Case Summary (G.R. No. 154366)
Procedural History
The Regional Trial Court (RTC), Branch 8, Cebu, rendered judgment on April 25, 1997 in Civil Case No. CEB-10104 in favor of petitioners (rescinding DBP’s deed of sale to respondents To Chip, Yap and Balila and ordering DBP to execute a deed of sale to petitioners). The Court of Appeals (CA) initially affirmed the RTC in a decision promulgated February 14, 2001. Respondents To Chip, Yap and Balila filed a motion for reconsideration with the CA more than six months after receipt of that decision; the CA admitted the late motion on February 5, 2002 and, by an Amended Decision dated July 5, 2002, reversed the RTC and dismissed petitioners’ complaint. Petitioners then filed the present Rule 45 petition to the Supreme Court, which considered both procedural and substantive issues.
Factual Background
Rudy and Elizabeth Robles mortgaged a parcel in Tabunoc, Talisay, Cebu to DBP (loan P500,000) on June 2, 1981. Robles leased a portion (the subject commercial unit) to Cebu Bionic under an October 28, 1981 lease containing, among other terms, a clause giving the lessee a first option to buy and to match offers from outside parties. DBP foreclosed and became the owner by foreclosure sale on February 6, 1987; a final deed of sale issued October 13, 1988. On June 18, 1987 DBP sent a letter to petitioners notifying DBP’s acquisition and advising petitioners that, if they wished to continue leasing, they should execute a new lease at DBP with stated salient conditions and that failure to sign within 30 days would be construed as lack of interest and would require vacatur. Petitioners’ counsel replied (July 7, 1987) with a counter-proposal; no written lease with DBP was executed. DBP offered the property for sale under a negotiated-sale 15-day acceptance period that closed 12:00 noon December 3, 1990. Petitioners submitted a letter-offer on the morning of December 3, 1990 with a manager’s check for 10% of the offered price; DBP later rejected that submission as insufficient. Respondents To Chip, Yap and Balila submitted a cash offer December 17, 1990 and completed the purchase December 28, 1990. Petitioners received demand letters to vacate in January–February 1991, made a lump-sum rental payment March 22, 1991, and filed this action on April 10, 1991 seeking rescission of the deed of sale, specific performance, cancellation of the respondents’ deed, damages and a preliminary injunction.
Issues Presented to the Supreme Court
Preliminary: (1) Validity of the petition’s verification and certification of non-forum shopping signed by only one petitioner; (2) Whether only questions of law are properly raised in the Rule 45 petition. Principal substantive issues summarized by petitioners included whether the CA erred in admitting the late motion for reconsideration; whether a lease existed between petitioners and DBP continuing the Robles lease; whether any continuing lease included a right of first refusal; whether Article 1670 applies; whether respondents were bound by any right of first refusal; and whether the CA erred in reversing its earlier judgment.
RTC Findings and Ruling
The RTC found that DBP continued the Robles lease by accepting petitioners’ payments and by acting in a way that revived the lease’s terms, including the right of first option to buy. The RTC concluded DBP violated petitioners’ right of first refusal, rescinded the deed of sale of December 28, 1990 between DBP and respondents To Chip, Yap and Balila, and ordered DBP to execute a deed of sale to petitioners upon their payment of the consideration.
Court of Appeals Decisions and Reconsideration
The CA initially affirmed the RTC on February 14, 2001. Respondents To Chip, Yap and Balila filed a motion for reconsideration more than six months after receipt of the CA’s decision; the CA admitted the late motion on February 5, 2002 in the interest of substantial justice and, after reevaluation, issued an Amended Decision on July 5, 2002 reversing the RTC. In the Amended Decision the CA held DBP had effectively terminated the Robles lease by its June 18, 1987 letter, petitioners failed to execute the new lease required by DBP within the stipulated period, no new contract was perfected, and Article 1670’s implied lease doctrine did not revive a right of first refusal as to outside purchasers. Accordingly the CA dismissed petitioners’ claims.
Supreme Court: Admissibility of the Late Motion for Reconsideration
The Supreme Court recognized that, as a general rule, failure to file a motion for reconsideration within the reglementary period renders an appellate decision final. Nonetheless, invoking the Court’s established discretion to relax procedural rules to serve substantial justice (as discussed in Barnes v. Padilla and other authorities), the Court excused respondents’ late filing. The Court found that property rights were at stake, the merits warranted review to settle competing claims of ownership/preferred purchase rights, and other equitable considerations weighed in favor of admitting the late motion; accordingly the CA’s reconsideration and amended judgment were properly entertained on equitable grounds.
