SECOND DIVISION
[G.R. No. 117355.
April 5, 2002]
RIVIERA FILIPINA, INC., petitioner, vs. COURT OF
APPEALS, JUAN L. REYES, (now deceased), substituted by his heirs, namely,
Estefania B. Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr. and Fidel B.
Reyes, PHILIPPINE CYPRESS CONSTRUCTION & DEVELOPMENT CORPORATION, CORNHILL
TRADING CORPORATION AND URBAN DEVELOPMENT BANK, respondents.
D E C I S I O N
DE LEON, JR., J.:
Before us is a petition
for review on certiorari of the Decision[1] of the Court of Appeals[2] dated June 6, 1994 in CA-G.R. CV No. 26513
affirming the Decision[3] dated March 20, 1990 of the Regional Trial
Court of Quezon City, Branch 89 dismissing Civil Case No. Q-89-3371.
Civil Case No. Q-89-3371
is a suit instituted by Riviera Filipina, Inc. (Riviera) on August 31, 1989[4] to compel the defendants therein Juan L.
Reyes, now deceased, Philippine Cypress Construction & Development
Corporation (Cypress), Cornhill Trading Corporation (Cornhill) and Urban
Development Bank to transfer the title covering a 1,018 square meter parcel of
land located along EDSA, Quezon City for alleged violation of Riviera’s right
of first refusal.
It appears that on
November 23, 1982, respondent Juan L. Reyes (Reyes, for brevity) executed a
Contract of Lease with Riviera. The ten-year
(10) renewable lease of Riviera, which started on August 1, 1982, involved a
1,018 square meter parcel of land located along Edsa, Quezon City, covered and
described in Transfer Certificate of Title No. 186326 of the Registry of Deeds
of Quezon City in the name of Juan L. Reyes.[5]
The said parcel of land
was subject of a Real Estate Mortgage executed by Reyes in favor of Prudential
Bank. Since the loan with Prudential
Bank remained unpaid upon maturity, the mortgagee bank extrajudicially foreclosed
the mortgage thereon. At the public
auction sale, the mortgagee bank emerged as the highest bidder. The redemption period was set to expire on
March 7, 1989. Realizing that he could
not possibly raise in time the money needed to redeem the subject property,
Reyes decided to sell the same.[6]
Since paragraph 11 of the
lease contract expressly provided that the “LESSEE shall have the right of
first refusal should the LESSOR decide to sell the property during the term of
the lease,”[7] Reyes offered to sell the subject property
to Riviera, through its President Vicente C. Angeles, for Five Thousand Pesos (P5,000.00)
per square meter. However, Angeles
bargained for Three Thousand Five Hundred Pesos (P3,500.00) per square
meter. Since Reyes was not amenable to
the said price and insisted on Five Thousand Pesos (P5,000.00) per
square meter, Angeles requested Reyes to allow him to consult the other members
of the Board of Directors of Riviera.[8]
Seven (7) months later,
or sometime in October 1988, Angeles communicated with Reyes Riviera’s offer to
purchase the subject property for Four Thousand Pesos (P4,000.00) per
square meter. However, Reyes did not
accept the offer. This time he asked
for Six Thousand Pesos (P6,000.00) per square meter since the value of
the property in the area had appreciated in view of the plans of Araneta to
develop the vicinity.[9]
In a letter dated
November 2, 1988, Atty. Irineo S. Juan, acting as counsel for Reyes, informed
Riviera that Reyes was selling the subject property for Six Thousand Pesos
(P6,000.00) per square meter, net of capital gains and transfer taxes,
registration fees, notarial fees and all other attendant charges. He further stated therein that:
In this connection, conformably to the provisions stipulated in
Paragraph/Item No. 11 of your CONTRACT OF LEASE (Doc. No. 365, Page No. 63,
Book No. X, Series of 1982, of the Notarial Registry of Notary Public Leovillo
S. Agustin), notice is served upon your goodselves for you to exercise “the
right of first refusal” in the sale of said property, for which purpose you are
hereby given a period of ten (10) days from your receipt hereof within which to
thus purchase the same under the terms and conditions aforestated, and failing
which you shall be deemed to have thereby waived such pre-emptive right and my
client shall thereafter be absolutely free to sell the subject property to
interested buyers.[10]
To answer the foregoing
letter and confirm their telephone conversation on the matter, Riviera sent a
letter dated November 22, 1988 to Atty. Juan, counsel for Reyes, expressing
Riviera’s interest to purchase the subject property and that Riviera is already
negotiating with Reyes which will take a couple of days to formalize.[11] Riviera increased its offer to Five Thousand
Pesos (P5,000.00) per square meter but Reyes did not accede to said
price as it was still lower than his quoted price of Six Thousand Pesos (P6,000.00)
per square meter.[12] Angeles asked Reyes to give him until the
end of November 1988 for Riviera’s final decision.
