G.R. No. 130722 December 9, 1999
SPS. REYNALDO K. LITONJUA and ERLINDA P. LITONJUA and PHIL. WHITE HOUSE AUTO SUPPLY, INC., petitioners,
vs.
L & R CORPORATION, VICENTE M. COLOYAN in his capacity as Acting Registrar of the Register of Deeds of Quezon City thru Deputy Sheriff ROBERTO R. GARCIA, respondents.
YNARES-SANTIAGO, J.:
May a mortgage contract provide: (a) that the mortgagor cannot sell the mortgaged property without first obtaining the consent of the mortgagee and that, otherwise, the sale made without the mortgagee's consent shall be invalid; and (b) for a right of first refusal in favor of the mortgagee?
The controversy stems from loans obtained by the spouses Litonjua from L & R Corporation in the aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and the remaining P200,000.00 obtained on March 27, 1978. The loans were secured by a mortgage 1 constituted by the spouses upon their two parcels of land and the improvements thereon located in Cubao, Quezon City covered by Transfer Certificates of Title No. 197232 and 197233, with an area of 599 and 1,436 square meters, respectively. The mortgage was duly registered with the Register of Deeds of Quezon City.
On July 14, 1979, the spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land they had previously mortgaged to L & R Corporation for the sum of P430,000.00. 2 The sale was annotated at the back of the respective certificates of title of the properties. 3
Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. On July 23, 1980, the mortgaged properties were sold at public auction to L & R Corporation as the only bidder for the amount of P221,624.58. 4
When L & R Corporation presented its corresponding Certificate of Sale issued by Deputy Sheriff Roberto B. Garcia, to the Quezon City Register of Deeds for registration on August 15, 1980, it learned for the first time of the prior sale of the properties made by the spouses Litonjua to PWHAS upon seeing the inscription at the back of the certificates of title. Thus, on August 20, 1980, it wrote a letter 5 to the Register of Deeds of Quezon City requesting for the cancellation of the annotation regarding the sale to PWHAS. L & R Corporation invoked a provision in its mortgage contract with the spouses Litonjua stating that the mortgagee's prior written consent was necessary in case of subsequent encumbrance or alienation of the subject properties. Thus, it argued that since the sale to PWHAS was made without its prior written consent, the same should not have been registered and/or annotated.
On March 10, 1981, or seven months after the foreclosure sale, PWHAS, for the account of the spouses Litonjua, tendered payment of the full redemption price to L & R Corporation in the form of China Bank Manager's Check No. HOF-M O12623 in the amount of P238,468.04. 6 L & R Corporation, however, refused to accept the payment, hence, PWHAS was compelled to redeem the mortgaged properties through the Ex-Oficio Sheriff of Quezon City. On March 31, 1981, it tendered payment of the redemption price to the Deputy Sheriff through China Bank Manager's Check No. HOF-O14750 in the amount of P240,798.94. 7 The check was deposited with the Branch Clerk of Court who issued Receipt No. 7522484 8 for the full redemption price of the mortgaged properties. Accordingly, the Deputy Sheriff issued a Certificate of Redemption in favor of the spouses Litonjua dated March 31, 1981. 9
In a letter of the same date, the Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full redemption price and advised it that it can claim the payment upon surrender of its owner's duplicate certificates of title. 10
On April 2, 1981, the spouses Litonjua presented for registration the Certificate of Redemption issued in their favor to the Register of Deeds of Quezon City. The Certificate also informed L & R Corporation of the fact of redemption and directed the latter to surrender the owner's duplicate certificates of title within five days. 11
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was without its consent, in contravention of paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was seeking to redeem the foreclosed properties, when under Articles 1236 and 1237 of the New Civil Code, the latter had no legal personality or capacity to redeem the same. 12
On the other hand, on May 8 and June 8, 1981, the spouses Litonjua asked the Register of Deeds to annotate their Certificate of Redemption as an adverse claim on the titles of the subject properties on account of the refusal of L & R Corporation to surrender the owner's duplicate copies of the titles to the subject properties. With the refusal of the Register of Deeds to annotate their Certificate of Redemption, the Litonjua spouses filed a Petition 13 on July 17, 1981 against L & R Corporation for the surrender of the owner's duplicate of Transfer Certificates of Title No. 197232 and 197233 before the then Court of First Instance of Quezon City, Branch IV, docketed as Civil Case No. 32905.