Supreme Court: Existence of a Contract of Lease Between Petitioners and DBP
Applying contract principles (Articles 1305, 1315 and 1319: meeting of minds and perfection by consent) and the three-stage view of contract formation (negotiation, perfection, consummation), the Court held no new lease was perfected between DBP and petitioners. DBP’s June 18, 1987 letter invited petitioners to execute a new lease with salient conditions and gave a 30-day period to act; petitioners’ July 7, 1987 correspondence was a counter-offer and the parties did not converge on agreed terms nor execute a written contract within the period. The Court rejected the RTC’s finding that DBP “opted to continue” the Robles lease; rather, DBP’s letter constituted a written notice terminating the Robles lease unless petitioners executed the new lease. Because the Robles lease was month-to-month and expressly required written notice to terminate, the June 18, 1987 letter qualified as that notice. The petitioners’ subsequent lump-sum rental payment (March 22, 1991) and DBP’s prior acceptance of some rentals di
...continue readingCase Syllabus (G.R. No. 154366)
Procedural Posture
- Petition for Review on Certiorari under Rule 45 of the Rules of Court filed in the Supreme Court (G.R. No. 154366) assailing: (a) Court of Appeals Resolution dated February 5, 2002 admitting respondents' Motion for Reconsideration despite being filed more than six months late; and (b) Court of Appeals Amended Decision dated July 5, 2002 reversing its earlier Decision of February 14, 2001 and dismissing petitioners' complaint.
- Underlying case: Civil Case No. CEB-10104 filed in the Regional Trial Court (RTC), Cebu, Branch 8, where the RTC rendered judgment in favor of petitioners on April 25, 1997.
- Timeline of appellate proceedings:
- RTC decision in favor of petitioners dated April 25, 1997; respondents filed notices of appeal.
- Court of Appeals Decision dated February 14, 2001 affirmed the RTC judgment.
- Court of Appeals admitted a late Motion for Reconsideration (Resolution dated February 5, 2002) and on July 5, 2002 issued an Amended Decision reversing the February 14, 2001 judgment and dismissing petitioners' complaint.
- Petitioners filed the present Rule 45 petition in the Supreme Court; respondents opposed on procedural and substantive grounds.
Parties and Roles
- Petitioners:
- Cebu Bionic Builders Supply, Inc. (a domestic corporation engaged in construction and sale of hardware materials).
- Lydia Sia (representative of Cebu Bionic).
- Respondents:
- Development Bank of the Philippines (DBP) — mortgagee, foreclosed and later sold the subject properties.
- Jose To Chip, Patricio Yap, and Roger Balila — purchasers of the subject properties from DBP.
- Other relevant individuals:
- Rudy R. Robles, Jr. and Elizabeth R. Robles — original lessors and mortgagors who entered a mortgage with DBP.
- Bonifacio Sia — husband of Lydia Sia and president of Cebu Bionic; recipient of DBP correspondence regarding acquisition.
- Atty. Apolinar K. Panal, Jr. — DBP Acquired Asset in Charge who handled offers and communications regarding sale.
- Judy Garces — petitioners' representative who submitted the letter-offer on December 3, 1990.
Facts: Mortgage, Lease, and Improvements
- On June 2, 1981 the spouses Rudy R. Robles, Jr. and Elizabeth R. Robles executed a mortgage contract with DBP to secure a P500,000 loan, covering a parcel of land in Tabunoc, Talisay, Cebu (TCT No. T-47783) and the commercial building to be constructed thereon (later the State Theatre Building).
- On October 28, 1981 Rudy Robles executed a written contract of lease in favor of Cebu Bionic, represented by Lydia Sia, leasing a portion of the ground floor (one unit/store space) with salient terms:
- Monthly rental: P1,000 payable in advance within the first five days of each month.
- Term: starts November 1, 1981 and terminates on the last day of each month thereafter; automatic month-to-month renewal unless proper written notice is sent (15 days after receipt of notice).
- Clause 9: If lessor decides to sell during term or immediately after expiration, lessee has the first option to buy and shall match outside offers.
- The lease contract between Robles and Cebu Bionic was not registered with the Registry of Deeds of Cebu.
Facts: Foreclosure, Acquisition by DBP, and DBP's Letter to Lessee
- The Robles spouses defaulted on their loan; DBP initiated extrajudicial foreclosure and on February 6, 1987 DBP was lone bidder and acquired the mortgaged properties; a final Deed of Sale to DBP issued October 13, 1988.
- DBP sent a letter dated June 18, 1987 to Bonifacio Sia notifying DBP's acquisition and setting conditions if Cebu Bionic wished to continue leasing:
- Lease to be month-to-month for a maximum of one year.