In a letter dated
December 2, 1988, Angeles wrote Reyes confirming Riviera’s intent to purchase
the subject property for the fixed and final[13] price of Five Thousand Pesos (P5,000.00)
per square meter, complete payment within sixty (60) to ninety (90) days which
“offer is what we feel should be the market price of your property.”
Angeles asked that the decision of Reyes and his written reply to the offer be
given within fifteen (15) days since there are also other properties being
offered to them at the moment.[14]
In response to the
foregoing letter, Atty. Juan sent a letter to Riviera dated December 5, 1988
informing Riviera that Riviera’s offer is not acceptable to his client. He further expressed, “let it be made
clear that, much as it is the earnest desire of my client to really give you
the preference to purchase the subject property, you have unfortunately failed
to take advantage of such opportunity and thus lost your right of first refusal
in sale of said property.”[15]
Meanwhile, on December 4,
1988, Reyes confided to Rolando P. Traballo, a close family friend and
President of Cypress, his predicament about the nearing expiry date of the
redemption period of the foreclosed mortgaged property with Prudential Bank,
the money for which he could not raise on time thereby offering the subject
property to him for Six Thousand Pesos (P6,000.00) per square
meter. Traballo expressed interest in
buying the said property, told Reyes that he will study the matter and
suggested for them to meet the next day.[16]
They met the next day,
December 5, 1988, at which time Traballo bargained for Five Thousand Three
Hundred Pesos (P5,300.00) per square meter. After considering the reasons cited by Traballo for his quoted
price, Reyes accepted the same.
However, since Traballo did not have the amount with which to pay Reyes,
he told the latter that he will look for a partner for that purpose.[17] Reyes told Traballo that he had already
afforded Riviera its right of first refusal but they cannot agree because
Riviera’s final offer was for Five Thousand Pesos (P5,000.00) per square meter.[18]
Sometime in January 1989,
apprehensive of the impending expiration in March 1989 of the redemption period
of the foreclosed mortgaged property with Prudential Bank and the deal between
Reyes and Traballo was not yet formally concluded, Reyes decided to approach
anew Riviera. For this purpose, he
requested his nephew, Atty. Estanislao Alinea, to approach Angeles and find out
if the latter was still interested in buying the subject property and ask him
to raise his offer for the purchase of the said property a little higher. As instructed, Atty. Alinea met with Angeles
and asked the latter to increase his offer of Five Thousand Pesos (P5,000.00)
per square meter but Angeles said that his offer is Five Thousand Pesos (P5,000.00)
per square meter.[19]
Following the meeting,
Angeles sent a letter dated February 4, 1989 to Reyes, through Atty. Alinea,
that his offer is Five Thousand Pesos (P5,000.00) per square meter
payment of which would be fifty percent (50%) down within thirty (30) days upon
submission of certain documents in three (3) days, the balance payable in five
(5) years in equal monthly installments at twelve percent (12%) interest in
diminishing balance.[20] With the terms of this second offer, Angeles
admittedly downgraded the previous offer of Riviera on December 2, 1988.[21]
Atty. Alinea conveyed to
Reyes Riviera’s offer of Five Thousand Pesos (P5,000.00) per square
meter but Reyes did not agree.
Consequently, Atty. Alinea contacted again Angeles and asked him if he
can increase his price. Angeles,
however, said he cannot add anymore.[22] Reyes did not expressly offer his subject
property to Riviera at the price of Five Thousand Three Hundred Pesos (P5,300.00)
per square meter.[23]
Sometime in February
1989, Cypress and its partner in the venture, Cornhill Trading Corporation,
were able to come up with the amount sufficient to cover the redemption money,
with which Reyes paid to the Prudential Bank to redeem the subject property.[24] On May 1, 1989, a Deed of Absolute Sale
covering the subject property was executed by Reyes in favor of Cypress and
Cornhill for the consideration of Five Million Three Hundred Ninety Five
Thousand Four Hundred Pesos (P5,395,400.00).[25] On the same date, Cypress and Cornhill
mortgaged the subject property to Urban Development Bank for Three Million
Pesos (P3,000,000.00).[26]
Thereafter, Riviera
sought from Reyes, Cypress and Cornhill a resale of the subject property to it
claiming that its right of first refusal under the lease contract was violated.
