Ayala Case Digest

AYALA CORPORATION vs. RAY BURTON DEVELOPMENT CORPORATION

G.R. No. 126699. August 7, 1998 NATURE :

specific performance or rescission

FACTS :

Ayala Corporation (AYALA) is the owner of the Ayala estate located in Makati City. The said estate was originally a raw land which has been deeloped with road and  b!ilding constr!ction co nstr!ction and installation of a central sewerage treatment plant and drainage system sericing the Ayala Ayala Commercial Area. "aramfil #mport$%&port Company Ltd. ("A'AM#L) bo!ght the land in iss!e which is *++ s,!are meters. The -eed of ale of een date proided for certain special conditions and restrictions on the !se or occ!panc y of the land. The pertinent ones are: Deed Restrictions: a) The total height o the !uilding to !e constructed on the lot shall not !e "ore than ort#$t%o &'2) "eters, nor shall it ha(e a total gross loor area o "ore than i(e &) ti"es the lot area* and !) The se%age dis+osal "ust !e !# "eans o connection into the se%erage s#ste" ser(icing the area. +ecial -onditions: a) The (endee "ust o!tain inal a++ro(al ro" AA/A o the !uilding +lans and s+eciications o the +ro+osed structures that shall !e constructed on the land* !) The lot shall not !e sold %ithout the !uilding ha(ing !een co"+leted* and c) An# !reach o the sti+ulations and restrictions entitles AA/A to rescission o the contract.

TCT was iss!ed in the name of "A'AM#L. The special conditions and restrictions were attached as an anne& to the deed of sale and incorporated in the Memorand!m of  %nc!mbrances at the reerse side of the title. "A'A "A'AM M#L #L sold sold the the lot lot to /alm /almcr cres estt -ee -eelo lopm pmen entt and and 'eal 'ealty ty Corp Corpor orat atio ion n (/ALMC'%T). (/ALMC'%T). #ts deed of sale was s!bmitted to AYALA ALA for approal in order to obtain the latter0s waier of the special condition prohibiting the resale of the lot !ntil after  "A'AM#L "A'AM#L shall hae constr!cted constr!cted a b!ilding.A b!ilding.AY YALA gae its written written conformity* conformity* anno annota tate ted d in the the deed deed of sale sale.. /ALMC' LMC'% %T T in t!rn t!rn sold sold the the lot lot to 'ay 'ay 1!rt 1!rton on -eelopment Corporation ('1-C)* with the agreement that AYALA AYALA retains possession of  the 2wners -!plicate -!plicate copy of the title title !ntil a b!ilding b!ilding is erected. erected. The -eed of Absol!te Absol!te alewas also presented to AYALA for approal. AYALA also gae its conformity to the sale* s!b3ect to '1-Cs compliance with the special conditions4restrictions. '1-C s!bmitted to AYALA for approal a set of architect!ral plans for the constr!ction of a 5$storey Trafalgar /la6a with a height of 75.+5 meters and a total gross floor area of  8*9+9.87 8*9+9.87 s,!are meters.ince meters.ince it was within within the 87$meter 87$meter height restriction* restriction* AYA AYALA approed the plans. AYALA also agreed to release the owners copy of the TCT of the lot to China 1anking Corporation as g!arantee of the loan of '1-C. '1-C* '1-C* togeth together er with with the Makati Makati -eelop -eelopers ers Associa Associati tion* on* #nc. #nc. (MA-A (MA-A#)* #)* of which which '1-C is a member* and other lot owners* filed a complaint against AYALA before the ;o!sing and Land o. 9? (the >ational 1!ilding Code) and Metro Manila Commission @oning 2rdinance >o. +$ = (c) iolate the constit!tional proision on e,!al protection of the laws* since the restrictions are imposed witho!t regard to reasonable standards or classifications= and (d) are contracts of adhesion since AYALA wo!ld not sell the lots !nless the b!yers agree to the deed restrictions. '1-C made another set of b!ilding plans which is 7?$storey high or 9+.? meters with gross floor area of 7+*? s,. meters for Trafalgar /la6a and s!bmitted the same for  approal to the 1!ilding 2fficial of the Makati City %ngineers 2ffice. #t was approed and '1-C started to constr!ct. oon the ma3ority of the lot owners in the Makati City area* in a general assembly* reised the -eed 'estrictions and made the 'eised -eed 'estrictions. ignificantly* the direct height restrictions were abolished in faor of floor area limits comp!ted on the  basis of floor area ratios (A's) wherein the ma&im!m gross floor area is only eight (+) times the lot area. Th!s* Trafalgar /la6a wo!ld still e&ceed 9*?5 s,!are meters of floor  area. o '1-C did not ote for the approal of the 'eised -eed 'estrictions and* therefore* contin!ed to be bo!nd by the original -eed 'estrictions. ;L'1 !pheld the deed restrictions and r!led for AYALA. Appeal to the 2ffice of the /resident was made. /ending s!ch 1!siness orld maga6ine feat!red the Trafalgar /la6a as a modern 7B$storey str!ct!re to rise in Makati. AYALA then sent a letter to '1-C demanding to cease constr!ction. oon* AYALA s!ed '1-C for specific performance or  rescission at the 'TC Makati. '1-Cs appeal to 2ffice of the /resident was dismissed since there is irt!ally no more act!al controersy on the s!b3ect of the -eed 'estrictions beca!se the same has been oerriden by the 'eised (-eed) 'estrictions which the appellee Ayala Corporation has in fact acknowledged as binding and in f!ll force and effect. '1-C moed to reconsider. 2ffice of the /resident r!led that () '1-C is bo!nd by the original -eed 'estrictions*  b!t it has the option to accept and be bo!nd by the 'eised -eed 'estrictions in lie! of  the former= and (7) that the ;L'1 decision which absoled Ayala from the charge of  !nso!nd b!siness practice is affirmed. AYALA then filed a Manifestation in the 'TC Case stating the pertinent r!lings4resol!tions in the proceedings before the ;L'1 and the 2ffice of the /resident* which wo!ld then amo!nt to res judicata on the iss!e of the alidity and enforceability of  the -eed 'estrictions. T'TC r!led in faor of '1-C. AYALA appealed to CA b!t CA affirmed 'TC 3!dgment. AYALA then filed for etition for reiew on certiorari. ISSUE:

hether the -eed 'estrictions is a contract of adhesion.

