ESTATE OF
and WENIFREDA T. LLENADO, in
her capacity as (a) Administratrix of
the Estate of
(b) Judicial Guardian of the Minor
children of
her Own behalf as the Surviving Spouse
and Legal Heir of
Petitioners, Present:
Ynares-Santiago, J. (Chairperson),
- versus - Carpio,*
Chico-Nazario,
Nachura, and
Peralta, JJ.
EDUARDO
LLENADO, JORGE
LLENADO,
FELIZA GALLARDO
VDA. DE
LLENADO and REGISTER
OF DEEDS of
Metro
Respondents.
March 4, 2009
x
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x
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the May 30, 2000 Decision[1] of
the Court of Appeals in CA-G.R. CV No. 58911 which reversed the May 5, 1997 Decision[2] of
the Regional Trial Court of Valenzuela City, Branch 75 in Civil Case No. 4248-V-93,
and the October 6, 2000 Resolution[3] which
denied the motion for reconsideration.
The appellate court dismissed for lack of merit the complaint for
annulment of deed of conveyance, title and damages filed by petitioner against
herein respondents.
The subject of this controversy is a
parcel of land denominated as Lot 249-D-1 (subject lot) consisting of 1,554 square
meters located in Barrio Malinta, Valenzuela, Metro Manila and registered in
the names of Eduardo Llenado (Eduardo) and Jorge Llenado (Jorge) under Transfer
of Certificate of Title (TCT) No. V-1689.[4] The subject lot once formed part of
On
Shortly thereafter or on
Upon the death of Orlando on
Sometime in 1993, Eduardo informed Wenifreda
of his desire to take over the subject lot. However, the latter refused to vacate the
premises despite repeated demands. Thus,
on
On
Wenifreda appealed to the Regional
Trial Court of Valenzuela, Metro Manila, which reversed the decision of the court
a quo. Thus, Eduardo appealed to the Court of Appeals
which rendered a Decision[8] on
Previously, after Eduardo instituted
the aforesaid unlawful detainer case on September 24, 1993, herein petitioner Wenifreda,
in her capacity as administratrix of the estate of Orlando Llenado, judicial
guardian of their minor children, and surviving spouse and legal heir of
Orlando, commenced the subject Complaint,[11]
later amended, on November 10, 1993 for annulment of deed of conveyance, title and
damages against herein respondents Eduardo, Jorge, Feliza Llenado (mother of
the Llenado brothers), and the Register of Deeds of Valenzuela, Metro Manila. The case was docketed as Civil Case No.
4248-V-93 and raffled to Branch 75 of the Regional Trial Court of Valenzuela,
Metro Manila.
Petitioner alleged that the transfer
and conveyance of the subject lot by Cornelio in favor of respondents Eduardo
and Jorge, was fraudulent and in bad faith considering that the March 31, 1978 Agreement
provided that while the lease is in force, the subject lot cannot be sold,
transferred or conveyed to any third party; that the period of the lease was
until December 3, 1987 with the option to renew granted to Orlando; that the subject
lot was transferred and conveyed to respondents Eduardo and Jorge on January
29, 1987 when the lease was in full force and effect making the sale null and
void; that Cornelio verbally promised Orlando that in case he (Cornelio) decides
to sell the subject lot, Orlando or his heirs shall have first priority or
option to buy the subject lot so as not to prejudice Orlando’s business and
because Orlando is the owner of the property adjacent to the subject lot; and
that this promise was wantonly disregarded when Cornelio sold the said lot to respondents
Jorge and Eduardo.
In their Answer,[12] respondents
Eduardo and Jorge claimed that they bought the subject lot from their father,
Cornelio, for value and in good faith; that the lease agreement and its
supplement were not annotated at the back of the mother title of the subject
lot and do not bind them; that said agreements are personal only to Cornelio
and Orlando; that the lease expired upon the death of Orlando on November 7,
1983; that they were not aware of any verbal promise to sell the subject lot
granted by Cornelio to Orlando and, even if there was, said option to buy is
unenforceable under the statute of frauds.
