VOL.

294, AUGUST 7, 1998 33

People vs. Daraman

*
G.R. No. 126699. August 7, 1998.

AYALA CORPORATION, petitioner, vs. RAY BURTON

DEVELOPMENT CORPORATION, respondent.

Remedial Law; Judgments; Effect of Judgments; Decision in

CA-G.R. SP No. 29157 is not binding on the parties as RBDC is
not a party in that case.—Decision in CA-G.R. SP No. 29157 is not
binding on the parties herein, simply because, except for AYALA,
RBDC is not a party in that case. Section 49, Rule 39 of the
Revised Rules of Court (now Sec. 47, Rule 39 of the 1997 Rules of
Civil Procedure) provides in part: Sec. 49. Effect of judgments. The
effect of a judgment or final order rendered by a court or judge of
the Philippines, having jurisdiction to pronounce the judgment or
order, may be as follows: (a) x x x; (b) In other cases the judgment
or order is, with respect to the matter directly adjudged or as to
any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by
title subsequent to the commencement of action or special
proceeding, litigating for the same thing and under the same title
and in the same capacity; (emphasis supplied)

Same; Same; Same; A final judgment or order of a court is

conclusive and binding only upon the parties to a case and their
successors in interest.—The clear mandate of the above-quoted
rule is that a final judgment or order of a court is conclusive and
binding only

___________________

* SECOND DIVISION.

49

VOL. 294, AUGUST 7, 1998 49

 Ayala Corporation vs. Ray Burton Development Corp.

upon the parties to a case and their successors in interest. Both the
present case and the Rosa-Diana case, however, involve different
parties who are not litigating “for the same thing” nor “under the
same title and in the same capacity.” Hence, the Rosa-Diana
decision cannot have binding effect against either party to the
instant case.

Same; Estoppel; An admission or representation is rendered

conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon.—“Under the
doctrine of estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. A party may not
go back on his own acts and representations to the prejudice of
the other party who relied upon them.” Here, we find no
admission, false representation or concealment that can be
attributed to AYALA relied upon by RBDC.

Civil Law; Contracts; Contract of Adhesion; Contracts of

adhesion wherein one party imposes a ready-made form of contract
on the other x x x are contracts not entirely prohibited. The one
who adheres to the contract is in reality free to reject it entirely.—A
contract of adhesion in itself is not an invalid agreement. This
type of contract is as binding as a mutually executed transaction.
We have emphatically ruled in the case of Ong Yiu vs. Court of
Appeals, et al. that “contracts of adhesion wherein one party
imposes a ready-made form of contract on the other x x x are
contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres he
gives his consent.” This ruling was reiterated in Philippine
American General Insurance Co., Inc. vs. Sweet Lines, Inc., et al.,
wherein we further declared through Justice Florenz Regalado
that “not even an allegation of ignorance of a party excuses non-
compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of
a contract of carriage (a contract of adhesion) devolves not on the
carrier but on the owner, shipper, or consignee as the case may
be.”

Same; Same; Same; Contracts of adhesion are accorded

inordinate vigilance and scrutiny by the courts in order to shield
the unwary from deceptive schemes contained in ready-made
covenants.—Contracts of adhesion, however, stand out from other
contracts (which are bilaterally drafted by the parties) in that the
former is accorded inordinate vigilance and scrutiny by the courts
in order to
 50

50 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

shield the unwary from deceptive schemes contained in ready-

made covenants. As stated by this Court, speaking through
Justice J.B.L. Reyes, in Qua Chee Gan vs. Law Union and Rock
Insurance Co., Ltd.: “The courts cannot ignore that nowadays,
monopolies, cartels and concentration of capital, endowed with
overwhelming economic power, manage to impose upon parties
dealing with them cunningly prepared ‘agreements’ that the
weaker party may not change one whit, his participation in the
‘agreement’ being reduced to the alternative to ‘take it or leave it’
labeled since Raymond Saleilles ‘contracts by adherence’
(contracts d’ adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies
of insurance and international bill of lading are prime examples)
obviously call for greater strictness and vigilance on the part of
the courts of justice with a view to protecting the weaker party
from abuses and imposition, and prevent their becoming traps for
the unwary.” (Emphasis supplied)

Same; Same; Same; In all contractual, property or other

relations, when one of the parties is at a disadvantage on account
of his moral dependence, ignorance, indigence, mental weakness,
tender age or other handicap, the courts must be vigilant for his
protection.—The stringent treatment towards contracts of
adhesion which the courts are enjoined to observe is in pursuance
of the mandate in Article 24 of the New Civil Code that “(i)n all
contractual, property or other relations, when one of the parties is
at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the
courts must be vigilant for his protection.”

Same; Same; Same; Validity and enforceability of the contract

of adhesion will have to be determined by the peculiar
circumstances obtaining in each case and the situation of the
parties concerned.—The validity and/or enforceability of a
contract of adhesion will have to be determined by the peculiar
circumstances obtaining in each case and the situation of the
parties concerned. In the instant case, the stipulations in the
Deed Restrictions and Special Conditions are plain and
unambiguous which leave no room for interpretation. Moreover,
there was even no attempt on the part of RBDC to prove that, in
the execution of the Deed of Sale on the subject lot, it was a
weaker or a disadvantaged party on account of its moral
dependence, ignorance, mental weakness or other handicap. On
the contrary, as testified to by Edwin Ngo, President of RBDC, the
latter is

51

VOL. 294, AUGUST 7, 1998 51

Ayala Corporation vs. Ray Burton Development Corp.

a realty firm and has been engaged in realty business, and that
he, a businessman for 30 years, represented RBDC in the
negotiations and in the eventual purchase of the subject lot from
PALMCREST. Edwin Ngo’s testimony proves that RBDC was not
an unwary party in the subject transaction. Instead, Edwin Ngo
has portrayed RBDC as a knowledgeable realty firm experienced
in real estate business.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

     Poblador, Bautista & Reyes for petitioner.
     Anthony Jay B. Consunji for private respondent.

