G.R. No. 202947, December 09, 2015
ASB REALTY CORPORATION, PETITIONER, VS. ORTIGAS & COMPANY LIMITED PARTNERSHIP, RESPONDENT.

FACTS

On June 29, 1994, respondent Ortigas & Company Limited Partnership sold a parcel of land to Amethyst Pearl Corporation via a Deed of Sale containing restrictive covenants. These covenants, annotated on the title, required Amethyst to submit building plans within six months and to complete construction of a specified building within four years from December 31, 1991. On December 28, 1996, Amethyst assigned the property to its sole stockholder, petitioner ASB Realty Corporation, through a Deed of Assignment in Liquidation. The transfer was made subject to the annotated covenants.
Ortigas filed a complaint for specific performance against ASB on July 7, 2000, alleging multiple violations of the deed’s covenants, including failure to submit plans, failure to complete the required building, and the erection of non-conforming commercial structures. The Regional Trial Court dismissed the complaint, ruling Ortigas was guilty of laches for not suing Amethyst before the property’s assignment. The Court of Appeals reversed, ordering rescission of the original sale and reconveyance of the property to Ortigas upon reimbursement.

ISSUE

Whether the Court of Appeals erred in ordering the rescission of the deed of sale and the reconveyance of the property to Ortigas.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic centers on the nature of the annotated covenants and the inapplicability of laches. The covenants imposing obligations on the construction of a building are real or in rem obligations that run with the land. They are binding on all subsequent owners, including ASB, as they were duly annotated on the title. ASB, as assignee, stepped into the shoes of its predecessor, Amethyst, and was thus bound by the same obligations and susceptible to the same action for breach.
The defense of laches is unavailing. Laches requires a finding of negligence or omission to assert a right within a reasonable time. The prescriptive period for filing an action based on a written contract is ten years. Ortigas filed its complaint in 2000, well within the ten-year period from the 1994 deed. Furthermore, the breach was a continuing one, as the obligated building was never constructed, and the improper commercial structures persisted. The right to seek rescission for breach of a contractual obligation annotated on the title is not extinguished by mere passage of time short of the prescriptive period, especially against a transferee who took the property with full knowledge of the restrictions.