After several unsuccessful attempts,[27] Riviera filed the suit to compel Reyes,
Cypress, Cornhill and Urban Development Bank to transfer the disputed title to the land in favor of Riviera upon
its payment of the price paid by Cypress and Cornhill.
Following trial on the
merits, the trial court dismissed the complaint of Riviera as well as the
counterclaims and cross-claims of the other parties.[28] It ruled that the defendants therein did not
violate Riviera’s right of first refusal, ratiocinating in this wise:
Resolving the first issue, this Court takes note that since the
beginning of the negotiation between the plaintiff and defendant Reyes for the
purchase of the property, in question, the plaintiff was firm and steadfast in
its position, expressed in writing by its President Vicente Angeles, that it
was not willing to buy the said property higher than P5,000.00, per
square meter, which was far lower than the asking price of defendant Reyes for P6,000.00,
per square meter, undoubtedly, because, in its perception, it would be
difficult for other parties to buy the property, at a higher price than what it
was offering, since it is in occupation of the property, as lessee, the term of
which was to expire after about four (4) years more.
On the other hand, it was obvious, upon the basis of the last ditch
effort of defendant Reyes, thru his nephew, Atty. Alinea, to have the plaintiff
buy the property, in question, that he was willing to sell the said property at
a price less than P6,000.00 and a little higher than P5,000.00,
per square meter, precisely, because Atty. Alinea, in behalf of his uncle,
defendant Reyes, sought plaintiff’s Angeles and asked him to raise his price a
little higher, indicating thereby the willingness of defendant Reyes to sell
said property at less than his offer of P6,000.00, per square meter.
This being the case, it can hardly be validly said by the plaintiff
that he was deprived of his right of first refusal to buy the subject property
at a price of P5,300.00, per square meter which is the amount defendants
Cypress/Cornhill bought the said property from defendant Reyes. For, it was again given such an opportunity
to exercise its right of first refusal by defendant Reyes had it only signified
its willingness to increase a little higher its purchase price above P5,000.00,
per square meter, when its President, Angeles, was asked by Atty. Alinea to do
so, instead of adamantly sticking to its offer of only P5,000.00 per
square meter, by reason of which, therefore, the plaintiff had lost, for the
second time, its right of first refusal, even if defendant Reyes did not
expressly offer to sell to it the subject land at P5,300.00, per square
meter, considering that by the plea of Atty. Alinea, in behalf of defendant
Reyes, for it to increase its price a little, the plaintiff is to be considered
as having forfeited again its right of first refusal, it having refused to
budged from its regid (sic) offer to buy the subject property at no more than P5,000.00,
per square meter.
As such, this Court holds that it was no longer necessary for the
defendant Reyes to expressly and categorically offer to the plaintiff the
subject property at P5,300.00, per square meter, in order that he can
comply with his obligation to give first refusal to the plaintiff as stipulated
in the Contract of Lease, the plaintiff having had already lost its right of
first refusal, at the first instance, by refusing to buy the said property at P6,000.00,
per square meter, which was the asking price of defendant Reyes, since to do so
would be a useless ceremony and would only be an exercise in futility,
considering the firm and unbending position of the plaintiff, which defendant
Reyes already knew, that the plaintiff, at any event, was not amenable to
increasing its price at over P5,000.00, per square meter.