MARTINEZ, J.:

Petitioner Ayala Corporation (AYALA) is the owner of the

Ayala estate located in Makati City. The said estate was
originally a raw land which was subdivided for sale into
different lots devoted for residential, commercial and
industrial purposes. The development of the estate
consisted of road and building construction and installation
of a central sewerage treatment plant and drainage system
which services the whole Ayala Commercial Area.
On March 20, 1984, Karamfil Import-Export Company
Ltd. (KARAMFIL) bought from AYALA a piece of land
identified as Lot 26, Block 2 consisting of 1,188 square
meters, located at what is now known as H.V. de la Costa
Street, Salcedo Village, Makati City. The said land, which
is now the subject of this case, is more particularly
described as follows:

“A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC]

Psd-6086, being a portion of Block D, described as plan [LRC]
Psd-5812 LRC [GLRO] Rec. No. 2029) situated in the
Municipality of Makati, Province of Rizal, Is. of Luzon. Bounded
on the N.E., points 2 to 3 by Lot 31, Block 2 (Creek 6.00 m. wide)
of the subdivision plan, on the SE., points 3 to 4 by Lot 27, Block 2
of the Subdivision plan; on the SW, points 4 to 5, by proposed
Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5 to 1 by
Street Lot 2 (17.00 m.

52

52 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

wide) of the subdivision plan. On the NW, points 1 to 2 by Lot 25,

Block 2 of the subdivision plan. x x x beginning, containing an
area of ONE THOUSAND ONE HUNDRED EIGHTY EIGHT
(1,188) SQUARE METERS.”
1
The transaction was documented in a Deed of Sale of even
date, which provides, among others, that the vendee would
comply with certain special conditions and restrictions on
the use or occupancy 2of the land, among which are—
Deed Restrictions:

a) The total height of the building to be constructed on

the lot shall not be more than forty-two (42) meters,
nor shall it have a total gross floor area of more
than five (5) times the lot area; and
b) The sewage disposal must be by means of
connection into the sewerage system servicing the
area.
3
Special Conditions:

a) The vendee must obtain final approval from AYALA

of the building plans and specifications of the
proposed structures that shall be constructed on the
land;
b) The lot shall not be sold without the building
having been completed; and
c) Any breach of the stipulations and restrictions
entitles AYALA to rescission of the contract.

As a result
4
of the sale, a Transfer Certificate of Title No.
132086 was issued in the name of KARAMFIL. The said
special conditions and restrictions were attached as an
annex to the deed of sale and incorporated in the
“Memorandum of Encumbrances” at the reverse side of the
title of the lot as Entry No. 2432/T-131086.
______________________

1 Exhibit “A,” RTC record, pp. 782-784.

2 Exhibit “A-1,” ibid., p. 784.
3 Exhibit “A-2,” ibid., p. 783.
4 Exhibit “P,” ibid., p. 795.

53

VOL. 294, AUGUST 7, 1998 53

Ayala Corporation vs. Ray Burton Development Corp.

On February 18, 1988, KARAMFIL sold the lot to

Palmcrest Development and Realty Corporation
5
(PALMCREST) under a Deed of Absolute Sale of even
date. This deed was submitted to AYALA for approval in
order to obtain the latter’s waiver of the special condition
prohibiting the resale of the lot until after KARAMFIL
shall have constructed a building thereon. AYALA gave its
written conformity to the sale but reflecting in its approval
the same special conditions/restrictions as in the previous
sale.6 AYALA’s conformity was annotated on the deed of
sale. PALMCREST did 7 not object to the stipulated
conditions and restrictions.
PALMCREST in turn sold the lot to Ray Burton
Development Corporation (RBDC), now respondent, on
April 11, 1988, with the agreement that AYALA retains
possession of the Owner’s Duplicate copy of the title until a
building is erected on said parcel of land in accordance
8
with
the requirements 9and/or restrictions of AYALA. The Deed
of Absolute Sale executed on the said date was also
presented to AYALA for approval since no building had yet
been constructed on the lot at the time of the sale. As in the
KARAMFIL-PALMCREST transaction, AYALA gave its
conformity to the sale, subject to RBDC’s compliance with
the special conditions/restrictions which were annotated in
the deed of sale, thus:

“With our conformity, subject to the compliance by the Vendees of

the Special Conditions of Sale on the reverse side of the Deed of
Sale dated March 20, 1984 per Doc. No. 140, Page No. 29, 10
Book
No. 1, Series of 1984 of the Notary Public Silverio Aquino.”

____________________

5 Exhibit “B,” RTC record, p. 785.

6 Exhibit “B-1,” ibid., p. 785.
7 See Transcript of Stenographic Notes, January 18, 1993, pp. 24-27.
 8 Exhibit “C-2,” RTC record, p. 788.
9 Exhibit “C,” ibid., pp. 788-791.
10 Exhibit “C-1,” RTC record, p. 791.

54

54 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

The conditions and restrictions of the sale were likewise

entered as encumbrances at the reverse side of the
Transfer Certificate of Title No.11
155384 which was later
issued in the name of RBDC. Like PALMCREST, RBDC
was not also 12
averse to the aforesaid conditions and
restrictions.
Sometime in June of 1989, RBDC submitted to AYALA
for approval a set of architectural plans for the construction
of a 5-storey office building on the subject lot, with a height
of 25.85 meters 13and a total gross floor area of 4,989.402
square meters. The building was to be known as
“Trafalgar Tower” but later renamed “Trafalgar Plaza.”
Since the building was well within the 42-meter height
restriction, AYALA approved14
the architectural plans.
Upon written request made by RBDC, AYALA likewise
agreed to release the owner’s copy of the title covering the
subject lot to the China Banking Corporation as guarantee
of the loan granted to RBDC for the construction of the 5-
storey building.
Meanwhile, on November 28, 1989, RBDC, together with
the Makati Developers Association, Inc. (MADAI), of which
RBDC is a member, and other lot owners, filed a complaint
against AYALA before the Housing and Land Use
Regulatory Board (HLRB), docketed as HLRB Case No.
REM-A-0818 (OAALA-REM-111489-4240). The complaint
sought the nullification of the very same Deed Restrictions
incorporated in the deeds of sale of the lots purchased by
the complainants from AYALA and annotated on their
certificates of title, on the grounds, inter alia, that said
restrictions purportedly: (a) place unreasonable control
over the lots sold by AYALA, thereby depriving the vendees
of the full enjoyment of the lots they bought, in violation of
Article 428 of the Civil Code; (b) have been superseded by
Presidential Decree No. 1096 (the