After the parties presented their
respective evidence, the Regional Trial Court rendered judgment on
WHEREFORE, PREMISES CONSIDERED, this Court finds the [petitioner’s] civil action duly established by preponderance of evidence, renders judgment (adjudicates) in favor of the [petitioner], Estate of Orlando Llenado represented by Wenifreda Llenado, and against [respondents] e.g. Jorge, Eduardo, Felisa Gallardo, all surnamed Llenado, and the Register of Deeds of Valenzuela, Metro Manila, as follows:
1) It hereby judicially declare as non-existence (sic) and null and void, the following:
a) The Kasulatan Sa Ganap na Kasunduan or Deed of Sale;
b) TCT- Transfer Certificate of Title No. V-9440, in the name of [respondent] Eduardo Llenado, TCT- Transfer Certificate of Title No. V-1689, in the name of Jorge Llenado, and Eduardo Llenado, and all deeds, documents or proceedings leading to the issuance of said title, and all subsequent title issued therefrom and likewise whatever deeds, documents or proceedings leading to the issuance of said subsequent titles;
2) It hereby orders the reconveyance of the said properties embraced in the said TCTs-Transfer Certificate of Title Nos. V-9440 and V-1689 to the [petitioner] for the same consideration, or purchase price, paid by [respondents] Eduardo Llenado and Jorge Llenado for the same properties;
3) It hereby orders [respondent], Register of Deeds of Valenzuela, Metro Manila, to cause the issuance of new transfer certificates of title over the said property in the name of the [petitioner];
4) And, because this Court is not only a court of law, but of equity, it hereby rendered the following damages to be paid by the [respondents], as the [respondents] litigated under bonafide assertions that they have meritorious defense, viz:
a) P400,000.00 as moral damages;
b) 10,000.00 as nominal damages;
c) 10,000.00 as temperate damages;
d) 10,000.00 as exemplary damages;
e) 10,000.00 attorney’s fees on the basis of quantum merit; and
f) costs of suit.
SO ORDERED.[13]
The Regional Trial Court found that
upon the death of
Respondents appealed before the Court
of Appeals which rendered the assailed
Upon the denial of its motion for
reconsideration, petitioner is now before this Court on the following assignment
of errors:
[T]he Court of Appeals erred:
1.- In finding and concluding that there is no legal basis to annul the deed of conveyance involved in the case and in not applying R.A. No. 3516, further amending R.A. No. 1162; and
2.- In not finding and holding as null and void the subject deed of conveyance, the same having been executed in direct violation of an expressed covenant in said deed and in total disregard of the pre-emptive, or preferential rights of the herein petitioners to buy the property subject of their lease contract under said R.A. No. 3516, further amending R.A. No. 1162.[14]
The
petition lacks merit.
Petitioner contends that the heirs of
This issue is being raised for the
first time on appeal. True, in Mataas Na Lupa Tenants Association, Inc.,
the Court explained that Section 1 of R.A. No. 1162, as amended by R.A. No.
3516, authorizes the expropriation of any
piece of land in the City of Manila, Quezon City and suburbs which have been
and are actually being leased to tenants for at least 10 years, provided
said lands have at least 40 families of tenants thereon.[19] Prior to and pending the expropriation, the
tenant shall have a right of first refusal or preferential right to buy the
leased premises should the landowner sell the same. However, compliance with the conditions for
the application of the aforesaid law as well as the qualifications of the heirs
of Orlando to be beneficiaries thereunder were never raised before the trial
court, or even the Court of Appeals, because petitioner solely anchored its
claim of ownership over the subject lot on the alleged violation of the prohibitory
clause in the lease contract between Cornelio and Orlando, and the alleged non-performance
of the right of first refusal given by Cornelio to
At any rate, the allegations in the Complaint
and the evidence presented during the trial below do not establish that Orlando
or his heirs are covered by R.A. No. 1162, as amended. It was not alleged nor shown that the subject
lot is part of the landed estate or haciendas in the City of Manila which were
authorized to be expropriated under said law; that the Solicitor General has
instituted the requisite expropriation proceedings pursuant to Section 2[21]
thereof; that the subject lot has been actually leased for a period of at least
ten (10) years; and that the subject lot has at least forty (40) families of
tenants thereon. Instead, what was merely
established during the trial is that the subject lot was leased by Cornelio to
In fine, the only issue for our
determination is whether the sale of the subject lot by Cornelio to his sons, respondents
Eduardo and Jorge, is invalid for (1) violating the prohibitory clause in the
lease agreement between Cornelio, as lessor-owner, and Orlando, as lessee; and
(2) contravening the right of first refusal of
It is not disputed that the lease
agreement contained an option to renew and a prohibition on the sale of the
subject lot in favor of third persons while the lease is in force. Petitioner claims that when Cornelio sold the
subject lot to respondents Eduardo and Jorge the lease was in full force and
effect, thus, the sale violated the prohibitory clause rendering it invalid. In
resolving this issue, it is necessary to determine whether the lease agreement
was in force at the time of the subject sale and, if it was in force, whether
the violation of the prohibitory clause invalidated the sale.