Dissatisfied with the
decision of the trial court, both parties appealed to the Court of Appeals.[29] However, the appellate court, through its
Special Seventh Division, rendered a Decision dated June 6, 1994 which affirmed
the decision of the trial court in its entirety.[30] In sustaining the decision of the trial
court, the Court of Appeals adopted the above-quoted ratiocination of the trial
court and further added:
To put things in its proper perspective in accordance with the
peculiar attendant circumstances herein, particular stress should be given to
RIVIERA’s uncompromising counter offer of only P5,000.00 per square
meter on all the occasions when REYES offered the subject property to it. RIVIERA, in its letter to REYES dated
December 2, 1988 (Exhibit “D”, p. 68, Rollo) justified its rigid offer by
saying that “the above offer is what we feel should be the market price of your
property.” If that be the case, We are convinced, the same manner that REYES
was, that RIVIERA was unwilling to increase its counter offer at any present or
future time. RIVIERA’s unilateral
valuation of the subject property thus binds him, it cannot now be heard to
claim that it could have upped its offer had it been informed of CYPRESS’ and
CORNHILL’S offer of P5,000.00 (sic) per square meter. Defendants CYPRESS and CORNHILL were
therefore right in saying that:
On the basic assumption that RIVIERA really meant what it said in
its letter, DR. REYES could not be faulted for believing that RIVIERA was
definitely NOT WILLING TO PAY MORE THAN P5,000.00 PER SQUARE METER ON HIS
PROPERTY. The fault lies with the
deceptive and insincere words of RIVIERA.
Injustice (sic) and equity, RIVIERA must be deemed in estoppel in now
belatedly asserting that it would have been willing to pay a price higher than P5,000.00
x x x.” (Defendants-Appellees Cypress’ and Cornhill’s Brief, p. 8)
For this reason, no adverse inference can be drawn from REYES’ failure to disclose to RIVIERA the intervening counter-offer of CYPRESS and CORNHILL.
It would have been far different had REYES’ non-disclosure of
CYPRESS’ and CORNHILL’s counter-offer to RIVIERA resulted in the sale of the
subject property at equal or less than RIVIERA’s offer; in which case, REYES
would have been rightly accused of cunningly circumventing RIVIERA’s right of
first refusal. But the incontrovertible
antecedents obtaining here clearly reveal REYES’ earnest efforts in respecting
RIVIERA’s contractual right to initially purchase the subject property. Not only once – but twice – did REYES
approach RIVIERA, the last one being the most telling indication of REYES’
sincerest intention in RIVIERA eventually purchasing the subject property if
only the latter would increase a little its offer of P5,000.00 per
square meter. And to this REYES was
desperately willing to accede to despite the financial quandary he was then in
as the expiration of the redemption period drew closer and closer, and despite
the better offer of CYPRESS and CORNHILL.
REYES unquestionably had displayed good faith. Can the same be said of RIVIERA?
We do not think so. It appears
that RIVIERA all along was trying to push REYES’ back against the wall, for
RIVIERA was well-aware of REYES’ precarious financial needs at that time, and
by clinging to its offer, REYES might eventually succumb to its offer out of
sheer desperation. RIVIERA was, to be
frank, whimsically exercising its contractual right to the prejudice of REYES
who had commendably given RIVIERA extra leeway in exercising it. And to this We say that no amount of
jurisprudence RIVIERA might avail of for the purpose of construing the right of
first refusal, however enlightening and persuasive they may be, will cover-up
for its arrogant exercise of its right as can be gleaned from the factual
premises. Equity in this case tilts in
favor of defendants REYES, CYPRESS and CORNHILL that the consummated sale
between them concerning the subject property be given this Court’s imprimatur,
for if RIVIERA lost its opportunity to acquire it, it has only itself to blame. For after all, REYES’ fundamental and
intrinsic right of ownership which necessarily carries with it the exclusive
right to dispose of it to whoever he pleases, must ultimately prevail over
RIVIERA’s right of first refusal which it unscrupulously tried to exercise.
From
this decision, Riviera filed a motion for reconsideration,[31] but the appellate court denied the same in a
Resolution dated September 22, 1994.[32]
Hence, Riviera interposed
the instant petition anchored on the following errors:[33]
I
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT PETITIONER RIVIERA FILIPINA, INC. ALREADY LOST ITS RIGHT OF FIRST REFUSAL.
II
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN NOT FINDING THAT IT WAS THE PETITIONER, NOT RESPONDENT JUAN L. REYES, WHICH HAD BEEN THOROUGHLY DECEIVED BY THE LATTER OUT OF ITS RIGHTS TO ITS CONTINUING PREJUDICE.
III
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DENYING RECONSIDERATION.
