Lucrative Realty and Development Corporation v. Bernabe Jr.
REITERATIONFacts
The Antecedents: Spouses Ambrocio and Lourdes Baal leased a parcel of land in Malate, Manila, to Fil Oil Refinery Corporation (FILOIL) in 1961. Respondent Ricardo Bernabe Jr. later acquired the right to operate the gasoline station on this property. FILOIL's assets, including the station, were eventually taken over by Petron Corporation, but Bernabe Jr. continued operations. In 1977, the Baals mortgaged this Malate property, along with another in Caloocan, to secure a loan from Home Savings Bank and Trust Company (HOME SAVINGS). In 1980, a new lease agreement was executed between the Baals and Bernabe Jr., explicitly granting him a right of first refusal should the property be sold. Procedural History: In 1989, the Baals defaulted on their loan, leading HOME SAVINGS to extrajudicially foreclose the mortgage. A compromise agreement was reached, wherein the Baals transferred ownership of the Malate property to HOME SAVINGS via dacion en pago in satisfaction of the debt. On the same day, HOME SAVINGS sold the property to petitioner Lucrative Realty and Development Corporation (LUCRATIVE REALTY). Bernabe Jr., believing the property was foreclosed, attempted to exercise his right of first refusal, which HOME SAVINGS denied, stating it was acquired through dacion en pago. Subsequently, HOME SAVINGS demanded Bernabe Jr. vacate the premises. Bernabe Jr. filed a complaint for annulment of sale, seeking to enforce his right of first refusal. Concurrently, LUCRATIVE REALTY filed an ejectment suit against Bernabe Jr. The trial court initially issued a writ of preliminary injunction in favor of Bernabe Jr. in the annulment case, later modified to apply only to LUCRATIVE REALTY. LUCRATIVE REALTY's demurrer to evidence was denied. The ejectment case saw Bernabe Jr. evicted by the Court of Appeals, but his subsequent appeal to the Supreme Court was dismissed. LUCRATIVE REALTY then sought the trial judge's inhibition and reconsideration of the denial of its demurrer, which was also denied. This denial led to LUCRATIVE REALTY filing a petition for certiorari with the Court of Appeals. The Petition: LUCRATIVE REALTY filed a petition for certiorari with the Court of Appeals, assailing the trial court's denial of its demurrer to evidence and its motion to inhibit the judge, alleging grave abuse of discretion. LUCRATIVE REALTY argued that Bernabe Jr.'s right of first refusal was invalid as it lacked separate consideration from the lease payments, thus barring his cause of action. The Court of Appeals dismissed the petition, finding LUCRATIVE REALTY guilty of laches due to its prolonged delays in challenging the injunction and the denial of its motions. The appellate court also found insufficient evidence of grave abuse of discretion by the trial judge. LUCRATIVE REALTY now petitions the Supreme Court, arguing the Court of Appeals erred in affirming the denial of its demurrer to evidence and in not recognizing that the right of first refusal, lacking distinct consideration, did not create a binding contract under Article 1479 of the Civil Code.
Issue(s)
Whether the Court of Appeals erred in affirming the trial court's denial of petitioner's demurrer to evidence and motion to lift injunction; and whether respondent Bernabe Jr.'s right of first refusal was valid and binding despite the absence of a separate consideration distinct from the lease rentals. Whether the trial court judge committed grave abuse of discretion in denying petitioner's motion to dismiss and motion to inhibit. Whether petitioner's petition for certiorari before the Court of Appeals was filed within the reglementary period.
Ruling
The Supreme Court denied the petition for review on certiorari, affirming the Decision of the Court of Appeals. The Court found no reversible error in the appellate court's ruling that petitioner was barred by laches and that there was no grave abuse of discretion on the part of the trial court judge. The Court reiterated that rent paid by a lessee constitutes sufficient consideration for a right of first refusal stipulated in the same lease contract.
Ratio Decidendi
On the validity of the right of first refusal, the denial of the demurrer to evidence, and the right of first refusal's consideration: The Court affirmed the Court of Appeals' finding that there was no ground to impute grave abuse of discretion on the part of Judge Hidalgo for denying petitioner's demurrer to evidence. The Court reiterated its ruling in Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., stating that it is incorrect to claim there is no consideration for a right of first refusal if it is embodied in the same contract of lease. The consideration for the lease contract inherently includes the consideration for the grant of the right of first refusal. Therefore, respondent Bernabe's testimony that he paid no other consideration apart from his rental payments did not defeat his cause of action. The rent paid by the lessee is sufficient consideration for the grant of such a right, especially when it is stipulated within the same lease agreement. This principle directly addresses the petitioner's argument that the right of first refusal was not supported by a distinct consideration under Article 1479 of the Civil Code. On the alleged grave abuse of discretion and partiality of the trial court judge: The Court dismissed petitioner LUCRATIVE REALTY's accusations of "unmistakable partiality" and prejudgment against Judge Hidalgo. The Court emphasized that a judge should not be presumed biased or prejudiced simply because a motion took time to resolve. Judges have a legal obligation to administer justice impartially, and mere delay in resolving a motion does not, by itself, constitute evidence of bias or partiality. The Court found no basis to indulge in the "unfounded assumptions" of partiality hurled by the petitioner against the judge, underscoring the importance of upholding the integrity of the judiciary against unsubstantiated claims. On the timeliness of the petition for certiorari: The Court of Appeals correctly disallowed the petition for certiorari filed by petitioner because it was filed beyond the sixty (60)-day reglementary period prescribed by Section 4, Rule 65 of the Rules of Court. The appellate court noted that the trial court's order granting the writ of preliminary injunction was issued on February 20, 1995, and the motion for its lifting was denied on June 5, 1996. However, petitioner only questioned the propriety of the writ's issuance on November 16, 1999, which was well beyond the sixty-day period. The lapse of the mandated period deprives an appellate court of jurisdiction to alter a final order rendered by a lower court. Therefore, the Court found every reason to uphold the Court of Appeals' Decision denying the petition for certiorari on the ground of laches and procedural timeliness.
Main Doctrine
The rent paid by a lessee constitutes sufficient consideration for the grant of a right of first refusal, especially when such right is stipulated in the same contract of lease. A lessee's claim to exercise this right is not defeated by the fact that no separate consideration was paid for the grant of the right of first refusal.