FACTS:

The case involved a lease agreement between Riviera Filipina, Inc. and Reyes, which included a right of first refusal clause. Reyes decided to sell the property due to financial difficulties and approached Traballo to discuss the possibility of a sale. They met on December 5, 1988, and agreed on a price of P5,300.00 per square meter. However, Traballo did not have the funds to pay at that time and informed Reyes that he would look for a partner.

In January 1989, Reyes, concerned about the expiration of the redemption period, asked his nephew to inquire with Riviera if they were interested in buying the property. Riviera confirmed their interest but maintained their offer of P5,000.00 per square meter. Reyes did not agree to Riviera's offer.

In February 1989, Reyes was able to secure the funds to redeem the property and subsequently sold it to Cypress and Cornhill for P5,395,400.00. Riviera sought a resale of the property, claiming a violation of their right of first refusal. The trial court dismissed Riviera's complaint, ruling that they had multiple opportunities to exercise their right but did not meet the price quoted by Reyes. Both parties appealed, but the Court of Appeals affirmed the trial court's decision.

ISSUES:

1. Whether or not Riviera Filipina, Inc. still had the right of first refusal.

2. Whether or not Riviera Filipina, Inc. was deceived by Juan L. Reyes.

3. Whether or not the Court of Appeals erred in denying reconsideration.

4. Whether or not the Court of Appeals' decision is void due to the alleged death of the principal appellee without proper substitution.

5. Whether the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in its decision and resolution.

6. Whether the right of first refusal of Riviera was violated by the sale of the subject property to Cypress and Cornhill.

7. Whether the practical construction of the contract by the parties should be considered in determining the meaning and intention of the parties.

8. Whether Riviera lost its right of first refusal due to its stubborn approach and refusal to negotiate with Reyes.

9. Whether or not the Court of Appeals erred in proceeding with the case despite the death of one of the parties.

10. Whether or not the Court of Appeals acquired jurisdiction over the heirs of the deceased party.

RULING:

1. The Court of Appeals did not commit a grave abuse of discretion in ruling that Riviera Filipina, Inc. already lost its right of first refusal.

2. The Court of Appeals did not commit a grave abuse of discretion in not finding that Riviera Filipina, Inc. was deceived by Juan L. Reyes.

3. The Court of Appeals did not commit a grave abuse of discretion in denying reconsideration.

4. The Court of Appeals' decision is not void due to the alleged death of the principal appellee without proper substitution.

5. The decision and resolution of the Court of Appeals are null and void because the instant petition should have been treated as a petition for review under Rule 45, not as a special civil action for certiorari under Rule 65 of the Revised Rules of Court.

6. The right of first refusal of Riviera was violated by the sale of the subject property to Cypress and Cornhill. The prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers. A contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible.

7. Yes. The practical construction of the contract by the parties is considered an important factor in determining the proper interpretation of the contract. In this case, the actions of the parties, as shown by their negotiations and correspondence, shaped their understanding and interpretation of the lease provision "right of first refusal" to mean that if the lessor decides to sell the property during the term of the lease, it should first be offered to the lessee.

8. Yes. Riviera lost its right of first refusal due to its stubborn approach and refusal to negotiate with Reyes. Riviera exhibited a "take-it or leave-it" attitude during the negotiations and quoted a fixed and final price. Therefore, Riviera cannot claim that it would have matched the offer of another party if it had been informed of it.

9. The Court held that the Court of Appeals did not commit any reversible error in proceeding with the case and acquiring jurisdiction over the heirs of the deceased party. The death of a party does not extinguish their civil personality. The purpose of the rule on substitution of parties is to protect the right of every party to due process, and this purpose has been met in this case since both parties argued their positions through their pleadings in the trial court and the appellate court. Therefore, the Decision of the Court of Appeals was affirmed.

PRINCIPLES:

• Right of first refusal

• Estoppel

• Good faith

• Equity

• Errors of jurisdiction are best reviewed in a special civil action for certiorari under Rule 65, while errors of judgment are correctible by appeal in a petition for review under Rule 45.

• An error of judgment that the court may commit in the exercise of its jurisdiction is not correctible through the original special civil action of certiorari.

• The right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers.

• A contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible.

• The intention of the parties to a contract shall be accorded primordial consideration and, in case of doubt, their contemporaneous and subsequent acts shall be principally considered.

• The court should not give a contract a strained or forced construction but should read it as the average person would read it.

• Peculiar factual circumstances of each case determine the interpretation of laws and contracts.

• The practical construction of a contract by the parties is an important factor in determining its meaning and intention.

• Silence or concealment, by itself, does not constitute fraud unless there is a special duty to disclose certain facts or according to good faith and the usages of commerce, the communication should be made.

• Courts cannot rewrite a contract or impose obligations not assumed by the parties.

• The failure to comply with the duty to inform the court of a client's death and to effect substitution will not invalidate the proceedings and judgment if the action survives the death of the party.

• The death of a party does not extinguish their civil personality.

• The rule on substitution of parties aims to protect the right of every party to due process.

• Jurisdiction can be acquired over the heirs of a deceased party if they voluntarily submit themselves to the jurisdiction of the court.