IV
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DECIDING PETITIONER’S APPEAL AT A TIME WHEN THE PRINCIPAL APPELLEE IS ALLEGEDLY DEAD AND NO PROPER SUBSTITUTION OF THE ALLEGED DECEASED PARTY HAS BEEN MADE; HENCE, THE DECISION OF THE COURT OF APPEALS AND ITS RESOLUTION DENYING RECONSIDERATION, IS NULL AND VOID.
At the outset, we note
that, while Riviera alleges that the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction, the instant petition
is, as it should be, treated as a petition for review under Rule 45 and not as
a special civil action for certiorari under Rule 65 of the Revised Rules of
Court, now the 1997 Rules of Civil Procedure.
The distinctions between
Rule 45 and 65 are far and wide, the most notable of which is that errors of
jurisdiction are best reviewed in a special civil action for certiorari under
Rule 65, while errors of judgment are correctible only by appeal in a petition
for review under Rule 45.[34] The rationale for the distinction is
simple. When a court exercises its
jurisdiction an error committed while so engaged does not deprive it of the
jurisdiction being exercised when the error is committed. If it did, every error committed by a court
would deprive it of its jurisdiction and every erroneous judgment would be a
void judgment. This cannot be
allowed. The administration of justice
would not countenance such a rule.
Thus, an error of judgment that the court may commit in the exercise of
its jurisdiction is not correctible through the original special civil action
of certiorari.[35] Appeal from a final disposition of the Court
of Appeals, as in the case at bar, is by way of a petition for review under
Rule 45.[36]
In the petition at bar,
Riviera posits the view that its right of first refusal was totally disregarded
or violated by Reyes by the latter’s sale of the subject property to Cypress
and Cornhill. It contends that the
right of first refusal principally amounts to a right to match in the sense
that it needs another offer for the right to be exercised.
The concept and
interpretation of the right of first refusal and the consequences of a breach
thereof evolved in Philippine juristic sphere only within the last decade. It all started in 1992 with Guzman,
Bocaling & Co. v. Bonnevie[37] where the Court held that a lease with a
proviso granting the lessee the right of first priority “all things and
conditions being equal” meant that there should be identity of the terms and
conditions to be offered to the lessee and all other prospective buyers, with
the lessee to enjoy the right of first priority. A deed of sale executed in favor of a third party who cannot be
deemed a purchaser in good faith, and which is in violation of a right of first
refusal granted to the lessee is not voidable under the Statute of Frauds but
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in
the case of Ang Yu Asuncion v. Court of Appeals,[38] the Court en banc departed from the
doctrine laid down in Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a contract of sale
which violated the right of first refusal.
The Court held that the so-called “right of first refusal” cannot be
deemed a perfected contract of sale under Article 1458 of the New Civil Code
and, as such, a breach thereof decreed under a final judgment does not entitle
the aggrieved party to a writ of execution of the judgment but to an action for
damages in a proper forum for the purpose.
In the 1996 case of Equatorial
Realty Development, Inc. v. Mayfair Theater, Inc.,[39] the Court en banc reverted back to
the doctrine in Guzman Bocaling & Co. v. Bonnevie stating that rescission is a relief allowed for the protection of one
of the contracting parties and even third persons from all injury and damage
the contract may cause or to protect some incompatible and preferred right by
the contract.
Thereafter in 1997, in Parañaque
Kings Enterprises, Inc. v. Court of Appeals,[40] the Court affirmed the nature of and the
concomitant rights and obligations of parties under a right of first
refusal. The Court, summarizing the
rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty Development, Inc. v.
Mayfair Theater, Inc.,
held that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the
price for which they were finally sold to a third person should have likewise
been first offered to the former.
Further, there should be identity of terms and conditions to be offered
to the buyer holding a right of first refusal if such right is not to be
rendered illusory. Lastly, the basis of
the right of first refusal must be the current offer to sell of the seller or
offer to purchase of any prospective buyer.
Thus, the prevailing
doctrine is that a right of first refusal means identity of terms and
conditions to be offered to the lessee and all other prospective buyers and a
contract of sale entered into in violation of a right of first refusal of
another person, while valid, is rescissible.
