Ayala Corporation vs.

Rosa-Diana Realty
346 SCRA 633

FACTS:
In April 1976, appellant-petitioner entered into a transaction with Manuel Sy and Sy Ka Kieng
where former sold a lot in Salcedo Village in Makati. The deed of sale had some encumbrances contained
in the Special Conditions of Sale (SCS) and Deed of Restrictions (DR), which should be followed by the
vendees. The stipulations in the SCS are:

1. A building proposal must be submitted to Ayala which must be in accordance with the DR,
2. The construction of the building must be completed on or before 1979, and,
3. That there will be no resale of the lot.

The DR specified the limits in height and floor area of the building to be constructed. However, Sy
and Kieng, failed to build a building but nonetheless with the permission of Ayala, the vendees sold the
said lot to the respondent, Rosa-Diana Realty. Respondent company agreed to abode by the SCS and the
DR stipulations. Prior to the construction, Rosa-Diana submitted a building plan to Ayala complying with
the DR but it also passed a different building plan to the building administrator of Makati, which did not
comply with the stipulations in the DR. While the building, “The Peak”, was constructed, Ayala filed a case
praying that: 1) Rosa-Diana, be compelled to comply with the DR and build the building in accordance
with the building plan submitted to Ayala; 2) on the alternative, the rescission of the deed of sale.

The trial court ruled in favor of the respondent and thus, Rosa-Diana was able to complete the
construction of “The Peak”. Undeterred, Ayala filed before the Register of Deeds (RD) of Makati a cause
of annotation lis pendens. RD refused to grant Ayala such registration for in the lower court; the case is
of personal action for a specific performance and/or rescission. However, the Land Registration Authority
(LRA) reversed RD’s ruling. The appellate court upheld the RD’s ruling stating that the case before the trial
court is a personal action for the cause of action arises from the alleged violation of the DR. The trial court
sustained the respondent’s point saying that Ayala was guilty of abandonment and/or estoppels due to
its failure to enforce the terms of the DR and SCS against Sy and Kieng. Ayala discriminately chose which
obligor would be made to follow certain conditions, which is not fair and legal. On appeal, the CA affirmed
the lower court’s ruling. Hence, this petition.

ISSUE: Whether or not Rosa-Diana committed a breach of contract.

RULING:
Yes. The Supreme Court ruled that Rosa-Diana committed a breach of contract by submitting two
sets of building plans – with one set which fully conformed to the Deed Restrictions and another in gross
violation of the same. This should have cautioned the trial to conclude that respondent Rosa-Diana was
under the erroneous impression that the Deed Restrictions were no longer enforceable and that it never
intended to be bound by the Undertaking signed by its President and Chairman. The Supreme Court
further reiterated that contractual obligations have the force of law between parties and unless the same
is contrary to public policy, morals, and good customs, they must be complied by the parties in good faith.
In view of the foregoing, the assailed decision of the Court of Appeals are reversed and set aside.