Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

ROBERTO D. TUAZON, G.R. No. 168325

Petitioner,

- versus -
Present:
LOURDES Q. DEL ROSARIO-SUAREZ,
CATALINA R. SUAREZ-DE LEON, CORONA, C. J., Chairperson,
WILFREDO DE LEON, MIGUEL LUIS S. DE LEONARDO-DE CASTRO,
LEON, ROMMEL LEE S. DE LEON, and DEL CASTILLO,
GUILLERMA L. SANDICO-SILVA, as ABAD, and
attorney-in-fact of the defendants, PEREZ, JJ.
exceptLourdes Q. Del Rosario-Suarez,
Respondents.
Promulgated:
December 8, 2010
x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within
a certain period, and the lessee fails to accept the offer or to purchase on time, then the lessee loses his
right to buy the property and the owner can validly offer it to another.

This Petition for Review on Certiorari[1] assails the Decision[2] dated May 30, 2005 of the Court of Appeals
(CA) in CA-G.R. CV No. 78870, which affirmed the Decision[3] dated November 18, 2002 of the Regional
Trial Court (RTC), Branch 101, Quezon City in Civil Case No. Q-00-42338.
Factual Antecedents

Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of land, containing more
or less an area of 1,211 square meters located along Tandang Sora Street, BarangayOld Balara, Quezon
City and previously covered by Transfer Certificate of Title (TCT) No. RT-56118[4] issued by the Registry
of Deeds of Quezon City.
On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract of
Lease[5] over the abovementioned parcel of land for a period of three years. The lease commenced in
March 1994 and ended in February 1997. During the effectivity of the lease, Lourdes sent a letter[6] dated
January 2, 1995 to Roberto where she offered to sell to the latter subject parcel of land. She pegged the
price at P37,541,000.00 and gave him two years from January 2, 1995 to decide on the said offer.

On June 19, 1997, or more than four months after the expiration of the Contract of Lease, Lourdes
sold subject parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law Wilfredo De Leon,
and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon (the De Leons), for a total
consideration of only P2,750,000.00 as evidenced by a Deed of Absolute Sale[7] executed by the
parties. TCT No. 177986[8] was then issued by the Registry of Deeds of Quezon City in the name of the
De Leons.

The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the
premises. Roberto refused hence, the De Leons filed a complaint for Unlawful Detainer before the
Metropolitan Trial Court (MeTC) of Quezon City against him. On August 30, 2000, the MeTC rendered a
Decision[9] ordering Roberto to vacate the property for non-payment of rentals and expiration of the
contract.
Ruling of the Regional Trial Court

On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the RTC of
Quezon City a Complaint[10] for Annulment of Deed of Absolute Sale, Reconveyance, Damages and
Application for Preliminary Injunction against Lourdes and the De Leons. On November 13, 2000, Roberto
filed a Notice of Lis Pendens[11] with the Registry of Deeds of Quezon City.

On January 8, 2001, respondents filed An Answer with Counterclaim[12] praying that the Complaint
be dismissed for lack of cause of action. They claimed that the filing of such case was a mere leverage of
Roberto against them because of the favorable Decision issued by the MeTC in the ejectment case.

On September 17, 2001, the RTC issued an Order[13] declaring Lourdes and the De Leons in
default for their failure to appear before the court for the second time despite notice. Upon a Motion for
Reconsideration,[14] the trial court in an Order[15] dated October 19, 2001 set aside its Order of default.

After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale made
by Lourdes in favor of the De Leons as valid and binding. The offer made by Lourdes to Roberto did not
ripen into a contract to sell because the price offered by the former was not acceptable to the latter. The
offer made by Lourdes is no longer binding and effective at the time she decided to sell the subject lot to
the De Leons because the same was not accepted by Roberto. Thus, in a Decision dated November 18,
2002, the trial court dismissed the complaint. Its dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing

the above-entitled Complaint for lack of merit, and ordering the Plaintiff to pay the
Defendants, the following:

1. the amount of P30,000.00 as moral damages;

2. the amount of P30,000.00 as exemplary damages;
3. the amount of P30,000.00 as attorneys fees; and
4. cost of the litigation.

SO ORDERED.[16]

Ruling of the Court of Appeals

On May 30, 2005, the CA issued its Decision dismissing Robertos appeal and affirming the
Decision of the RTC.

Hence, this Petition for Review on Certiorari filed by Roberto advancing the following arguments:

I.
THE TRIAL COURT AND THE COURT OF APPEALS HAD DECIDED THAT THE
RIGHT OF FIRST REFUSAL EXISTS ONLY WITHIN THE PARAMETERS OF AN
OPTION TO BUY, AND DID NOT EXIST WHEN THE PROPERTY WAS SOLD LATER
TO A THIRD PERSON, UNDER FAVORABLE TERMS AND CONDITIONS WHICH
THE FORMER BUYER CAN MEET.

II.
WHAT IS THE STATUS OR SANCTIONS OF AN APPELLEE IN THE COURT OF
APPEALS WHO HAS NOT FILED OR FAILED TO FILE AN APPELLEES BRIEF?[17]

Petitioners Arguments

Roberto claims that Lourdes violated his right to buy subject property under
the principle of right of first refusal by not giving him notice and the opportunity to buy the property under
the same terms and conditions or specifically based on the much lower price paid by the De Leons.
Roberto further contends that he is enforcing his right of first refusal based on Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc.[18] which is the leading case on the right of first refusal.
Respondents Arguments

On the other hand, respondents posit that this case is not covered by the principle of right of first
refusal but an unaccepted unilateral promise to sell or, at best, a contract of option which was not
perfected. The letter of Lourdes to Roberto clearly embodies an option contract as it grants the latter only
two years to exercise the option to buy the subject property at a price certain of P37,541,000.00. As an
option contract, the said letter would have been binding upon Lourdes without need of any consideration,
had Roberto accepted the offer. But in this case there was no acceptance made neither was there a
distinct consideration for the option contract.

Our Ruling

The petition is without merit.

This case involves an option contract and not a contract

of a right of first refusal

In Beaumont v. Prieto,[19] the nature of an option contract is explained thus:

In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following
language:

A contract by virtue of which A, in consideration of the payment of a certain sum

to B, acquires the privilege of buying from, or selling to, B certain securities or properties
within a limited time at a specified price. (Story vs. Salamon, 71 N. Y., 420.)

From Vol. 6, page 5001, of the work Words and Phrases, citing the case of Ide vs. Leiser (24 Pac.,
695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken:

An agreement in writing to give a person the option to purchase lands within a

given time at a named price is neither a sale nor an agreement to sell. It is simply a
contract by which the owner of property agrees with another person that he shall
have the right to buy his property at a fixed price within a certain time. He does not
sell his land; he does not then agree to sell it; but he does sell something; that is, the right
or privilege to buy at the election or option of the other party. The second party gets in
praesenti, not lands, nor an agreement that he shall have lands, but he does get
something of value; that is, the right to call for and receive lands if he elects. The owner
parts with his right to sell his lands, except to the second party, for a limited period. The
second party receives this right, or rather, from his point of view, he receives the right to
elect to buy.
But the two definitions above cited refer to the contract of option, or, what amounts to the same
thing, to the case where there was cause or consideration for the obligation x x
x. (Emphasis supplied.)

On the other hand, in Ang Yu Asuncion v. Court of Appeals,[20] an elucidation on the right of first
refusal was made thus:

In the law on sales, the so-called right of first refusal is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458
of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per
se be brought within the purview of an option under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under Article 1319 of the same Code. An option or an
offer would require, among other things, a clear certainty on both the object and the cause
or consideration of the envisioned contract. In a right of first refusal, while the object
might be made determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter into a binding
juridical relation with another but also on terms, including the price, that obviously
are yet to be later firmed up. Prior thereto, it can at best be so described as merely
belonging to a class of preparatory juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would still be indefinite and inconclusive)
but by, among other laws of general application, the pertinent scattered provisions of the
Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it sanction an
action for specific performance without thereby negating the indispensable element of
consensuality in the perfection of contracts. It is not to say, however, that the right of first
refusal would be inconsequential for, such as already intimated above, an unjustified
disregard thereof, given, for instance, the circumstances expressed in Article 19 of the
Civil Code, can warrant a recovery for damages. (Emphasis supplied.)

From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first
refusal in that in the former, the option granted to the offeree is for a fixed period and at a determined
price. Lacking these two essential requisites, what is involved is only a right of first refusal.

In this case, the controversy is whether the letter of Lourdes to Roberto dated January 2, 1995 involved
an option contract or a contract of a right of first refusal. In its entirety, the said letter-offer reads:

206 Valdes Street

Josefa Subd. Balibago
Angeles City 2009
January 2, 1995
 Tuazon Const. Co.
986 Tandang Sora Quezon City

Dear Mr. Tuazon,

I received with great joy and happiness the big box of sweet grapes and ham, fit
for a kings party. Thanks very much.

I am getting very old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only
family. I need money to buy a house and lot and a farm with a little cash to start.

I am offering you to buy my 1211 square meter at P37,541,000.00 you can pay me in
dollars in the name of my daughter. I never offered it to anyone. Please shoulder the
expenses for the transfer. I wish the Lord God will help you buy my lot easily and you will
be very lucky forever in this place. You have all the time to decide when you can, but
not for 2 years or more.

I wish you long life, happiness, health, wealth and great fortune always!

I hope the Lord God will help you be the recipient of multi-billion projects aid from other
countries.
Thank you,
Lourdes Q. del Rosario vda de Suarez

It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two
years to buy the subject property at a price certain of P37,541,000.00. It being an option contract, the rules
applicable are found in Articles 1324 and 1479 of the Civil Code which provide:

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as something paid
or promised.

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price

certain is binding upon the promissor if the promise is supported by a consideration distinct
from the price.