On August 15, 1981, while the said case was pending, L & R Corporation executed an Affidavit of Consolidation of Ownership. 14 Thereafter, on August 20, 1981, the Register of Deeds cancelled Transfer Certificates of Title No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No. 280054 15 and 28055 16 in favor of L & R Corporation, free of any lien or encumbrance.
With titles issued in its name, L & R Corporation advised the tenants of the apartments situated in the subject parcels of land that being the new owner, the rental payments should be made to them, and that new lease contracts will be executed with interested tenants before the end of August, 1981. 17 Upon learning of this incident from their tenants, the spouses Litonjua filed an adverse claim 18 and a notice of lis pendens 19 with the Register of Deeds. In the process, they learned that the prior sale of the properties in favor of PWHAS was not annotated on the titles issued to L & R.
A complaint for Quieting of Title, Annulment of Title and Damages with preliminary injunction was filed by the spouses Litonjua and PWHAS against herein respondents before the then Court of First Instance of Quezon City, Branch 9, docketed as Civil Case No. Q-33362. 20 On February 10, 1987, the lower court rendered its Decision 21 dismissing the Complaint upon its finding that the sale between the spouses Litonjua and PWHAS was null and void and unenforceable against L & R Corporation and that the redemption made was also null and void.
On appeal, the decision of the trial court was set aside by the Court of Appeals in its Decision dated June 22, 1994, 22 on the ground that the sale made to PWHAS as well as the redemption effected by the spouses Litonjua were valid. However, the same was subsequently reconsidered and set aside in an Amended Decision dated September 11, 1997. 23
Hence, the instant Petition on the following issues:
(1) whether or not paragraphs 8 and 9 of the Real Estate Mortgage are valid and enforceable;
(2) whether or not the sale of the mortgaged properties by the spouses Litonjua to PWHAS, without the knowledge and consent of L & R Corporation, is valid and enforceable;
(3) whether or not PWHAS had the right to redeem the foreclosed properties on the account of the spouses Litonjua; and
(4) whether or not there was a valid redemption.
Paragraphs 8 and 9 of the subject Deed of Real Estate Mortgage read as follows —
8. That the MORTGAGORS shall not sell, dispose of, mortgage, nor in any other manner encumber the real property/properties subject of this mortgage without the prior written consent of the MORTGAGEE;
9. That should the MORTGAGORS decide to sell the real property/properties subject of this mortgage, the MORTGAGEE shall be duly notified thereof by the MORTGAGORS, and should the MORTGAGEE be interested to purchase the same, the latter shall be given priority over all the other prospective buyers; 24
There is no question that the spouses Litonjua violated both the aforesaid provisions, selling the mortgaged properties to PWHAS without the prior written consent of L & R Corporation and without giving the latter notice of such sale nor priority over PWHAS.
Re: Validity of prohibition against subsequent sale of mortgaged property without prior written consent of mortgagee and validity of subsequent sale to PWHAS
Petitioners defend the validity of the sale between them by arguing that paragraph 8 violates Article 2130 of the New Civil Code which provides that "(A) stipulation forbidding the owner from alienating the immovable mortgaged shall be void."
In the case of Philippine Industrial Co. v. El Hogar Filipino and
Vallejo, 25 a stipulation prohibiting the mortgagor from entering into second or subsequent mortgages was held valid. This is clearly not the same as that contained in paragraph 8 of the subject Deed of Real Estate Mortgage which also forbids any subsequent sale without the written consent of the mortgagee. Yet, in Arancillo v. Rehabilitation Finance Corporation, 26 the case of Philippine Industrial Co., supra, was erroneously cited to have held a mortgage contract against the encumbrance, sale or disposal of the property mortgaged without the consent of the mortgagee is valid. No similar prohibition forbidding the owner of mortgaged property from (subsequently) mortgaging the immovable mortgaged is found in our laws, making the ruling in Philippine Industrial Co., supra, perfectly valid. On the other hand, to extend such a ruling to include subsequent sales or alienation runs counter not only to Philippine Industrial Co., itself, but also to Article 2130 of the New Civil Code.