However, we must remember
that general propositions do not decide specific cases. Rather, laws are interpreted in the context
of the peculiar factual situation of each proceeding. Each case has its own flesh and blood and cannot be ruled upon on
the basis of isolated clinical classroom principles.[41] Analysis and construction should not be
limited to the words used in the contract, as they may not accurately reflect
the parties’ true intent.[42] The court must read a contract as the
average person would read it and should not give it a strained or forced
construction.[43]
In the case at bar, the
Court finds relevant and significant the cardinal rule in the interpretation of
contracts that the intention of the parties shall be accorded primordial
consideration and in case of doubt, their contemporaneous and subsequent acts
shall be principally considered.[44] Where the parties to a contract have given
it a practical construction by their conduct as by acts in partial performance,
such construction may be considered by the court in construing the contract,
determining its meaning and ascertaining the mutual intention of the parties at
the time for contracting. The parties’
practical construction of their contract has been characterized as a clue or
index to, or as evidence of, their intention or meaning and as an important,
significant, convincing, persuasive, or influential factor in determining the
proper construction of the contract.[45]
An examination of the
attendant particulars of the case do not persuade us to uphold Riviera’s
view. As clearly shown by the records
and transcripts of the case, the actions of the parties to the contract of
lease, Reyes and Riviera, shaped their understanding and interpretation of the
lease provision “right of first refusal” to mean simply that should the lessor
Reyes decide to sell the leased property during the term of the lease, such
sale should first be offered to the lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a
series of negotiations on the price per square meter of the subject property
with neither party, especially Riviera, unwilling to budge from his offer, as
evidenced by the exchange of letters between the two contenders.
It can clearly be
discerned from Riviera’s letters dated December 2, 1988 and February 4, 1989
that Riviera was so intractable in its position and took obvious advantage of
the knowledge of the time element in its negotiations with Reyes as the
redemption period of the subject foreclosed property drew near. Riviera strongly exhibited a “take-it or
leave-it” attitude in its negotiations with Reyes. It quoted its “fixed and final” price as Five Thousand Pesos
(P5,000.00) and not any peso more. It
voiced out that it had other properties to consider so Reyes should decide and
make known its decision “within fifteen days.” Riviera, in its letter dated
February 4, 1989, admittedly, even downgraded its offer when Reyes offered anew
the property to it, such that whatever amount Reyes initially receives from
Riviera would absolutely be insufficient to pay off the redemption price of the
subject property. Naturally, Reyes had
to disagree with Riviera’s highly disadvantageous offer.
Nary a howl of protest or
shout of defiance spewed forth from Riviera’s lips, as it were, but a seemingly
whimper of acceptance when the counsel of Reyes strongly expressed in a letter
dated December 5, 1989 that Riviera had lost its right of first refusal. Riviera cannot now be heard that had it been
informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of Cypress
and Cornhill it would have matched said price.
Its stubborn approach in its negotiations with Reyes showed
crystal-clear that there was never any need to disclose such information and
doing so would be just a futile effort on the part of Reyes. Reyes was under no obligation to disclose the
same. Pursuant to Article 1339[46] of the New Civil Code, silence or
concealment, by itself, does not constitute fraud, unless there is a special
duty to disclose certain facts, or unless according to good faith and the
usages of commerce the communication should be made.[47] We apply the general rule in the case at bar
since Riviera failed to convincingly show that either of the exceptions are
relevant to the case at bar.
In sum, the Court finds
that in the interpretation of the right of first refusal as understood by the
parties herein, the question as to what is to be included therein or what is
meant by the same, as in all other provisions of the contract, is for the
parties and not for the court to determine, and this question may not be
resolved by what the parties might have provided had they thought about it,
which is evident from Riviera claims, or by what the court might conclude
regarding abstract fairness.[48]
The Court would be
rewriting the contract of Reyes and Riviera under the guise of construction
were we to interpret the right of first refusal as Riviera propounds it,
despite a contrary construction as exhibited by its actions. A court, even the Supreme Court, has no
right to make new contracts for the parties or ignore those already made by them,
simply to avoid seeming hardships.
