G.R. No. 133705 . March 31, 2005
C-J YULO & SONS, INC., Petitioner, vs. ROMAN CATHOLIC BISHOP OF SAN PABLO, INC., Respondent.

FACTS

On September 24, 1977, petitioner C-J Yulo & Sons, Inc. donated a parcel of land to respondent Roman Catholic Bishop of San Pablo, Inc. The Deed of Donation stipulated that the land would be used to establish and maintain a home for the aged and infirm. A critical condition stated that, except with the prior written consent of the donor, the donee shall not use the land except for the stated purpose, nor sell or dispose of it. A breach would cause the land to revert to the donor. The respondent’s title was issued accordingly.
From 1980 to 1990, the respondent, without securing the donor’s prior written consent, leased portions of the donated property on three separate occasions to third parties. The stated purpose was to generate funds for constructing the perimeter fence and the nucleus building for the home for the aged, named “Casa dela Merced.” In 1990, citing these unauthorized leases as a material breach, the petitioner revoked the donation and demanded reconveyance.

ISSUE

Whether the donee’s unauthorized leasing of the donated property constitutes a substantial breach warranting the revocation of the donation.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals, ruling that the unauthorized leases did not constitute a substantial breach justifying revocation. The legal logic centers on the interpretation of the donation’s conditions and the principle against forfeiture. The Court emphasized that conditions in a donation must be interpreted to avoid the forfeiture of rights, as the law favors the certainty of ownership.
The leases were executed to raise funds specifically for the fulfillment of the donation’s primary objective: constructing and maintaining the home for the aged. The respondent did not divert the property to an alien purpose but used the leases as a means to finance the very charitable cause intended by the donor. Therefore, the breaches were not substantial or material. The condition requiring prior consent was deemed a collateral stipulation aimed at ensuring the primary purpose was achieved, not an absolute prohibition. A reasonable construction that upholds the donation’s spirit is preferred. Since the leases did not detract from the ultimate charitable goal, revocation was unwarranted. The Court also noted that a subsequent proposal by the donee to possibly exchange the land due to impending industrialization of the area was a prudent act to better achieve the donation’s purpose, not an abandonment of it.