Dolar vs. Barangay Lublub

An action that seeks a declaration of absolute ownership over previously donated property is necessarily an action to revoke the donation and must be brought within the prescriptive period — four years under Article 764 or, for onerous donations, ten years under Article 1144 — reckoned from the donee’s non‑compliance with the conditions. An automatic‑rescission clause in a deed of donation does not dispense with judicial determination when the donee denies or challenges the rescission; the court’s decision is then merely declaratory of a revocation already effected by the breach, not itself the revocatory act.

Edgardo D. Dolar and Serafin Jaranilla co‑owned a 4.6‑hectare parcel in Barangay Lublub, Dumangas, Iloilo. On September 16, 1981, they donated the entire property to the barangay, stipulating that it be developed into a public plaza, sports complex, public market, health centre, and similar facilities within five years, and that any conversion to other uses would automatically revoke the donation and revert ownership to the donors. The barangay took possession and over time various government and public‑utility structures were erected on the land. The donation was never registered. In 1989, after a TCT had been issued in his name, Dolar executed a second deed covering the same property with identical conditions. Subsequently, the mother lots were included in a list of tax‑delinquent properties and sold at public auction; Dolar was the winning bidder. He then sought to oust the barangay and other occupants, claiming the donation had become ineffective.

• The 1981 Donation and its Conditions: Petitioner Edgardo D. Dolar and Serafin Jaranilla co‑owned a 4.6‑hectare parcel (Lot 1, Pcs‑06‑000744) in Barangay Lublub, Dumangas, Iloilo. On September 16, 1981, they executed a deed of donation in favour of the barangay, accepted by then barangay captain Jose Militar. The deed imposed three principal conditions: (a) the area was to be used for constructing a public plaza, sports complex, public market, health centres and similar facilities, and designated “Don Venancio Dolar Plaza”; (b) construction and development were to be initiated and completed within five years, failing which the donation would have no force and ownership would revert to the donors; and (c) any conversion to uses other than those stipulated would likewise revoke the donation and cause reversion.

• Possession and Improvements: The barangay immediately took possession. Over time, a PLDT office, a Dumangas Water District building, a PNP Mobile Force station, and a courtroom of RTC‑Iloilo Branch 68 were established on the property, along with paved roads and other infrastructure costing an estimated ₱25 million. The barangay claimed these projects substantially complied with the conditions and were for the benefit of its residents.

• Issuance of Title and 1989 Deed: The donation was never registered. On April 12, 1989, petitioner obtained TCT No. T‑129837 over the donated area. In June 1989, he executed another deed of donation over the same property to the same barangay, containing identical conditions.

• Tax Delinquency and Auction: The mother lots were later included in a list of tax‑delinquent properties for public auction. Petitioner was the highest bidder and was awarded the property.

• Petitioner’s Complaint (Civil Case No. 98‑033): On May 6, 1998, Dolar sued for quieting of title and recovery of possession. He alleged that the barangay failed to build the stipulated structures within five years, allowed the property to be used for other purposes, and failed to declare it for taxation, resulting in the auction sale. He claimed the donation had automatically lost force and that ownership had reverted to him.

• Barangay’s Defence and Counter‑Suit: The barangay denied non‑compliance and asserted that the structures built were for public use and satisfied the conditions. It argued that the action for revocation had prescribed under Article 764 (four years) or Article 1144 (ten years) and that the donation, having been accepted with authority from the barangay council, was valid. Subsequently, as renamed Barangay P.D. Monfort North, it filed Civil Case No. 00‑140 for cancellation of petitioner’s title, reconveyance, and nullity of the tax delinquency proceedings, alleging collusion between petitioner and municipal officials.

• RTC Disposition: The trial court found that petitioner’s action was one to revoke the donation and that it had prescribed, whether the four‑year period under Article 764 or the ten‑year period under Article 1144 was applied, because the right of action accrued in 1986 and the complaint was filed only in 1998.

• Nature of Action: Petitioner maintained that Civil Case No. 98‑033 was an action to quiet title under Article 476 of the Civil Code, not an action to revoke a donation, and that an action to quiet title is generally imprescriptible.

• Automatic Revocation: Petitioner argued that the deed’s automatic‑rescission/reversion clause, upheld in De Luna v. Abrigo and Roman Catholic Archbishop of Manila v. Court of Appeals, operated to revoke the donation and revert ownership to him by operation of law upon the barangay’s non‑compliance, without need of judicial intervention.

