Multi-Realty Development v. Makati Tuscany Condominium
REITERATIONFacts
The Antecedents: Multi-Realty Development Corporation (Multi-Realty) developed the Makati Tuscany Condominium Building. It executed a Master Deed and Declaration of Restrictions (Master Deed) which defined common areas and accessories to units. Section 7(d) of the Master Deed designated parking areas other than those assigned to units as common areas. Multi-Realty sold 26 of the 98 unassigned parking slots to unit buyers between 1977 and 1986, and MATUSCO (Makati Tuscany Condominium Corporation) did not object. In 1989, MATUSCO, through its counsel, asserted ownership over the remaining unassigned parking slots, claiming they were common areas. Procedural History: Multi-Realty filed a complaint for Damages and/or Reformation of Instrument against MATUSCO, alleging that the Master Deed did not reflect the true intention of the parties regarding the ownership of the 98 unassigned parking slots due to mistake. The Regional Trial Court (RTC) dismissed the complaint and MATUSCO's counterclaim. The Court of Appeals (CA) dismissed Multi-Realty's appeal on the ground of prescription, ruling that the action accrued in 1975 upon the execution of the Master Deed. The CA denied Multi-Realty's motion for reconsideration. The Petition: Multi-Realty filed a petition for review on certiorari, arguing that the CA erred in dismissing its appeal on the ground of prescription, as this issue was not raised by the parties in the lower courts, and that its action for reformation had not prescribed because the prescriptive period began in 1989 when MATUSCO repudiated their true agreement.
Issue(s)
Whether the Court of Appeals erred in dismissing petitioner's appeal on the ground of prescription when the issue was not raised by the parties in the lower courts. Whether petitioner's action for reformation of the Master Deed had already prescribed when it was filed in 1990.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals is SET ASIDE. The Court of Appeals is directed to resolve petitioner's appeal with reasonable dispatch.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in dismissing the appeal on the ground of prescription: The Supreme Court ruled that the Court of Appeals erred in dismissing Multi-Realty's appeal solely on the ground of prescription, as this issue was not alleged as an affirmative defense by MATUSCO in its Answer, nor was it raised throughout the proceedings in the RTC. The trial court did not base its ruling on prescription, and MATUSCO did not assign it as an error in its brief to the CA. Settled jurisprudence dictates that no questions will be entertained on appeal unless they have been raised below, as basic considerations of due process impel this rule. While the CA has broad discretionary power to consider matters not assigned as errors if necessary for a just decision, it was inappropriate in this case to delve into prescription motu proprio when the parties had not raised it. The appellate court should have resolved the appeal on its merits instead of dismissing it on a ground not raised by the parties. On the issue of whether petitioner's action had already prescribed: The Supreme Court ruled that the CA erred in holding that Multi-Realty's action had already prescribed. Prescription is a statute of repose meant to suppress fraudulent and stale claims. Article 1144 of the Civil Code states that an action upon a written contract must be brought within ten (10) years from the time the right of action accrues. Article 1150 provides that the time for prescription is counted from the day the action may be brought, which is when all the facts constituting the cause of action have occurred. A cause of action for reformation accrues when the mistake is discovered or ought to have been discovered, or when the other party repudiates the true agreement. In this case, Multi-Realty had no doubt about its ownership of the unassigned parking lots and even sold some of them without objection from MATUSCO. MATUSCO only asserted ownership in 1989, at which point Multi-Realty discovered the error in the Master Deed. Thus, Multi-Realty's cause of action for reformation accrued in 1989, and its complaint filed in 1990 was within the ten-year prescriptive period. The Court distinguished this case from Rosello-Bentir v. Hon. Leanda, where the breach of the contract was evident.
Main Doctrine
The prescriptive period for an action for reformation of an instrument begins to run not from the date of execution of the instrument, but from the time the party seeking reformation discovers the mistake or when the other party repudiates the true agreement, giving rise to the cause of action.