G.R. No. L-21677 - De Santos vs. City of Manila

On October 1, 1958, a contract of exchange was executed between the City of Manila and Arellano University, Inc.
The exchange was in pursuance of Resolution No. 442 of the Municipal Board of Manila (adopted on August 15, 1958 and approved by the City Mayor on August 22, 1958).
The City exchanged five parcels of its land (Lots 1, 2, 3, 4 and 5, Psu-167195; aggregate area of approximately 2,458.3 square meters) for three parcels of Arellano University’s land (Lots 4-A, 9-A, and 10-A, Psd-53347; aggregate area of approximately 2,171.4 square meters).
The exchanged lands were significant for the development of the Azcarraga (now Claro M. Recto) Extension.

The lot in controversy is Lot No. 1 of Psu-167195, measuring 221.50 square meters.
It forms part of the partially dried bed of the Estero de San Miguel or Sampaloc and is adjacent to lands of Arellano University, Inc.
Plaintiff Antonio G. de Santos (petitioning on behalf of his predecessor-in-interest, Enrique C. Lopez) filed a suit on March 25, 1959 against the City of Manila and Arellano University, Inc. with the following claims:

To declare the contract of exchange null and void as it concerns Lot No. 1.
Alternatively, if the contract is validated, to declare Lot No. 1 subject to his right of redemption within 30 days from notice of the exchange.
If Lot No. 1 does not belong to the City, to enjoin the City from disposing of the property in a manner that would preclude his right of preemption.

The defendant University counterclaimed P5,000.00 for legal services to defend against the suit.
The defendant City of Manila maintained ownership over Lot No. 1 and argued that de Santos held no preferential or better right than Arellano University for acquisition through preemption, legal redemption, sale, or exchange.

Prior to the contract, on May 14, 1957, the City notified the University regarding the need for approximately 2,400 square meters for the Azcarraga extension, with an offer of exchange based on the area of adjoining esteros.
Subsequent correspondence and negotiations ensued, leading to the formulation of Resolution No. 442 and ultimately to the contract of exchange.
Separately, Enrique C. Lopez had proposed an exchange concerning his property (Lot 4, Block 2646, Manila Cadastre) with City property adjoining his lot, citing the impending expropriation for street widening. This negotiation was later processed through official channels, involving appraisal and recommendations by the City Engineer and the City Mayor.

It held that de Santos had no right to preempt or redeem Lot No. 1.
It dismissed the complaint to annul the exchange, stating that de Santos was not a proper party in interest.
It ordered de Santos to pay P5,000.00 as attorneys’ fees to Arellano University.

The Court of Appeals, on July 11, 1963, affirmed the trial court’s decision, which eventually led to the present petition for review by certiorari.

Whether petitioner-appellant Antonio G. de Santos had a right of preemption or redemption over Lot No. 1 of Psu-167195 as an adjacent owner under Article 1622 of the Civil Code.

The issue hinges on whether the lot is “so small and so situated that a major portion thereof cannot be used for any practical purpose” and whether it was “bought merely for speculation” or is “about to be re-sold.”
It must also be determined if de Santos, as a successor-in-interest of Enrique C. Lopez and through previous communications, acquired any legitimate claim.

Whether the award of P5,000.00 in attorney’s fees in favor of Arellano University is justified.

The petitioner contends that imposing attorney’s fees is unsound public policy and penalizes the right to litigate.
The issue requires evaluation of the discretion granted to the trial court under Paragraph 4 of Article 2208 of the Civil Code, particularly given the claim was determined to be unfounded.