Meanwhile in De la Paz v. Macondray &; Co., Inc., 27 it was held that while an agreement of such nature does not nullify the subsequent sale made by the mortgagor, the mortgagee is authorized to bring the foreclosure suit against the mortgagor without the necessity of either notifying the purchaser or including him as a defendant. At the same time, the purchaser of the mortgaged property was deemed not to have lost his equitable right of redemption.
In Bonnevie v. Court of Appeals, 28 where a similar provision appeared in the subject contract of mortgage, the petitioners therein, to whom the mortgaged property were sold without the written consent of the mortgagee, were held as without the right to redeem the said property. No consent having been secured from the mortgagee to the sale with assumption of mortgage by petitioners therein, the latter were not validly substituted as debtors. It was further held that since their rights were never recorded, the mortgagee was charged with the obligation to recognize the right of redemption only of the original mortgagors-vendors. Without discussing the validity of the stipulation in question, the same was, in effect, upheld.
Again, in Cruz v. Court of Appeals, 29 while a similar provision was recognized and applied, no discussion as to its validity was made since the same was not raised as an issue.
On the other hand, in Tambunting v. Rehabilitation Finance
Corporation, 30 the validity of a similar provision was specifically raised and discussed and found as invalid. It was there ratiocinated that —
To be sure, the deed of second mortgage executed by the Escuetas in favor of Aurora Tambunting, married to Antonio L. Tambunting, does contain a provision that "the property mortgaged shall not be . . . the subject of any new or subsequent contracts of agreements, saving and excepting those having connection with the first mortgage with the RFC, without first securing the written permission and consent of MORTGAGEE". But the provision can only be construed as directed against subsequent mortgages or encumbrance, not to an alienation of the immovable itself. For while covenants prohibiting the owner from constituting a later mortgage over property registered under the Torrens Act have been held to be legally permissible (Phil. Industrial Co. v. El Hogar Filipino, et al., 45 Phil. 336, 341-342; Bank of the Philippines v. Ty Camco Sobrino, 57 Phil. 801), stipulations "forbidding the owner from alienating the immovable mortgaged" are expressly declared void by law (Art. 2130, Civil Code). It is clear that the stipulation against "subsequent agreements" above mentioned had not been breached by the assignment by the Escuetas (to the Hernandezes) of their right of redemption in connection with the mortgage constituted if favor of the R.F.C. The assignment was not subsequent mortgage or encumbrance, licitly comprehended by the prohibitory stipulation, but was actually a sale or conveyance of all their rights in the encumbered real property — in truth, an alienation of the immovable — which could not lawfully be forbidden. Moreover, since the subject of the assignment to the Hernandezes had "connection with the first assignment with the R.F.C.", it did not fall within, but was explicitly excepted from, the prohibitory stipulation in question. Finally, it should not be forgotten that since the Tambuntings, in their own deed of conditional sale with the R.F.C., had accepted without demur the provision that said contract could be revoked within one (1) year from September 16, 1955 at the option of the RFC, as vendor, should the former owner (Escueta) exercise his right to redeem the property; and that the redemption of the property within said period by "the former owner or his successor-in-interest" would render their instrument of conditional sale "automatically null and void and without effect", they cannot now assume a position inconsistent with said provision.
(Emphasis, Ours).
Earlier, in PNB v. Mallorca, 31 it was reiterated that a real mortgage is merely an encumbrance; it does not extinguish the title of the debtor, whose right to dispose — a principal attribute of ownership — is not thereby lost. Thus, a mortgagor had every right to sell his mortgaged property, which right the mortgagee cannot oppose.
In upholding the validity of the stipulation in question, the amended Decision relied on the cases of Cruz v. Court of Appeals, supra, and Medida v. Court of Appeals. 32 According to the Court of Appeals, said cases, are not only more recent that of Tambunting, supra, but are also more applicable to the issue at bar.
We are not convinced.
