Ayala Corporation vs.

Rosa-Diana Realty
346 SCRA 633
December 1, 2000

FACTS:
This is a petition on the decision of the Court of Appeals affirming the lower court ruling in favor
of Rosa-Diana Realty for the construction of “The Peak”.
In April 20, 1976, appellant-petitioner entered into a transaction with Manuel Sy and Sy Ka Kieng
where former sold a lot in Salcedo Village in Makati. The deed of sale had some encumbrances contained
in the Special Conditions of Sale (SCS) and Deed of Restrictions (DR), which should be followed by the
vendees. The stipulations in the SCS are:

1. A building proposal must be submitted to Ayala which must be in accordance with the DR;
2. The construction of the building must be completed on or before 1979, and;
3. That there will be no resale of the lot.

The DR specified the limits in height and floor area of the building to be constructed. However, Sy
and Kieng, failed to construct a building but nonetheless with the permission of Ayala, the vendees sold
the said lot to the respondent, Rosa-Diana Realty. Respondent company agreed to abide by the SCS and
the DR stipulations. Prior to the construction, Rosa-Diana submitted a building plan to Ayala complying
with the DR but it also passed a different building plan to the building administrator of Makati, which did
not comply with the stipulations in the DR. During the construction of “The Peak”, Ayala filed a case
praying that: 1) Rosa-Diana, be compelled to comply with the DR and construct the building in accordance
with the building plan submitted to Ayala; 2) on the alternative, the rescission of the deed of sale.

ISSUE: Whether or not Rosa-Diana committed a breach of contract.

RULING:
Yes. The Supreme Court ruled that Rosa-Diana committed a breach of contract by submitting two
sets of building plans – with one set which fully conformed to the Deed Restrictions and another in gross
violation of the same. This should have cautioned the trial court to conclude that respondent Rosa-Diana
was under the erroneous impression that the Deed Restrictions were no longer enforceable and that it
never intended to be bound by the Undertaking signed by its President and Chairman. The Supreme Court
further reiterated that contractual obligations have the force of law between parties and unless the same
is contrary to public policy, morals, and good customs, they must be complied by the parties in good faith.
In view of the foregoing, the assailed decision of the Court of Appeals are reversed and set aside.