It is clear from the provision of Article 1324 that there is a great difference between the effect of an
option which is without a consideration from one which is founded upon a consideration. If the option is
without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the
offeree at anytime before acceptance; if it is founded upon a consideration, the offeror cannot withdraw
his offer before the lapse of the period agreed upon.
The second paragraph of Article 1479 declares that an accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price. Sanchez v. Rigos[21] provided an interpretation of the said second
paragraph of Article 1479 in relation to Article 1324. Thus:

There is no question that under Article 1479 of the new Civil Code "an option to
sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported
by a consideration distinct from the price." This is clearly inferred from the context of said
article that a unilateral promise to buy or to sell, even if accepted, is only binding if
supported by consideration. In other words, "an accepted unilateral promise can only have
a binding effect if supported by a consideration, which means that the option can still be
withdrawn, even if accepted, if the same is not supported by any consideration. Hence, it
is not disputed that the option is without consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by appellee.

It is true that under Article 1324 of the new Civil Code, the general rule regarding
offer and acceptance is that, when the offerer gives to the offeree a certain period to
accept, "the offer may be withdrawn at any time before acceptance" except when the
option is founded upon consideration, but this general rule must be interpreted
as modified by the provision of Article 1479 above referred to, which applies to "a promise
to buy and sell" specifically. As already stated, this rule requires that a promise to sell to
be valid must be supported by a consideration distinct from the price.

In Diamante v. Court of Appeals,[22] this Court further declared that:

A unilateral promise to buy or sell is a mere offer, which is not converted into a
contract except at the moment it is accepted. Acceptance is the act that gives life to a
juridical obligation, because, before the promise is accepted, the promissor may
withdraw it at any time. Upon acceptance, however, a bilateral contract to sell and to
buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the
offeror, on the other hand, would be liable for damages if he fails to deliver the thing he
had offered for sale.

xxxx

Even if the promise was accepted, private respondent was not bound
thereby in the absence of a distinct consideration. (Emphasis ours.)

In this case, it is undisputed that Roberto did not accept the terms stated in the letter of Lourdes as
he negotiated for a much lower price. Robertos act of negotiating for a much lower price was a counter-
offer and is therefore not an acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides:
 Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance constitutes a counter-
offer. (Emphasis supplied.)

The counter-offer of Roberto for a much lower price was not accepted by Lourdes. There is
therefore no contract that was perfected between them with regard to the sale of subject property. Roberto,
thus, does not have any right to demand that the property be sold to him at the price for which it was sold
to the De Leons neither does he have the right to demand that said sale to the De Leons be annulled.

Equatorial Realty Development, Inc. v. Mayfair Theater,

Inc. is not applicable here

It is the position of Roberto that the facts of this case and that of Equatorial are similar in nearly all aspects.
Roberto is a lessee of the property like Mayfair Theater in Equatorial. There was an offer made to Roberto
by Lourdes during the effectivity of the contract of lease which was also the case in Equatorial. There were
negotiations as to the price which did not bear fruit becauseLourdes sold the property to the De Leons
which was also the case in Equatorial wherein Carmelo and Bauermann sold the property to
Equatorial. The existence of the lease of the property is known to the De Leons as they are related
to Lourdes while in Equatorial, the lawyers of Equatorial studied the lease contract of Mayfair over the
property. The property in this case was sold by Lourdes to the De Leons at a much lower price which is
also the case in Equatorial where Carmelo and Bauerman sold to Equatorial at a lesser price. It is
Robertos conclusion that as in the case of Equatorial, there was a violation of his right of first refusal and
hence annulment or rescission of the Deed of Absolute Sale is the proper remedy.

Robertos reliance in Equatorial is misplaced. Despite his claims, the facts in Equatorial radically differ from
the facts of this case. Roberto overlooked the fact that in Equatorial, there was an express provision in the
Contract of Lease that

(i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given
30-days exclusive option to purchase the same.

There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What
is involved here is a separate and distinct offer made by Lourdes through a letter dated January 2, 1995
wherein she is selling the leased property to Roberto for a definite price and which gave the latter a definite
period for acceptance. Roberto was not given a right of first refusal.The letter-offer of Lourdes did not form
part of the Lease Contract because it was made more than six months after the commencement of the
lease.

It is also very clear that in Equatorial, the property was sold within the lease period. In this case, the subject
property was sold not only after the expiration of the period provided in the letter-offer of Lourdes but also
after the effectivity of the Contract of Lease.

Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not bound thereby
because of the absence of a consideration distinct and separate from the price. The argument of Roberto
that the separate consideration was the liberality on the part of Lourdes cannot stand. A perusal of the
letter-offer of Lourdes would show that what drove her to offer the property to Roberto was her immediate
need for funds as she was already very old. Offering the property to Roberto was not an act of liberality on
the part of Lourdes but was a simple matter of convenience and practicality as he was the one most likely
to buy the property at that time as he was then leasing the same.

All told, the facts of the case, as found by the RTC and the CA, do not support Robertos claims that the
letter of Lourdes gave him a right of first refusal which is similar to the one given to Mayfair Theater in the
case of Equatorial. Therefore, there is no justification to annul the deed of sale validly entered into
by Lourdes with the De Leons.
What is the effect of the failure of Lourdes to file her
appellees brief at the CA?

Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her appellees brief before
the CA.

Certainly, the appellees failure to file her brief would not mean that the case would be automatically
decided against her. Under the circumstances, the prudent action on the part of the CA would be to
deem Lourdes to have waived her right to file her appellees brief. De Leon v. Court of Appeals,[23] is
instructive when this Court decreed:

On the second issue, we hold that the Court of Appeals did not commit grave
abuse of discretion in considering the appeal submitted for decision. The proper remedy
in case of denial of the motion to dismiss is to file the appellees brief and proceed with the
appeal. Instead, petitioner opted to file a motion for reconsideration which, unfortunately,
was pro forma. All the grounds raised therein have been discussed in the first resolution
of the respondent Court of Appeals. There is no new ground raised that might warrant
reversal of the resolution. A cursory perusal of the motion would readily show that it was
 a near verbatim repetition of the grounds stated in the motion to dismiss; hence, the filing
of the motion for reconsideration did not suspend the period for filing the appellees
brief. Petitioner was therefore properly deemed to have waived his right to file
appellees brief. (Emphasis supplied.)

In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in the RTC. He
obtained a favorable judgment and so defendant went to the CA. The appeal of defendant-appellant was
taken cognizance of by the CA but De Leon filed a Motion to Dismiss the Appeal with Motion to Suspend
Period to file Appellees Brief. The CA denied the Motion to Dismiss.De Leon filed a Motion for
Reconsideration which actually did not suspend the period to file the appellees brief. De Leon therefore
failed to file his brief within the period specified by the rules and hence he was deemed by the CA to have
waived his right to file appellees brief.
The failure of the appellee to file his brief would not result to the rendition of a decision favorable to the
appellant. The former is considered only to have waived his right to file the Appellees Brief. The CA has
the jurisdiction to resolve the case based on the Appellants Brief and the records of the case forwarded
by the RTC. The appeal is therefore considered submitted for decision and the CA properly acted on it.

WHEREFORE, the instant petition for review on certiorari is DENIED. The assailed Decision of
the Court of Appeals in CA-G.R. CV No. 78870, which affirmed the Decision dated November 18, 2002 of
the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-00-42338 is AFFIRMED.

SO ORDERED.
 Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

CEBU BIONIC BUILDERS SUPPLY, G.R. No. 154366

INC. and LYDIA SIA,
Petitioners, Present:

CORONA, C.J.,
- versus - Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEVELOPMENT BANK OF THE PERALTA,* and
PHILIPPINES, JOSE TO CHIP, PEREZ, JJ.
PATRICIO YAP and ROGER BALILA,
Respondents. Promulgated:

November 17, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO DE CASTRO, J.:

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the
Resolution[2] dated February 5, 2002 and the Amended Decision[3] dated July 5, 2002 of the Court
of Appeals in CA-G.R. CV No. 57216. In the Resolution dated February 5, 2002, the Court of
Appeals admitted the Motion for Reconsideration[4] of herein respondents Development Bank of
the Philippines (DBP), Jose To Chip, Patricio Yap and Roger Balila, notwithstanding the fact that
the same was filed more than six months beyond the reglementary period. Said motion prayed
for the reversal of the Court of Appeals Decision[5] dated February 14, 2001, which affirmed the
Decision[6] dated April 25, 1997 of the Regional Trial Court (RTC) of Cebu, Branch 8, in Civil Case
No. CEB-10104 that ruled in favor of petitioners. In the Amended Decision of July 5, 2002, the
Court of Appeals reversed its previous Decision dated February 14, 2001 and dismissed the
petitioners complaint for lack of merit.
The facts leading to the instant petition are as follows:

On June 2, 1981, the spouses Rudy R. Robles, Jr. and Elizabeth R. Robles entered into
a mortgage contract[7] with DBP in order to secure a loan from the said bank in the amount
of P500,000.00. The properties mortgaged were a parcel of land situated in Tabunoc, Talisay,
Cebu, which was then covered by Transfer Certificate of Title (TCT) No. T- 47783 of the Register
of Deeds of Cebu, together with all the existing improvements, and the commercial building to be
constructed thereon[8] (subject properties). Upon completion, the commercial building was named
the State Theatre Building.

On October 28, 1981, Rudy Robles executed a contract of lease in favor of petitioner Cebu Bionic
Builders Supply, Inc. (Cebu Bionic), a domestic corporation engaged in the construction business,
as well as the sale of hardware materials. The contract pertinently provides:

CONTRACT OF LEASE

KNOW ALL MEN BY THESE PRESENTS:

This Lease Contract made and entered into, by and between:

RUDY ROBLES, JR., Filipino, of legal age, married and resident of 173 Maria
Cristina Ext., Cebu City, hereinafter referred to as the LESSOR,

- and -

CEBU BIONIC BUILDER SUPPLY, represented by LYDIA SIA, Filipino, of legal

age, married and with address at 240 Magallanes St., Cebu City hereinafter known
as the LESSEE;

WITNESSETH:

The LESSOR is the owner of a commercial building along Tabunok, Talisay, Cebu,
known as the State Theatre Building.