As we have mentioned, although a similar provision was recognized and applied in Cruz v. Court of Appeals, supra, no discussion as to its validity was made since the same was not raised as an issue. Thus, it cannot be said that the specific pronouncement in the Tambunting case that such a stipulation can only be construed as against subsequent mortgages or encumbrances but not to an alienation of the immovable itself, which is prohibited under Article 2130, was abandoned thereby. On the other hand, the facts in the case of Medida v. Court of Appeals, are different from those in the present case for what was in issue in the said case was a second mortgage over a foreclosed property during the period of redemption. Thus, the ruling in Medida quoted in the Amended Decision that "what is delimited is not the mortgagor's jus dispodendi, as an attribute of ownership, but merely the rights conferred by such act of disposal which may correspondingly be restricted," actually refers to the fact that the only rights which a mortgagor can legally transfer, cede and convey after the foreclosure of his properties are the right to redeem the land, and the possession use and enjoyment of the same during the period of redemption. It has no connection or reference to the right of a mortgagor to sell his mortgaged property without the required consent of the mortgagee. To be sure, there is absolutely nothing in Medida that upholds the validity of the stipulation in controversy.
Insofar as the validity of the questioned stipulation prohibiting the mortgagor from selling his mortgaged property without the consent of the mortgagee is concerned, therefore, the ruling in the Tambunting case is still the controlling law. Indeed, we are fully in accord with the pronouncement therein that such a stipulation violates Article 2130 of the New Civil Code. Both the lower court and the Court of Appeals in its Amended Decision rationalize that since paragraph 8 of the subject Deed of Real Estate Mortgage contains no absolute prohibition against the sale of the property mortgaged but only requires the mortgagor to obtain the prior written consent of the mortgagee before any such sale, Article 2130 is not violated thereby. This observation takes a narrow and technical view of the stipulation in question without taking into consideration the end result of requiring such prior written consent. True, the provision does not absolutely prohibit the mortgagor from selling his mortgaged property; but what it does not outrightly prohibit, it nevertheless achieves. For all intents and purposes, the stipulation practically gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party. The mortgagee can simply withhold its consent and thereby, prevent the mortgagor from selling the property. This creates an unconscionable advantage for the mortgagee and amounts to a virtual prohibition on the owner to sell his mortgaged property. In other words, stipulations like those covered by paragraph 8 of the subject Deed of Real Estate Mortgage circumvent the law, specifically, Article 2130 of the New Civil Code.
Being contrary to law, paragraph 8 of the subject Deed of Real Estate Mortgage is not binding upon the parties. Accordingly, the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior written consent of L & R Corporation, is valid.
Re: Validity of redemption effected by PWHAS on the account of the spouses Litonjua
Coming now to the issue of whether the redemption offered by PWHAS on account of the spouses Litonjua is valid, we rule in the affirmative. The sale by the spouses Litonjua of the mortgaged properties to PWHAS is valid. Therefore, PWHAS stepped into the shoes of the spouses Litonjua on account of such sale and was in effect, their successor-in-interest. As such, it had the right to redeem the property foreclosed by L & R Corporation. Again, Tambunting, supra, clarifies that —
. . .. The acquisition by the Hernandezes of the Escuetas' rights over the property carried with it the assumption of the obligations burdening the property, as recorded in the Registry of Property, i.e., the mortgage debts in favor of the RFC (DBP) and the Tambuntings. The Hernandezes, by stepping into the Escuetas' shoes as assignees, had the obligation to pay the mortgage debts, otherwise, these debts would and could be enforced against the property subject of the assignment. Stated otherwise, the Hernandezes, by the assignment, obtained the right to remove the burdens on the property subject thereof by paying the obligations thereby secured; that is to say, they had the right of redemption as regards the first mortgage, to be exercised within the time and in the manner prescribed by law and the mortgage deed; and as regards the second mortgage, sought to be judicially foreclosed but yet unforeclosed, they had the so-called equity of redemption.
The right of PWHAS to redeem the subject properties finds support in Section 6 of Act 3135 itself which gives not only the mortgagor-debtor the right to redeem, but also his successors-in-interest. As vendee of the subject properties, PWHAS qualifies as such a successor-in-interest of the spouses Litonjua.
Re: Validity of redemption made
It is clear from the records that PWHAS offered to redeem the subject properties seven (7) months after the date of registration of the foreclosure sale, well within the one year period of redemption.