- Deposit equivalent to two months rental and advance of one month; remaining nine months' amount to be secured by surety bond, cash bond, or assigned time deposit.
- In case of a better offer/purchase offer, the lessee is given an option of first refusal; otherwise lessee must vacate within 30 days from notice.
- DBP requested remittance of rental due for June 1987 and submission of six-month receipts for rental until DBP fixes the rental amount.
- If contract not executed within 30 days, lessee to be deemed uninterested and vacate.
- Counsel for Bonifacio Sia replied July 7, 1987 proposing modifications: deposit of P10,000 as assigned time deposit and request for 60 days rather than 30 days' notice.
- A Certificate of Time Deposit for P11,395.64 in the name of Bonifacio Sia was issued November 14, 1989 and allegedly remitted to DBP as advance rental deposit; no written lease between DBP and Cebu Bionic was executed for reasons unclear.
Facts: DBP's Offers for Sale and Negotiated Sale Process
- DBP offered the acquired properties for sale and published invitations to bid on several dates (January 19, 1989; February 23, 1989; April 13, 1989; November 15, 1990) without interested bidders.
- DBP published an Invitation on Negotiated Sale/Offer on November 16, 1990, establishing a 15-Day-Acceptance-Period from November 19, 1990 to 12:00 noon of December 3, 1990, with terms:
- Sealed negotiated offers to be opened December 3, 1990 at 2:00 p.m.
- Starting price for the item including commercial building: P1,838,100.00.
- Negotiated offers may be CASH (10% deposit) or TERMS (20% deposit) — deposit to be enclosed with offer in form of cash or cashier's/manager's check.
- If no offer during acceptance period, property to be sold on first-come-first-served basis thereafter.
- Acknowledgment receipts issued and interested offerors asked to contact Atty. Apolinar Panal, Jr. for Letter-Offer form and rules.
Facts: Petitioners' and Respondents' Offers and Sales
- On December 3, 1990 (morning), petitioners through their representative Judy Garces submitted a letter-offer offering P1,840,000.00 for the property and attached a manager's check for P184,000 (10% of offered price) and a copy of the Negotiated Sale Rules and Procedures; DBP allegedly did not accept the offer, claiming the deposit was insufficient.
- Petitioners did not submit any other offer after the 15-day period lapsed.
- On December 17, 1990 respondents To Chip, Yap and Balila submitted a letter-offer to purchase on a cash basis for P1,838,100.00, accompanied by downpayment P183,810.00 (10%); DBP acknowledged receipt and accepted their offer.
- On December 28, 1990 respondents To Chip, Yap and Balila paid the balance and DBP issued a Deed of Sale in their favor.
- Counsel for respondents sent notice January 11, 1991 to Cebu Bionic to vacate within 30 days and to pay rentals for January 1, 1991 to end of 30-day period; Cebu Bionic's counsel replied seeking verification of ownership and a copy of the deed of sale.
- Respondents wrote follow-up letters (To Chip letter of February 15, 1991 requesting urgent vacation and reiterating business need; final demand letter of February 27, 1991 warning of ejectment if Cebu Bionic did not vacate within seven days).
- Despite notices, Cebu Bionic paid P5,000.00 to DBP on March 22, 1991 covering rents for November 1990 to March 1991.
Plaintiffs' (Petitioners') Complaint in RTC
- Petitioners filed suit on April 10, 1991 (Civil Case No. CEB-10104) for:
- Specific performance;
- Cancellation of the Deed of Sale with damages;
- Injunction with prayer for writ of preliminary injunction.
- Core allegations:
- Cebu Bionic was a lessee and occupant from October 1981 to filing of complaint.
- DBP advertised for sale and petitioners timely submitted a higher cash offer on December 3, 1990 with required documents including manager's check for 10% and Negotiated Sale Rules and Procedures.
- DBP initially accepted but later returned the documents, assuring petitioners that there was no urgency because there was no other bidder and petitioners would be preferred as lessee.
- DBP sold to respondents in a simulated/fictitious sale without notifying petitioners and thus breached petitioners' right of first option to buy under the Robles lease.
- Petitioners contended DBP assumed the Robles lease upon acquiring property, binding DBP to the first option clause.
- Remedies sought: rescission of DBP-to-respondents' deed of sale; writ of preliminary injunction to restrain respondents' registration and ejectment; order for DBP to execute deed of sale to petitioners; damages and attorney's fees.
DBP's Answer and Counterarguments
- DBP denied a lease contract between itself and petitioners.
- DBP contended petitioners' letter-offer was not accepted because it was on terms requiring 20% deposit while only 10% was submit