G.R. No. 128119 - MURLI SADHWANI, GOBIND SADHWANI, HARESH SADHWANI, AND NARESH SADHWANI, VS. THE HONORABLE COURT OF APPEALS, ORIENT ELECTRONICS CORP., HOMOBONO SAWIT, (REPRESENTED BY THE HEIRS), AND SILVER SWAN MANUFACTURING CO., INC..

Ruling

Accordingly, it entered into a contract with petitioners Sadhwanis, first, on June 18, 1984 for the sublease of one building and again, on November 17, 1987, for the sublease of the other building, for periods coinciding with the date of expiration of the Sawit-Orient lease contract. The whereas clauses of the two contracts of sublease in pertinent parts recited: WHEREAS, the SUB-LESSOR is the lessee in a Contract of Lease dated . . . with MR. HOMOBONO SAWIT as lessor, a copy of which is attached herewith as Annex A and made an integral part hereof. WHEREAS, under the Contract of Lease, the lessee therein, SUB-LESSOR herein, has the right to sublease the . . . building of the property situated at 102 E. Rodriquez Ave., Pasig, Metro Manila, more particularly described as follows: WHEREAS, the SUB-LESSOR wishes to sublease said building to the SUB-LESSEE and the SUB-LESSEE wishes to sublease the same from the SUB-LESSOR. In December 1988, i.e., six (6) months before the expiration of both the lease and sublease contracts, respondent Sawit sold his property to respondent Silver Swan Manufacturing Co., Inc. (Silver Swan Mfg.). Petitioners protested the sale, claiming they had the right of first refusal because their contracts of sublease with Orient Electronics expressly incorporated the Sawit-Orient lease contract as integral part of such contracts. They further claimed that in a meeting with the representatives of respondents Sawit, Orient Electronics, and Silver Swan Mfg., it was agreed upon that petitioners could buy back the property from Silver Swan Mfg. for the same price which the latter had paid in the amount of P4.5 million, provided another property could be found for Silver Swan Mfg. As nothing materialized out of the alleged agreement, petitioners alleged that they had to bring this action for the annulment of contract of sale, cancellation of title and specific performance. The action was brought against respondents Orient Electronics, Sawit and Silver Swan Mfg. in the Regional Trial Court of Pasig, Metro Manila. Respondent Orient Electronics was declared in default because while it filed an answer, it failed to serve a copy on petitioners. Orient Electronics appealed the order to the Court of Appeals, but its appeal was dismissed on February 28, 1991. On June 3, 1994, the trial court [1] rendered judgment sustaining petitioners claim of right of first refusal. It held that the parties intention, as revealed particularly in the whereas clauses of the sublease contracts, was to assign the entire lease, with all the rights and obligations of respondent Orient Electronics, to the petitioners as sublessees. Accordingly, the trial court ordered respondent Silver Swan Mfg. to execute a deed of absolute sale over the subleased property in favor of petitioners within 30 days from receipt of the decision and to pay moral and exemplary damages as well as attorneys fees. Orient Electronics was absolved from civil liability to the petitioner