Llenado v. Llenado
REITERATIONFacts
The Antecedents: Cornelio Llenado owned Lot 249-D. He leased a portion, Lot 249-D-1 (subject lot), to his nephew Romeo Llenado. Subsequently, Romeo assigned his rights to Orlando Llenado. An agreement stipulated that the subject lot could not be sold, transferred, or alienated while the lease was in force. Orlando was given options to renew the lease. Upon Orlando's death in 1983, his wife Wenifreda took over the gasoline station business on the lot. In 1987, Cornelio sold Lot 249-D to his children Eduardo and Jorge, with the subject lot registered in their names. In 1993, Eduardo demanded the lot from Wenifreda, who refused to vacate. Eduardo filed an unlawful detainer case, which eventually reached the Supreme Court and was dismissed. Procedural History: Prior to the unlawful detainer case, Wenifreda, as administratrix of Orlando's estate, filed a complaint for annulment of the deed of conveyance, title, and damages against Eduardo, Jorge, and others. The Regional Trial Court (RTC) ruled in favor of Wenifreda, declaring the sale null and void. The Court of Appeals (CA) reversed the RTC decision, dismissing the complaint. The CA held that the breach of the non-alienation clause did not nullify the sale as Orlando's heirs were mere lessees and could not claim superior ownership rights. The CA also found no proof of a verbal promise of a right of first refusal. The Petition: Wenifreda, as petitioner, assailed the CA decision before the Supreme Court, arguing that the CA erred in not annulling the deed of conveyance for violating a covenant in the lease and disregarding the preferential right to buy under R.A. No. 3516, amending R.A. No. 1162.
Issue(s)
Whether the sale of the subject lot by Cornelio to his sons Eduardo and Jorge was invalid for violating the prohibitory clause in the lease agreement. Whether the sale contravened the alleged right of first refusal of Orlando over the subject lot. Whether the heirs of Orlando were entitled to the rights of a tenant under Republic Act No. 1162, as amended by Republic Act No. 3516, including the right of first refusal.
Ruling
The petition is denied. The Court of Appeals' decision dismissing the complaint for annulment of deed of conveyance, title, and damages is affirmed.
Ratio Decidendi
On the validity of the sale and the prohibitory clause: The Court held that while lease contracts are generally transmissible to heirs, the lease agreement in this case had terminated. Orlando died on November 7, 1983, and the lease was set to expire on December 3, 1983. The option to renew, though an enforceable right, must be exercised through a positive act before or at the time of the expiration of the original term. There was no evidence presented to show that Orlando or his heirs exercised this option. Consequently, the lease had terminated by January 29, 1987, when Cornelio sold the lot to his sons. Therefore, the prohibitory clause, which was only effective during the subsistence of the lease, was no longer in force, and the sale was not an obstacle. On the alleged right of first refusal: The Court acknowledged that a right of first refusal, even if verbal, is not covered by the statute of frauds and can be proven by oral evidence. However, in this case, the petitioner failed to present any testimonial or documentary evidence to establish the existence of Cornelio's verbal promise to Orlando. Petitioner Wenifreda's testimony did not mention such a promise, and the other witnesses were not privy to it. The respondents denied knowledge of such a promise. Therefore, the claim based on this alleged right of first refusal could not be sustained due to lack of competent proof. On the applicability of R.A. No. 1162, as amended: The Court ruled that the issue of the applicability of R.A. No. 1162, as amended by R.A. No. 3516, was raised for the first time on appeal and thus could not be considered. Even if it were considered, the petitioner failed to establish that the subject lot met the conditions for the application of the law, such as being part of a landed estate, the institution of expropriation proceedings by the Solicitor General, or the presence of at least forty families of tenants. The lease was for a commercial purpose (gasoline station), which is not covered by R.A. No. 1162 or its successor, P.D. No. 1517, as amended, which are intended for urban land reform and residential tenants.
Main Doctrine
The failure to exercise an option to renew a lease contract through a positive act before or at the time of its expiration renders the lease terminated, thereby removing any obstacle to the sale of the leased property by the landowner, even if a prohibitory clause against alienation existed during the lease term. Furthermore, a verbal promise of a right of first refusal, while potentially enforceable if proven by competent evidence, cannot be sustained if no such evidence is presented before the trial court.