Trias vs. Gregorio Araneta, Inc.

A prohibition against factories annotated on a Torrens certificate of title, imposed by a subdivision owner as a condition of sale, is a valid easement and contractual restriction that may not be cancelled merely because a zoning ordinance independently prohibits factories in the area.

The lot in Quezon City formed part of a subdivision originally owned by J.M. Tuason & Co., Inc., which sold parcels through Gregorio Araneta, Inc. subject to a prohibition against factories printed on the back of the transfer certificates. Rafaela V. Trias later acquired the lot subject to the same annotation on Transfer Certificate of Title No. 54417. The annotation was made under the Torrens system, and the Civil Code provisions on easements govern the owner’s power to impose such restrictions.

In May 1963, Dra. Rafaela V. Trias, married to Manuel Sia Ramos, filed a petition in the Rizal court of first instance to cancel from her Torrens certificate of title an annotation on its back reading: “5. That no factories will be permitted in this section.” She alleged that she was the registered owner of the lot in Quezon City; that she wanted the cancellation not for the purpose of erecting a factory thereon but merely to facilitate approval of a loan she had applied for; that the restriction was illegal because it impaired the owner’s dominical rights; and that it was a mere surplusage because zoning ordinances prohibited the establishment of factories in that district. The court granted the petition, endorsing her views, particularly the one referring to surplusage due to a zoning ordinance.

Two weeks later, Gregorio Araneta, Inc. moved for reconsideration, alleging that the condition had been inserted in the title pursuant to a contract of sale between it and Rafaela’s predecessor-in-interest; that it received no timely notice of the petition; that the order disregarded contractual rights and obligations; that the prohibition against factories was valid and not a surplusage; and that the court had no jurisdiction to act on the petition. Upon denial of its motion for reconsideration, Gregorio Araneta, Inc. appealed to the Supreme Court.

The parties agreed that there were no issues of fact. The lot was part of a subdivision and originally belonged to J.M. Tuason & Co., Inc., which, upon selling it through Araneta, Inc. to purchasers Garcia Mateo and Deogracias Lopez, imposed the prohibition; the prohibition was accordingly printed on the back of the transfer certificate issued to the purchaser. After several transfers, always subject to the prohibition, Rafaela acquired the lot, again subject to the limitation, which was repeated on the back of her certificate. Upon receiving her certificate, she noticed the prohibition and, arguing that it infringed the owner’s right to use her land, asked for its cancellation.

• Dominical Rights: Petitioner maintained that the restriction was illegal because it impaired the owner’s dominical rights.
• Surplusage Due to Zoning: Petitioner argued that the annotation was a mere surplusage because zoning ordinances prohibited the establishment of factories in that district.
• Purpose of Cancellation: Petitioner alleged that she wanted cancellation not for the purpose of erecting a factory on the lot but merely to facilitate approval of a loan she had applied for.
• Free Use of Land: Petitioner argued that the prohibition infringed the owner’s right to use her land.

• Contractual Basis: Respondent maintained that the condition had been inserted in the title pursuant to a contract of sale between it and Rafaela’s predecessor-in-interest.
• Notice: Respondent alleged that it received no timely notice of the petition.
• Contractual Rights: Respondent argued that the order disregards contractual rights and obligations.
• Validity of Prohibition: Respondent contended that the prohibition against factories was valid and not a surplusage.
• Jurisdiction: Respondent argued that the court had no jurisdiction to act on the petition.

• Validity of Prohibition: Whether the prohibition against factories annotated on the Torrens certificate of title is valid.
• Effect of Zoning Ordinance: Whether the existence of a zoning ordinance prohibiting factories in the area renders the annotation a surplusage and subject to cancellation.
• Cancellation of Annotation: Whether the petition to cancel the annotation should be granted.

• Validity of Prohibition: Yes. The prohibition is a valid easement and contractual obligation under Art. 594 of the Civil Code or Art. 688 of the New Civil Code, not contrary to law, public policy, or public order.
• Effect of Zoning Ordinance: No. The zoning ordinance does not render the annotation a surplusage; it may be repealed, and the annotation remains necessary to bind subsequent purchasers.
• Cancellation of Annotation: No. The petition to cancel is denied, and the appealed order is reversed, with costs against petitioner.

