Mactan-Cebu International Airport Authority vs. Lapu-Lapu City

A donation subject to a condition may be revoked only for noncompliance that is substantial and fundamental, not merely slight or casual, taking into account the purpose of the donation and the parties’ intent; absent valid revocation, no right of reversion accrues and a subsequent sale by the donors’ heirs conveys nothing.

Petitioner MCIAA and respondent Lapu-Lapu City are the parties litigating over Lot No. 4726-A, a parcel of land in Lapu-Lapu City. The present petition is part of litigation over Lot No. 4726, originally registered in the names of Spouses Marcos and Basilisa Seno, involving the Seno heirs, Lapu-Lapu City, and MCIAA. A prior SC Resolution in G.R. No. 242666 denied the heirs’ petition and became final and executory on December 26, 2019, settling with finality the heirs’ entitlement to the subject properties.

Spouses Marcos and Basilisa Seno were the registered owners of Lot No. 4726, which was later subdivided into Lot Nos. 4726-A and 4726-B; the present dispute concerns Lot No. 4726-A. In 1935, the spouses donated Lot No. 4726-A to Lapu-Lapu City, subject to the condition that the property “shall be used exclusively and forever for school purposes only.” Pursuant to that condition, Ibo Elementary School was constructed on the property. The school was later demolished and transferred to another location due to the increasing student population.

In 1958, some of the heirs of the spouses Seno executed an Extrajudicial Settlement and Sale covering the entire Lot No. 4726, including Lot No. 4726-A, in favor of MCIAA. Years later, the heirs instituted an action for recovery of Lot No. 4726, including Lot No. 4726-A. They claimed that the sale to MCIAA was void because the lot had already been donated to Lapu-Lapu City; since the City did not comply with the condition to use the property for school purposes, ownership reverted to them.

MCIAA agreed that Lapu-Lapu City’s failure to comply with the donor’s condition triggered reversion of the property to the heirs, but contended that ownership had subsequently passed to it by virtue of the Extrajudicial Settlement and Sale; accordingly, it asserted that it was the rightful owner of Lot No. 4726-A. Lapu-Lapu City, for its part, maintained the validity and subsistence of the donation, pointing out that it continues to intend to use the property for educational purposes.

No evidence showed that Lapu-Lapu City abandoned the property or repudiated the donor’s intent that the land be devoted to educational purposes. The City consistently maintained that Lot No. 4726-A remained intended for school use and that the demolition of the school building was prompted not by abandonment but by the practical necessity of transferring the school to accommodate a growing student population. A letter dated August 24, 1998 from Dr. Caridad C. Labe, then Schools Division Superintendent, acknowledged that the property had been used as the site of Ibo Elementary School and stated that, with the increase in pupil enrollment, Ibo Elementary School would be using the school site for school purposes.

At present, no school building stands on the subject lot, and Lapu-Lapu City cannot comply with the condition because the lot is occupied by MCIAA; the CA observed that it is up to Lapu-Lapu City to institute the proper proceedings to take back possession over Lot No. 4726-A so that it can comply with the condition attached to the donation.

• Revocation for Breach of Condition: Petitioner maintained that the donation had become ineffective because Lapu-Lapu City failed to comply with the express condition that the property be used exclusively for school purposes; the Ibo Elementary School had been demolished as early as 1991 and was never rebuilt, warranting revocation of the donation and reversion of ownership.
• Ownership under the Extrajudicial Settlement and Sale: Petitioner contended that ownership of Lot No. 4726-A had passed to it by virtue of the 1958 Extrajudicial Settlement and Sale executed by some of the Seno heirs.

• Validity and Subsistence of the Donation: Respondent maintained that the donation remained valid and subsisting because it continues to intend to use the property for educational purposes.

• Revocation of Donation and Ownership of Lot No. 4726-A: Whether the CA erred in upholding Lapu-Lapu City’s ownership of Lot No. 4726-A despite the demolition and non-rebuilding of Ibo Elementary School.

• Revocation of Donation and Ownership of Lot No. 4726-A: No. The CA did not err. The donation remained valid and subsisting because petitioner failed to establish a substantial and fundamental breach; absent valid revocation, no right of reversion accrued to the heirs, and petitioner could not derive ownership from the Extrajudicial Settlement and Sale.