Under Article 1311 of the Civil Code,
the heirs are bound by the contracts entered into by their
predecessors-in-interest except when the rights and obligations therein are not
transmissible by their nature, by stipulation or by provision of law. A contract of lease is, therefore, generally
transmissible to the heirs of the lessor or lessee. It involves a property right and, as such, the
death of a party does not excuse non-performance of the contract.[29] The rights and obligations pass to the heirs
of the deceased and the heir of the deceased lessor is bound to respect the period
of the lease.[30] The same principle applies to the option to
renew the lease. As a general rule, covenants to renew a lease are not personal
but will run with the land.[31] Consequently, the successors-in-interest of
the lessee are entitled to the benefits, while that of the lessor are burdened
with the duties and obligations, which said covenants conferred and imposed on
the original parties.
The foregoing principles apply with
greater force in this case because the parties expressly stipulated in the
March 31, 1978 Agreement that Romeo, as lessee, shall transfer all his rights
and interests under the lease contract with option to renew “in favor of the
party of the Third Part (Orlando), the latter’s
heirs, successors and assigns”[32] indicating
the clear intent to allow the transmissibility of all the rights and interests of
Orlando under the lease contract unto his heirs, successors or assigns. Accordingly, the rights and obligations under
the lease contract with option to renew were transmitted from
It does not follow, however, that the
lease subsisted at the time of the sale of the subject lot on
A clause found in an agreement relative to the renewal of the lease agreement at the option of the lessee gives the latter an enforceable right to renew the contract in which the clause is found for such time as provided for. The agreement is understood as being in favor of the lessee, and the latter is authorized to renew the contract and to continue to occupy the leased property after notifying the lessor to that effect. A lessor’s covenant or agreement to renew gives a privilege to the tenant, but is nevertheless an executory contract, and until the tenant has exercised the privilege by way of some affirmative act, he cannot be held for the additional term. In the absence of a stipulation in the lease requiring notice of the exercise of an option or an election to renew to be given within a certain time before the expiration of the lease, which of course, the lessee must comply with, the general rule is that a lessee must exercise an option or election to renew his lease and notify the lessor thereof before, or at least at the time of the expiration of his original term, unless there is a waiver or special circumstances warranting equitable relief.
There is no dispute that in the instant case, the lessees (private respondents) were granted the option to renew the lease for another five (5) years after the termination of the original period of fifteen years. Yet, there was never any positive act on the part of private respondents before or after the termination of the original period to show their exercise of such option. The silence of the lessees after the termination of the original period cannot be taken to mean that they opted to renew the contract by virtue of the promise by the lessor, as stated in the original contract of lease, to allow them to renew. Neither can the exercise of the option to renew be inferred from their persistence to remain in the premises despite petitioners’ demand for them to vacate. x x x.[35]
Similarly, the election of the option
to renew the lease in this case cannot be inferred from petitioner Wenifreda’s
continued possession of the subject lot and operation of the gasoline station even
after the death of
Given the foregoing, it becomes unnecessary
to resolve the issue on whether the violation of the prohibitory clause
invalidated the sale and conferred ownership over the subject lot to Orlando’s
heirs, who are mere lessees, considering that at the time of said sale on
January 29, 1987 the lease agreement had long been terminated for failure of
Orlando or his heirs to validly renew the same. As a result, there was no obstacle to the sale
of the subject lot by Cornelio to respondents Eduardo and Jorge as the
prohibitory clause under the lease contract was no longer in force.
Petitioner also anchors its claim
over the subject lot on the alleged verbal promise of Cornelio to
The question as to whether a right of
first refusal may be proved by parole evidence has been answered in the
affirmative by this Court in Rosencor
Development Corporation v. Inquing:[36]
We have previously held that not all agreements “affecting land” must be put into writing to attain enforceability. Thus, we have held that the setting up of boundaries, the oral partition of real property, and an agreement creating a right of way are not covered by the provisions of the statute of frauds. The reason simply is that these agreements are not among those enumerated in Article 1403 of the New Civil Code.
A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the New Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involved, but of the right of first refusal over the property sought to be sold.
It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As such, a right of first refusal need not be written to be enforceable and may be proven by oral evidence.[37]
In the instant case, the Regional Trial
Court ruled that the right of first refusal was proved by oral evidence while
the Court of Appeals disagreed by ruling that petitioner merely relied on the
allegations in its Complaint to establish said right. We have reviewed the records and find that no
testimonial evidence was presented to prove the existence of said right. The testimony of petitioner Wenifreda made no
mention of the alleged verbal promise given by Cornelio to
WHEREFORE, the
petition is DENIED. The May 30, 2000 Decision of the Court of
Appeals in CA-G.R. CV No. 58911 dismissing the complaint for annulment of deed
of conveyance, title and damages, and the October 6, 2000 Resolution denying
the motion for reconsideration, are AFFIRMED.
Costs against petitioner.
SO ORDERED.
CONSUELO
YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA
Associate
Justice Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ATTESTATION
I
attest that the conclusions in the above decision were reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
* In lieu of Associate Justice Ma. Alicia Austria-Martinez, per Special Order No. 568 dated February 12, 2009.
