Facts:

The case involves Zacarias Delos Santos as the petitioner and Consuelo B. Papa and Maria C. Mateo as the respondents. The events leading to this case began when the petitioner was leasing a property owned by respondent Papa. On May 2, 1994, Papa verbally offered to sell the property to Delos Santos, who declined the offer due to financial constraints. Subsequently, Papa sold the property to Mateo, who had the ownership transferred to her name through Transfer Certificate of Title No. 216221 issued by the Registry of Deeds of Manila. During this period, Delos Santos failed to pay his rent from May to August 1994, prompting Mateo to file ejectment proceedings against him in the Metropolitan Trial Court (MeTC) of Manila, which was docketed as Civil Case No. 146030. The MeTC ruled in favor of Mateo, ordering Delos Santos's ejectment. Delos Santos appealed this decision to the Court of Appeals (CA), which upheld the MeTC's ruling.

While the ejectment case was ongoing, on...

Facts:

Background of the Case

• The petitioner, Zacarias Delos Santos, was leasing a property owned by respondent Consuelo Papa.
• On May 2, 1994, Papa verbally offered to sell the property to the petitioner, but he declined due to lack of funds.
• Papa subsequently sold the property to Maria C. Mateo, who became the new owner, and the property was transferred to her name under Transfer Certificate of Title (TCT) No. 216221.

Ejectment Proceedings

• The petitioner failed to pay rent from May to August 1994, prompting Mateo to file an ejectment case against him before the Metropolitan Trial Court (MeTC) of Manila.
• The MeTC ruled in favor of Mateo, ordering the petitioner's ejectment. The Court of Appeals (CA) upheld this decision on appeal.

Annulment of Sale Case

• On October 17, 1994, while the ejectment case was pending, the petitioner filed a case for "Annulment of Deed of Sale and Cancellation of Title with Injunction" before the Regional Trial Court (RTC), Branch 38, Manila.
• The RTC dismissed the petitioner's complaint due to insufficient evidence, as the petitioner and his counsel failed to appear during a crucial hearing, resulting in the striking off of a key witness's testimony.
• The RTC proceeded to hear the respondents' counterclaim, awarding them moral and exemplary damages, attorney's fees, and litigation expenses.

Appeal to the Court of Appeals

• The CA affirmed the RTC's decision but reduced the amounts awarded for moral and exemplary damages.
• The CA ruled that the petitioner was not a bona fide lessee under Presidential Decree (P.D.) No. 1517 and P.D. No. 2016, as he had failed to pay rent during the relevant period.
• The CA also found that the petitioner acted in bad faith by filing the complaint despite knowing he had no right of first refusal.

Issue:

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Ruling:

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Ratio:

1. Right of First Refusal under P.D. No. 1517:

   • The petitioner had a legitimate claim to the right of first refusal under P.D. No. 1517, as he had been a tenant for over 10 years and had built his home on the property.
   • The failure to pay rent did not automatically render him a non-legitimate tenant, as the law requires more than mere non-payment to disqualify a tenant.

2. Moral and Exemplary Damages:

   • Moral damages are only recoverable if there is clear evidence of injury, a culpable act, and a causal connection between the act and the injury.
   • The respondents failed to prove that the petitioner acted in bad faith or with malicious intent in filing the complaint.
   • Exemplary damages cannot be awarded unless moral damages are first established, which was not the case here.

3. Attorney's Fees and Litigation Expenses:

   • Attorney's fees are not automatically awarded to the prevailing party and require factual, legal, and equitable justification.
   • None of the circumstances justifying an award of attorney's fees under Article 2208 of the Civil Code were present in this case.

Conclusion:

The Supreme Court reversed the CA's decision, deleting the awards of moral and exemplary damages, attorney's fees, and litigation expenses. The Court emphasized that the petitioner's complaint, while ultimately unsuccessful, was not entirely baseless and did not warrant the imposition of damages.