The LESSOR agrees to lease unto the LESSEE and the LESSEE accepts the
lease from the LESSOR, a portion of the ground floor thereof, consisting of one (1)
unit/store space under the following terms and conditions:
 1. The LESSEE shall pay a monthly rental of One Thousand
(P1,000.00) Pesos, Philippine Currency. The rental is payable in advance within
the first five (5) days of the month, without need of demand;

2. That the term of this agreement shall start on November 1, 1981 and
shall terminate on the last day of every month thereafter; provided however that
this contract shall be automatically renewed on a month to month basis if no notice,
in writing, is sent to the other party to terminate this agreement after fifteen (15)
days from receipt of said notice;

xxxx

9. Should the LESSOR decide to sell the property during the term of this
lease contract or immediately after the expiration of the lease, the LESSEE shall
have the first option to buy and shall match offers from outside
parties.[9] (Emphases ours.)

The above contract was not registered by the parties thereto with the Registry of Deeds of Cebu.

Subsequently, the spouses Robles failed to settle their loan obligation with DBP. The latter
was, thus, prompted to effect extrajudicial foreclosure on the subject properties. [10] On February
6, 1987, DBP was the lone bidder in the foreclosure sale and thereby acquired ownership of the
mortgaged subject properties.[11] On October 13, 1988, a final Deed of Sale[12] was issued in favor
of DBP.

Meanwhile, on June 18, 1987, DBP sent a letter to Bonifacio Sia, the husband of petitioner Lydia
Sia who was then President of Cebu Bionic, notifying the latter of DBPs acquisition of the State
Theatre Building. Said letter reads:

June 18, 1987

Mr. Bonifacio Sia

Bionic Builders Inc.
State Theatre Bldg.
Tabunok, Talisay, Cebu

Sir:

This refers to the commercial space you are occupying in the acquired property of
the Bank, formerly owned by Rudy Robles, Jr.
 Please be informed that said property has been acquired through foreclosure on
February 6, 1987. Considering thereat, we require you to remit the rental due for
June 1987.

If you wish to continue on leasing the property, we request you to come to the Bank
for the execution of a Contract of Lease, the salient conditions of which are as
follows:

1. The lease will be on month to month basis, for a maximum period of one
(1) year;

2. Deposit equivalent to two (2) months rental and advance of one (1)
month rental, and the remaining amount for one year period
(equivalent to 9 months rental) shall be secured by either surety
bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a

purchase offer, within the term, the lessor is given an option of first
refusal, otherwise he has to vacate the premises within thirty (30)
days from date of notice.

We consider, temporarily, the current monthly rental based on the six-month

receipts, which we require you to submit, until such time when we will fix the
amount accordingly.

If the contract of lease is not executed within thirty (30) days from date hereof, it is
construed that you are not interested in leasing the premises and will vacate within
the said period.

Please be guided accordingly.

Truly yours,

(SGD)LUCILO S. REVILLAS
Branch Head[13] (Emphases ours.)

On July 7, 1987, the counsel of Bonifacio Sia replied to the above letter, to wit:

July 7, 1987

Mr. Lucilo S. Revillas

Branch Head
Development Bank of the Philippines

Dear Mr. Revillas,

This has reference to your letter of 18 June 1987 which you sent to my client, Mr.
Bonifacio Sia of Cebu Bionic Builders Supply the lessee of a commercial space of
the State Theatre Bldg., located at Tabunok, Talisay, Cebu.
 My client is amenable to the terms contained in your letter except the following:

1. In lieu of item no. 2 thereof, my client will deposit with your bank the
amount of P10,000.00, as assigned time deposit;

2. The 30 days notice you mentioned in your letter, (3), is too short. My
client is requesting for at least 60 days notice.

I sincerely hope that you will give due course to this request.

Thank you.

Truly yours,

(SGD) ANASTACIO T. MUNTUERTO, JR.[14]

Thereafter, on November 14, 1989, a Certificate of Time Deposit[15] for P11,395.64 was issued in
the name of Bonifacio Sia and the same was allegedly remitted to DBP as advance rental deposit.

For reasons unclear, however, no written contract of lease was executed between DBP and Cebu
Bionic.

In the meantime, subsequent to the acquisition of the subject properties, DBP offered the
same for sale along with its other assets. Pursuant thereto, DBP published a series of invitations
to bid on such properties, which were scheduled on January 19, 1989,[16] February 23,
1989,[17] April 13, 1989,[18] and November 15, 1990.[19] As no interested bidder came forward, DBP
publicized an Invitation on Negotiated Sale/Offer, the relevant terms and conditions of which
stated:

INVITATION ON NEGOTIATED SALE/OFFER

The DEVELOPMENT BANK OF THE PHILIPPINES, Cebu Branch, will receive

SEALED NEGOTIATED OFFERS/PURCHASE PROPOSALS tendered at its
Branch Office, DBP Building, Osmea Boulevard, Cebu City for the sale of its
acquired assets mentioned hereinunder within the 15-Day-Acceptance-Period
starting from NOVEMBER 19, 1990 up to 12:00 oclock noon of DECEMBER 3,
1990. Sealed offers submitted shall be opened by the Committee on Negotiated
Offers at exactly 2:00 oclock in the afternoon of the last day of the acceptance
period in order to determine the highest and/or most advantageous offer.

Item No. Description/Location Starting Price

xxxx

II Commercial land, Lot No. 3681-C-3,

having an area of 396 sq. m., situated
in Tabunok, Talisay, Cebu and P1,838,100.00
 covered by TCT No. T-65199 (DBP),
including the commercial building
thereon.

xxxx

A pre-numbered Acknowledgment Receipt duly signed by at least two (2) of the

Committee members shall be issued to the offeror acknowledging receipt of such
offer.

Negotiated offers may be made in CASH or TERMS, the former requiring a deposit
of 10% and the latter 20% of the starting price, either in the form of cash or
cashiers/managers check to be enclosed in the sealed offer.

xxxx

Interested negotiated offerors are requested to see Atty. Apolinar K. Panal, Jr.,
Acquired Asset in Charge (Tel. No. 9-63-25), in order to secure copies of the Letter-
Offer form and Negotiated Sale Rules and Procedures.

NOTE: If no offer is received during the above stated acceptance period, the
properties described above shall be sold to the first offeror who submits
an acceptable proposal on a First-Come-First-Served basis.

City of Cebu, Philippines, November 16, 1990.

(SGD.) TIMOTEO P. OLARTE

Branch Head[20] (Emphases ours.)

In the morning of December 3, 1990, the last day for the acceptance of negotiated offers,
petitioners submitted through their representative, Judy Garces, a letter-offer form, offering to
purchase the subject properties for P1,840,000.00. Attached to the letter-offer was a copy of the
Negotiated Sale Rules and Procedures issued by DBP and a managers check for the amount
of P184,000.00, representing 10% of the offered purchase price. This offer of petitioners was not
accepted by DBP, however, as the corresponding deposit therefor was allegedly insufficient.

After the lapse of the above-mentioned 15-day acceptance period, petitioners did not
submit any other offer/proposal to purchase the subject properties.

On December 17, 1990, respondents To Chip, Yap and Balila presented their letter-offer[21] to
purchase the subject properties on a cash basis for P1,838,100.00. Said offer was accompanied
by a downpayment of 10% of the offered purchase price, amounting to P183,810.00. On even
date, DBP acknowledged the receipt of and accepted their offer. On December 28, 1990,
respondents To Chip, Yap and Balila paid the balance of the purchase price and DBP issued a
Deed of Sale[22] over the subject properties in their favor.
On January 11, 1991, the counsel of respondents To Chip, Yap and Balila sent a
letter[23] addressed to the proprietor of Cebu Bionic, informing the latter of the transfer of
ownership of the subject properties. Cebu Bionic was ordered to vacate the premises within thirty
(30) days from receipt of the letter and directed to pay the rentals from January 1, 1991 until the
end of the said 30-day period.

The counsel of Cebu Bionic replied[24] that his client received the above letter on January 11,
1991. He stated that he has instructed Cebu Bionic to verify first the ownership of the subject
properties since it had the preferential right to purchase the same. He likewise requested that he
be furnished a copy of the deed of sale executed by DBP in favor of respondents To Chip, Yap
and Balila.

On February 15, 1991, respondent To Chip wrote a letter[25] to the counsel of Cebu Bionic,
insisting that he and his co-respondents Yap and Balila urgently needed the subject properties to
pursue their business plans. He also reiterated their demand for Cebu Bionic to vacate the
premises.

Shortly thereafter, on February 27, 1991, the counsel of respondents To Chip, Yap and Balila
sent its final demand letter[26] to Cebu Bionic, warning the latter to vacate the subject properties
within seven (7) days from receipt of the letter, otherwise, a case for ejectment with damages will
be filed against it.[27]

Despite the foregoing notice, Cebu Bionic still paid[28] to DBP, on March 22, 1991, the amount
of P5,000.00 as monthly rentals on the unit of the State Theatre Building it was occupying for
period of November 1990 to March 1991.

On April 10, 1991, petitioners filed against respondents DBP, To Chip, Yap and Balila
a complaint[29] for specific performance, cancellation of deed of sale with damages, injunction with
a prayer for the issuance of a writ of preliminary injunction. [30] The complaint was docketed as
Civil Case No. CEB-10104 in the RTC.

Petitioners alleged, inter alia, that Cebu Bionic was the lessee and occupant of a
commercial space in the State Theatre Building from October 1981 up to the time of the filing of
the complaint. During the latter part of 1990, DBP advertised for sale the State Theatre Building
and the commercial lot on which the same was situated. In the prior invitation to bid, the bidding
was scheduled on November 15, 1990; while in the next, under the 15-day acceptance period,
the submission of proposals was to be made from November 19, 1990 up to 12:00 noon of
December 3, 1990. Petitioners claimed that, at about 10:00 a.m. on December 3, 1990, they duly
submitted to Atty. Apolinar Panal, Jr., Chief of the Acquired Assets of DBP, the following
documents, namely:
 6.1 Letter-offer form, offering to purchase the property advertised,
for the price of P1,840,000, which was higher than the starting price
of P1,838,100.00 on cash basis. x x x;

6.2 Negotiated Sale Rules and Procedures, duly signed by plaintiff,

x x x;

6.3 Managers check for the amount of P184,000 representing 10%

of the deposit dated December 3, 1990 and issued by Allied Banking Corp. in favor
of the Development Bank of the Philippines. x x x.[31] (Emphasis ours.)