[1] Rollo, pp. 29-39; penned by Presiding Justice Salome A. Montoya and concurred in by Associate Justices Romeo J. Callejo, Sr. (later a member of this Court) and Martin S. Villarama, Jr.
[2]
[3]
[4] This lot was later subdivided into three smaller lots under TCT Nos. V-9438, V-9439 and V-9440.
[5] Exhibit “F,” records, pp. 176-179.
[6] Exhibit “G,” records, pp. 180-181.
[7] Exhibit “O,” records, pp. 192-194.
[8] Rollo, pp. 212-224.
[9]
[10]
[11] Records, pp. 1-8.
[12]
[13]
[14] Rollo, p. 21.
[15] “An Act Providing For The Expropriation Of Landed
Estates Or Haciendas Or Lands Which Formed Part Thereof In The City Of Manila,
Their Subdivision Into Small Lots, And The Sale Of Such Lots At Cost Or Their
Lease On Reasonable Terms, And For Other Purposes.” Effective
[16]
“An Act To Further Amend Certain Sections Of Republic Act Numbered Eleven
Hundred and Sixty-Two, Entitled “An Act Providing For the Expropriation of
Landed Estates Or Haciendas Or Lands Which Formerly Formed Part Thereof Or Any
Piece Of Land In The City Of Manila, Quezon City and Suburbs, Their Subdivision
Into Small Lots At Costs Or Their Lease On Reasonable Terms, And For Other
Purposes.’” Effective
[17] Section 5. From the approval of this Act, and even before the commencement of the expropriation herein provided, ejectment proceedings against any tenant or occupant of any landed estates or haciendas or lands herein authorized to be expropriated, shall be suspended for a period of two years, upon motion of the defendant, if he pays in current rentals, and such suspension shall continue upon the filing of expropriation proceedings until the final determination of the latter: Provided, however, That if any tenant or occupant is in arrears in the payment of rentals or any amount due in favor of the owners of said landed estates or haciendas or lands, the amount legally due shall be liquidated either in cash or by surety bond, and shall be payable in eighteen equal monthly installments from the time of liquidation, but this payment of rentals in arrears shall not be a condition precedent to the suspension of ejectment proceedings: Provided, further, That the rentals being collected from the tenants of the landed estates or haciendas or lands herein authorized to be expropriated, shall not be increased above the amounts of rentals being charged as of December thirty-one, nineteen hundred and fifty-three, except in cases where there are existing rental contracts for a fixed period which expired on said date, in which case the court shall fix a reasonable rental not exceeding eight per centum of the assessed value on December thirty-one, nineteen hundred and fifty-three, but, in any case, if after said date there has been an increase in assessment, the rental may also be increased by the corresponding amount of actual increase in the land tax: Provided, furthermore, That no lot or portion thereof actually occupied by a tenant or occupant shall be sold by the landowner to any other person that such tenant or occupant, unless the latter renounce in a public instrument his rights under this Act: Provided, finally, That if there shall be tenant who have constructed bona fide improvements on the lots leased by them, the rights of these tenants should be recognized in the sale or in the lease of the lots, the limitation as to area in Section three notwithstanding
[18] 215 Phil. 18 (1984).
[19]
[20] Natalia v. Court of Appeals, G.R. No. 116216, June 20, 1997, 274 SCRA 527, 538-539.
[21] Section 2. Immediately upon the
availability of the necessary funds by the Congress of the
[22]
Effective
[23] Supra note 18 at 32.
[24]
G.R. No. 148562,
[25] Section 4. Proclamation of Urban Land Redorm Zones. The President shall proclaim specific parcels of urban and urbanizable lands as Urban Land Reform Zones, otherwise known as Urban Zones for purposes of this Decree x x x.
[26] Supra note 24 at 201.
[27] Section 6. Land Tenancy in Urban Land Reform Areas. Within the Urban Zones legitimate tenants who have resided on the land for ten years or more who have built their homes on the land and residents who have legally occupied the lands by contract, continuously for the last ten years shall not be dispossessed of the land and shall be allowed the right of first refusal to purchase the same within a reasonable time and at reasonable prices, under terms and conditions to be determines by the Urban Zone Expropriation and Land Management Committee created by Section 8 of this Decree.
[28] Supra note 24 at 200-201.
[29] DKC Holdings Corporation v. Court of Appeals, 386 Phil. 107, 118 (2000).
[30]
[31] 50 Am Jur 2d LANDLORD AND TENANT § 1194.
[32] Records, p. 14.
[33] Mercy’s Incorporated v. Verde, G.R. No.
L-21571,
[34]
G.R. Nos. 68580-81,
[35]
[36] 406 Phil. 565 (2001).
[37]
[38] Records, p. 87.