• Revocation of Donation and Ownership of Lot No. 4726-A: To justify revocation of a donation for breach of a condition, the noncompliance must be substantial and fundamental, not merely slight or casual, taking into account the purpose of the donation and the parties’ intent. The SC quoted the rule that rescission is not permitted for a slight or casual breach, but only for breaches so substantial and fundamental as to defeat the object of the parties in making the agreement, and noted that Article 1191 is relevant in determining the nature of the breach while Article 764 involves revocation and resolution because noncompliance with conditions can be considered a resolutory condition. Measured against this standard, MCIAA failed to establish a breach sufficient to warrant revocation. The records did not show that Lapu-Lapu City abandoned the property or repudiated the donor’s intent that the land be devoted to educational purposes; on the contrary, the City consistently maintained that Lot No. 4726-A remained intended for school use and that the demolition of the school building was prompted not by abandonment but by the practical necessity of transferring the school to accommodate a growing student population. The transfer was itself motivated by the continuing educational needs of the community. The City’s continuing intention was confirmed by the August 24, 1998 letter of Dr. Caridad C. Labe, then Schools Division Superintendent, which acknowledged the prior use of the property as the site of Ibo Elementary School and the plan to continue utilizing the property for school purposes. The City’s present inability to utilize the property for school purposes appeared attributable, at least in part, to MCIAA’s own occupation and use of the property; the CA observed that although no school building stood on the lot, the donation remained valid and subsisting because the City aimed to utilize the lot for school purposes in the future, the deed of donation did not provide a specific time-frame for building the school, and the City should be afforded sufficient time to comply, but that the City could not presently comply because the lot was occupied by MCIAA and it was up to the City to institute proper proceedings to take back possession. The SC held that a party cannot invoke the nonfulfillment of a condition where such nonfulfillment was caused or materially contributed to by its own acts, and that to rule otherwise would allow MCIAA to profit from a circumstance it itself helped create. Without a valid revocation, no right of reversion accrued to the heirs; consequently, MCIAA could not derive any right from the Extrajudicial Settlement and Sale they executed, because nemo dat quod non habet — no one can give what one does not have. The CA therefore committed no reversible error in upholding the donation and Lapu-Lapu City’s ownership.

• Substantial and Fundamental Breach for Revocation of Conditional Donation — A donation subject to a condition may be revoked only when the noncompliance is substantial and fundamental, not merely slight or casual, considering the purpose of the donation and the parties’ intent. The SC applied this to hold that Lapu-Lapu City’s demolition and transfer of Ibo Elementary School, prompted by increasing student population, did not amount to abandonment or a substantial breach of the school-use condition.
• No Reversion Without Valid Revocation — No right of reversion accrues to the donor or heirs absent a valid revocation of the donation. The SC applied this to hold that because there was no substantial breach, the donation remained valid and the heirs had no right to Lot No. 4726-A that they could sell to MCIAA.
• Nemo dat quod non habet — No one can give what one does not have. The SC applied this to hold that MCIAA could not derive ownership from the Extrajudicial Settlement and Sale because the heirs had no right of reversion to convey.
• Party Cannot Invoke Nonfulfillment Caused by Its Own Acts — A party cannot invoke the nonfulfillment of a condition where such nonfulfillment was caused or materially contributed to by its own acts. The SC applied this to reject MCIAA’s argument because its occupation and use of the property contributed to Lapu-Lapu City’s inability to use the lot for school purposes, and allowing MCIAA to benefit would let it profit from a circumstance it helped create.

• “To justify the revocation of a donation for breach of a condition, the noncompliance must be substantial and fundamental, not merely slight or casual, taking into account the purpose of the donation and the parties’ intent.” — This states the standard the SC applied in rejecting MCIAA’s claim for revocation.
• “The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement.” — Quoted in the decision as the early rule in Song Fo & Co. vs. Hawaiian Philippine Co., used to measure whether the donation condition was breached.
• “Indeed, a party cannot invoke the nonfulfillment of a condition where such nonfulfillment was caused or materially contributed to by its own acts.” — The SC used this to reject MCIAA’s position because MCIAA occupied the property and contributed to the City’s inability to use it for school purposes.
• “Without a valid revocation of the donation, no right of reversion accrued to the heirs. Consequently, petitioner could not derive any right from the Extrajudicial Settlement and Sale they executed.” — This explains why MCIAA acquired no ownership over Lot No. 4726-A from the heirs.

• Camarines Sur Teachers and Employees Association, Inc. vs. Province of Camarines Sur, 864 Phil. 344, 373-374 (2019) — Cited and followed for the rule that revocation of a donation for breach of condition requires substantial and fundamental noncompliance, not merely slight or casual breach.
• Song Fo & Co. vs. Hawaiian Philippine Co. — Quoted in the decision as the early case stating the general rule that rescission is not permitted for a slight or casual breach but only for a breach so substantial and fundamental as to defeat the object of the parties.
• Catungal vs. Rodriguez, 661 Phil. 484, 508 (2011) — Cited in support of the rule that a party cannot invoke the nonfulfillment of a condition where such nonfulfillment was caused or materially contributed to by its own acts.
• Alano vs. Planter’s Development Bank, 667 Phil. 81, 82 (2011) — Cited in support of the principle of nemo dat quod non habet.

• Rule 45, Rules of Court — The petition was filed under Rule 45; the SC denied it after finding no reversible error in the CA decision and resolution.
• Article 1191 — The decision quoted that Article 1191 is relevant in determining the nature of the breach or violation that will justify rescission; applied through the requirement that only a substantial and fundamental breach, not a slight or casual one, justifies revocation.
• Article 764 — The decision quoted that Article 764 is a clear case not only of revocation but also resolution because noncompliance with conditions can be considered a resolutory condition; applied in assessing whether the school-use condition was breached sufficiently to revoke the donation.