In a significant ruling, the Supreme Court affirmed the revocation of a donation due to the donee’s failure to comply with the conditions stipulated in the Deed of Donation. The Court emphasized that when a donation is coupled with specific obligations, such as the construction of infrastructure, the donee’s non-compliance constitutes a substantial breach. This breach entitles the donor to revoke the donation, reclaiming ownership of the property, especially when the donee transfers the property to another party without fulfilling the original conditions. This decision reinforces the principle that donors have legal recourse when the intended purpose of their generosity is not honored.

Conditional Promises and Broken Ground: Can a Donation Be Revoked?

The case of Municipality of Dasmariñas vs. Dr. Paulo C. Campos and National Housing Authority vs. Dr. Paulo C. Campos (G.R. Nos. 232675 and 233078) revolves around a Deed of Donation executed in 1976 by Dr. Paulo C. Campos in favor of the National Housing Authority (NHA). The donation involved a parcel of land intended for the construction of a 36-meter-wide access road. However, the NHA only built a 20-meter-wide road and later donated the property to the Municipality of Dasmariñas. This prompted Dr. Campos to file an action for revocation of the donation, claiming non-compliance with the stipulated condition. The central legal question is whether the NHA’s failure to construct the road as agreed upon and its subsequent donation of the property justified the revocation of the original donation.

The petitioners, the Municipality of Dasmariñas and the NHA, argued that the action to revoke the Deed of Donation had prescribed under Article 1144 of the Civil Code, which requires actions upon a written contract to be brought within ten years from the accrual of the right of action. They contended that the prescriptive period should be reckoned from the time Dr. Campos discovered that the NHA had only constructed a 20-meter-wide road. The NHA also alleged that Dr. Campos was guilty of laches, having waited 25 years before filing the action for revocation. They further claimed that the NHA had substantially complied with the condition by constructing a portion of the road and reserving the remaining area for future widening. The petitioners emphasized that the unpaved portion of the donated property remained part of the access road and had not been used for any other purpose. They also cited a clause in the Deed of Donation allowing the donor to use the property if development was delayed.

The respondents-heirs, on the other hand, argued that their right of action accrued in 1993 when the NHA donated the subject property to the Municipality of Dasmariñas. They maintained that the NHA’s failure to build the agreed-upon 36-meter-wide road constituted a substantial breach of the Deed of Donation, warranting its revocation. They emphasized that the subsequent donation of the property meant that the missing 16 meters would never be devoted to the intended purpose. The respondents-heirs also contended that the subsequent donation contravened the provision in the initial Deed of Donation that allowed the donor to use the property until the donee was in a position to use it.

The Supreme Court sided with the respondents-heirs, holding that the action for revocation was filed within the allowable time under the law. The Court emphasized that the donation was of an onerous nature, as it contained the stipulation to build the 36-meter-wide access road. Citing jurisprudence, the Court affirmed that donations of an onerous type are governed by the law on contracts, not by the law on donations. Article 1144 of the New Civil Code stipulates that actions upon a written contract must be brought within ten years from the accrual of the right of action. The Court reasoned that the respondents-heirs’ right of action accrued only when the NHA donated the property to the Municipality of Dasmariñas, as this transfer effectively removed the NHA’s ability to complete the access road and precluded any move to compel the transferee to finish it.

The Court also rejected the assertion that the doctrine of laches applied. The Court cited established requisites for laches, including conduct by the defendant giving rise to the situation, delay in asserting the complainant’s right, lack of knowledge by the defendant that the complainant would assert the right, and injury or prejudice to the defendant if relief were granted to the complainant. In this case, the Court found that Dr. Campos had shown patience in allowing the NHA time to fulfill its obligation and filed the case only when it became clear that the NHA could no longer do so. The fact that the case was filed within the prescriptive period of ten years also removed it from the scope of laches.