Re: Validity and enforceability of stipulation granting the mortgagee the right of first refusal
While petitioners question the validity of paragraph 8 of their mortgage contract, they appear to be silent insofar as paragraph 9 thereof is concerned. Said paragraph 9 grants upon L & R Corporation the right of first refusal over the mortgaged property in the event the mortgagor decides to sell the same. We see nothing wrong in this provision. The right of first refusal has long been recognized as valid in our jurisdiction. The consideration for the loan-mortgage includes the consideration for the right of first refusal. L & R Corporation is in effect stating that it consents to lend out money to the spouses Litonjua provided that in case they decide to sell the property mortgaged to it, then L & R Corporation shall be given the right to match the offered purchase price and to buy the property at that price. Thus, while the spouses Litonjua had every right to sell their mortgaged property to PWHAS without securing the prior written consent of L & R Corporation, they had the obligation under paragraph 9, which is a perfectly valid provision, to notify the latter of their intention to sell the property and give it priority over other buyers. It is only upon failure of L & R Corporation to exercise its right of first refusal could the spouses Litonjua validly sell the subject properties to others, under the same terms and conditions offered to L & R Corporation.
What then is the status of the sale made to PWHAS in violation of L & R Corporation's contractual right of first refusal? On this score, we agree with the Amended Decision of the Court of Appeals that the sale made to PWHAS is rescissible. The case of Guzman, Bocaling & Co. v. Bonnevie 33 is instructive on this point —
The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded by the Bonnevies for they had substantial interest that were prejudiced by the sale of the subject property to the Contract of Lease.
According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. It is a relief allowed for one of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferential right created by the contract. Rescission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity.
(emphasis, Ours)
It was then held that the Contract of Sale there, which violated the right of first refusal, was rescissible.
In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the subject properties since the Deed of Real Estate Mortgage containing such a provision was duly registered with the Register of Deeds. As such, PWHAS is presumed to have been notified thereof by registration, which equates to notice to the whole world.
We note that L & R Corporation had always expressed its willingness to buy the mortgaged properties on equal terms as PWHAS. Indeed, in its Answer to the Complaint filed, L & R Corporation expressed that it was ready, willing and able to purchase the subject properties at the same purchase price of P430,000.00, and was agreeable to pay the difference between such purchase price and the redemption price of P249,918.77, computed as of August 13, 1981, the expiration of the one-year period to redeem. That it did not duly exercise its right of first refusal at the opportune time cannot be taken against it, precisely because it was not notified by the spouses Litonjua of their intention to sell the subject property and thereby, to give it priority over other buyers.
All things considered, what then are the relative rights and obligations of the parties? To recapitulate:, the sale between the spouses Litonjua and PWHAS is valid, notwithstanding the absence of L & R Corporation's prior written consent thereto. Inasmuch as the sale to PWHAS was valid, its offer to redeem and its tender of the redemption price, as successor-in-interest of the spouses Litonjua, within the one-year period should have been accepted as valid by the L & R Corporation. However, while the sale is, indeed, valid, the same is rescissible because it ignored L & R Corporation's right of first refusal.
Foreseeing a possible rescission of the sale, the spouses Litonjua contend that with the restoration of the original status quo, with no sale having been made, they should now be allowed to redeem the subject properties, the period of redemption having been suspended during the period of litigation. In effect, the spouses Litonjua want to retain ownership of the same. We cannot, however, sanction this belated reversal of the spouses Litonjua's decision to sell. To do so would afford them undue advantage on account of the appreciation of the value of the subject properties in the intervening years when they precisely were the ones who violated and ignored the right of first refusal of L & R Corporation over the same. Moreover, it must be stressed that in rescinding the sale made to PWHAS, the purpose is to uphold and enforce the right of first refusal of L &R Corporation.
WHEREFORE, the Decision appealed from is hereby AFFIRMED with the following MODIFICATIONS:
(a) Ordering the rescission of the sale of the mortgaged properties between petitioners spouses Reynaldo and Erlinda Litonjua and Philippine White House Auto Supply, Inc. and ordering said spouses to return to Philippine White House Auto Supply, Inc. the purchase price of P430,000.00;
(c) Disallowing, due to the rescission of the sale made in its favor, the redemption made by Philippine White House Auto Supply, Inc. and ordering Quezon City Sheriff Roberto Garcia to return to it the "redemption" check of P240,798.94;
(d) Allowing respondent L & R Corporation to retain its consolidated titles to the foreclosed properties but ordering it to pay to the Litonjua spouses the additional sum of P189,201.96 representing the difference from the purchase price of P430,000.00 in the rescinded sale;
(e) Deleting the awards for moral and exemplary damages and attorney's fees to the respondents.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, Melo, Puno, Kapunan, Panganiban, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes and De Leon, Jr., JJ., concur.