• Validity of Prohibition: The prohibition is similar to other conditions imposed by sellers of subdivision lots in and around Manila. It is in reality an easement, which every owner of real estate may validly impose under Art. 594 of the Civil Code or Art. 688 of the New Civil Code, provided it does not contravene law, public policy, or public order. No law was cited outlawing the condition, which was imposed by the subdivision owner to establish a residential section and assure purchasers that the peace and quiet of the place would not be disturbed by the noise or smoke of factories. The limitation is essentially a contractual obligation imposed by the seller, Tuason & Co., Inc. through Araneta, Inc., and accepted by the purchaser. Although it restricts the free use of the land, courts generally sustain covenants restricting the use of property where reasonable and not contrary to public policy, including building restrictions limiting buildings to residences and restrictions as to the character or location of structures. It was proper for Tuason & Co., Inc. through Araneta, Inc. to oppose elimination of the condition because, if erased, a purchaser who obtains a new certificate of title without the annotation would hold the lot free from the encumbrance and might build a factory. Under Sec. 39 of Act 496 as amended, every purchaser of registered land holds the same free from all encumbrances except those noted in the certificate.
• Effect of Zoning Ordinance: The existence of a zoning ordinance prohibiting factories in the area is immaterial. The ordinance might be repealed at any time; if so repealed, the prohibition would not be enforceable against new purchasers of the land who may be ignorant thereof. The same remark applies to Rafaela’s promise not to build a factory on the lot: new owners might not be bound. A problem might arise if and when the ordinance is amended to convert the area into an industrial zone impliedly permitting factories; probably the limitation might still bind the lot owner with annotation, but that was not the present issue and was not decided.
• Cancellation of Annotation: Because the prohibition is valid and the zoning ordinance does not justify cancellation, the petition to cancel must be denied. The Court found it unnecessary to take up the other questions regarding notice and jurisdiction, and did not pass on the point raised by appellee concerning appellant’s personality to object to the cancellation, because the proper party in interest, J.M. Tuason & Co., Inc., could be impleaded as substitute party on appeal, citing Alonzo vs. Villamor, 16 Phil. 315. The appealed order was therefore reversed, and the petition to cancel denied, with costs against petitioner.

• Easement Imposed by Landowner — Under Art. 594 of the Civil Code and Art. 688 of the New Civil Code, the owner of a piece of land may establish thereon the easements he may deem suitable, provided he does not contravene law, public policy, or public order. A subdivision seller’s prohibition against factories, annotated on the transfer certificate and accepted by the purchaser, is in reality an easement and a contractual obligation. The Court applied this to uphold the annotation against cancellation.
• Contractual Building Restrictions — While courts have manifested some disfavor of covenants restricting the use of property, they generally sustain them where reasonable and not contrary to public policy. Building restrictions limiting buildings to residences and restrictions as to the character or location of structures to be erected have been sustained. The Court applied this to hold the prohibition against factories valid.
• Torrens Title: Encumbrances Noted on Certificate — Under Sec. 39 of Act 496 as amended, every purchaser of registered land shall hold the same free from all encumbrances except those noted in said certificate. The Court applied this to explain that erasing the annotation would allow a purchaser with a new certificate to hold the lot free from the restriction and build a factory.
• Zoning Ordinance Does Not Render Contractual Annotation Surplusage — The existence of a zoning ordinance prohibiting factories is immaterial to the validity of a contractual annotation because the ordinance may be repealed at any time; if repealed, the prohibition would not be enforceable against new purchasers who may be ignorant thereof. The Court applied this to reject the trial court’s surplusage rationale.

• "The limitation is essentially a contractual obligation which the seller, Tuason & Co., Inc. (thru Araneta Inc.) imposed, and the purchaser agreed to accept." — This states the contractual character of the annotation and supports its validity as a binding restriction on the lot owner.
• "The existence of a zoning ordinance prohibiting factories in the area is immaterial. The ordinance might be repealed at any time; and if so repealed, this prohibition would not be enforceable against new purchasers of the land, who may be ignorant thereof." — This is the ratio for rejecting the surplusage argument based on the zoning ordinance.
• "every purchaser of registered land ... shall hold the same free from all encumbrances except those noted in said certificate." — The Court cited Sec. 39 of Act 496 as amended to explain the Torrens system consequence of cancelling the annotation and why the oppositor may oppose erasure.
• "The appealed order is reversed, and the petition to cancel is denied, with costs against petitioner." — This is the dispositive portion.

• Alonzo vs. Villamor, 16 Phil. 315 — Cited for the proposition that the proper party in interest could be impleaded as substitute party on appeal. The Court used it to avoid passing on the point concerning appellant’s personality to object to the cancellation.

• Art. 594, Civil Code — Cited as one basis for an owner’s power to impose easements. Applied to uphold the subdivision’s prohibition against factories as a valid easement.
• Art. 688, New Civil Code — Provides that the owner of a piece of land may establish thereon the easements he may deem suitable, provided he does not contravene law, public policy, or public order. Applied to sustain the annotation.
• Sec. 39, Act 496 as amended — Provides that every purchaser of registered land shall hold the same free from all encumbrances except those noted in said certificate. Applied to show that cancelling the annotation would free subsequent purchasers from the restriction.

Bautista Angelo, Concepcion, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concurred. Reyes, J.B.L., J., took no part.