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. 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 make a counter-offer. Malabanan subsequently sold the property to petitioner Leonida Senolos. Gaw Ching, who had by then acquired Filipino citizenship, filed two cases: one to annul the sale to Senolos and enjoin demolition of a building on the land, and another for damages arising from the eventual demolition.
The Regional Trial Court dismissed both complaints. It found that Gaw Ching, being an alien at the time of the offer to sell, was disqualified from acquiring private land and thus had no right of first refusal under the Urban Land Reform law. It also found the demolition was lawful, having been carried out pursuant to a valid order from the City Engineer after Gaw Ching failed to comply with notices. The Intermediate Appellate Court reversed, holding that Gaw Ching, having become a citizen before the property was sold to Senolos, had a valid right of first refusal which was violated. It also awarded damages for the demolition.

ISSUE

The primary issues were: (1) Whether Gaw Ching, an alien at the time of the offer to sell but a citizen before the consummated sale to a third party, possessed a right of first refusal enforceable against the vendor; and (2) Whether the demolition of the building was lawful, precluding an award of damages.

RULING

The Supreme Court reversed the Appellate Court and reinstated the trial court’s decision, ruling in favor of petitioners Malabanan and Senolos. On the first issue, the Court held that no right of first refusal ever accrued in favor of Gaw Ching. The legal logic is rooted in capacity and timeliness. Under the Constitution and the Public Land Act, an alien is absolutely prohibited from acquiring private land. Since Gaw Ching was an alien at the precise moment Malabanan made her offer to sell (April to October 1980), he was utterly without legal capacity to purchase the land. A right of first refusal is a conditional option, but it presupposes the offeree’s capacity to accept the underlying contract. An alien cannot have an enforceable option to buy land, as this would circumvent the constitutional prohibition. His subsequent naturalization did not retroactively validate a right that could not legally exist at its inception.
On the second issue, the Court found the demolition was lawful and justified. The demolition was executed under a valid order from the Office of the City Engineer of Manila, issued after Gaw Ching failed to comply with multiple notices. Gaw Ching had ample notice and opportunity to vacate and remove his belongings but chose not to. Furthermore, his application for a preliminary injunction to stop the demolition had been denied by the trial court, leaving no legal impediment to proceed. The demolition was therefore carried out under color of legal authority, negating any basis for an award of damages. The Court emphasized that a property owner has the right to possess and use their property, and the lawful enforcement of a demolition order against a holdover lessee does not constitute a tort.