• Validity of the Donation: Petitioner contended that the donation was void under Article 745 because the accepting barangay captain lacked specific authority from the Sangguniang Barangay as required by B.P. Blg. 337 and the Local Government Code.

• Reckoning Point for Prescription: Petitioner asserted that the 1989 deed of donation should be used as the point of reference for determining prescription, rendering his 1998 complaint timely.

• Imperscriptibility Against Registered Land: Petitioner argued that prescription does not run against registered land, and thus the barangay’s claim of acquisitive prescription could not defeat his Torrens title.

• Prescription: Respondent barangay countered that whatever right petitioner had to revoke the donation had already prescribed under Article 764 (four years from non‑compliance) or, if the donation was deemed onerous, under Article 1144 (ten years from accrual), as the five‑year development period lapsed in 1986 and the complaint was filed only in 1998.

• Substantial Compliance: Respondent argued that the construction of a telephone exchange, water district office, police station, courtroom, and other infrastructure substantially fulfilled the donation’s conditions and that such projects were for the benefit of its residents.

• Ratification of Acceptance: Respondent alleged that barangay captain Jose Militar accepted the donation with authority from the barangay council, and in any event the Sanggunian’s decades‑long inaction and enjoyment of benefits constituted ratification.

• Ownership by Donation, Not Prescription Alone: Respondent anchored its claim of ownership primarily on the deed of donation, not solely on acquisitive prescription.

• Nature of Action and Prescription: Whether the complaint in Civil Case No. 98‑033 was an action to quiet title or an action to revoke a donation, and whether it had prescribed.

• Validity and Efficacy of the Donation: Whether the donation was void for defective acceptance, and whether the automatic‑rescission clause rendered the donation revoked without need of a judicial declaration.

• Acquisitive Prescription: Whether respondent barangay could acquire ownership by acquisitive prescription as against petitioner’s Torrens title.

• Nature of Action and Prescription: The complaint’s prayer for a declaration of petitioner’s absolute ownership necessarily included the revocation of the deed of donation; a judgment of absolute ownership was legally impossible unless the donation was first extinguished. Hence, the action was in substance one for revocation. An action to quiet title under Article 476 was not available because the barangay’s claim rested on a donation that had not yet been effectively revoked; thus there was no cloud on petitioner’s title removable by that remedy. The prescriptive period for revoking an onerous donation is governed by the general rules on contracts — ten years under Article 1144 from accrual of the right. The right of action accrued in September 1986, when the five‑year development period expired. The complaint filed in May 1998 fell outside even this ten‑year window. Even under the shorter four‑year period of Article 764, the action was time‑barred.

• Validity and Efficacy of the Donation: The challenge to the validity of the acceptance was not properly raised by petitioner, and in any event, the Sanggunian’s prolonged silence and the barangay’s enjoyment of the benefits of the donation for over two decades effectively ratified whatever defect may have attended the acceptance. The automatic‑rescission clause was valid, but where the donee denies or challenges the propriety of the rescission, the matter must be submitted to judicial determination. The court’s role, in such a case, is not to effect the revocation — which occurs upon the breach of the resolutory condition — but to determine whether the rescission was proper, with its decision being merely declaratory. The 1989 deed of donation was inconsequential because petitioner had already relinquished ownership in 1981; nemo dat qui non habet. The lack of registration of the donation did not affect its validity and binding effect between the parties.

• Acquisitive Prescription: The barangay’s claim of ownership was founded primarily on the deed of donation, not on adverse possession alone, rendering unnecessary a definitive ruling on whether prescription could defeat a registered title. The pending Civil Case No. 00‑140, which sought cancellation of petitioner’s title on the ground of its dubious acquisition, was not prejudged.

• Automatic Rescission Clause in Donation — A stipulation providing for automatic revocation and reversion of the donated property upon breach of condition is valid under Article 1306 of the Civil Code. When the donee does not contest the violation, the donation is deemed revoked by operation of the resolutory condition without judicial intervention. However, when the donee denies or challenges the propriety of the rescission, judicial intervention is necessary — not to effect the revocation, but to determine whether the rescission was proper. The resulting decision is merely declaratory of a revocation that has already taken place by force of the stipulation.

• Prescription of Action to Revoke Onerous Donation — Donations with an onerous cause are governed by the rules on contracts (Article 733). The action to revoke an onerous donation for non‑compliance with conditions prescribes in ten years under Article 1144(1), counted from the time the right of action accrues. Where the donation sets a specific period for compliance, the right to revoke accrues upon expiration of that period.

• Action to Quiet Title vis‑à‑vis Unrevoked Donation — An action to quiet title under Article 476 is not the proper remedy where the defendant’s claim of ownership arises from a valid donation that has not yet been effectively revoked. The existence of a subsisting deed of donation does not constitute a cloud on the donor’s title removable by an action to quiet title; the donation must first be set aside.

• Ratification of Ultra Vires Acceptance by Local Government Unit — The absence of formal authority of a local chief executive to accept a donation may be cured by the local legislative body’s prolonged inaction and the community’s acceptance of the benefits of the donation, which operate as ratification.

• Non‑Registration of Donation Between Parties — Registration of a deed of donation with the Registry of Deeds is not necessary for its validity and efficacy as between the donor and the donee and their assigns.

• “When a deed of donation … expressly provides for automatic revocation and reversion of the property donated, the rules on contract and the general rules on prescription should apply, and not Article 764 of the Civil Code. … [T]hat stipulation … providing for automatic revocation of the deed of donation, without prior judicial action for that purpose, is valid subject to the determination of the propriety of the rescission sought. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act.”

• “[A] declaration of petitioner’s absolute ownership appears legally possible only when the deed of donation is contextually declared peremptorily revoked.”

• “[T]he remedy afforded in Article 476 of the Civil Code is unavailing until the donation shall have first been revoked in due course under Article 764 or Article 1144 of the Code.”

• “Petitioner’s long silence vis‑à‑vis the kind of development structures that Barangay Lublub had decided to put up … cannot but be taken as an indicia of his satisfaction with respondent barangay’s choice of public service projects.”

• De Luna v. Abrigo, 181 SCRA 150 [1990] — Followed; established that an automatic‑reversion clause in a deed of donation is a valid resolutory condition and that prescription for actions to revoke onerous donations is governed by the general rules on contracts (ten years under Article 1144).

• Roman Catholic Archbishop of Manila v. Court of Appeals, 198 SCRA 300 [1991] — Followed and clarified; held that where the deed provides for automatic revocation, judicial intervention is necessary only to determine the propriety of the rescission when contested, and the court’s ruling is merely declaratory.

• University of the Philippines v. de los Angeles, 35 SCRA 102 [1970] — Cited for the principle that only the final award of the court can conclusively settle whether a contractual resolution is proper.

• Mamadsual v. Moson, 190 SCRA 82 [1990] — Cited for the exception to the general rule on imprescriptibility of actions to quiet title: where the plaintiff is not in actual possession of the land, the action may prescribe.

• Pajarillo v. Intermediate Appellate Court, 176 SCRA 340 [1989] — Cited for the rule that registration of a deed of donation is not required for its validity and binding effect as between the donor and the donee.

• Garcia v. Court of Appeals, 130 SCRA 435 [1984] — Cited for the maxim nemo dat qui non habet.

• Article 764, Civil Code — The action to revoke a donation for non‑compliance with conditions prescribes after four years from non‑compliance. Applied to bar petitioner’s suit; the Court found that even under this shorter period, the action had prescribed.

• Article 733, Civil Code — Donations with an onerous cause are governed by the rules on contracts. Applied to characterise the donation as onerous and thus subject to the ten‑year prescription under Article 1144.

• Article 1144(1), Civil Code — Actions upon a written contract must be brought within ten years from the time the right of action accrues. Applied as the applicable prescriptive period for the revocation of the onerous donation; the period was found to have lapsed.

• Article 1306, Civil Code — The parties may establish stipulations not contrary to law, morals, good customs, public order, or public policy. Invoked to uphold the validity of the automatic‑rescission clause.

• Article 745, Civil Code — The donee must accept the donation personally or through an authorised person with a special power; otherwise, the donation shall be void. Raised by petitioner but found inapplicable because any defect was deemed ratified.

• Article 476, Civil Code — An action to quiet title may be brought to remove a cloud on title created by an instrument apparently valid but in truth invalid, ineffective, or unenforceable. Held inapplicable until the donation is first revoked.

• Section 88, Batas Pambansa Blg. 337 (Local Government Code of 1983) and Sections 91 and 389, R.A. 7160 (Local Government Code of 1991) — These provisions require Sanggunian authorisation for the punong barangay to enter into contracts. Raised in relation to the acceptance’s validity; deemed satisfied through subsequent ratification.

Artemio V. Panganiban (Chairman, Third Division), Angelina Sandoval‑Gutierrez, Renato C. Corona, Conchita Carpio‑Morales concurred. Chief Justice Hilario G. Davide Jr. certified the decision.