Petitioners asserted that the above documents were initially accepted but later
returned. DBP allegedly advised petitioners that there was no urgent need for the same x x x,
considering that the property will necessarily be sold to [Cebu Bionic] for the reasons that there
was no other interested party and that [Cebu Bionic] was a preferred party being the lessee and
present occupant of the property subject of the lease[.][32] Petitioners then related that, without
their knowledge, DBP sold the subject properties to respondents To Chip, Yap and Balila. The
sale was claimed to be simulated and fictitious, as DBP still received rentals from petitioners until
March 1991. By acquiring the subject properties, petitioners contended that DBP was deemed to
have assumed the contract of lease executed between them and Rudy Robles. As such, DBP
was bound by the provision of the lease contract, which stated that:

9. Should the Lessor decide to sell the property during the term of this lease
contract or immediately after the expiration of the lease, the Lessee shall have the
first option to buy and shall match offers from outside parties.[33]

Petitioners sought the rescission of the contract of sale between DBP and respondents
To Chip, Yap and Balila. Petitioners also prayed for the issuance of a writ of preliminary injunction,
restraining respondents To Chip, Yap and Balila from registering the Deed of Sale in the latters
favor and from undertaking the ejectment of petitioners from the subject properties. Likewise,
petitioners entreated that DBP be ordered to execute a deed of sale covering the subject
properties in their name and to pay damages and attorneys fees.

In its answer,[34] DBP denied the existence of a contract of lease between itself and
petitioners. DBP countered that the letter-offer of petitioners was actually not accepted as their
offer to purchase was on a term basis, which therefore required a 20% deposit. The 10% deposit
accompanying the petitioners letter-offer was declared insufficient. DBP stated that the letter-offer
form was not completely filled out as the Term and Mode of Payment fields were left blank. DBP
then informed petitioner Lydia Sia of the inadequacy of her offer. After ascertaining that there was
no other offeror as of that time, Lydia Sia allegedly summoned back her representative who did
not leave a copy of the letter-offer and the attached documents. DBP maintained that petitioners
documents did not show that the same were received and approved by any approving authority
of the bank. The letter-offer attached to the complaint, which indicated that the mode of payment
was on a cash basis, was allegedly not the document shown to DBP. In addition, DBP argued
that there was no assumption of the lease contract between Rudy Robles and petitioners since it
acquired the subject properties through the involuntary mode of extrajudicial foreclosure and its
request to petitioners to sign a new lease contract was simply ignored. DBP, therefore, insisted
that petitioners occupancy of the unit in the State Theatre Building was merely upon its
acquiescence. The petitioners payment of rentals on March 22, 1991 was supposedly made in
bad faith as they were made to a mere teller who had no knowledge of the sale of the subject
properties to respondents To Chip, Yap and Balila. DBP, thus, prayed for the dismissal of the
complaint and, by way of counterclaim, asked that petitioners be ordered to pay damages and
attorneys fees.

Respondents To Chip, Yap and Balila no longer filed a separate answer, adopting instead
the answer of DBP.[35]

In an Order[36] dated July 31, 1991, the RTC granted the prayer of petitioners for the
issuance of a writ of preliminary injunction.[37]

On April 25, 1997, the RTC rendered judgment in Civil Case No. CEB-10104, finding
meritorious the complaint of the petitioners. Explained the trial court:

It is a fact on record that [petitioners] complied with the requirements of deposit

and advance rental as conditions for constitution of lease between the
parties. [Petitioners] in complying with the requirements, issued a time deposit in
the amount of P11,395.64 and remitted faithfully its monthly rentals until April,
1991, which monthly rental was no longer accepted by the DBP.Although there
was no formal written contract executed between [respondent] DBP and the
[petitioners], it is very clear that DBP opted to continue the old and previous
contract including the terms thereon by accepting the requirements contained in
paragraph 2 of its letter dated June 18, 1987. It is also a fact on record that under
the lease contract continued by the DBP on the [petitioners], it is provided in
paragraph 9 thereof that the lessee shall have the first option to buy and shall
match offers from outside parties. And yet, [respondent] DBP never gave
[petitioners] the first option to buy or to match offers from outside parties, more
specifically [respondents] To Chip, Balila and Yap. It is also a fact on record that
[respondent] DBP in its letter dated June 18, 1987 to [petitioners] wrote in
paragraph 3 thereof, that in case there is better offer or if a property will be subject
of purchase offer, within the term, the lessee is given the option of first refusal,
otherwise, he has to vacate the premises within thirty (30) days. Yet, [respondent]
DBP never informed [petitioners] that there was an interested party to buy the
property, meaning, [respondents To Chip, Yap and Balila], thus depriving
[petitioners] of the opportunity of first refusal promised to them in its letter dated
June 18, 1987. x x x.[38] (Emphases ours.)

As regards the offer of petitioners to purchase the subject properties from DBP, the RTC gave
more credence to the petitioners version of the facts, to wit:

It is also a fact on record that when [respondent] DBP offered the property for
negotiated sale under the 15-day acceptance period[, which] ended at noon of
 December 3, 1991, [Cebu Bionic] submitted its offer, complete with [the required
documents.] x x x.

xxxx

These requirements, however, were unceremoniously returned by [respondent]

bank with the assurance that since there was no other bidder of the said property,
there was no urgency for the same and that [Cebu Bionic] also, in all events, is
entitled to first option being the present lessee.

The declaration of Atty. Panal to the effect that Cebu Bionic wanted to buy the
property on installment terms, such that the deposit of P184,000.00 was
insufficient being only 10% of the offer, could not be given much credence as it is
refuted by Exh. H which is the negotiated offer to purchase form under the 15-day
acceptance period accomplished by [petitioners] which shows clearly the written
word Cash after the printed words Term and Mode of Payment, Exhibit J, the
Managers check issued by Allied Banking Corporation dated December 3, 1990 in
the amount of P184,000.00 representing 10% of the offer showing the mode of
payment is for cash; Exhibit K which is the application for Managers check in the
amount of P184,000.00 dated December 3, 1990 showing the beneficiary as
DBP. If it is true that the offer of [petitioners] was for installment payments, then in
the ordinary course of human behavior, it would not have wasted effort in securing
a Managers check in the amount of P184,000.00 which was insufficient for 20%
deposit as required for installment payments. More credible is the explanation
[given by] witness Judy Garces when she said that DBP through Atty. Panal
returned the documents submitted by her, saying that there was no urgency for the
same as there was no other bidder of [the said] property and that Cebu Bionic was
entitled to a first option to buy being the present lessee. In the letter also of
[respondent] bank dated June 18, 1987, it is important to note that aside from
requiring Cebu Bionic to comply with certain requirements of time deposit and
advance rental, as condition for constitution of lease between the parties and which
was complied by Cebu Bionic[,] said letter further states in paragraph 3 thereof
that in case there is [a] better offer or if the property will be subject of a purchase
offer, within the term, the lessee is given the option of first refusal, otherwise, he
has to vacate the premises within thirty days. In answer to the Courts question,
however, Atty. Panal admitted that he did not tell [petitioners] that there was
another party who was willing to purchase the property, in violation of [petitioners]
right of first refusal.[39] (Emphasis ours.)

Likewise, the RTC found that respondents To Chip, Yap and Balila were aware of the lease
contract involving the subject properties before they purchased the same from DBP.Thus:

[Respondent] Jose To Chip lamely pretends ignorance that [petitioners] are

lessees of the property, subject matter of this case. He states that he and his
partners, the other [respondents], were given assurances by Atty. Panal of the
DBP that [Lydia Sia] is not a lessee, although he knew that [petitioners] were
presently occupying the property and that it was possessed by [petitioners] even
before it was owned by the DBP. x x x.

xxxx
 [Respondent] Roger Balila, in his testimony, likewise pretended ignorance that he
knew that [Lydia Sia] was a lessee of the property. x x x.

xxxx

Upon further questioning by the Court, he admitted that [Lydia Sia] was not
possessing the building freely; that she was a lessee of Rudy Robles, the former
owner, but cleverly insisted in disowning knowledge that [Lydia Sia] was a lessee,
denying knowledge that [Lydia Sia] was paying rentals to [respondent] bank. His
pretended ignorance x x x was a way of evading [Cebu Bionics] right of first priority
to buy the property under the contract of lease. x x x The Court is convinced that
[respondents To Chip, Yap and Balila] knew that [Cebu Bionic] was the present
lessee of the property before they bought the same from [respondent]
bank. Common observation, knowledge and experience dictates that as a prudent
businessman, it was but natural that he ask Lydia Sia what her status was in
occupying the property when he went to talk to her, that he ask her if she was a
lessee. But he said, all he asked her was whether she was interested to buy the
property. x x x.[40]

The trial court, therefore, concluded that:

From the foregoing facts on record, it is thus clear that [petitioner] Cebu Bionic is
the present lessee of the property, the lease contract having been continued by
[respondent] DBP when it received rental payments up to March of 1991 as well
as the advance rental for one year represented by the assigned time deposit which
is still in [respondent] banks possession. The provision, therefore, in the lease
contract, on the right of first option to buy and the right of first refusal contained in
[respondent] banks letter dated June 18, 1987, are still subsisting and binding up
to the present, not only on [respondent] bank but also on [respondents To Chip,
Yap and Balila]. x x x.

xxxx

WHEREFORE, THE FOREGOING PREMISES CONSIDERED, judgment is

hereby rendered:

(1) Rescinding the Deed of Sale dated December 28, 1990 between
[respondent] Development Bank of the Philippines and [respondents]
Roger Balila, Jose To Chip and Patricio Yap;

(2) Ordering the [respondent] Development Bank of the Philippines to

execute a Deed of Sale over the property, subject matter of this case
upon payment by [petitioners] of the whole consideration involved and
to complete all acts or documents necessary to have the title over said
property transferred to the name of [petitioners];

(3) Costs against [respondents].[41]

 DBP forthwith filed a Notice of Appeal.[42] Respondents To Chip, Yap and Balila filed a
Motion for Reconsideration[43] of the above decision, but the RTC denied the same in an
Order[44] dated July 4, 1997. Said respondents then filed their Notice of Appeal.[45]

On February 14, 2001, the Court of Appeals promulgated its Decision,[46] pronouncing that:

We find nothing erroneous with the judgment rendered by the trial

court. Perforce, We sustain it and dismiss the [respondents] submission.

The RTC determined, upon evidence on record after a careful evaluation

of the witnesses and their testimonies during the trial that indeed [petitioners] right
of first option was violated and thus, rescission of the sale made by DBP to
[respondents To Chip, Yap and Balila] are in order.

xxxx

Apparently, DBP accepted [the documents submitted by petitioners] and

thereafter, through Atty. Panal (of DBP), returned all of it to the [petitioners] with
the assurance that since there was no other bidder of the said property, there was
no urgency for the same and that [Cebu Bionic] also, in all events, is entitled to first
option being the present lessee.

[DBP] maintains that the return of the documents [submitted by petitioners]

was in order since the [petitioners] offered to buy the property in question on
installment basis requiring a higher 20% deposit. This, however, was correctly
rejected by the trial court[.] x x x

The binding effect of the lease agreement upon the [respondents To Chip,
Yap and Balila] must be sustained since from existing jurisprudence cited by the
lower court, it was determined during trial that:

... [respondents To Chip, Yap and Balila] knew that [Cebu

Bionic] was the present lessee of the property before they bought
the same from [respondent] bank.Common observation, knowledge
and experience dictates that as a prudent businessman, it was but
natural that he ask Lydia Sia what her status was in occupying the
property when he went to talk to her, that he ask her if she was a
lessee. But he said, all he asked her was whether she was
interested to buy the property. x x x.

Moreover, We find that the submissions presented by the [respondents] in

their respective briefs argue against questions of facts as found and determined
by the lower court. The respondents contentions consist of crude attempts to
question the assessment and evaluation of testimonies and other evidence
gathered by the trial court.

It must be remembered that findings of fact as determined by the trial court

are entitled to great weight and respect from appellate courts and should not be
disturbed on appeal unless for [strong] and cogent reasons. These findings
 generally, so long as supported by evidence on record, are not to be disturbed
unless there are some facts or evidence which the trial court has misappreciated
or overlooked, and which if considered would have altered the results of the entire
case. Sad to say for the [respondents], We see no reason to depart from this well-
settled legal principle.

WHEREFORE, in view of the foregoing, the judgment of the Regional Trial

Court of Cebu City, Branch 8, in Civil Case No. 10104 is hereby AFFIRMED in
toto.[47]

On October 1, 2001, petitioners filed a Motion for Issuance of Entry of

Judgment.[48] Petitioners stressed that, based on the records of the case, respondents were
served a copy of the Court of Appeals Decision dated February 14, 2001 sometime on March 7,
2001. However, petitioners discovered that respondents have not filed any motion for
reconsideration of the said decision within the reglementary period therefor, nor was there any
petition for certiorari or appeal filed before the Supreme Court.

In response to the above motion, respondents To Chip, Yap and Balila filed on October 8,
2001 a Motion to Admit Motion for Reconsideration.[49] Atty. Francis M. Zosa, the counsel for
respondents To Chip, Yap and Balila, explained that he sent copies of the motion for
reconsideration to petitioners and DBP via personal delivery. On the other hand, the copies of the
motion to be filed with the Court of Appeals were purportedly sent to Mr. Domingo Tan, a friend
of Atty. Zosa in Quezon City, who agreed to file the same personally with the appellate court in
Manila. When Atty. Zosa inquired if the motion for reconsideration was accordingly filed, Mr. Tan
allegedly answered in the affirmative. To his surprise, Atty. Zosa received a copy of petitioners
Motion for Issuance of Entry of Judgment. Atty. Zosa, thus, attributed the failure of his clients to
file a motion for reconsideration on the mistake, excusable negligence and/or fraud committed by
Mr. Tan.

In the assailed Resolution dated February 5, 2002, the Court of Appeals granted the
motion of respondents To Chip, Yap and Balila and admitted the motion for reconsideration
attached therewith in the higher interest of substantial justice.[50]

On July 5, 2002, the Court of Appeals reversed its original Decision dated February 14,
2001, reasoning thus:

After a judicious review and reevaluation of the evidence and facts on

record, we are convinced that DBP had terminated the Robles lease
contract. From its letter of June 18, 1987, DBP had expressly notified [petitioners]
that (I)f they wish to continue on leasing the property x x x to come to the Bank for
the execution of a Contract of Lease, the salient conditions of which are as follows:

1. The lease will be on a month to month basis for a maximum period of

one (1) year;
 2. Deposit equivalent to two (2) months rental and advance of one (1)
month rental, and the remaining amount for one year (equivalent to 9 months
rental) shall be secured by either surety bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a

purchase offer, within the term, the lessor is given an option of first refusal,
otherwise he has to vacate the premises within thirty (30) days from date of notice.

We consider, temporarily, the current monthly rental based on the six-

month receipts, which we require you to submit, until such time when we will fix
the amount accordingly.

Evidently, except for the remittance of the monthly rentals up to March

1991, the conditions imposed by DBP have never been complied with. [Petitioners]
did not go to the Bank to sign any new written contract of lease with
DBP. [Petitioners] also did not put up a surety bond nor cash bond nor assign a
time deposit to secure the payment of rental for nine (9) months, although the
[petitioners] opened a time deposit but did not assign it to DBP.

But even with the remittance and acceptance of the deposit made by
[petitioners] equivalent to two (2) months rental and advance of one (1) month
rental it does not necessarily follow that DBP opted to continue with the Robles
lease. This is because the Robles contract provides:

That the term of the agreement shall start on November 1,

1981 and shall terminate on the last day of every month thereafter,
provided however, that this contract shall be automatically renewed
on a month to month basis if no notice in writing is sent to the other
party to determine to terminate this agreement after fifteen (15)
days from the receipt of said notice.

Here, a notice was sent to [petitioners] on June 18, 1987, informing them that if
they wish to continue on leasing the property, we request you to come to the Bank
for the execution of a Contract of Lease x x x.

[Petitioners] failed to enter into the contract of lease required by DBP for it
to continue occupying the leased premises.

Because of [petitioners] failure to comply with the conditions embodied in

the 18 June 1987 letter, it cannot be said that [petitioners] entered into a new
contract with DBP where they were given the first option to buy the leased property
and to match offers from outside parties.

xxxx

Be that as it may, DBP continued to accept the monthly rentals based on

the old Robles contract despite the fact that the [petitioners] failed to enter into a
written lease contract with it.Corollarily, the relations between the parties is now
governed by Article 1670 of the New Civil Code, thus:
 Art. 1670. If at the end of contract the lessee should
continue enjoying the thing leased for fifteen days with the
acquiescence of the lessor, and unless a notice to the contrary by
either party has previously been given, it is understood that there is
an implied new lease, not for the period of the original contract, but
for the time established in Articles 1682 and 1687. The other terms
of the original contract shall be revived.

xxxx

x x x [T]he acceptance by DBP of the monthly rentals does not mean that
the terms of the Robles contract were revived. In the case of Dizon vs. Court of
Appeals, the Supreme Court declared that:

The other terms of the original contract of lease which are

revived in the implied new lease under Article 1670 of the New Civil
Code are only those terms which are germane to the lessees right
[of] continued enjoyment of the property leased an implied new
lease does not ipso facto carry with it any implied revival of any
option to purchase the leased premises.

In view of the foregoing, it is clear that [petitioners] had no right to file a

case for rescission of the deed of sale executed by DBP in favor of [respondents
To Chip, Yap and Balila] because said deed of sale did not violate their alleged
first option to buy or match offers from outside parties which is legally non-existent
and which was not impliedly renewed under Article 1670 of the Civil Code.

WHEREFORE, premises considered, the 14 February 2001 Decision is

hereby RECONSIDERED and another one is issued REVERSING the 25 April
1997 Decision of the Regional Trial Court, Branch 8, Cebu City in Civil Case No.
CEB-10104 and the complaint of [petitioners] is DISMISSED for lack of merit.[51]
Without seeking a reconsideration of the above decision, petitioners filed the instant
petition. In their Comment, respondents opposed the petition on both procedural and substantive
grounds.

In petitioners Memorandum, they summarized the issues to be resolved in the present

case as follows:

A) PRELIMINARY ISSUES:

WHETHER OR NOT THE VERIFICATION (AND CERTIFICATION OF NON-

FORUM SHOPPING) IN THE INSTANT PETITION WAS PROPER AND VALID
DESPITE ITS BEING SIGNED BY ONLY ONE OF THE TWO PETITIONERS.

II
WHETHER OR NOT ONLY QUESTIONS OF LAW AND NOT OF FACT CAN BE
RAISED IN THE INSTANT PETITION BEFORE THIS HON. SUPREME COURT.

B) MAIN AND PRINCIPAL ISSUES IN THE INSTANT PETITION:

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN ADMITTING

RESPONDENTS MOTION FOR RECONSIDERATION DESPITE ITS BEING
FILED OUT OF TIME

II

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN DECLARING

THAT PETITIONERS DID NOT ENTER INTO CONTRACT WITH RESPONDENT
DBP CONTINUING THE TERMS OF THE ROBLES CONTRACT

III

WHETHER OR NOT THE HON. 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

IV

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT

DECLARED THAT THE LEASE CONTRACT IS GOVERNED BY ART. 1670 OF
THE NEW CIVIL CODE

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT FAILED

TO RECOGNIZE PETITIONERS RIGHT OF FIRST REFUSAL TO WHICH
RESPONDENTS WERE BOUND

VI

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT FAILED

TO DECLARE THAT RESPONDENT DBP HAD VIOLATED PETITIONERS
RIGHTS

VII

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN REVERSING

ITS OWN JUDGMENT AND DISMISSING PETITIONERS CLAIM FOR
RESCISSION[52]
We shall first resolve the preliminary issues.

Respondents To Chip, Yap and Balila argue that the instant petition should be dismissed outright
as the verification and certification of non-forum shopping was executed only by petitioner Lydia
Sia in her personal capacity, without the participation of Cebu Bionic.

The Court is not persuaded.

Except for the powers which are expressly conferred on it by the Corporation Code and
those that are implied by or are incidental to its existence, a corporation has no powers. It
exercises its powers through its board of directors and/or its duly authorized officers and
agents. Thus, its power to sue and be sued in any court is lodged with the board of directors that
exercises its corporate powers.[53] Physical acts, like the signing of documents, can be performed
only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act
of the board of directors.[54]

In this case, respondents To Chip, Yap and Balila obviously overlooked the Secretarys
Certificate[55] attached to the instant petition, which was executed by the Corporate Secretary of
Cebu Bionic. Unequivocally stated therein was the fact that the Board of Directors of Cebu Bionic
held a special meeting on July 26, 2002 and they thereby approved a Resolution authorizing Lydia
Sia to elevate the present case to this Court in behalf of Cebu Bionic, to wit:

Whereas, the board appointed LYDIA I. SIA to act and in behalf of the
corporation to file the CERTIORARI with the Supreme Court in relations to the
decision of the Court of Appeals dated July 5, 2002 which reversed its own
judgment earlier promulgated on February 14, 2001 entitled CEBU BIONIC
BUILDERS SUPPLY, INC. and LYDIA SIA, (Petitioners- Appellants) versus THE
DEVELOPMENT BANK OF THE PHILIPPINES, JOSE TO CHIP, PATRICIO YAP
and ROGER BALILA (Respondents- Appelles), docketed CA-G.R. NO. 57216.

Whereas, on mass unanimously motion of all members of directors present

hereby approved the appointment of LYDIA I. SIA to act and sign all papers in
connection of CA-G.R. NO. 57216.

Resolved and it is hereby resolve to appoint and authorized LYDIA I. SIA

to sign and file with the SUPREME COURT in connection to decision of the Court
of Appeals as above mention.[56]

Respondents To Chip, Yap and Balila next argue that the instant petition raises questions
of fact, which are not allowed in a petition for review on certiorari. They, therefore, submit that the
factual findings of the Court of Appeals are binding on this Court.

Section 1, Rule 45 of the Rules of Court categorically states that the petition filed
thereunder shall raise only questions of law, which must be distinctly set forth. A question of law
arises when there is doubt as to what the law is on a certain state of facts, while there is a question
of fact when the doubt arises as to the truth or falsity of the alleged facts.For a question to be one
of law, the same must not involve an examination of the probative value of the evidence presented
by the litigants or any of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a review of the
evidence presented, the question posed is one of fact.[57]

The above rule, however, admits of certain exceptions,[58] one of which is when the
findings of the Court of Appeals are contrary to those of the trial court. As will be discussed further,
this exception is attendant in the case at bar.

We now determine the principal issues put forward by petitioners.

First off, petitioners fault the Court of Appeals for admitting the Motion for Reconsideration
of its Decision dated February 14, 2001, which was filed by respondents To Chip, Yap and Balila
more than six months after receipt of the said decision. The motion was eventually granted and
the Court of Appeals issued its assailed Amended Decision, ruling in favor of respondents.

Indeed, the appellate courts Decision dated February 14, 2001 would have ordinarily
attained finality for failure of respondents to seasonably file their Motion for Reconsideration
thereon. However, we agree with the Court of Appeals that the higher interest of substantial
justice will be better served if respondents procedural lapse will be excused.

Verily, we had occasion to apply this liberality in the application of procedural rules
in Barnes v. Padilla[59] where we aptly declared that

The failure of the petitioner to file his motion for reconsideration within the period
fixed by law renders the decision final and executory. Such failure carries with it
the result that no court can exercise appellate jurisdiction to review the
case. Phrased elsewise, a final and executory judgment can no longer be attacked
by any of the parties or be modified, directly or indirectly, even by the highest court
of the land.

However, this Court has relaxed this rule in order to serve substantial
justice considering (a) matters of life, liberty, honor or property, (b) the existence
of special or compelling circumstances, (c) the merits of the case, (d) a cause not
entirely attributable to the fault or negligence of the party favored by the
suspension of the rules, (e) a lack of any showing that the review sought is merely
frivolous and dilatory, and (f) the other party will not be unjustly prejudiced
thereby.[60]

In this case, what are involved are the property rights of the parties given that, ultimately,
the fundamental issue to be determined is who among the petitioners and respondents To Chip,
Yap and Balila has the better right to purchase the subject properties. More importantly, the merits
of the case sufficiently called for the suspension of the rules in order to settle conclusively the
rights and obligations of the parties herein.

In essence, the questions that must be resolved are: 1) whether or not there was a contract
of lease between petitioners and DBP; 2) if in the affirmative, whether or not this contract
contained a right of first refusal in favor of petitioners; and 3) whether or not respondents To Chip,
Yap and Balila are likewise bound by such right of first refusal.

Petitioners contend that there was a contract of lease between them and DBP, considering
that they had been allowed to occupy the premises of the subject property from 1987 up to 1991
and DBP received their rental payments corresponding to the said period. Petitioners claim that
DBP were aware of their lease on the subject property when the latter foreclosed the same and
the acquisition of the subject properties through foreclosure did not terminate the
lease. Petitioners subscribe to the ruling of the RTC that even if there was no written contract of
lease, DBP chose to continue the existing contract of lease between petitioners and Rudy Robles
by accepting the requirements set down by DBP on the letter dated June 18, 1987. Petitioners
likewise posit that the contract of lease between them and Rudy Robles never expired, inasmuch
as the contract did not have a definite term and none of the parties thereto terminated the same. In
view of the continuation of the lease contract between petitioners and Rudy Robles, petitioners
submit that Article 1670 of the Civil Code on implied lease is not applicable on the instant case.

We are not persuaded.

In Uy v. Land Bank of the Philippines,[61] the Court held that [i]n respect of the lease on
the foreclosed property, the buyer at the foreclosure sale merely succeeds to the rights and
obligations of the pledgor-mortgagor subject to the provisions of Article 1676 of the Civil Code on
its possible termination. This article provides that [t]he purchaser of a piece of land which is under
a lease that is not recorded in the Registry of Property may terminate the lease, save when there
is a stipulation to the contrary in the contract of sale, or when the purchaser knows of the existence
of the lease. In short, the buyer at the foreclosure sale, as a rule, may terminate an unregistered
lease except when it knows of the existence of the lease.

In the instant case, the lease contract between petitioners and Rudy Robles was not
registered.[62] During trial, DBP denied having any knowledge of the said lease contract. [63] It
asserted that the lease was merely presumed in view of the existence of tenants in the subject
property.[64] Nevertheless, DBP recognized and acknowledged this lease contract in its letter
dated June 18, 1987, which was addressed to Bonifacio Sia, then President of Cebu Bionic. DBP
even required Sia to pay the monthly rental for the month of June 1987, thereby exercising the
right of the previous lessor, Rudy Robles, to collect the rental payments from the lessee. In the
same letter, DBP extended an offer to Cebu Bionic to continue the lease on the subject property,
outlining the provisions of the proposed contract and specifically instructing the latter to come to
the bank for the execution of the same. DBP likewise gave Cebu Bionic a 30-day period within
which to act on the said contract execution. Should Cebu Bionic fail to do so, it would be deemed
uninterested in continuing with the lease. In that eventuality, the letter states that Cebu Bionic
should vacate the premises within the said period.

Instead of acceding to the terms of the aforementioned letter, the counsel of Cebu Bionic
sent a counter-offer to DBP dated July 7, 1987, suggesting a different mode of payment for the
rentals and requesting for a 60-day period within which time the parties will execute a new contract
of lease.

The parties, however, failed to execute a written contract of lease. Petitioners put the
blame on DBP, asserting that no contract was signed because DBP did not prepare it for
them. DBP, on the other hand, counters that it was petitioners who did not positively act on the
conditions for the execution of the lease contract. In view of the counter-offer of petitioners, DBP
and respondents To Chip, Yap and Balila argue that there was no meeting of minds between DBP
and petitioners, which would have given rise to a new contract of lease.

The Court rules that, indeed, no new contract of lease was ever perfected between
petitioners and DBP.

In Metropolitan Manila Development Authority v. JANCOM Environmental

Corporation,[65] we emphasized that:

Under Article 1305 of the Civil Code, [a] contract is a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give
something or to render some service. A contract undergoes three distinct stages
preparation or negotiation, its perfection, and finally, its
consummation. Negotiation begins from the time the prospective contracting
parties manifest their interest in the contract and ends at the moment of agreement
of the parties. The perfection or birth of the contract takes place when the parties
agree upon the essential elements of the contract. The last stage is the
consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof (Bugatti vs.
CA, 343 SCRA 335 [2000]). Article 1315 of the Civil Code, provides that a contract
is perfected by mere consent. Consent, on the other hand, is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract (See Article 1319, Civil Code). x x x.[66]

In the case at bar, there was no concurrence of offer and acceptance vis--vis the terms of
the proposed lease agreement. In fact, after the reply of petitioners counsel dated July 7, 1987,
there was no indication that the parties undertook any other action to pursue the execution of the
intended lease contract. Petitioners even admitted that they merely waited for DBP to present the
contract to them, despite being instructed to come to the bank for the execution of the same.[67]

Contrary to the ruling of the RTC, the Court is also not convinced that DBP opted to
continue the existing lease contract between petitioners and Rudy Robles.
 The findings of the RTC that DBP supposedly accepted the requirements the latter set
forth in its letter dated June 18, 1987 is not well taken. To recapitulate, the third paragraph of the
letter reads:

If you wish to continue on leasing the property, we request you to come to the Bank
for the execution of a Contract of Lease, the salient conditions of which are as
follows:

1. The lease will be on month to month basis, for a maximum period of one
(1) year;

2. Deposit equivalent to two (2) months rental and advance of one (1)
month rental, and the remaining amount for one year period
(equivalent to 9 months rental) shall be secured by either surety
bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be

subject of a purchase offer, within the term, the lessor is given an
option of first refusal, otherwise he has to vacate the premises
within thirty (30) days from date of notice.[68]

The so-called requirements enumerated in the above paragraph are not really
requirements to be complied with by the petitioners for the execution of the proposed lease
contract, as apparently considered by the RTC and the petitioners. A close reading of the letter
reveals that the items enumerated therein were in fact the salient terms and conditions of the
proposed contract of lease, which the DBP and the petitioners were to execute if the latter were
so willing. Also, the Certificate of Time Deposit in the amount of P11,395.64, which was allegedly
paid to DBP as advance rental deposit pursuant to the said requirements, was not even clearly
established as such since it was neither secured by a security bond or a cash bond, nor was it
assigned to DBP.

The contention that the lease contract between petitioners and Rudy Robles did not
expire, given that it did not have a definite term and the parties thereto failed to terminate the
same, deserves scant consideration. To recall, the second paragraph of the terms and conditions
of the contract of lease between petitioners and Rudy Robles reads:

2. That the term of this agreement shall start on November 1, 1981 and shall
terminate on the last day of every month thereafter; provided however that this
contract shall be automatically renewed on a month to month basis if no notice, in
writing, is sent to the other party to terminate this agreement after fifteen (15) days
from receipt of said notice.[69] (Emphases ours.)

Crystal clear from the above provision is that the lease is on a month-to-month
basis. Relevantly, the well-entrenched principle is that a lease from month-to-month is with a
definite period and expires at the end of each month upon the demand to vacate by the
lessor.[70] As held by the Court of Appeals in the assailed Amended Decision, the above-
mentioned lease contract was duly terminated by DBP by virtue of its letter dated June 18,
1987. We reiterate that the letter explicitly directed the petitioners to come to the office of the DBP
if they wished to enter into a new lease agreement with the said bank. Otherwise, if no contract
of lease was executed within 30 days from the date of the letter, petitioners were to be considered
uninterested in entering into a new contract and were thereby ordered to vacate the property. As
no new contract was in fact executed between petitioners and DBP within the 30-day period, the
directive to vacate, thus, took effect. DBPs letter dated June 18, 1987, therefore, constituted the
written notice that was required to terminate the lease agreement between petitioners and Rudy
Robles. From then on, the petitioners continued possession of the subject property could be
deemed to be without the consent of DBP.

Thusly, petitioners assertion that Article 1670 of the Civil Code is not applicable to the
instant case is correct. The reason, however, is not that the existing contract was continued by
DBP, but because the lease was terminated by DBP, which termination was accompanied by a
demand to petitioners to vacate the premises of the subject property.

Article 1670 states that [i]f at the end of the contract the lessee should continue enjoying
the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the
contrary by either party has previously been given, it is understood that there is an implied new
lease, not for the period of the original contract, but for the time established in Articles 1682 and
1687. The other terms of the original contract shall be revived. In view of the order to vacate
embodied in the letter of DBP dated June 18, 1987 in the event that no new lease contract is
entered into, the petitioners continued possession of the subject properties was without the
acquiescence of DBP, thereby negating the constitution of an implied lease.

Contrary to the ruling of the RTC, DBPs acceptance of petitioners rental payments
of P5,000.00 for the period of November 1990 to March 1991 did not likewise give rise to an
implied lease between petitioners and DBP. In Tagbilaran Integrated Settlers Association (TISA)
Incorporated v. Court of Appeals,[71] we held that the subsequent acceptance by the lessor of
rental payments does not, absent any circumstance that may dictate a contrary conclusion,
legitimize the unlawful character of their possession. In the present case, the petitioners rental
payments to DBP were made in lump sum on March 22, 1991. Significantly, said payments were
remitted only after petitioners were notified of the sale of the subject properties to respondents To
Chip, Yap and Balila and after the petitioners were given a final demand to vacate the
properties. These facts substantially weaken, if not controvert, the finding of the RTC and the
argument of petitioners that the latter were faithfully remitting their rental payments to DBP until
the year 1991.

Thus, having determined that the petitioners and DBP neither executed a new lease
agreement, nor entered into an implied lease contract, it follows that petitioners claim of
entitlement to a right of first refusal has no leg to stand on. Furthermore, even if we were to grant,
for the sake of argument, that an implied lease was constituted between petitioners and the DBP,
the right of first refusal that was contained in the prior lease contract with Rudy Robles was not
renewed therewith. This is in accordance with the ruling in Dizon v. Magsaysay,[72] which involved
the issue of whether a provision regarding a preferential right to purchase is revived in an implied
lease under Article 1670, to wit:

[T]he other terms of the original contract which are revived in the implied new lease
under Article 1670 are only those terms which are germane to the lessees right of
continued enjoyment of the property leased. This is a reasonable construction of
the provision, which is based on the presumption that when the lessor allows the
lessee to continue enjoying possession of the property for fifteen days after the
expiration of the contract he is willing that such enjoyment shall be for the entire
period corresponding to the rent which is customarily paid in this case up to the
end of the month because the rent was paid monthly. Necessarily, if the presumed
will of the parties refers to the enjoyment of possession the presumption covers
the other terms of the contract related to such possession, such as the amount of
rental, the date when it must be paid, the care of the property, the responsibility for
repairs, etc. But no such presumption may be indulged in with respect to special
agreements which by nature are foreign to the right of occupancy or enjoyment
inherent in a contract of lease.[73]

DBP cannot, therefore, be accused of violating the rights of petitioners when it offered the
subject properties for sale, and eventually sold the same to respondents To Chip, Yap and Balila,
without first notifying petitioners. Neither were the said respondents bound by any right of first
refusal in favor of petitioners. Consequently, the sale of the subject properties to respondents was
valid. Petitioners claim for rescission was properly dismissed.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
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 hereby AFFIRMED. No costs.

SO ORDERED.
The second lease contract contained the following provision:

III. It is mutually agreed by the parties that this Contract of Lease shall be in full force and effect
for a period of ten (10) years counted from the effectivity of the payment of rental as provided
under sub-paragraph (b) of Article I, with option to renew for another ten (10) years with the mutual
consent of both parties. In no case should the rentals be increased by more than 100% of the
original amount fixed.

Lessee shall also have the option to purchase the area leased, the price to be negotiated
and determined at the time the option to purchase is exercised. [EMPHASIS SUPPLIED]

An option is a contract by which the owner of the property agrees with another person that the
latter shall have the right to buy the formers property at a fixed price within a certain time. It is a
condition offered or contract by which the owner stipulates with another that the latter shall have
the right to buy the property at a fixed price within a certain time, or under, or in compliance with
certain terms and conditions; or which gives to the owner of the property the right to sell or demand
a sale.[26] It binds the party, who has given the option, not to enter into the principal contract with
any other person during the period designated, and, within that period, to enter into such contract
with the one to whom the option was granted, if the latter should decide to use the option.[27]
Upon the other hand, a right of first refusal is a contractual grant, not of the sale of a property,
but of the first priority to buy the property in the event the owner sells the same. [28] As
distinguished from an option contract, in a right of first refusal, while the object might be made
determinate, the exercise of the right of first refusal would be dependent not only on the owners
eventual intention to enter into a binding juridical relation with another but also on terms, including
the price, that are yet to be firmed up.[29]
As the option to purchase clause in the second lease contract has no definite period within which
the leased premises will be offered for sale to respondent lessee and the price is made subject to
negotiation and determined only at the time the option to buy is exercised, it is obviously a mere
right of refusal, usually inserted in lease contracts to give the lessee the first crack to buy the
property in case the lessor decides to sell the same. That respondent was granted a right of first
refusal under the second lease contract appears not to have been disputed by petitioners. What
petitioners assail is the CAs erroneous conclusion that such right of refusal subsisted even after
the expiration of the original lease period, when respondent was allowed to continue staying in
the leased premises under an implied renewal of the lease and without the right of refusal carried
over to such month-to-month lease. Petitioners thus maintain that no right of refusal was violated
by the sale of the property in favor of PUP pursuant to Memorandum Order No. 214.
Petitioners position is untenable.
When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee
not to sell the leased property to anyone at any price until after the lessor has made an offer to
sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has
failed to exercise his right of first priority could the lessor sell the property to other buyers under
the same terms and conditions offered to the lessee, or under terms and conditions more
favorable to the lessor.[30]
Records showed that during the hearing on the application for a writ of preliminary injunction,
respondent adduced in evidence a letter of Antonio A. Henson dated 15 July 1988addressed to
Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino Macaraeg,
reviewing a proposed memorandum order submitted to President Corazon C. Aquino transferring
the whole NDC Compound, including the premises leased by respondent, in favor of petitioner
PUP. This letter was offered in evidence by respondent to prove the existence of documents as
of that date and even prior to the expiration of the second lease contract or the lapse of the ten
(10)-year period counted from the effectivity of the rental payment -- that is, one hundred and fifty
(150) days from the signing of the contract (May 4, 1978), as provided in Art. I, paragraph (b) of
C-12-78, or on October 1, 1988.
Respondent thus timely exercised its option to purchase on August 12, 1988. However,
considering that NDC had been negotiating through the National Government for the sale of the
property in favor of PUP as early as July 15, 1988 without first offering to sell it to respondent and
even when respondent communicated its desire to exercise the option to purchase granted to it
under the lease contract, it is clear that NDC violated respondents right of first refusal. Under the
premises, the matter of the right of refusal not having been carried over to the impliedly renewed
month-to-month lease after the expiration of the second lease contract on October 21, 1988
becomes irrelevant since at the time of the negotiations of the sale to a third party, petitioner PUP,
respondents right of first refusal was still subsisting.
Petitioner NDC in its memorandum contended that the CA erred in applying the ruling
in Polytechnic University of the Philippines v. Court of Appeals pointing out that the case of lessee
Firestone Ceramics, Inc. is different because the lease contract therein had not yet expired while
in this case respondents lease contracts have already expired and never renewed. The date of
the expiration of the lease contract in said case is December 31, 1989 which is prior to the
issuance of Memorandum Order No. 214 on January 6, 1989. In contrast, respondents lease
contracts had already expired (September 1988) at the time said memorandum order was
issued.[31]
Such contention does not hold water. As already mentioned, the reckoning point of the offer of
sale to a third party was not the issuance of Memorandum Order No. 214 on January 6, 1989 but
the commencement of such negotiations as early as July 1988 when respondents right
of first refusal was still subsisting and the lease contracts still in force.Petitioner NDC did not
bother to respond to respondents letter of June 13, 1988 informing it of respondents exercise of
the option to renew and requesting to discuss further the matter with NDC, nor to the subsequent
letter of August 12, 1988 reiterating the request for renewing the lease for another ten (10) years
and also the exercise of the option to purchase under the lease contract. Petitioner NDC had
dismissed these letters as mere informative in nature, and a request at its best.[32]
Perusal of the letter dated August 12, 1988, however, belies such claim of petitioner NDC that it
was merely informative, thus:

August 12, 1988

HON. ANTONIO HENSON

General Manager
NATIONAL DEVELOPMENT COMPANY
377 Se(n). Gil J. Puyat Avenue
Makati, Metro Manila

REF: Contract of Lease

Nos. C-33-77 & C-12-78

Dear Sir:

This is further to our earlier letter dated June 13, 1988 formally advising
your goodselves of our intention to exercise our option for another ten (10) years. Should
the National Development Company opt to sell the property covered by said leases, we
also request for priority to negotiate for its purchase at terms and/or conditions mutually
acceptable.
As a backgrounder, we wish to inform you that since the start of our lease, we have improved on
the property by constructing bodega-type buildings which presently house all legitimate trading
and manufacturing concerns. These business are substantial taxpayers, employ not less than
300 employees and contribute even foreign earnings.

It is in this context that we are requesting for the extension of the lease contract to prevent
serious economic disruption and dislocation of the business concerns, as well as provide
ourselves, the lessee, an opportunity to recoup our investments and obtain a fair return
thereof.

Your favorable consideration on our request will be very much appreciated.

very truly yours,

TIU HAN TENG

President[33]

As to petitioners argument that respondents right of first refusal can be invoked only with respect
to the second lease contract which expressly provided for the option to purchase by the lessee,
and not in the first lease contract which contained no such clause, we sustain the RTC and CA in
finding that the second contract, covering an area of 3,222.80 square meters, is interrelated to
and inseparable from the first contract over 2,407 square meters. The structures built on the
leased premises, which are adjacent to each other, form part of an integrated system of a
commercial complex leased out to manufacturers, fabricators and other businesses. Petitioners
submitted a sketch plan and pictures taken of the driveways, in an effort to show that the leased
premises can be used separately by respondent, and that the two (2) lease contracts are distinct
from each other.[34] Such was a desperate attempt to downplay the commercial purpose of
respondents substantial improvements which greatly contributed to the increased value of the
leased premises. To prove that petitioner NDC had considered the leased premises as a single
unit, respondent submitted evidence showing that NDC issued only one (1) receipt for the rental
payments for the two portions.[35] Respondent further presented the blueprint plan prepared by its
witness, Engr. Alejandro E. Tinio, who supervised the construction of the structures on the leased
premises, to show the building concept as a one-stop industrial site and integrated commercial
complex.[36]
In fine, the CA was correct in declaring that there exists no justifiable reason not to apply the same
rationale in Polytechnic University of the Philippines v. Court of Appeals in the case of respondent
who was similarly prejudiced by petitioner NDCs sale of the property to PUP, as to entitle the
respondent to exercise its option to purchase until October 1988 inasmuch as the May 4, 1978
contract embodied the option to renew the lease for another ten (10) years upon mutual consent
and giving respondent the option to purchase the leased premises for a price to be negotiated
and determined at the time such option was exercised by respondent. It is to be noted
that Memorandum Order No. 214 itself declared that the transfer is subject to such liens/leases
existing [on the subject property]. Thus:
...we now proceed to determine whether FIRESTONE should be allowed to exercise its right of
first refusal over the property. Such right was expressly stated by NDC and FIRESTONE in
par. XV of their third contract denominated as A-10-78 executed on 22 December
1978 which, as found by the courts a quo, was interrelated to and inseparable from their first
contract denominated as C-30-65 executed on 24 August 1965 and their second contract
denominated as C-26-68 executed on 8 January 1969. Thus -
Should the LESSOR desire to sell the leased premises during the term of this Agreement, or any
extension thereof, the LESSOR shall first give to the LESSEE, which shall have the right of first
option to purchase the leased premises subject to mutual agreement of both parties.

In the instant case, the right of first refusal is an integral and indivisible part of the contract of
lease and is inseparable from the whole contract. The consideration for the right is built into the
reciprocal obligations of the parties. Thus, it is not correct for petitioners to insist that there was
no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the
stipulation is part and parcel of the contract of lease making the consideration for the lease the
same as that for the option.

It is a settled principle in civil law that when a lease contract contains a right of first refusal,
the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has
made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The
lessee has a right that the lessors first offer shall be in his favor.
The option in this case was incorporated in the contracts of lease by NDC for the benefit
of FIRESTONE which, in view of the total amount of its investments in the property, wanted
to be assured that it would be given the first opportunity to buy the property at a price for
which it would be offered. Consistent with their agreement, it was then implicit for NDC to
have first offered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in
favor of PUP. Only if FIRESTONE failed to exercise its right of first priority could NDC
lawfully sell the property to petitioner PUP.[37] [EMPHASIS SUPPLIED]

As we further ruled in the afore-cited case, the contractual grant of a right of first refusal is
enforceable, and following an earlier ruling in Equatorial Realty Development, Inc. v. Mayfair
Theater, Inc.,[38] the execution of such right consists in directing the grantor to comply with his
obligation according to the terms at which he should have offered the property in favor of the
grantee and at that price when the offer should have been made. We then determined the proper
rate at which the leased portion should be reconveyed to respondent by PUP, to whom
the lessor NDC sold it in violation of respondent lessees right of first refusal, as follows:

It now becomes apropos to ask whether the courts a quo were correct in fixing the proper
consideration of the sale at P1,500.00 per square meter. In contracts of sale, the basis of the
right of first refusal must be the current offer of the seller to sell or the offer to purchase of the
prospective buyer. Only after the lessee-grantee fails to exercise its right under the same terms
and within the period contemplated can the owner validly offer to sell the property to a third person,
again, under the same terms as offered to the grantee. It appearing that the whole NDC
compound was sold to PUP for P554.74 per square meter, it would have been more proper for
the courts below to have ordered the sale of the property also at the same price. However, since
FIRESTONE never raised this as an issue, while on the other hand it admitted that the value
of the property stood at P1,500.00 per square meter, then we see no compelling reason to
modify the holdings of the courts a quo that the leased premises be sold at that
price.[39] [EMPHASIS SUPPLIED]

In the light of the foregoing, we hold that respondent, which did not offer any amount to petitioner
NDC, and neither disputed the P1,500.00 per square meter actual value of NDCs property at that
time it was sold to PUP at P554.74 per square meter, as duly considered by this Court in
the Firestone case, should be bound by such determination.Accordingly, the price at which the
leased premises should be sold to respondent in the exercise of its right of first refusal under the
lease contract with petitioner NDC, which was pegged by the RTC at P554.74 per square meter,
should be adjusted to P1,500.00 per square meter, which more accurately reflects its true value
at that time of the sale in favor of petitioner PUP.
Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a right of first refusal
that stands upon valuable consideration.[40] We have categorically ruled that it is not correct to
say that there is no consideration for the grant of the right of first refusal if such grant is embodied
in the same contract of lease. Since the stipulation forms part of the entire lease contract, the
consideration for the lease includes the consideration for the grant of the right of first refusal. In
entering into the contract, the lessee is in effect stating that it consents to lease the premises and
to pay the price agreed upon provided the lessor also consents that, should it sell the leased
property, then, the lessee shall be given the right to match the offered purchase price and to buy
the property at that price.[41]
We have further stressed that not even the avowed public welfare or the constitutional priority
accorded to education, invoked by petitioner PUP in the Firestone case, would serve as license
for us, and any party for that matter, to destroy the sanctity of binding obligations. While education
may be prioritized for legislative and budgetary purposes, it is doubtful if such importance can be
used to confiscate private property such as the right of first refusal granted to a lessee of petitioner
NDC.[42] Clearly, no reversible error was committed by the CA in sustaining respondents
contractual right of first refusal and ordering the reconveyance of the leased portion of petitioner
NDCs property in its favor.
WHEREFORE, the petitions are DENIED. The Decision dated November 25, 2004 of the
Regional Trial Court of Makati City, Branch 144 in Civil Case No. 88-2238, asaffirmed by the Court
of Appeals in its Decision dated June 25, 2008 in CA-G.R. CV No. 84399, is
hereby AFFIRMED with MODIFICATION in that the price to be paid by respondent Golden
Horizon Realty Corporation for the leased portion of the NDC Compound under Lease Contract
Nos. C-33-77 and C-12-78 is hereby increased to P1,500.00 per square meter.
No pronouncement as to costs.
SO ORDERED.