____________________

11 Exhibit “D,” ibid., pp. 792-794.

 12 Transcript of Stenographic Notes, January 18, 1993, pp. 2832; TSN,
July 16, 1993, pp. 17-23.
13 Exhibits “E,” “E-1” to “E-6”; RTC record, pp. 798-804.
14 Exhibit “R,” ibid., p. 908, vis-à-vis Exhibits “EE” & “FF.”

55

VOL. 294, AUGUST 7, 1998 55

Ayala Corporation vs. Ray Burton Development Corp.

National Building Code) and Metro Manila Commission

Zoning Ordinance No. 81-01; (c) violate the constitutional
provision on equal protection of the laws, since the
restrictions are imposed without regard to reasonable
standards 15
or classifications; and (d) are contracts of
adhesion since AYALA would not sell the lots unless the
buyers agree to the deed restrictions. The complaint also
alleged that AYALA is in estoppel from enforcing the
restrictions in question when it allowed the construction of
other high-rise buildings in Makati City beyond the height
and floor area limits. AYALA was further charged with
unsound business practice.
Early in June of 1990, RBDC made another set of
building plans for “Trafalgar Plaza” and submitted the
same for approval, this time to 16the Building Official of the
Makati City Engineer’s Office, not to AYALA. In these
plans, the building was to be 26-storey high, or a height of
98.60 meters, with a total gross floor area of 28,600 square
meters. After having obtained the necessary building
permits from the City Engineer’s Office, RBDC began to
construct “Trafalgar Plaza” in accordance with these new
plans.
On July 11, 1990, the majority of the lot owners in the
Makati City area, including the Salcedo and Legaspi
Village areas, in a general assembly of the Makati
Commercial Estate Association, Inc. (MACEA), approved
the revision of the Deed Restrictions, which revision was
embodied in 17
the “Consolidated and Revised Deed
Restrictions” (Revised Deed Restrictions) wherein direct
height restrictions were abolished in favor of floor area
limits computed on the basis of “floor area ratios” (FARs).
In the case of buildings devoted solely to office use in
Salcedo Village—such as the “Trafalgar Plaza”—the same
could have a maximum gross floor area of only eight (8)
times the lot area. Thus, under the Revised Deed
Restrictions, “Trafalgar Plaza” could be built with a
maximum gross floor area of only 9,504 square meters
(1,188 sq. m.—the size of the
____________________

15 Petition, par. 15; Rollo, p. 47.

16 Exhibits “Z,” Z-1” to “Z-14.”
17 Exhibit “F,” RTC record, pp. 805-821.

56

56 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

subject lot—multiplied by 8). Even under the Revised Deed

Restrictions, Trafalgar would still exceed 19,065 square
meters of floor area on the basis of a FARs of 8:1. RBDC did
not vote for the approval of the Revised Deed Restrictions
and, therefore, it continued to be bound by the original
Deed Restrictions.
In the meantime, on August 18
22, 1990, the HLRB En
Banc rendered a decision (a) upholding the Deed
Restrictions; (b) absolving AYALA from the charge of
unsound business practice; and (c) dismissing HLRB Case
No. REM-A-0818. MADAI and RBDC separately appealed
the decision to the Office of the President, which appeal
was docketed as O.P. Case No. 4476.
While the appeal was pending before the Office of the
President, the September
19
21, 1990 issue of the Business
World magazine featured the “Trafalgar Plaza” as a
modern 27storey structure which will soon rise in Salcedo
Village, Makati City. Stunned by this 20
information, AYALA,
through counsel, then sent a letter to RBDC demanding
the latter to cease the construction of the building which
dimensions do not conform to the previous plans it earlier
approved.
21
RBDC, through counsel, replied with a series of
letters requesting for time to assess the merits of
AYALA’s demand.
For failing to heed AYALA’s bidding, RBDC was sued on
January 25, 1991 before the Regional Trial Court of Makati
City (Branch 148). AYALA’s complaint for Specific
Performance of Rescission, docketed as Civil Case No. 91-
220, prayed inter alia that judgment be rendered—

“x x x      x x x      x x x

b. Ordering the defendant to comply with its contractual

obligations and to remove or demolish the portions or
areas of the Trafalgar Tower/Plaza Building constructed
beyond or in excess of
____________________

18 RTC record, pp. 1342-1354.

19 Exhibit “G,” RTC record, pp. 822-823.
20 Exhibit “H,” ibid., pp. 824-825.
21 Exhibits “I” to “O,” ibid., pp. 826-839.

57

VOL. 294, AUGUST 7, 1998 57

Ayala Corporation vs. Ray Burton Development Corp.

the approved height as shown by building plans approved

by the plaintiff, including any other portion of the building
constructed not in accordance with the building plans and
specifications submitted to and approved by plaintiff.
c. Alternatively, in the event specific performance becomes
impossible:

i) Ordering the cancellation and rescission of the Deed of Sale

dated March 20, 1984 (Annex ‘A’ hereof) and ordering defendant
to return to plaintiff Lot 26, Block 2 of Salcedo Village;
ii) Ordering the cancellation of Transfer Certificate of Title No.
155384 (in the name of defendant) and directing the Makati
Register of Deeds to issue a new title over the Lot in the name of
plaintiff; and

d. Ordering defendant to pay plaintiff attorney’s fees in the

amount of P500,000.00, exemplary damages in22 the amount
of P5,000.00 and the costs of the instant suit.”