RULING: RATIO :

CA decision '%%'%- and %T A#-%

>o. The only basis for s!ch finding is that the -eed 'estrictions and pecial Conditions was a Contract of Adhesion were pre$printed and prepared by AYALA* and that '1-Cs participation thereof was only to sign the -eed of ale with the said

restrictions and conditions. A contract of adhesion in itself is not an inalid agreement. This type of contract is as  binding as a m!t!ally e&ec!ted transaction. The !preme Co!rt ,!oted Ong Yiu vs. Court  of Appeals, et. Al .wherein contracts of adhesion wherein one party imposes a ready$made form of contract on the other & & & are contracts not entirely prohibited. The one who adheres to the contract is in reality free to re3ect it entirely= if he adheres he gies his consent. They also noted their r!ling in Philippine American General Insurance Co., Inc. vs. Sweet ines, Inc., et. al.* wherein not een an allegation of ignorance of a party e&c!ses non$compliance with the contract!al stip!lations since the responsibility for  ens!ring f!ll comprehension of the proisions of a contract of carriage (a contract of  adhesion) deoles not on the carrier b!t on the owner* shipper* or consignee as the case may be. Contracts of adhesion* howeer* is accorded inordinate igilance and scr!tiny by the co!rts in order to shield the !nwary from deceptie schemes contained in ready$made coenants. The Co!rt reiterated their r!ling in !ua Chee Gan vs. aw "nion and #oc$   Insurance Co., td.% The co!rts cannot ignore that nowadays* monopolies* cartels and concentration of capital* endowed with oerwhelming economic power* manage to impose ! pon parties dealing with them c!nningly prepared agreements that the weaker party may not change one whit* his participation in the agreement being red!ced to the alternatie to take it or leae it labeled since 'aymond aleilles contracts by adherence (contracts d adhesion) in contrast to those entered into by parties bargaining on an e,!al footing. !ch contracts (of  which policies of ins!rance and international bill of lading are prime e&les) obio!sly call for greater strictness and igilance on the part of the co!rts of 3!stice with a iew to  protecting the weaker party from ab!ses and imposition* and preent their becoming traps for the !nwary. The stringent treatment towards contracts of adhesion which the co!rts are en3oined to obsere is in p!rs!ance of the mandate in Article 78 of the >ew Ciil Code that D(i)n all contract!al* property or other relations* when one of the parties is at a disadantage on acco!nt of his moral dependence* ignorance* indigence* mental weakness* tender age or  other handicap* the co!rts m!st be igilant for his protection.D Th!s* the alidity and4or enforceability of a contract of adhesion will hae to be determined by the pec!liar circ!mstances obtaining in each case and the sit!ation of the  parties concerned. #n the instant case* the stip!lations in the -eed 'estrictions and pecial Conditions are  plain and !nambig!o!s which leae no room for interpretation. Moreoer* there was een no attempt on the part of '1-C to proe that* in the e&ec!tion of the -eed of ale on the s!b3ect lot* it was a weaker or a disadantaged party on acco!nt of its moral dependence* ignorance* mental weakness or other handicap. 2n the contrary* as testified to by %dwin  >go* /resident of '1-C* the latter is a realty firm and has been engaged in realty  b!siness* and that he* a b!sinessman for E years* represented '1-C in the negotiations and in the eent!al p!rchase of the s!b3ect lot from /ALMC'%T. %dwin >goFs

testimony proes that '1-C was not an !nwary party in the s!b3ect transaction. #nstead* %dwin >go has portrayed '1-C as a knowledgeable realty firm e&perienced in real estate b!siness. ADDITIONAL DOCTRINES:

The deed restrictions are integral parts of the deed of sale* considering that AYALAFs re,!ired conformity to the transfer* as annotated therein* was conditioned !pon '1-CFs compliance of the deed restrictions. Conse,!ently* as a matter of contract!al obligation* '1-C is bo!nd to obsere the deed restrictions which impose a b!ilding height of not more than 87 meters. '1-C was also f!lly aware that it was bo!nd by the 87$meter  height limit since p!rs!ant to the special conditions4restrictions of the sale* it s!bmitted to AYALA* for approal* b!ilding plans for a 5$storey str!ct!re with a height of 75.+5 meters. AYALA not estopped or barred from enforcing the deed restrictions %en if Ayala had preio!sly allowed and tolerated similar and repeated iolations of  the same restrictie coenants by property owners as in the 'osa$-iana case* the decision the Co!rts has is not binding as '1-C is not a party in that case. ection 89* '!le E9 of  the 'eised '!les of Co!rt (now ec. 8B* '!le E9 of the 99B '!les of Ciil /roced!re)  proides in part: The clear mandate of the aboe$,!oted r!le is that a final 3!dgment or  order of a co!rt is concl!sie and binding only !pon the parties to a case and their  s!ccessors in interest. 1oth the present case and the #osa&'iana case* howeer* inole different parties who are not litigating for the same thing nor !nder the same title and in the same capacity. ;ence* the #osa&'iana  decision cannot hae binding effect against either party to the instant case.