G.R. No. 203883 & G.R. No. 203930, November 10, 2015
HOMEOWNERS ASSOCIATION OF TALAYAN VILLAGE INC., PETITIONER, VS. J.M. TUASON & CO., INC., TALAYAN HOLDINGS, INC., QUEZON CITY MAYOR AND EQUITABLE BANKING CORPORATION (NOW BANCO DE ORO BANKING CORPORATION), RESPONDENTS. [G.R. NO. 203930] J.M. TUASON & CO., AND TALAYAN HOLDINGS, INC., PETITIONER, VS. HOMEOWNERS ASSOCIATION OF TALAYAN VILLAGE, INC. AND QUEZON CITY MAYOR, RESPONDENTS.

FACTS

The subject is a 22,012 sqm parcel, Block 494 of Talayan Village, part of Sta. Mesa Heights Subdivision in Quezon City, registered under TCT No. RT-110168 in the name of J.M. Tuason & Co., Inc. (J.M. Tuason). In the 1950s, J.M. Tuason, through Gregorio Araneta, Inc., sold subdivision lots per Subdivision Plan PSD-52256, which designated Block 503 as the park/open space. Block 494 remained undivided in the plan. An undated certification from Araneta listed Block 494 as one of the subdivision’s open spaces. In 1962, Quezon City Ordinance No. 5095 required subdivision owners to turn over open spaces equivalent to 6% of the total area to the city. Ostensibly in compliance, J.M. Tuason, through Araneta, executed a Deed of Donation in favor of the city government covering open spaces, including Block 494. This deed, submitted in 1969, was not notarized, and there is no record showing the city government accepted it. Block 494 became the site of a barangay hall, multi-purpose hall, sports courts, and a playground developed at the expense of the Homeowners Association of Talayan Village, Inc. (HATVI) and the Quezon City government. In 1996, due to J.M. Tuason’s failure to pay realty taxes, Block 494 was sold at a tax delinquency sale, and J.M. Tuason was the highest bidder. J.M. Tuason then sold Block 494 to Talayan Holdings, Inc. (THI), which subdivided it and obtained titles. THI later mortgaged the lots to Equitable Banking Corporation. HATVI filed a complaint for annulment of sale, cancellation of titles and mortgage, acceptance of donation, and damages, arguing Block 494 was an open space beyond commerce. The Regional Trial Court dismissed the complaint, ruling Block 494 was not an open space, the donation was void due to non-acceptance, and Equitable Bank was a mortgagee in good faith. The Court of Appeals affirmed with modification, holding that J.M. Tuason and THI, having acted in bad faith by allowing amenities to be built on the land, are accountable to HATVI and Quezon City for damages under Article 447 of the Civil Code, to be determined in separate proceedings.

ISSUE

The core issues involve whether Block 494 was a reserved open space, whether estoppel applies against J.M. Tuason and THI, whether Block 494 remained private property due to non-acceptance of the donation, and the accountability of the parties for the improvements built on the land.

RULING

The Supreme Court denied the petitions and affirmed the Court of Appeals Decision. The Court ruled that at the time of the subdivision’s development, the applicable law was the Land Registration Act (Act No. 496), which did not prescribe a minimum area for open spaces. The Quezon City ordinances requiring open spaces were complied with by J.M. Tuason, as the total open spaces segregated exceeded the required 6%. The Deed of Donation was void because, under Articles 749 and 745 of the Civil Code, a donation of an immovable requires a public document and acceptance by the donee during the donor’s lifetime; here, the donation was not accepted by the city government. Therefore, ownership of Block 494 remained with J.M. Tuason. The tax delinquency sale further confirmed its status as private property. The principle of estoppel does not apply because the elements of estoppel were not present; J.M. Tuason’s act of listing Block 494 as an open space in an undated certification did not constitute a clear and unequivocal representation intended to induce reliance. However, J.M. Tuason and THI are deemed builders in bad faith under Article 447 of the Civil Code. They knowingly allowed HATVI and the city government to introduce permanent improvements on Block 494 without objection, leading the homeowners to believe the lot was for public use. Consequently, as owners in bad faith, they are liable to pay the value of the facilities built on the land and for damages. The determination of the actual value and extent of damages must be made in a separate proceeding. The Court also upheld that Equitable Bank was a mortgagee in good faith, as it relied on the clean titles of THI.