In its answer (with counterclaim) to the complaint, RBDC

denied having “actual or constructive notice of the Deed
Restrictions” imposed by AYALA on the subject lot. RBDC
alleged in essence that even if said deed restrictions exist,
the same are not economically viable and should not be
enforced because they constitute unreasonable restrictions
on its property rights and are, therefore, contrary to law,
morals, good customs, public order or public policy.
Moreover, RBDC claimed that the enforcement of the deed
restrictions has also been arbitrary or discriminatory since
AYALA has not made any action against a number of
violators of the deed restrictions.
Meantime, the appeal of MADAI in O.P. Case No. 44761
was considered resolved when it entered into a compromise
agreement with AYALA wherein the latter adopted and
acknowledged as 23
binding the Revised Deed Restrictions of
July 11, 1990. On the other hand, RBDC’s appeal was
dismissed
__________________

22 RTC record, pp. 17-18.

23 See Resolution, ibid., p. 1356.

58

58 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

in an Order dated February 13, 1992, for the reason that,

“insofar as the disposition of the appealed (HLRB) decision
is concerned, there is virtually no more actual controversy
on the subject of the ‘Deed Restrictions’ because the same
has been overridden by the ‘Revised (Deed) Restrictions’
which the appellee Ayala Corporation has in fact 24
acknowledged as binding and in full force and effect x x x.”
Accordingly, aside from dismissing RBDC’s appeal, the
Order of February 13, 1992 also “set aside” the appealed
HLRB decision. From this order, AYALA sought a
reconsideration or clarification, noting, inter alia, that
while the said order has ruled that AYALA can no longer
enforce the Deed Restrictions against RBDC, it does not
expressly state that RBDC is bound by the Revised Deed
Restrictions. Clarifying this matter, the Office of the 25
President issued a Resolution dated April 21, 1992,
modifying the February 13, 1992 order, ruling: (1) that
RBDC is bound by the original Deed Restrictions, but it has
the option to accept and be bound by the Revised Deed
Restrictions in lieu of the former; and (2) that the “HLRB
decision dated 22 August 1990, to the extent that it
absolved AYALA from the charge of unsound business
practice, subject of the basic complaint, is affirmed.” This
time RBDC moved for a reconsideration of the April 21,
1992 Order, but the motion26
was denied in a Resolution
dated27 October 15, 1993. Another Resolution of March 21,
1994 was issued denying with finality RBDC’s second
motion for reconsideration. 28
AYALA then filed a Manifestation in Civil Case No.
91220, informing the trial court of the pertinent
rulings/resolutions in the proceedings before the HLRB and
the Office of the President, which rulings, AYALA
suggested, amount to res judicata on the issue of the
validity and enforceability of the Deed Restrictions
involved in the said civil case.

__________________
 24 RTC record, p. 1357.
25 Ibid., pp. 1358-1361.
26 Ibid., pp. 1362-1366.
27 Ibid., pp. 1339-1341.
28 Ibid., pp. 1336-1338.

59

VOL. 294, AUGUST 7, 1998 59

Ayala Corporation vs. Ray Burton Development Corp.

After trial on the merits, the trial court rendered a Decision

on April 28, 1994 in favor of RBDC, the dispositive portion
of which reads:

“WHEREFORE, premises considered, judgment is hereby

rendered in favor of the defendant and against the plaintiff, and
as a consequence:

1. The instant case is hereby dismissed;

2. The motion/application for the annotation of the lis
pendens is hereby DENIED;
3. The motion/application to hold defendant in continuing
contempt is hereby also DENIED;
4. No damages is awarded to any of the parties;
5. Plaintiff is hereby ordered to pay the defendant
P30,000.00 for and as attorney’s fees and litigation
expenses;

“With costs against

29
plaintiff.
“SO ORDERED.”

The trial court’s decision is based on its findings that: (1)

RBDC had neither actual nor constructive notice of the
42meter height limitation of the building to be constructed
on the subject lot; (2) even if the Deed Restrictions did
exist, AYALA is estopped from enforcing the same against
RBDC by reason of the former’s failure to enforce said
restrictions against other violators in the same area; (3) the
Deed Restrictions partake of the nature of a contract of
adhesion; (4) since the Trafalgar Plaza building is in accord
with the minimum requirements of P.D. No. 1096 (The
National Building Code), the Deed Restrictions may not be
allowed by RBDC; and (5) the rulings of the HLRB and the
Office of the President do not have binding effect in the
instant case.
Dissatisfied, AYALA appealed to the Court of Appeals
which affirmed the judgment of the trial court in a
30
 30
Decision dated February 27, 1996 in CA-G.R. CV No.
46488. AYALA’s

__________________

29 Rollo, pp. 197-232.

30 Ibid., pp. 9-25.

60

60 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

motion for31 reconsideration was likewise denied in the

Resolution of October 7, 1996.
AYALA now interposes the present petition for review
on certiorari, citing several errors in the decision of the
Court of Appeals, some of which involve questions of fact.
The resolution of factual issues raised in the petition
would certainly call for a review of the Court of Appeals’
findings of fact. As a rule, the reexamination of the
evidence proffered by the contending parties during the
trial of the case is not a function that this Court normally
undertakes inasmuch as the findings of fact of the Court of
Appeals are generally
32
binding and conclusive on the
Supreme Court. The jurisdiction of this Court in a petition
for review on certiorari under Rule 45 of the Revised Rules
33
of Court is limited to reviewing only errors of law. A
reevaluation of factual issues by this Court is justified
when the findings of fact complained of are devoid of
support by the evidence on record, or when 34 the assailed
judgment is based on misapprehension of facts.
The present petition has shown that certain relevant
facts were overlooked by the Court of Appeals, which facts,
if properly appreciated, would justify a different conclusion
from the one reached in the assailed decision.
The principal error raised here by petitioner AYALA
pertains to the Court of Appeals’ finding that RBDC did not
have actual or constructive notice of the 42-meter height
restriction, since what was annotated on its (RBDC’s) title
is the erroneous 23-meter height limit which, according to
AYALA’s 35 own witness, Jose Cuaresma, was not applicable
to RBDC. Thus, the Court of Appeals concluded, RBDC
“has the right to

__________________

31 Rollo, p. 27.
 32 De la Serna vs. Court of Appeals, 233 SCRA 325, 329 [1994]; New
Testament Church of God vs. Court of Appeals, 246 SCRA 266, 270 [1995].
33 Section 1, Rule 45, Revised Rules of Court.
34 New Testament Church of God vs. Court of Appeals, supra.
35 CA Decision, p. 14; Rollo, p. 22.