Davide Jr., C.J., I join Mr. Justice Vitug in his concurring and dissenting opinion.
Vitug, J., pls. see concurring & dissenting opinion.
Mendoza, J., I join Justice Vitug's separate opinion.
Separate Opinions
VITUG, J.,
concurring and dissenting opinion;
At the pith of the controversy are two stipulations in a real estate mortgage contract, to wit: (a) that the mortgagor cannot sell the mortgaged property without the written consent of the mortgagee, and (b) that the latter has a "right of first refusal" in any projected sale of the hypothecated property.
Outlined below is a factual backdrop of the case.
The spouses Reynaldo and Erlinda Litonjua (Litonjua spouses) contracted a loan from L & R Corporation in the sum of P400,000.00 drawn in two tranches — P 200,000.00 on 06 August 1974 and the other P 200,000.00 on 27 March 1978. The loan was secured by a real estate mortgage constituted by the spouses on their two parcels of land located in Cubao, Quezon City, covered by Transfer Certificates of Title ("TCT") No. 197232 and 197233, measuring 599 and 1,436 sq. m., respectively. The contract provided, inter alia, that the mortgagors were enjoined from conveying the mortgaged property without the written consent of the mortgagee and that the mortgagee had a right of first refusal in the event the mortgagors decided to sell the property. 1 The mortgage was duly registered with the Register of Deeds of Quezon City.
While the mortgage obligation was still outstanding, the Litonjua spouses sold the two parcels of land to Philippine White House Auto Supply, Inc. (PWHAS), for the amount of P430,000.00. The sale was annotated at the back of the certificate of title.
When the Litonjuas defaulted in the payment of the loan, L & R Corporation initiated extrajudicial foreclosure of the mortgage. The mortgaged parcels were sold at public auction to L & R Corporation, it being the sole bidder, on 23 July 1980. On 15 August 1980, when L & R presented its certificate of sale to the Register of Deeds of Quezon City, it was informed of the previous sale made by the Litonjua spouses to PWHAS. L & R Corporation thereupon sought from the Register of Deeds the cancellation of the annotation of sale to PWHAS calling attention to the proviso in the mortgage agreement enjoining the Litonjua spouses from selling the property.
Later, PWHAS, for the account of the Litonjua spouses, tendered payment of the full redemption price to L & R Corporation. Upon the latter's refusal to honor the redemption, PWHAS tendered the amount with the Branch Clerk of Court; correspondingly, the Deputy Sheriff issued a certificate of redemption in favor of the Litonjua spouses. The Certificate of Redemption, however, could not be registered because L & R Corporation would not surrender the owner's duplicate certificates of title. When the Register of Deeds likewise refused to annotate the certificate of redemption as an adverse claim on the titles covering the two parcels of land, the Litonjuas filed a petition with the then Court of First Instance of Quezon City to compel L & R Corporation to surrender the duplicate certificates of title.
During the pendency of the case, L & R Corporation executed an "Affidavit of Consolidation of Ownership," on the basis of which the Register of Deeds cancelled TCT No. 197232 and 197233 and, in lieu thereof, issued TCT No. 280054 and 280055 in favor of L & R Corporation free from any lien or encumbrance. L & R Corporation thereupon advised the tenants of the apartment units on the subject lots to tender rental payments to the corporation as being the new owner.
Apprised of the foregoing, the Litonjua spouses filed a complaint for "Quieting of Title, Annulment of Title and Damages." The trial court dismissed the complaint on the thesis that the sale between the spouses Litonjua and PWHAS, as well as the redemption subsequently made, was null and void and unenforceable against L & R Corporation.
On appeal, the judgment of the trial court was set aside by the Court of Appeals in its decision of 22 June 1994; however, on 11 September 1997, the appellate court reconsidered and reversed its previous stand.
