Cebu Bionic Builders Supply v. Development Bank of the Philippines
REITERATIONFacts
The Antecedents: Spouses Rudy R. Robles, Jr. and Elizabeth R. Robles obtained a loan from Development Bank of the Philippines (DBP) secured by a mortgage on a parcel of land and a commercial building to be constructed thereon. The spouses failed to settle the loan, leading DBP to extrajudicially foreclose the mortgaged properties. DBP became the lone bidder and acquired ownership. Meanwhile, Rudy Robles executed a contract of lease with petitioner Cebu Bionic Builders Supply, Inc. (Cebu Bionic) for a portion of the ground floor of the State Theatre Building, granting Cebu Bionic the first option to buy the property should the lessor decide to sell. Procedural History: After DBP acquired the property, it notified Cebu Bionic of the foreclosure and offered to continue the lease on a month-to-month basis with specific conditions. Cebu Bionic's counsel responded with a counter-offer. No written contract of lease was executed. DBP later offered the property for sale through a negotiated sale. Cebu Bionic submitted an offer, which DBP allegedly returned as insufficient. Subsequently, respondents Jose To Chip, Patricio Yap, and Roger Balila submitted an offer, which DBP accepted, and a Deed of Sale was issued in their favor. Petitioners filed a complaint for specific performance, cancellation of deed of sale with damages, and injunction, alleging violation of their right of first refusal. The Regional Trial Court (RTC) ruled in favor of petitioners, rescinding the sale and ordering DBP to execute a deed of sale in favor of petitioners. The Court of Appeals (CA) initially affirmed the RTC decision. However, upon a motion for reconsideration filed by respondents To Chip, Yap, and Balila, the CA admitted the motion despite being filed out of time, citing substantial justice. Subsequently, the CA reversed its earlier decision, dismissing petitioners' complaint. The CA ruled that no new lease contract was perfected between petitioners and DBP, and the original lease was terminated by DBP's letter. It further held that even if an implied lease existed, the right of first refusal was not revived under Article 1670 of the Civil Code. The Petition: Petitioners filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's Resolution admitting the motion for reconsideration and its Amended Decision reversing the RTC ruling.
Issue(s)
Whether the Court of Appeals erred in admitting respondents’ motion for reconsideration despite being filed out of time. Whether the Court of Appeals erred in declaring that petitioners did not enter into a contract with respondent DBP continuing the terms of the Robles contract. Whether the Court of Appeals erred when it declared that the continuation by respondent DBP of the lease contract did not contain the right of first refusal, and whether the lease contract is governed by Article 1670 of the New Civil Code. Whether the Court of Appeals erred when it failed to recognize petitioners’ right of first refusal to which respondents were bound. Whether the Court of Appeals erred when it failed to declare that respondent DBP had violated petitioners’ rights and in reversing its own judgment and dismissing petitioners’ claim for rescission.
Ruling
The Petition for Review on Certiorari is DENIED. The Resolution dated February 5, 2002 and the Amended Decision dated July 5, 2002 of the Court of Appeals in CA-G.R. CV No. 57216 are AFFIRMED.
Ratio Decidendi
On the issue of admitting the motion for reconsideration out of time: The Supreme Court affirmed the Court of Appeals' decision to admit the motion for reconsideration filed by respondents To Chip, Yap, and Balila despite being filed out of time. The Court held that while procedural rules are essential, they can be relaxed in the higher interest of substantial justice, especially when property rights are involved and the merits of the case warrant a thorough review. The Court cited the case of Barnes v. Padilla to support the principle that procedural lapses can be excused under compelling circumstances to prevent a miscarriage of justice. In this instance, the Court found that the fundamental issue of who had the better right to purchase the subject properties justified the suspension of the rules. The Court emphasized that the review sought was not frivolous and that the opposing party would not be unjustly prejudiced by the procedural leniency. On whether a contract of lease was perfected between petitioners and DBP: The Supreme Court ruled that no new contract of lease was perfected between petitioners and DBP. The Court found that DBP's letter dated June 18, 1987, proposed a new lease agreement with specific terms and conditions, including a month-to-month basis for a maximum of one year, a specific deposit and advance rental, and a first option to purchase. Petitioners, through their counsel's counter-offer, did not fully accept these terms, proposing a different mode of payment and a longer notice period. The Court found no concurrence of offer and acceptance regarding the proposed lease agreement, and no further actions were taken by the parties to pursue its execution. Petitioners' admission that they waited for DBP to present the contract, despite being instructed to come to the bank, further supported the conclusion that no meeting of the minds occurred. On whether the right of first refusal was revived under Article 1670 of the Civil Code and whether the lease contract was governed by Article 1670 of the New Civil Code: The Supreme Court held that even if an implied new lease were constituted under Article 1670 of the Civil Code, the right of first refusal from the original lease contract with Rudy Robles was not revived. The Court reiterated the ruling in Dizon v. Magsaysay, stating that only terms germane to the lessee's continued enjoyment of the property are revived in an implied new lease. Special agreements, such as an option to purchase or a right of first refusal, are considered foreign to the right of occupancy and are not presumed to be revived. Therefore, petitioners' claim of entitlement to a right of first refusal was without legal basis, as it was not part of the terms that would be revived under an implied lease. The Supreme Court clarified that Article 1670 of the Civil Code was not applicable in the manner petitioners argued. The Court explained that the lease was effectively terminated by DBP's letter dated June 18, 1987, which demanded that petitioners either enter into a new lease contract within 30 days or vacate the premises. Since no new contract was executed, petitioners' continued possession was without DBP's acquiescence, thus negating the constitution of an implied lease under Article 1670. The Court further noted that DBP's acceptance of rental payments did not legitimize petitioners' possession, especially since these payments were made in lump sum after petitioners were notified of the sale and given a final demand to vacate. Therefore, the premise for applying Article 1670, which requires the lessee's continued enjoyment of the leased thing for fifteen days with the lessor's acquiescence, was absent. On whether the Court of Appeals erred when it failed to recognize petitioners’ right of first refusal to which respondents were bound: The Supreme Court concluded that DBP did not violate petitioners' rights by selling the property to respondents To Chip, Yap, and Balila without first notifying petitioners. This was based on the finding that petitioners had no valid right of first refusal. On whether DBP violated petitioners' rights and the dismissal of the rescission claim: Consequently, the sale to respondents was valid, and petitioners' claim for rescission of the deed of sale was correctly dismissed by the Court of Appeals. The Court found no error in the CA's reversal of the RTC's decision, as the RTC had misappreciated certain facts and overlooked evidence, particularly regarding the non-perfection of a new lease and the non-revival of the right of first refusal.
Main Doctrine
The acceptance of monthly rentals by a bank after foreclosure, without a new written contract of lease being executed, does not automatically revive the right of first refusal from the original lease contract, especially when the original lease was on a month-to-month basis and was effectively terminated by the bank's notice to vacate or enter into a new contract. An implied new lease under Article 1670 of the Civil Code only revives terms germane to the lessee's enjoyment of the property, not special agreements like an option to purchase.