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FIRST DIVISION

G.R. No. 154366               November 17, 2010

CEBU BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA, Petitioners,

vs.
DEVELOPMENT BANK OF THE PHILIPPINES, JOSE TO CHIP,
PATRICIO YAP and ROGER BALILA, Respondents.

DECISION

LEONARDO – DE CASTRO, J.:

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails
the Resolution2 dated February 5, 2002 and the Amended Decision3 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 Reconsideration4 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 Decision5 dated February 14, 2001, which affirmed
the Decision6 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 contract7 with DBP in order to secure a loan from the said bank in
the amount of ₱500,000.00. 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 thereon8 (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:

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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 (₱1,000.00)

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 Sale12 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
DBP’s acquisition of the State Theatre Building. Said letter reads:

June 18, 1987

Mr. Bonifacio Sia

Bionic Builders’ Inc.
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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 Head13 (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,

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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 Deposit15 for ₱11,395.64

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, Osmeña 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 o’clock noon of DECEMBER
3, 1990. Sealed offers submitted shall be opened by the Committee on Negotiated
Offers at exactly 2:00 o’clock in the afternoon of the last day of the acceptance
period in order to determine the highest and/or most advantageous offer.

Item Description/Location Starting Price

No.
xxxx
II Commercial land, Lot No. 3681-C- ₱1,838,100.00
3, having an area of 396 sq. m.,
situated in Tabunok, Talisay, Cebu
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and 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 cashier’s/manager’s 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  (Emphases ours.)
20

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 ₱1,840,000.00. Attached to the
letter-offer was a copy of the Negotiated Sale Rules and Procedures issued by DBP
and a manager’s check for the amount of ₱184,000.00, 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.1avvphi1

On December 17, 1990, respondents To Chip, Yap and Balila presented their letter-
offer21 to purchase the subject properties on a cash basis for ₱1,838,100.00. Said
offer was accompanied by a downpayment of 10% of the offered purchase price,
amounting to ₱183,810.00. 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
letter23 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
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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 replied24 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 letter26 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 paid28 to DBP, on March 22, 1991,
the amount of ₱5,000.00 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 complaint29 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 ₱1,840,000, which was higher than the starting price of
₱1,838,100.00 on cash basis. x x x;

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

6.3 Manager’s check for the amount of ₱184,000 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.)
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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 latter’s 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 attorney’s 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 attorney’s fees.
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Respondents To Chip, Yap and Balila no longer filed a separate answer, adopting
instead the answer of DBP.35

In an Order36 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 ₱11,395.64 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 ₱184,000.00 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
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acceptance period accomplished by [petitioners] which shows clearly the written

word "Cash" after the printed words "Term" and "Mode of Payment", Exhibit "J",
the Manager’s check issued by Allied Banking Corporation dated December 3,
1990 in the amount of ₱184,000.00 representing 10% of the offer showing the mode
of payment is for cash; Exhibit "K" which is the application for Manager’s check in
the amount of ₱184,000.00 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 Manager’s check in the amount of ₱184,000.00 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 Court’s 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 Bionic’s] 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
 Page 10 of 21

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] bank’s 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] bank’s 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 Reconsideration43 of the above decision, but the RTC denied the
same in an Order44 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.
 Page 11 of 21

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.
 Page 12 of 21

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.
 Page 13 of 21

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 lessee’s 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
 Page 14 of 21

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
 Page 15 of 21

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 RESCISSION52

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
Secretary’s Certificate55 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
 Page 16 of 21

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 court’s 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. Padilla59 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
 Page 17 of 21

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
 Page 18 of 21

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
 Page 19 of 21

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-à-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 ₱11,395.64, 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:
 Page 20 of 21

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. DBP’s 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, DBP’s acceptance of petitioners’ rental payments
of ₱5,000.00 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
 Page 21 of 21

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 lessee’s
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.