Neither abstract justice nor the rule of liberal construction justifies
the creation of a contract for the parties which they did not make themselves
or the imposition upon one party to a contract of an obligation not assumed.[49]
On the last error
attributed to the Court of Appeals which is the effect on the jurisdiction of
the appellate court of the non-substitution of Reyes, who died during the
pendency of the appeal, the Court notes that when Riviera filed its petition
with this Court and assigned this error, it later filed on October 27, 1994 a
Manifestation[50] with the Court of Appeals stating that it
has discovered that Reyes is already dead, in view of which the appellate court
issued a Resolution dated December 16, 1994 which noted the manifestation of
Riviera and directed the counsel of Reyes to submit a copy of the latter’s
death certificate and to file the proper motion for substitution of party.[51] Complying therewith, the necessary motion
for substitution of deceased Reyes, who died on January 7, 1994, was filed by
the heirs, namely, Estefania B. Reyes, Juanita R. de la Rosa, Juan B. Reyes,
Jr. and Fidel B. Reyes.[52] Acting on the motion for substitution, the
Court of Appeals granted the same.[53]
Notwithstanding the foregoing,
Section 16[54] and 17[55] of Rule 3 of the Revised Rules of Court,
upon which Riviera anchors its argument, has already been amended by the 1997
Rules of Civil Procedure.[56] Even applying the old Rules, the failure of
a counsel to comply with his duty under Section 16 of Rule 3 of the Revised
Rules of Court, to inform the court of the death of his client and no
substitution of such is effected, will not invalidate the proceedings and the
judgment thereon if the action survives the death of such party,[57] as this case does, since the death of Reyes
did not extinguish his civil personality.
The appellate court was well within its jurisdiction to proceed as it
did with the case since the death of a party is not subject to its judicial
notice. Needless to stress, the purpose
behind the rule on substitution of parties is the protection of the right of
every party to due process. This
purpose has been adequately met in this case since both parties argued their
respective positions through their pleadings in the trial court and the
appellate court. Besides, the Court has
already acquired jurisdiction over the heirs of Reyes by voluntarily submitting
themselves to our jurisdiction.[58]
In view of all the
foregoing, the Court is convinced that the appellate court committed no
reversible error in its challenged Decision.
WHEREFORE, the instant petition is hereby DENIED, and
the Decision of the Court of Appeals dated June 6, 1994 in CA-G.R. CV No. 26513
is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
Bellosillo, (Chairman),
Mendoza, and Quisumbing, JJ., concur.
[1] Penned by Associate
Justice Ricardo J. Francisco and concurred in by Associate Justices Ramon A.
Barcelona and Hector L. Hofilena, Rollo, pp. 126-135.
[2] Special Seventh
Division.
[3] Penned by Judge Rodolfo
A. Ortiz, Rollo, pp. 115-125.
[4] Original Record, pp.
1-5.
[5] Original Record, pp.
6-11.
[6] TSN, February 12,
1990, pp. 17-18.
[7] Original Record, p.
8.
[8] TSNs, February 5,
1990, pp. 17-18; February 12, 1990, pp. 18-22.
[9] TSNs, February 5,
1990, pp. 17, 21; February 12, 1990, p 30.
[10] Original Record, p.
66.
[11] Original Record, p.
67.
[12] TSN, February 12,
1990, pp. 28-30.
[13] TSN, February 5,
1990, p. 33.
[14] Original Record, p.
68; TSN, February 5, 1990, pp. 25-26.
[15] Original Record, p.
69.
[16] TSNs, February 12, 1990,
pp. 33-34; February 14, 1990, pp. 9-10.
[17] TSNs, February 12,
1990, pp. 34-37; February 14, 1990, pp. 10, 15-16, 23-24.
[18] TSNs, February 12,
1990, pp. 48-49; February 14, 1990, pp. 12-15.
[19] TSN, February 12,
1990, pp. 37-41, 54-56.
[20] Original Record, pp.
72-73.
[21] TSN, February 5,
1990, p. 35.
[22] TSN, February 5,
1990, pp. 40-41, 56-57.
[23] TSN, February 12,
1990, pp. 60-61.
[24] TSN, February 14,
1990, pp. 16-17, 24.
[25] Original Record, pp.
14-15.
[26] Original Record, p.
80.
[27] Original Record, p.
71.
[28] See Note No. 3, supra.
[29] Rollo, pp.
43-114.
[30] See Note No. 1, supra.
[31] Rollo, pp.
136-155.
[32] Rollo, p.
186.
[33] Rollo, pp.
19-20.
[34] Toyota Autoparts,
Philippines, Inc. v. Director of the Bureau of Labor Relations of the
Department of Labor and Employment, 304 SCRA 95, 105 [1999] citing Fernando v.
Vasquez 31 SCRA 288 [1970].
[35] Asian Trading
Corporation v. Court of Appeals, 303 SCRA 152, 162 [1999]; Jamer v.
