G.R. No. 7380 - People vs Rafael

Respondent Gaw Ching, a long-time lessee of a house and lot in Binondo, Manila, sued petitioners Angelina Malabanan, Leonida Senolos, et al. in two consolidated cases connected with the sale of the said property.
Civil Case No. R-81-416 sought annulment of the sale, injunction against demolition of the building on the land, and damages.
Civil Case No. R-82-6798 demanded damages from petitioner Senolos for causing the demolition.

Gaw Ching leased the property from Mr. Jabit since 1951; after Jabit’s death, Malabanan (Jabit’s daughter) continued the lease at a higher rent.
Lease was verbal, rentals paid monthly, initially P700 then increased to P1,000.
On April 27, 1980, Malabanan offered to sell the property at P5,000.00 per square meter; Gaw Ching found price prohibitive.
Malabanan repeated the offer by letter on May 13, 1980, and October 2, 1980, threatening to sell to others if Gaw Ching did not agree.
Gaw Ching consulted his counsel, Atty. Sugay, and neither accepted the original nor the reduced offer of P4,000 per square meter.

On November 3, 1980, Malabanan informed Gaw Ching the property was sold to Leonida Senolos.
Gaw Ching requested documentation but was not furnished copies of the Deed of Sale or Transfer Certificate of Title (TCT) until later discovery.
The Deed of Sale was dated August 23, 1979, and registered December 9, 1980.
Malabanan refused to accept June 1980 rent; Gaw Ching deposited payments in a bank.

Gaw Ching admitted he was not a Filipino citizen at the time of the initial offers to sell (April and May 1980, and October 2, 1980).
He became a Filipino citizen only on October 7, 1980, but did not inform Malabanan.

A City Engineer issued a demolition order against the building due to condemnation (July 29, 1981).
Despite notice and demands to vacate, Gaw Ching refused to leave.
On November 16, 1981, with police present, Senolos’s laborers commenced demolition despite prior stop orders.
Gaw Ching claimed damage from loss of property and personal injury during demolition.
MPWH ordered demolition stopped following a complaint by Gaw Ching but order came late, during demolition final stages.

Trial court (Aug 10, 1984) upheld the validity of sale between Malabanan and Senolos, rejecting Gaw Ching’s claim of preemptive right under PD No. 1517 and related laws, since land was outside declared Urban Land Reform Zone.
Trial court ruled Gaw Ching had ample opportunity to exercise preemptive right but declined.
Appellate Court reversed (Jan 31, 1986) and annulled the sale, holding it was vitiated by fraud and bad faith causing damage to Gaw Ching.
Appellate Court awarded Gaw Ching P350,000.00 for moral, exemplary, and actual damages, plus attorneys’ fees, mainly for demolition and bad faith.
Appellate Court’s majority found the sale to Senolos preceded the offer to Gaw Ching, and demolition was unwarranted and invalid since tenants still occupied.

Petitioners assailed the annulment of the deed of sale and damage award.
They argued Gaw Ching lacked legal standing to annul the contract, lacked preemptive rights, and demolition was lawful.

Whether or not respondent Gaw Ching, as a lessee and a stranger to the contract of sale between petitioners Malabanan and Senolos, had the legal standing and right to annul said contract.
Whether Gaw Ching had a legal preemptive right to purchase the property under PD No. 1517 and related laws.
Whether the contract of sale between Malabanan and Senolos was valid and free from fraud, deceit, or bad faith.
Whether the demolition of the building was lawful and whether petitioners are liable for damages for demolition and alleged misconduct during the demolition.
Whether the appellate court erred in reversing the trial court’s decision and awarding damages to Gaw Ching.