G.R. No. 134284, December 1, 2000.
AYALA CORPORATION, petitioner, vs. ROSA-DIANA REALTY AND DEVELOPMENT CORPORATION, respondent.

FACTS

Petitioner Ayala Corporation sold a parcel of land in Makati to Manuel Sy and Sy Ka Kieng. The Deed of Sale contained Special Conditions of Sale, requiring the construction of a building within a specified period, and Deed Restrictions, limiting the building’s gross floor area and height until 2025. The buyers violated the Special Conditions by failing to construct. Nevertheless, with Ayala’s approval, they sold the lot to respondent Rosa-Diana Realty in 1989. Rosa-Diana executed an Undertaking to comply with the Deed Restrictions and submitted building plans for a seven-storey condominium (“The Peak”) conforming to the restrictions to obtain the title release from Ayala. Subsequently, Rosa-Diana submitted a different set of plans to the Makati building official for a 38-storey condominium grossly violating the height and floor area restrictions and proceeded with its construction.
Ayala filed an action for specific performance and/or rescission with the RTC to compel compliance. The trial court sustained Rosa-Diana’s Demurrer to Evidence, ruling Ayala was guilty of abandonment and estoppel for not enforcing the restrictions against the original buyers and for discriminatory enforcement against other properties in Salcedo Village. The Court of Appeals affirmed, citing the “law of the case” from a prior related proceeding (involving a notice of lis pendens) which stated Ayala was barred from enforcing the Deed Restrictions.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s dismissal via Demurrer to Evidence based on the doctrines of abandonment, estoppel, and the “law of the case.”

RULING

Yes. The Supreme Court reversed the Court of Appeals. The legal logic is twofold. First, the principle of “law of the case” was misapplied. This doctrine applies only to rulings on questions of law expressly or necessarily decided in a prior appeal of the same case. The prior CA decision cited (C.A. G.R. S.P. No. 29157, affirmed in G.R. No. 112774) was a separate special civil action for certiorari concerning the propriety of annotating a notice of lis pendens. Its ruling—that the action was in personam and a notice of lis pendens was improper—was a procedural determination on a provisional remedy. It did not constitute a final adjudication on the substantive merits of Ayala’s right to enforce the Deed Restrictions. Therefore, it could not bind the subsequent trial on the main action for specific performance/rescission or serve as a bar under the “law of the case” doctrine.
Second, the trial court’s grounds for dismissal via demurrer were erroneous. A demurrer challenges the sufficiency of the plaintiff’s evidence. Ayala’s evidence established the existence of the valid Deed Restrictions annotated on the title, Rosa-Diana’s Undertaking to comply, and its subsequent blatant violation by constructing a vastly larger building. The alleged discriminatory enforcement or abandonment against prior owners or other lot buyers does not negate Rosa-Diana’s own contractual obligations, which it expressly assumed. Estoppel or abandonment requires clear, consistent, and unequivocal conduct leading another to believe a right has been relinquished. Ayala’s act of approving the sale to Rosa-Diana subject to the restrictions and securing a new Undertaking was an act of asserting, not waiving, its rights. The demurrer was thus improperly granted. The Supreme Court rendered judgment for Ayala, ordering Rosa-Diana to pay development charges, exemplary damages, and attorney’s fees.