61

VOL. 294, AUGUST 7, 1998 61

Ayala Corporation vs. Ray Burton Development Corp.

enjoy the subject property as36 if no restrictions and

conditions were imposed thereon.”
The above finding and conclusion of the Court of
Appeals, AYALA submits, are based on “surmises and
conjectures” which are “contrary37
to the evidence on record
and (RBDC’s) own admissions.”
There is merit in AYALA’s submission.
The erroneous annotation of the 23-meter height
restriction in RBDC’s title was explained by Jose
Cuaresma, AYALA’s Assistant Manager for Marketing and
Sales. Cuaresma testified that when the deed of sale
between PALMCREST and RBDC was submitted to the
Register of Deeds of Makati and the corresponding title
was issued in the name of RBDC, the Register of Deeds
annotated the wrong height limit in Entry No. 2432 on the
said title, but he emphasized
38
that the incorrect annotation
does not apply to RBDC.
Jose Cuaresma further clarified that the correct height 39
restriction imposed by AYALA on RBDC was 42 meters.
This height ceiling, he said, is based on the40 deed of
restrictions attached as annex to the deed of sale, and the
same has been uniformly imposed on the transferees
beginning from the41
original deed of sale between AYALA
and KARAMFIL.
This clarificatory statement of Jose Cuaresma should
have cautioned the Court of Appeals from making the
unfounded and sweeping conclusion that RBDC can do
anything it wants on the subject property “as if no
restrictions and conditions were imposed thereon,” on the
mistaken premise that RBDC was unaware of the correct
42-meter height limit. It must be stressed that Cuaresma’s
testimony is bolstered by documen-

________________

36 Ibid. (Emphasis supplied).

37 Petition, p. 31; Rollo, p. 64.
 38 Transcript of Stenographic Notes, January 18, 1993, pp. 5354.
39 Ibid., p. 52.
40 Ibid., pp. 53-54.
41 Ibid., pp. 51-54.

62

62 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

tary evidence and circumstances of the case which would

show that RBDC was put on notice about the 42-meter
height restriction.
The record reveals that the subject Lot 26 was first sold
by AYALA to KARAMFIL under a deed of sale (Exhibit
“A”) dated March 20, 1984 and duly notarized by Notary
Public Silverio Aquino. Attached to the deed of sale is an
appendix of special conditions/restrictions (deed
restrictions), which provides, inter alia, that the building to
be constructed on the lot must have a total height of not
more than 42 meters, and that any building plans and
specifications of the proposed structures must have the
approval of AYALA. The deed restrictions were
incorporated in the memorandum of encumbrances at the
reverse side of the title of the lot as Entry No. 2432. When
the lot was sold by KARAMFIL to PALMCREST, the deed
of sale (Exhibit “B”) on this transaction bears an
annotation of AYALA’s conformity to the transfer, with the
condition that the approval was “subject to the compliance
by the vendee of the special conditions of sale on the
reverse side of the deed of sale dated March 20, 1984, per
Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of
Notary Public Silverio F. Aquino” (Exhibit “B-1”).
PALMCREST later resold the lot to RBDC by virtue of a
deed of sale (Exhibit “C”), to which AYALA’s approval was
also annotated therein (Exhibit “C-1”), but with the same
explicit inscription that RBDC, as vendee, must comply
with the special deed restrictions appended to the AYALA-
KARAMFIL deed of sale of March 20, 1984. All these three
(3) deeds of sale and the accompanying special deed
restrictions imposing a 42-meter height limit, were duly
registered with the Register of Deeds. Thus, RBDC cannot
profess ignorance of the 42-meter height restriction and
other special conditions of the sale.
Verily, the deed restrictions are integral parts of the
PALMCREST-RBDC deed of sale, considering that
AYALA’s required conformity to the transfer, as annotated
therein, was conditioned upon RBDC’s compliance of the
deed restrictions. Consequently, as a matter of contractual
obligation, RBDC is
63

VOL. 294, AUGUST 7, 1998 63

Ayala Corporation vs. Ray Burton Development Corp.

bound to observe the deed restrictions which impose a

building height of not more than 42 meters.
Moreover, RBDC was fully aware that it was bound by
the 42-meter height limit. This is shown by the fact that,
pursuant to the special conditions/restrictions of the sale, it
submitted to AYALA, for approval, building plans for a 5-
storey structure with a height of 25.85 meters. Certainly,
RBDC would not have submitted such plans had it truly
believed that it was restricted by a lower 23-meter height
ceiling, in the same manner that RBDC did not seek
AYALA’s approval when it later made another set of
building plans for the 26storey “Trafalgar Plaza,” knowing
that the same would be disapproved for exceeding the 42-
meter height restriction. The fact that RBDC was later
issued a building permit from the Makati City Engineer’s
Office for the construction of the “Trafalgar Plaza” is not a
valid justification to disregard the stipulated contractual
restriction of 42 meters.
Another error which AYALA claims to have been
committed by the Court of Appeals is the latter’s finding
that AYALA, under the principle of estoppel, is now barred
from enforcing the deed restrictions because it had
supposedly failed to act against other violators of the said
restrictions. AYALA argues that such finding is baseless
and is contrary to the Civil Code provisions on estoppel and
applicable jurisprudence.
We agree with the petitioner.
In support of its finding that estoppel operates against
AYALA, the Court of Appeals merely cited its decision
dated November 17, 1993, in CA-G.R. SP No. 29157,
entitled RosaDiana Realty and Development Corporation,
Petitioner vs. Land Registration Authority and Ayala
Corporation, Respondents, and reiterated its findings
therein, to wit:

“Also, Ayala is barred from enforcing the deed of restrictions in

question, pursuant to the doctrines of waiver and estoppel. Under
the terms of the deed of sale, the vendee Sy Ka Kieng assumed
faithful compliance with the special conditions of sale and with
the Salcedo Village deed of restrictions. One of the conditions was
that a

64

64 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

building would be constructed within one year. Ayala did nothing

to enforce the terms of the contract. In fact, it even agreed to the
sale of the lot by Sy Ka Kieng in favor of the petitioner realty in
1989, or thirteen (13) years later. We, therefore, see no justifiable
reason for Ayala to attempt to enforce the terms of the conditions
of the sale against the petitioner. It should now be estopped from
enforcing the said conditions through any means.
x x x      x x x      x x x
“Even assuming that petitioner RDR violated the floor area
and height restrictions, it is markedly significant that Ayala
disregarded the fact that it had previously allowed and tolerated
similar and repeated violations of the same restrictive covenants
by property owners which it now seeks to enforce against the
herein petitioner. Some examples of existing buildings in Salcedo
Village that greatly exceeded the gross floor area (5 times lot
area) and height (42 meters) limitations are (Rollo, p. 32):

(1) Pacific Star (Nauru Center Building—29 stories and 112.5

meters high)
(2) Sagittarius Building—16 stories
(3) Shell House Building—14 stories
(4) Eurovilla Building—15 stories
(5) LPL Plaza Building—18 stories
42
(6) LPL Tower Building—24 stories.”

An examination of the decision in the said Rosa Diana case

reveals that the sole issue raised before the appellate court
was the propriety of the lis pendens annotation. However,
the appellate court went beyond the sole issue and made
factual findings bereft of any basis in the record to
inappropriately rule that AYALA is in estoppel and has
waived its right to enforce the subject restrictions. Such
ruling was immaterial to the resolution of the issue of the
propriety of the annotation of the lis pendens. The finding
of estoppel was thus improper and made in excess of
jurisdiction.
Moreover, the decision in CA-G.R. SP No. 29157 is not
binding on the parties herein, simply because, except for
AYALA, RBDC is not a party in that case. Section 49, Rule
39 of
___________________

42 CA Decision in CA-G.R. SP No. 29157, pp. 6-8; Rollo, p. 21.

65

VOL. 294, AUGUST 7, 1998 65

Ayala Corporation vs. Ray Burton Development Corp.

the Revised Rules of Court (now Sec. 47, Rule 39 of the

1997 Rules of Civil Procedure) provides in part:

Sec. 49. Effect of judgments.—The effect of a judgment or final

order rendered by a court or judge of the Philippines, having
jurisdiction to pronounce the judgment or order, may be as
follows:

(a) x x x;
(b) In other cases the judgment or order is, with respect to the
matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive
between the parties and their successors in interest by title
subsequent to the commencement of action or special
proceeding, litigating for the same thing and under the
same title and in the same capacity; (emphasis supplied)
(c) x x x.”

The clear mandate of the above-quoted rule is that a final

judgment or order of a court is conclusive and binding only
upon the parties to a case and their successors in interest.
Both the present case and the Rosa-Diana case, however,
involve different parties who are not litigating “for the
same thing” nor “under the same title and in the same
capacity.” Hence, the Rosa-Diana decision cannot have
binding effect against either party to the instant case.
In any case, AYALA asserts that a few gross violators of
the deed43restrictions “have been, or are being, proceeded
against.” AYALA admits, though, that there are other
violations of the restrictions but these are of a minor
nature which do not detract from substantial compliance by
the lot owners of the deed restrictions. AYALA submits
that minor violations are insufficient to warrant judicial
action, thus:

“As a rule, non-objection to trivial breaches of a restrictive

covenant does not result in loss of the right to enforce the
covenant by injunction, and acquiescence in violations of a
restrictive covenant which are immaterial and do not affect or
injure one will not preclude him from restraining violations
thereof which would so operate as to

_________________

43 Petition, p. 29; Rollo, p. 62.

66

66 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

cause him to be damaged.” (20 Am. Jur. 2d. Sec. 271, p. 835;
italics provided).
“Occasional and temporary violations by lot owners of a
covenant forbidding the use of property for mercantile purposes are
not sufficient as a matter of law to warrant a finding of a waiver
or abandonment of the right to enforce the restriction. A waiver in
favor of one person and for a limited purpose is not44a waiver as to
all persons generally.” (id., at 836; italics provided).

It is the sole prerogative and discretion of AYALA to

initiate any action against violators of the deed restrictions.
This Court cannot interfere with the exercise of such
prerogative/discretion.
How AYALA could be considered in estoppel as found by
both the trial court and the Court of Appeals, was not duly
established. “Under the doctrine of estoppel, an admission
or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the
person relying thereon. A party may not go back on his own
acts and representations45
to the prejudice of the other party
who relied upon them.” Here, we find no admission, false
representation or concealment that can be attributed to
AYALA relied upon by RBDC.
What is clear from the record, however, is that RBDC
was the party guilty of misrepresentation and/or
concealment when it resorted to the fraudulent scheme of
submitting two (2) sets of building plans, one (1) set
conformed to the Deed Restrictions,
46
which was submitted
to and approved by AYALA, while another set violated the
said restrictions, and which it presented to the Makati City
Building Official in order47 to secure from the latter the
necessary building permit. It is noteworthy that after the
submission of the second

___________________

44 Ibid., p. 28; Rollo, p. 61.

 45 Laureano Investment & Development Corp. vs. Court of Appeals, 272
SCRA 253, 263 [1997].
46 Exhibits “E,” “E-1” to “E-6.”
47 Exhibits “Z,” “Z-1” to “Z-14.”

