G.R. No. 74938-39 and G.R. No. 75524-25; January 17, 1990
ANGELINA J. MALABANAN, petitioner, vs. GAW CHING and THE INTERMEDIATE APPELLATE COURT, respondents. LEONIDA CHY SENOLOS, LEONARD CHAN and LEONSO CHY CHAN, petitioners, vs. INTERMEDIATE APPELLATE COURT and GAW CHING, respondents.

FACTS

Respondent Gaw Ching was a long-term lessee of a property in Binondo, Manila, owned first by a Mr. Jabit and later by petitioner Angelina Malabanan. The lease was on a month-to-month basis. In 1980, Malabanan offered to sell the property to Gaw Ching at P5,000 per square meter. Gaw Ching found the price prohibitive and did not accept the offer. Malabanan subsequently sold the property to petitioner Leonida Senolos. Gaw Ching, who had by then acquired Filipino citizenship, filed a case to annul the sale, claiming a right of first refusal under Presidential Decree No. 1517 (the Urban Land Reform Law). He also filed a separate case for damages after the building on the property was demolished by Senolos following a lawful order from the City Engineer.
The Regional Trial Court dismissed both of Gaw Ching’s complaints. It ruled that P.D. 1517 did not apply as the property was not within a declared Urban Land Reform Zone. It also found the demolition lawful and that Gaw Ching had sufficient notice. The Intermediate Appellate Court reversed this decision, holding that Gaw Ching, as a legitimate tenant, was entitled to a right of first refusal under P.D. 1517, and that the demolition was executed in bad faith, warranting an award of damages.

ISSUE

The primary issues were: (1) Whether respondent Gaw Ching, as a month-to-month lessee, possessed a right of first refusal under P.D. 1517; and (2) Whether the demolition of the leased building was lawful and executed in good faith.

RULING

The Supreme Court reversed the Appellate Court and reinstated the trial court’s decision, ruling in favor of the petitioners. On the first issue, the Court held that P.D. 1517 and its implementing provisions apply only to areas specifically proclaimed as Urban Land Reform Zones. The subject property in Binondo was not within such a proclaimed zone; therefore, the law’s benefits, including the right of first refusal for tenants, were inapplicable. Gaw Ching’s month-to-month tenancy did not, by itself, create a statutory pre-emptive right absent the law’s specific territorial application.
On the second issue, the Court found the demolition was carried out lawfully and in good faith. Senolos acted pursuant to a valid demolition order from the City Engineer of Manila. The Court noted that Gaw Ching had ample notice of the order, his application for a preliminary injunction to stop the demolition had been denied by the trial court, and there was no subsisting judicial restraint at the time of demolition. The fact that the demolition was temporarily paused upon a verbal request from a city official did not invalidate the underlying lawful order or imply bad faith. Consequently, no basis for an award of damages existed. The Court emphasized that Gaw Ching’s losses, if any, were a result of his own choice not to comply with the lawful demolition order after receiving proper notice.