On the substantive issue of the revocation of the Deed of Donation, the Court affirmed the findings of the lower courts that the NHA had committed a substantial breach that justified the partial revocation of the donation. The Court noted that the object of the agreement was clearly the construction of a 36-meter-wide access road, reiterated multiple times in the Deed of Donation. The failure to construct the access road with the expressly mentioned specifications was undeniably a breach. The Court rejected the petitioners’ contention that the condition had been complied with because the unpaved 16-meter portion was still reserved for completion. The Court stated that the stipulation required actual construction of the entire 36-meter property and that non-usage of even a portion would constitute a contravention of the Deed of Donation. In accordance with the law and jurisprudence, the Court emphasized that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

Moreover, the Court determined that the NHA’s subsequent donation of the subject property to the Municipality of Dasmariñas was not required by law, particularly Section 31 of Presidential Decree (P.D.) No. 957. This provision applies to subdivisions or condominium projects, which the Dasmariñas Resettlement Project was not. The Court also noted the bad faith exhibited by both petitioners: the NHA by donating the property without substantially complying with the condition and the Municipality of Dasmariñas by introducing structures and developing the land despite knowledge of the pending appeal and the rulings of the lower courts. A critical aspect of the case was that the second deed between the NHA and the Municipality of Dasmariñas did not state the condition for the 36 meter wide road. This resulted in no legal obligation on the part of the Municipality of Dasmariñas to complete the road, nor a way for the NHA to compel the same.

The Court acknowledged the supervening events, including the construction of buildings and infrastructure projects, but stressed that any dire effects of the revocation of the donation were solely on the account of the petitioners due to their bad faith. The Court suggested that the petitioners could exercise the power of eminent domain to keep the subject property and continue their infrastructure improvements but would not provide an easy way out given their actions. It is crucial to recognize that, as reiterated in Republic of the Phils. v. Silim, 408 Phil. 69, 77 (2001), donations of an onerous type are governed by the law on contracts.

FAQs

What was the key issue in this case?	The key issue was whether the NHA’s failure to comply with the condition in the Deed of Donation, specifically the construction of a 36-meter-wide access road, justified the revocation of the donation. The subsequent donation to the Municipality of Dasmariñas heightened the breach.
What type of donation was involved?	The donation was considered an onerous donation because it involved a condition—the construction of the access road—that the donee (NHA) had to fulfill. This meant it was governed by contract law, not donation law.
When did the prescriptive period for filing the revocation action begin?	The prescriptive period began when the NHA donated the property to the Municipality of Dasmariñas, as this act made it impossible for the NHA to fulfill the original condition. This triggered the donor’s right to seek revocation.
What does the doctrine of laches entail?	The doctrine of laches concerns unreasonable delay in asserting a right, leading to prejudice for the opposing party. The Court ruled it did not apply here as Dr. Campos did not unreasonably delay his action.
What constituted the substantial breach of contract?	The NHA’s failure to build the access road to the stipulated width (36 meters) was considered a substantial breach. This non-compliance defeated the core purpose of the donation agreement.
Was the donation to the Municipality of Dasmariñas legally justified?	No, the Court found the donation unjustified, as it did not fall under the provisions of P.D. No. 957, which pertains to subdivisions and condominium projects. The Dasmariñas Resettlement Project was not classified as either.
What remedy does the Municipality of Dasmariñas have?	The Municipality can exercise its power of eminent domain to acquire the property from Dr. Campos’ heirs. This would allow them to continue with their infrastructure projects while providing just compensation to the landowners.
What was the main reason the SC denied the consolidation petition?	The SC denied the petitions because the NHA exhibited bad faith, by donating the property to Municipality of Dasmariñas without fulfilling the promise. Also, the Municipality of Dasmariñas also showed bad faith, because even with the pending appeal and ruling in favor of the appeal, it still continued on the land’s construction.

This case underscores the importance of fulfilling conditions attached to donations, especially those of an onerous nature. The Supreme Court’s decision serves as a reminder that donors have legal avenues to reclaim their property when donees fail to uphold their end of the agreement. The ruling also highlights the necessity for government entities to act in good faith and respect contractual obligations, fostering transparency and accountability in land transactions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Municipality of Dasmariñas vs. Dr. Paulo C. Campos, G.R. Nos. 232675 and 233078, July 17, 2019