National Labor Relations Commission, 278 SCRA 632, 646 [1997]; Lalican v.
Vergara, 276 SCRA 518, 529 [1997].
[36] National Irrigation
Administration v. Court of Appeals, 318 SCRA 255, 264 [1999]; Director
of Lands v. Court of Appeals, 276 SCRA 276, 282 [1997].
[37] 206 SCRA 668 [1992].
[38] 238 SCRA 602 [1994].
[39] 264 SCRA 483 [1996].
[40] 268 SCRA 727 [1997]. See also Litonjua v. L & R
Corporation, 320 SCRA 405 [1999] and Rosencor Development Corporation and Rene
Joaquin v. Paterno Inquing, Irene Guillermo, Federico Bantugan, Fernando
Magbanua and Lizza Tiangco, G.R. No. 140479, March 8, 2001.
[41] Equatorial Realty
Development, Inc. v. Mayfair Theatre, Inc., G.R. No. 133879, November
21, 2001, pp. 1-2.
[42] Carceller v.
Court of Appeals, 302 SCRA 718, 725 [1999].
[43] 17 Am Jur 2d Contracts §336.
[44] Article 1371, New
Civil Code; Agro Conglomerates, Inc. v. Court of Appeals, 348 SCRA 450, 459
[2000]; Matanguihan v. Court of Appeals, 275 SCRA 380, 389 [1997];
Tanguilig v. Court of Appeals, 266 SCRA 78, 84 [1997]; Manila Surety
& Fidelity Co., Inc. v. Court of Appeals, 191 SCRA 805, 812 [1990];
Mercantile Insurance Co., Inc. v. Felipe Ysmael, Jr. & Co., Inc.,
169 SCRA 66, 74 [1989]; GSIS v. Court of Appeals, 145 SCRA 311, 318-319
[1986].
[45] Javier v.
Court of Appeals, 183 SCRA 171, 179 [1990]; 17A C.J.S. Contracts § 325.
[46] Art. 1339. Failure to disclose facts, when there is a
duty to reveal them, as when the parties are bound by confidential relations,
constitutes fraud.
[47] Rural Bank of Sta.
Maria, Pangasinan v. Court of Appeals, 314 SCRA 255, 270 [1999].
[48] Stockton Dry Goods
Co. v. Girsh, 36 Cal 2d 677, 227 P2d 1, 22 ALR 2d 1460.
[49] Collins v.
Northwest Casualty Co., 180 Wash 347, 39 P2d 986, 97 ALR 1235.
[50] Rollo, pp.
187-188.
[51] Rollo, p.
344.
[52] Rollo, pp.
345-349.
[53] Rollo, p.
351.
[54] Sec. 16. Duty of attorney upon death, incapacity, or
incompetency of party. – Whenever a party to a pending case dies, becomes
incapacitated or incompetent, it shall be the duty of his attorney to inform
the court promptly of such death, incapacity or incompetency, and to give the
name and residence of his executor, administrator, guardian or other legal representative.
[55] Sec. 17. Death of a party. After a party dies and the claim is not thereby extinguished, the
court shall order, upon proper notice, the legal representative of the
deceased, within a period of thirty (30) days, or within such time as may be
granted. If the legal representative
fails to appear within said time, the court may order the opposing party to
procure the appointment of a legal representative of the deceased within a time
to be specified by the court, and the representative shall immediately appear
for and on behalf of the interest of the deceased. The court charges involved in procuring such appointment, if
defrayed by the opposing party, may be recovered as costs. The heirs of the deceased may be allowed to
be substituted for the deceased, without requiring the appointment of an
executor or administrator and the court may appoint guardian ad litem
for the minor heirs.
[56] Now under Sec. 16, which reads:
Sec. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal representative or representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice.
If no legal representative is
named by the counsel for the deceased party, or if the one so named shall fail
to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or
administrator for the estate of the deceased and the latter shall immediately
appear for and on behalf of the deceased.
The court charges in procuring such appointment, if defrayed by the
opposing party, may be recovered as costs.
[57] Benavidez v.
Court of Appeals, 313 SCRA 714, 722 [1999]; Florendo, Jr. v. Coloma, 129
SCRA 304, 310 [1984].
[58] Cordova v.
Tornilla, 246 SCRA 430, 432 [1995].