There appears to be some merit in the instant petition.
The stipulation in the real estate mortgage which prohibits the mortgagor from selling the mortgaged property without the written consent of the mortgagee contravenes the law. Article 2130 of the New Civil Code holds that a stipulation forbidding the owner from alienating the immovable mortgaged shall be void. The phrase "without (the) written consent of the mortgagee," added by the parties in their contract is of no real comfort to the mortgagee and did nothing but to stress, indeed, the restriction against what should otherwise be an unimpeded right of the mortgagor to alienate the property. The clear intention of the law is to outlaw a stipulation that would effectively prevent the mortgagor from freely conveying the property during the life of the mortgage. Needless to state, the injunction of the law may not be circumvented, whether directly or indirectly, by the parties.
I am, therefore, in complete accord with the majority in concluding that "the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior written consent of L & R Corporation, is valid," and that as such successor-in-interest of the Litonjuas, PWHAS has a "right to redeem the property foreclosed by L & R Corporation."
What I find quite difficult to accept, with all due respect, is the
pre-emptive and peremptory pronouncement in the ponencia that the sale between the Litonjuas and PWHAS is rescissible because it ignored the "right of first refusal" of L & R Corporation. I must stress that a right of first refusal is not a perfected contract. 2 Neither does it qualify as an option under the second paragraph of Article 1479, 3
which itself must be supported by a consideration separate and distinct from the price itself, 4
nor an offer which Article 1319 5 of the Code requires to be definitive and certain both as to object and cause of the contemplated agreement. Even while the object in a "right of first refusal" might be determinate, the exercise of the right, nevertheless, would still be dependent not only on the grantor's eventual intention to enter into a binding juridical relation but also on terms, including the price, that obviously are yet to be fixed. It would be absurd to suggest that a right of first refusal can be the proper subject of an action for specific performance but, of course, neither would it be correct to say that a breach of such right would be totally inconsequential. A grantor who unjustly discards his own affirmation violates the basic dogma in human relations so well expressed as in Article 19 of the Civil Code to the effect that every person is expected to act with justice, give another is due and observe honesty and good faith. When ignored, the legal feasibility of an action for damages is a matter now long settled.
Most importantly, a rescissory action in consonance with Article 1380, in relation to Article 1381, paragraph (3), of the New Civil Code 6 so invoked (by citing Guzman, Bocaling & Co. vs. Bonnevie 7) as the authority for the rescission of the sale between the Litonjua spouses and PWHAS is here off the mark unfortunately. An action for rescission under said provisions of the Code is merely subsidiary and relates to the specific instance when a debtor, in an attempt to defraud his creditor, enters into a contract with another that deprives the creditor to recover his just claim and leaves him with no other legal means, than by rescission, to obtain reparation. 8 Hence, the rescission is only to the extent necessary to cover the damages caused pursuant to Article 1384 of the Civil Code. Verily, the case and factual settings in the instant controversy (for "Quieting of Title, Annulment of Title and Damages with Preliminary Injunction") initiated by the Litonjua spouses and PWHAS against herein respondents is neither the occasion nor the proper forum for such an issue to be considered. 9
To sum up, the only matter called for to be said, in my view, is that part of the ponencia which concludes that the sale between the Litonjua spouses and PWHAS is a valid and subsisting contract which has accorded to PWHAS, by stepping into the shoes of the sellers, a corresponding entitlement to redeem the foreclosed property.
WHEREFORE, I vote to REVERSE and SET ASIDE the appealed amended judgment and to REINSTATE the original decision, dated 22 June 1994, of the appellate court.
Footnotes
1 See Exhibits "14" & "15", Deed and Amendment of Real Estate Mortgage, respectively, Folder of Exhibits.
2 See Exhibit "U", Deed of Absolute Sale, id.
3 See Exhibits "3-A" & "4-A", Annotations on Transfer Certificates of Title Nos. 197232 and 197233, respectively, id.
4 See Exhibits "C" & "5", Certificate of Sale, id.
5 Exhibit "18", id.
6 See Exhibits "G" & "2", Letter of PWHAS to L & R Corporation, id.
7 See Exhibit "D", