De Luna v Abrigro

G.R. No. L-57455, January 18, 1990

Civil Code, Art. 1306 – The contracting parties may establish such stipulations, clauses, terms and conditions NOT contrary to law, morals, good customs, public order or public policy.

Facts:

Prudencio de Luna donated a portion of lot in favor to the Luzonian University Foundation, Inc, as embodied in a Deed of Donation Intervivos.

The donation was subject to certain terms and conditions and provided for the automatic reversion to the donor of the donated property in case of violation or non-compliance, couched in the following terms:

xxx xxx xxx.

11. That violation of any of the conditions herein provided shall cause the automatic reversion of the donated area to the donor, his heirs, assigns and representatives, without the need of executing any other document for that purpose and without obligation whatever on the part of the DONOR.

The foundation failed to comply the conditions of the donation so that Prudencio revived the said donation in favor of the foundation subject to terms and conditions, again with automatic reversion clause in case of violation thereof.

After the death of Prudencio, his heirs filed a complaint for the cancellation of the donation and the reversion of the donated land to them, alleging that the terms and conditions of the donation were not complied with by the foundation.

In its answer, the foundation claimed of partial and substantial compliance with the conditions of the donation and that was granted an indefinite extension of time.

The trial court dismissed the complaint by reason of prescription.

The petitioners brought the instant petition for review, contending that onerous donations are governed by the rules on contracts and not by the rules on donations, so that the automatic reversion of the donated area to the donor in case of violation of any of the conditions is effective without the need of executing any other document for that purpose as stipulated in the donation.

Issue:

WoN the stipulation of automatic reversion in the Deed of Donation is valid and binding upon the foundation who voluntarily consented thereto.

Held:

          Yes, the Supreme Court holds that stipulation not being contrary to law, morals, good customs, public order or public policy, is valid and binding upon the foundation.

Under Article 1306 of the New Civil Code, the parties to a contract have the right "to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy."

          In the case at bar, the validity of the stipulation in the contract providing for the automatic reversion of the donated property to the donor upon non-compliance cannot be doubted. It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach, without need of going to court.

Thus, the petition is GRANTED. Respondent judge is ordered to conduct a trial on the merits to determine the propriety of the revocation of the subject donation.