De Luna vs. Abrigo

An onerous donation is governed by the rules on contracts, not by the rules on donations; thus, an action to enforce a resolutory condition providing for automatic revocation of the donation upon breach of its conditions does not prescribe in four years under Article 764 of the Civil Code, but in ten years under Article 1144(1) for enforcement of a written contract. A contractual stipulation for automatic revocation without judicial intervention is valid, and judicial action only becomes necessary when the extrajudicial revocation is contested, to determine whether the revocation was proper.

Prudencio de Luna donated a 7,500-square-meter portion of land to Luzonian Colleges, Inc. (later Luzonian University Foundation, Inc.) under a Deed of Donation Intervivos in 1965, subject to conditions and with a reversion clause. That donation was later “revived” on April 9, 1971, through a “Revival of Donation Intervivos,” imposing the obligation on the donee to construct a chapel, nursery, and kindergarten school within five years, and containing a clause that any violation would cause automatic reversion of the property to the donor or his heirs. The donor died on August 18, 1980. His children, claiming to be his only heirs, filed a complaint on September 23, 1980, alleging non-compliance with the conditions and praying for cancellation of the donation and reversion of the land. The donee foundation asserted partial and substantial compliance, an indefinite extension granted by the donor, and invoked prescription of action. The trial court, after a preliminary hearing on the affirmative defense of prescription, dismissed the complaint on the ground that the action had prescribed under Article 764 of the Civil Code.

• The Donation and Its Revival: On January 24, 1965, Prudencio de Luna donated 7,500 square meters of land to Luzonian Colleges, Inc. under a Deed of Donation Intervivos subject to conditions and containing a reversion clause. On April 9, 1971, the donor “revived” the donation through a “Revival of Donation Intervivos” in favor of the foundation, now known as Luzonian University Foundation, Inc. The donee accepted the donation in the same document, subject to all terms and conditions.

• Conditions and Automatic Reversion Clause: The revived donation required the donee to construct at its own expense a Chapel, a Nursery and Kindergarten School (to be named St. Veronica), and accessories strictly according to approved plans and specifications, with construction to start immediately, be at least 70% finished within three years, and the entire project completed within five years from April 9, 1971. Paragraph 11 of the deed provided that violation of any condition would cause the “automatic reversion of the donated area to the donor, his heirs, assigns and representatives, without the need of executing any other document for that purpose and without obligation whatever on the part of the DONOR.” The donation was registered and annotated on the title, and a Deed of Segregation was executed on August 3, 1971, resulting in a separate title in the donee’s name.

• Non-Compliance Alleged and Complaint: Prudencio de Luna died on August 18, 1980. On September 23, 1980, his children—petitioners Evelyn, Rosalina, Prudencio Jr., Willard, Antonio, and Joselito, all surnamed de Luna—filed a complaint alleging that the donee failed to comply with the conditions of the donation and praying for cancellation of the donation and reversion of the land.

• Defense and Motion to Dismiss on Prescription: Respondent foundation claimed partial and substantial compliance, asserting it had introduced improvements worth more than the donated land, and that the donor had granted an indefinite extension. It raised the affirmative defense of prescription and moved for a preliminary hearing. The trial court treated the motion as one to dismiss on the ground of prescription.

• Trial Court’s Ruling on Prescription: The trial court held that the donation was onerous, but ruled that a judicial decree revoking the donation was necessary because the donee had not consented to the revocation after the violation occurred. Applying Article 764, it held that the action to revoke prescribed in four years from non-compliance. Since the five-year period to complete construction ended on April 9, 1976, the four-year period expired on April 9, 1980; the complaint filed on September 23, 1980 was thus time-barred. The complaint was dismissed.

• Non-Applicability of Article 764: Petitioners argued that Article 764 of the New Civil Code applies only when revocation has not been agreed upon by the parties. Where the donation itself contains a stipulation for automatic revocation upon non-compliance, as in this case, no judicial action for revocation is necessary, and the applicable provision is not Article 764.

• Nature of Action and Prescriptive Period: Petitioners maintained that the complaint was not one for judicial revocation under Article 764, which prescribes in four years, but an action to enforce a written contract containing an automatic reversion clause, which prescribes in ten years under Article 1144(1) of the Civil Code. The action was timely filed within the ten-year period.

• Propriety of Judgment on the Pleadings: Petitioners contended that the trial court should have rendered judgment on the pleadings because the answer allegedly admitted material allegations, and the court’s failure to do so constituted reversible error.

• Prescription under Article 764: Respondent foundation asserted that the complaint was for a judicial decree of revocation under Article 764 of the Civil Code. It argued that the four-year prescriptive period commenced on April 9, 1976, when the five-year period for completion of the construction expired, and expired on April 9, 1980. Since the complaint was filed only on September 23, 1980, the action was barred by prescription.

• Substantial Compliance and Extension: The foundation claimed it had partially and substantially complied with the conditions, having introduced improvements valued at more than the donated land, and that the donor had granted an indefinite extension of time to complete the construction. These factual contentions were raised to contest the alleged breach and to support the defense that no cause of action for revocation had accrued.

• Governing Law for the Donation: Whether the donation is an onerous donation governed by the rules on contracts under Article 733 of the Civil Code, thereby rendering Article 764 on the revocation of donations inapplicable.

• Prescriptive Period for the Action: Whether the complaint to enforce the automatic reversion clause prescribes in four years under Article 764 or in ten years under Article 1144(1) of the Civil Code.