67

VOL. 294, AUGUST 7, 1998 67

Ayala Corporation vs. Ray Burton Development Corp.

set of building plans to the Building Official, RBDC

continued to make representations to AYALA that it would
build the five-storey building in accordance with the first
set of plans approved by AYALA, obviously for the purpose
of securing the release of the title of the subject lot to
obtain bank funding. AYALA relied on RBDC’s false
representations and released the said title. Hence, RBDC
was in bad faith.
AYALA further assigns as error the finding of the
respondent court that, “while the Deed of Sale to Ray
Burton (RBDC) did not appear to be a contract of
adhesion,” however, “the subject 48Deed Restrictions
annotated therein appeared to be one.” The only basis for
such finding is that the Deed Restrictions and Special
Conditions were “pre-printed” and “prepared” by AYALA,
and that RBDC’s participation thereof was “only to sign49 the
Deed of Sale with the said restrictions and conditions.”
The respondent court erred in ruling that the Deed
Restrictions is a contract of adhesion.
A contract of adhesion in itself is not an invalid
agreement. This type of contract is as binding as a
mutually executed transaction. We have emphatically 50
ruled in the case of Ong Yiu vs. Court of Appeals, et al.
that “contracts of adhesion wherein one party imposes a
ready-made form of contract on the other x x x are
contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he
adheres he gives his consent.” This ruling was reiterated in
Philippine American 51
General Insurance Co., Inc. vs. Sweet
Lines, Inc., et al., wherein we further declared through
Justice Florenz Regalado that “not even an allegation of
ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for
ensuring full comprehension of the provisions of a contract
of carriage (a

________________
 48 CA Decision, p. 14; Rollo, p. 22.
49 Ibid., p. 15; Rollo, p. 23.
50 91 SCRA 223, 231 [1979].
51 212 SCRA 194, 212-213 [1992].

68

68 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

contract of adhesion) devolves not on the carrier but on the

owner, shipper, or consignee as the case may be.”
Contracts of adhesion, however, stand out from other
contracts (which are bilaterally drafted by the parties) in
that the former is accorded inordinate vigilance and
scrutiny by the courts in order to shield the unwary from
deceptive schemes contained in ready-made covenants. As
stated by this Court, speaking through Justice J.B.L.
Reyes, in52Qua Chee Gan vs. Law Union and Rock Insurance
Co., Ltd.:

“The courts cannot ignore that nowadays, monopolies, cartels and

concentration of capital, endowed with overwhelming economic
power, manage to impose upon parties dealing with them
cunningly prepared ‘agreements’ that the weaker party may not
change one whit, his participation in the ‘agreement’ being
reduced to the alternative to ‘take it or leave it’ labeled since
Raymond Saleilles ‘contracts by adherence’ (contracts d’ adhesion)
in contrast to those entered into by parties bargaining on an equal
footing. Such contracts (of which policies of insurance and
international bill of lading are prime examples) obviously call for
greater strictness and vigilance on the part of the courts of justice
with a view to protecting the weaker party from abuses and 53
imposition, and prevent their becoming traps for the unwary.”
(Emphasis supplied)

The stringent treatment towards contracts of adhesion

which the courts are enjoined to observe is in pursuance of
the mandate in Article 24 of the New Civil Code that “(i)n
all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender
age or other handicap, the courts must be vigilant for his
protection.”
Thus, the validity and/or enforceability of a contract of
adhesion will have to be determined by the peculiar
circum-
__________________

52 98 Phil. 95 [1955].
53 Cited also in Fieldmen’s Insurance Co., Inc. vs. Vda. de Songco, et al.,
25 SCRA 70, 75 [1968], and in Sweet Lines, Inc. vs. Teves, et al., 83 SCRA
361, 369 [1978].

69

VOL. 294, AUGUST 7, 1998 69

Ayala Corporation vs. Ray Burton Development Corp.

stances obtaining in each case and the situation of the

parties concerned.
In the instant case, the stipulations in the Deed
Restrictions and Special Conditions are plain and
unambiguous which leave no room for interpretation.
Moreover, there was even no attempt on the part of RBDC
to prove that, in the execution of the Deed of Sale on the
subject lot, it was a weaker or a disadvantaged party on
account of its moral dependence, ignorance, mental
weakness or other handicap. On the contrary, as testified
to by Edwin Ngo, President of RBDC, the latter54is a realty
firm and has been engaged in 55realty business, and that
he, a businessman for 30 years, represented RBDC in the
negotiations and in the
56
eventual purchase of the subject lot
from PALMCREST. Edwin Ngo’s testimony proves that
RBDC was not an unwary party in the subject transaction.
Instead, Edwin Ngo has portrayed RBDC as a
knowledgeable realty firm experienced in real estate
business.
In sum, there is more than ample evidence on record
pinpointing RBDC’s violation of the applicable FAR
restrictions in the Consolidated and Revised Deed
Restrictions (CRDRs) when it constructed the 27-storey
Trafalgar Plaza. The prayer of petitioner is that judgment
be rendered as follows:

“a. Ordering Ray Burton to comply with its contractual

obligations in the construction of ‘Trafalgar Plaza’ by
removing or demolishing the portions of areas thereof
constructed beyond or in excess of the approved height, as
shown by the building plans submitted to, and approved
by, Ayala, including any other portion of the building
constructed not in accordance with the said building
plans;
b. Alternatively, in the event specific performance becomes
impossible:
 (1) ordering the cancellation and rescission of the March 20,
1984 ‘Deed of Sale’ and all subsequent ‘Deeds of

___________________

54 TSN, July 16, 1993, p. 24.

55 Ibid., pp. 23-24.
56 Ibid., pp. 6-8.

70

70 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

Sale’ executed in favor of the original vendee’s successors-

ininterest and ordering Ray Burton to return to Ayala Lot
26, Lot 2 of Salcedo Village;
(2) ordering the cancellation of Transfer Certificate of Title
No. 155384 (in the name of defendant) and directing the
Office of the Register of Deeds of Makati to issue a new
title over the lot in the name of Ayala; and
57
x x x      x x x      x x x.”

