G.R. No. 119466 November 25, 1999
SALVADOR ADORABLE and LIGAYA ADORABLE, petitioners, vs. COURT OF APPEALS, HON. JOSE O. RAMOS, FRANCISCO BARENG and SATURNINO BARENG, respondents.

FACTS

Petitioners, spouses Salvador and Ligaya Adorable, were lessees of a portion of land owned by Saturnino Bareng. The Barengs obtained a loan from the Adorables and promised to transfer possession of another lot as security. The Barengs failed to pay the loan, leading to a compromise agreement. Subsequently, Francisco Bareng sold a portion of the land, which included the area leased by the petitioners, to respondent Jose Ramos. The Adorables, as unpaid creditors, filed a complaint for the annulment of this sale, alleging it was fraudulently executed to prejudice their interests. During trial, after presenting one witness, petitioners failed to appear at subsequent hearings. The trial court thus terminated their presentation of evidence and allowed respondents to present evidence ex parte.

ISSUE

The primary issue is whether the petitioners, as creditors and lessees, have a valid cause of action to seek the annulment of the sale between Francisco Bareng and Jose Ramos.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision dismissing the complaint for lack of cause of action. The Court’s legal logic is threefold. First, as mere creditors, petitioners possess only a personal right to demand payment from the debtor, not a real right over the specific property sold. An action for rescission of a contract by a creditor under Article 1381 of the Civil Code, on grounds of fraud, is an accion pauliana. This remedy is subsidiary and requires the creditor to first exhaust the debtor’s general assets through legal means, which petitioners failed to do. They did not show that the sale rendered Francisco Bareng insolvent or that they had pursued his other properties without satisfaction.
Second, the claim of a preferential right to purchase the land as lessees under Commonwealth Act No. 539 is untenable. The law grants such preference only to bona fide tenants after the government has expropriated or purchased the land for resale. This situation was not present, as the land remained in private ownership and was subject to a private sale. Petitioners’ interest as lessees did not grant them a cause of action to annul a sale to a third party.
Third, the trial court did not commit grave abuse of discretion in terminating petitioners’ presentation of evidence due to their unexplained absence at scheduled hearings. Their counsel, though based in Makati, received proper notice. Failure to appear constituted a waiver of the right to present further evidence, and the court’s decision to proceed ex parte was not arbitrary. Therefore, petitioners failed to establish a legal standing or cause of action to challenge the validity of the sale.