vigilance on the part of the courts of justice with a view to protecting the weaker
party from abuses and imposition, and prevent their becoming traps for the
unwary.liii[53] (Emphasis supplied)
The stringent treatment towards contracts of adhesion which the courts are enjoined
to observe is in pursuance of the mandate in Article 24 of the New Civil Code that
"(i)n all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence,
mental weakness, tender age or other handicap, the courts must be vigilant for his
protection."
Thus, the validity and/or enforceability of a contract of adhesion will have to be
determined by the peculiar circumstances obtaining in each case and the situation of
the parties concerned.
In the instant case, the stipulations in the Deed Restrictions and Special Conditions
are plain and unambiguous which leave no room for interpretation. Moreover, there
was even no attempt on the part of RBDC to prove that, in the execution of the Deed
of Sale on the subject lot, it was a weaker or a disadvantaged party on account of its
moral dependence, ignorance, mental weakness or other handicap. On the contrary,
as testified to by Edwin Ngo, President of RBDC, the latter is a realty firm and has
been engaged in realty business,liv[54] and that he, a businessman for 30
years,lv[55] represented RBDC in the negotiations and in the eventual purchase of
the subject lot from PALMCREST.lvi[56] Edwin Ngo's testimony proves that RBDC
was not an unwary party in the subject transaction. Instead, Edwin Ngo has portrayed
RBDC as a knowledgeable realty firm experienced in real estate business.
In sum, there is more than ample evidence on record pinpointing RBDCs violation of
the applicable FAR restrictions in the Consolidated and Revised Deed Restrictions
(CRDRs) when it constructed the 27-storey Trafalgar Plaza. The prayer of petitioner is
that judgment be rendered as follows:
a. Ordering Ray Burton to comply with its contractual obligations in the construction of
Trafalgar Plaza by removing or demolishing the portions of areas thereof constructed
beyond or in excess of the approved height, as shown by the building plans submitted
to, and approved by, Ayala, including any other portion of the building constructed not
in accordance with the said building plans;
b. Alternatively, in the event specific performance becomes impossible:
(1) ordering the cancellation and rescission of the March 20, 1984 Deed of Sale and
all subsequent Deeds of Sale executed in favor of the original vendees successors-in-
interest and ordering Ray Burton to return to Ayala Lot 26, Lot 2 of Salcedo Village;
(2) ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of
defendant) and directing the Office of the Register of Deeds of Makati to issue a new
title over the lot in the name of Ayala; and
 xxx xxx x x x.lvii[57]
However, the record reveals that construction of Trafalgar Plaza began in 1990, and a
certificate of completion thereof was issued by the Makati City Engineers Office per
ocular inspection on November 7, 1996.lviii[58] Apparently Trafalgar Plaza has been
fully built, and we assume, is now fully tenanted. The alternative prayers of petitioner
under the CRDRs, i.e., the demolition of excessively built space or to permanently
restrict the use thereof, are no longer feasible.
Thus, we perforce instead rule that RBDC may only be held alternatively liable for
substitute performance of its obligations the payment of damages. In this regard, we
note that the CRDRs impose development charges on constructions which exceed
the estimated Gross Limits permitted under the original Deed Restrictions but which
are within the limits of the CRDRs.
In this regard, we quote hereunder pertinent portions of The Revised Deed
Restrictions, to wit:
"3. DEVELOPMENT CHARGE
For any building construction within the Gross Floor Area limits defined under
Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area
exceeding certain standards defined in Paragraphs C-3.1-C below, the OWNER shall
pay MACEA, prior to the start of construction of any new building or any expansion of
an existing building, a DEVELOPMENT CHARGE as a contribution to a trust fund to
be administered by MACEA. This trust fund shall be used to improve facilities and
utilities in the Makati Central Business District.
3.1 The amount of the development charge that shall be due from the OWNER shall
be computed as follows:
DEVELOPMENT CHARGE = A x (B - C - D)
where:
A - is equal to the Area Assessment which shall be set at Five Hundred Pesos
(P500.00) until December 31, 1990. Each January 1 st thereafter, such amount shall
increase by ten percent (10%) over the Area Assessment charged in the immediately
preceding year; provided that, beginning 1995 and at the end of every successive
five-year period thereafter, the increase in the Area Assessment shall be reviewed
and adjusted by the VENDOR to correspond to the accumulated increase in the
construction cost index during the immediately preceding five years as based on the
weighted average of wholesale price and wage indices of the National Census and
Statistics Office and the Bureau of Labor Statistics.
B - is equal to the total Gross Floor Area of the completed or expanded building in
square meters.
C - is equal to the estimated Gross Floor Area permitted under the original deed
restrictions, derived by multiplying the lot area by the effective original FAR shown
below for each location:"lix[59]
Accordingly, in accordance with the unique, peculiar circumstance of the case at
hand, we hold that the said development charges are a fair measure of compensatory
damages which RBDC has caused in terms of creating a disproportionate additional
burden on the facilities of the Makati Central Business District.
As discussed above, Ray Burton Development Corporation acted in bad faith in
constructing Trafalgar Plaza in excess of the applicable restrictions upon a double
submission of plans and exercising deceit upon both AYALA and the Makati
Engineer's Office, and thus by way of example and correction, should be held liable to
pay AYALA exemplary damages in the sum of P2,500,000.00.
Finally, we find the complaint to be well-grounded, thus it is AYALA which is entitled
to an award of attorney's fees, and while it prays for the amount of P500,000.00, we
award the amount of P250,000.00 which we find to be reasonable under the
circumstances.
WHEREFORE, premises considered, the assailed Decision of the Court of Appeals
dated February 27, 1996, in CA-G.R. CV No. 46488, and its Resolution dated October
7, 1996 are hereby REVERSED and SET ASIDE, and in lieu thereof, judgment is
hereby rendered finding that:
(1) The Deed Restrictions are valid and petitioner AYALA is not estopped from
enforcing them against lot owners who have not yet adopted the Consolidated and
Revised Deed Restrictions;
(2) Having admitted that the Consolidated and Revised Deed Restrictions are the
applicable Deed Restrictions to Ray Burton Development Corporations Trafalgar
Plaza, RBDC should be, and is, bound by the same;
(3) Considering that Ray Burton Development Corporations Trafalgar Plaza exceeds
the floor area limits of the Deed Restrictions, RBDC is hereby ordered to pay
development charges as computed under the provisions of the Consolidated and
Revised Deed Restrictions currently in force.
(4) Ray Burton Development Corporation is further ordered to pay AYALA exemplary
damages in the amount of P2,500,000.00, attorneys fees in the amount of
P250,000.00, and the costs of suit.
SO ORDERED.
Regalado (Chairman), Melo, Puno, and Mendoza, JJ.,concur