However, the record reveals that construction of Trafalgar

Plaza began in 1990, and a certificate of completion thereof
was issued by the Makati City Engineer’s
58
Office per ocular
inspection on November 7, 1996. Apparently Trafalgar
Plaza has been fully built, and we assume, is now fully
tenanted. The alternative prayers of petitioner under the
CRDRs, i.e., the demolition of excessively built space or to
permanently restrict the use thereof, are no longer feasible.
Thus, we perforce instead rule that RBDC may only be
held alternatively liable for substitute performance of its
obligations—the payment of damages. In this regard, we
note that the CRDRs impose development charges on
constructions which exceed the estimated Gross Limits
permitted under the original Deed Restrictions but which
are within the limits of the CRDRs.
In this regard, we quote hereunder pertinent portions of
The Revised Deed Restrictions, to wit:

“3. DEVELOPMENT CHARGE

For any building construction within the Gross Floor Area
limits defined under Paragraphs C-2.1 to C-2.4 above, but which
will result in a Gross Floor Area exceeding certain standards
defined in Paragraphs C-3.1-C below, the OWNER shall pay
MACEA, prior to the start of construction of any new building or
any expansion of an existing building, a DEVELOPMENT
CHARGE as a contribution to a trust fund to be administered by
MACEA. This trust fund shall be

__________________

57 Petition, pp. 59-60; Rollo, pp. 92-93.

58 See p. 299, rollo.

71

VOL. 294, AUGUST 7, 1998 71

Ayala Corporation vs. Ray Burton Development Corp.

used to improve facilities and utilities in the Makati Central

Business District.
3.1 The amount of the development charge that shall be due
from the OWNER shall be computed as follows:
DEVELOPMENT CHARGE = A x (B - C - D) where:

A— is equal to the Area Assessment which shall be set at Five

Hundred Pesos (P500.00) until December 31, 1990. Each
January 1st thereafter, such amount shall increase by ten
percent (10%) over the Area Assessment charged in the
immediately preceding year; provided that, beginning
1995 and at the end of every successive five-year period
thereafter, the increase in the Area Assessment shall be
reviewed and adjusted by the VENDOR to correspond to
the accumulated increase in the construction cost index
during the immediately preceding five years as based on
the weighted average of wholesale price and wage indices
of the National Census and Statistics Office and the
Bureau of Labor Statistics.
B— is equal to the total Gross Floor Area of the completed or
expanded building in square meters.
C— is equal to the estimated Gross Floor Area permitted
under the original deed restrictions, derived by
multiplying the lot area by the59
effective original FAR
shown below for each location:”

Accordingly, in accordance with the unique, peculiar

circumstance of the case at hand, we hold that the said
development charges are a fair measure of compensatory
damages which RBDC has caused in terms of creating a
disproportionate additional burden on the facilities of the
Makati Central Business District.
As discussed above, Ray Burton Development
Corporation acted in bad faith in constructing Trafalgar
Plaza in excess of the applicable restrictions upon a double
submission of plans and exercising deceit upon both
AYALA and the Makati Engineer’s Office, and thus by way
of example and correction, should be held liable to pay
AYALA exemplary damages in the sum of P2,500,000.00.

_______________

59 Rollo, p. 173.

72

72 SUPREME COURT REPORTS ANNOTATED

Ayala Corporation vs. Ray Burton Development Corp.

Finally, we find the complaint to be well-grounded, thus it

is AYALA which is entitled to an award of attorney’s fees,
and while it prays for the amount of P500,000.00, we award
the amount of P250,000.00 which we find to be reasonable
under the circumstances.
WHEREFORE, premises considered, the assailed
Decision of the Court of Appeals dated February 27, 1996,
in CA-G.R. CV No. 46488, and its Resolution dated October
7, 1996 are hereby REVERSED and SET ASIDE, and in
lieu thereof, judgment is hereby rendered finding that:

(1) The Deed Restrictions are valid and petitioner

AYALA is not estopped from enforcing them against
lot owners who have not yet adopted the
Consolidated and Revised Deed Restrictions;
(2) Having admitted that the Consolidated and Revised
Deed Restrictions are the applicable Deed
Restrictions to Ray Burton Development
Corporation’s Trafalgar Plaza, RBDC should be,
and is, bound by the same;
(3) Considering that Ray Burton Development
Corporation’s Trafalgar Plaza exceeds the floor area
limits of the Deed Restrictions, RBDC is hereby
ordered to pay development charges as computed
under the provisions of the Consolidated and
Revised Deed Restrictions currently in force.
(4) Ray Burton Development Corporation is further
ordered to pay AYALA exemplary damages in the
amount of P2,500,000.00, attorney’s fees in the
amount of P250,000.00, and the costs of suit.

SO ORDERED.
           Regalado (Chairman), Melo, Puno and Mendoza,
JJ., concur.

Judgment reversed and set aside.

Notes.—Contracts of adhesion are not invalid per se.

(Philippine Airlines, Inc. vs. Court of Appeals, 255 SCRA 48
[1996])

73

VOL. 294, AUGUST 7, 1998 73

Ligon vs. Court of Appeals

The Supreme Court has construed obscurities and

ambiguities in the restrictive provisions of contracts of
adhesion strictly albeit not unreasonably against the
drafter thereof when justified in light of the operative facts
and surrounding circumstances. (Philippine Airlines, Inc.
vs. Court of Appeals, 255 SCRA 48 [1996])
A contract of adhesion is defined as one in which one of
the parties imposes a ready-made form of contract, which
the other party may accept or reject, but which the latter
cannot modify. (Philippine Commercial International Bank
vs. Court of Appeals, 255 SCRA 299 [1996])

——o0o——

© Copyright 2019 Central Book Supply, Inc. All rights reserved.