Malabanan v IAC (Civil Procedure)

Angeline Malabanan v. IAC and Gaw Ching

Facts:

·       Mr. Jabit has previously entered into an oral contract of lease with respondent Gaw Ching;

·       When Mr. Jabit died, petitioner, daughter, continued the lease but the rental was increased from P700.00 to P1,000.00 per month;

·       There was no written contract with regards to the duration of the lease between Mr. Jabit and respondent;

·       Subsequently thereafter, petitioner informed respondent that she was selling the house and lot for P5,000.00 per square meter;

·       Respondent argued that the price is prohibitive; nonetheless, petitioner maintained her proposition;

·       Respondent, nothwithstanding the aforementioned, still tried to pay his rental dues but petitioner refused to accept; hence, he deposited the same in a bank, as advised by his counsel;

·       After letters of notice that petitioner will sell the subject property should respondent opt not to buy the same, the property was subsequently sold to Leonidas Senolos;

·       Verious notices was sent by petitioner to vacate the said property;

·       Petitioner then caused the said property to be demolished; hence, respondent filed an action to annul sale with damages between Senolos and petitioner.

Lower court ruling:

RTC:    declared the validity of the sale; respondent was given ample opportunity to exercise right of first refusal

IAC: Reversed the decision of the RTC; the majority held that the transaction between petitioner was vitiated by fraud, deceit and bad faith allegedly causing damage to respondent; hence, annulled the deed of sale and ordered petitioner to pay respondent P350,000.00 in damages (moral, exemplary and actual)

Issue:

1.)   WON respondent has been prejudiced in his right so as to give him the right of action to annul the sale;

2.)   WON respondent is entitled to said damages as awarded by the IAC;

Ruling:

1.)   No, respondent was not prejudiced in his right by reason of the sale of said property.

The firmly settled rule is that strangers to a contract cannot sue either or both of the contracting parties to annul and set aside the contract.

Nonetheless, he who is not the party obligated principally or subsidiarily in a contract may perhaps be entitled to an action for nullity, if he is prejudiced in his rights with respect to one of the contracting parties; but, in order that such be the case, it is indispensable to show the detriment which positively would result to him from the contract in which he had no intervention.

Gaw Ching does not fall within such exception. First, Gaw Ching had no legal right of preemption in respect of the house and lot involved. The subject piece of land is located outside the Urban Land Reform Zones declared in P.D. 1517 which entitles the lessee to a right of preemption or redemption if he has built his home thereon and resided for at least 10 years thereat.

Even assuming (which it is not) that the subject property falls within the Urban Land, still Gaw Ching has not satisfactorily complied with the requisites for entitlement (construction of home and the 10 year requirement).

Furthermore, he was even offered to buy said property which he declined.

2.)   No, respondent is not entitled to the damages awarded by the IAC.

Firstly, the order of condemnation or demolition had been issued by the proper authorities (Office of the City Engineer) which order was valid and subsisting at the time the demolition was carried out.

Second, it is the owner of the building or installation to be demolished who may appeal an order of demolition to the Secretary of Public Works and Highways. At bar, Gaw Ching is merely a lessee.

Third, the action filed by respondent to annul the sale was with preliminary injunction which the RTC denied; hence, it was only after such denial that demolition was continued.

Lastly, Gaw Ching had ample notice of demolition order and had adequate time to remove his belongings from the premises if he was minded to obey the order of demolition. He chose not to obey that order. If he did suffer any losses – the trial court did not believe his claims that he did – he had only himself to blame.