• Propriety of Judgment on the Pleadings: Whether the trial court erred in not rendering a judgment on the pleadings despite the alleged absence of a genuine issue.

• Governing Law for the Donation: The donation was onerous, having been made subject to the burden of constructing a chapel, nursery, and kindergarten school on the donated property. Under Article 733, donations with an onerous cause are governed by the rules on contracts, not by the provisions on simple or remuneratory donations. Consequently, Article 764, which prescribes a four-year period for actions to revoke donations on the ground of non-compliance with conditions, did not apply to the case.

• Prescriptive Period for the Action: The automatic reversion clause in the deed of donation constituted a valid facultative resolutory condition. Upon the breach of the conditions, the donation was automatically revoked without need of a judicial declaration to that effect. When the extrajudicial revocation is contested by the other party, judicial intervention is warranted only to determine the propriety of the revocation, not to decree rescission. Accordingly, the complaint was not an action for judicial revocation under Article 764 but an action to enforce a written contract. The applicable prescriptive period is ten years under Article 1144(1) of the Civil Code, counted from the time the cause of action accrued—i.e., from the expiration of the five-year compliance period on April 9, 1976. Filed on September 23, 1980, the complaint was well within the ten-year period and not time-barred.

• Propriety of Judgment on the Pleadings: The material allegations of non-compliance were squarely contested by respondent foundation, which claimed substantial compliance and an indefinite extension. There being no admission of the material allegations, a judgment on the pleadings was not proper. Moreover, even if warranted, the trial court could not render such a judgment motu proprio; it must be upon motion of a party under Section 1, Rule 19 of the Rules of Court.

• Onerous Donations Governed by Rules on Contracts — Under Article 733 of the Civil Code, donations with an onerous cause are governed not by the law on donations but by the rules on contracts. This applies equally to questions of prescription; the provisions on revocation of donations, including Article 764, do not govern onerous donations.

• Validity of Automatic Reversion Clause — A stipulation in a contract of donation that provides for the automatic reversion of the donated property upon violation of any of its conditions is valid as a facultative resolutory condition. It grants a party the right to rescind the contract unilaterally, without need of judicial intervention (University of the Philippines v. de los Angeles, 35 SCRA 102; Angeles v. Calasanz, G.R. No. L-42283, March 18, 1985; Ponce Enrile v. Court of Appeals, 29 SCRA 504).

• Limited Role of Judicial Intervention in Automatic Revocation — When a contract provides for extrajudicial rescission, judicial action is not necessary to decree rescission, as the contract is already deemed rescinded by the happening of the resolutory condition. However, if the extrajudicial revocation is contested, judicial intervention is proper solely for the purpose of determining whether the revocation was proper; only the final award of a court of competent jurisdiction can conclusively settle the dispute (University of the Philippines v. de los Angeles, supra).

• Prescription of Action to Enforce Written Contract with Resolutory Condition — An action to enforce a written contract containing a resolutory condition, including one for automatic revocation of an onerous donation, prescribes in ten years under Article 1144(1) of the Civil Code. The prescriptive period runs from the time the right of action accrues, i.e., from the non-compliance with or violation of the conditions.

• “It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach, without need of going to court. Upon the happening of the resolutory condition of non-compliance with the conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect.” — This passage encapsulates the ratio on the validity and effect of an automatic reversion clause.

• “… judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the recession was proper.” — This clarifies the limited role of the court when an extrajudicial revocation is contested.

• “Art. 733. Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed.” — The statutory anchor for the ruling that the prescription rules on contracts, not donations, apply.

• Parks v. Province of Tarlac, 49 Phil. 143 (1926) — Distinguished. In Parks, the onerous donation did not contain an automatic revocation clause, thus a judicial declaration of revocation was necessary. The general rules on prescription applied. This case was relied upon by the trial court but held inapplicable.

• University of the Philippines v. de los Angeles, G.R. No. L-28602, September 29, 1970, 35 SCRA 102 — Followed. Upheld the validity of a contractual stipulation allowing cancellation without court intervention and held that judicial action is necessary only to determine the propriety of the extrajudicial rescission when contested.

• Angeles v. Calasanz, G.R. No. L-42283, March 18, 1985 — Followed. Reiterated the rule that judicial action for rescission is not necessary where the contract provides that it may be revoked for violation of its terms.

• Carlos v. Ramil, 20 Phil. 183 (1911) and Manalo v. de Mesa, 29 Phil. 495 (1915) — Cited as settled authority under the old Civil Code that donations with an onerous cause are governed not by the law on donations but by the rules on contracts.

• Article 733, Civil Code — Donations with an onerous cause shall be governed by the rules on contracts. Applied to hold that Article 764 does not govern the prescriptive period for revocation of the onerous donation.

• Article 764, Civil Code — Action for revocation of a donation on the ground of non-compliance with conditions must be brought within four years from such non-compliance. Held inapplicable to onerous donations.

• Article 1144(1), Civil Code — Actions upon a written contract prescribe in ten years. Applied as the governing prescriptive period for the enforcement of the automatic reversion clause.

• Article 1306, Civil Code — Parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. Cited as basis for the validity of the automatic reversion clause.

• Section 1, Rule 19, Rules of Court — Judgment on the pleadings may be rendered only upon motion of the party, and where the answer fails to tender an issue or admits material allegations. Cited to support the denial of judgment on the pleadings.

Narvasa, Cruz, Gancayco, and Griño-Aquino, JJ., concurred.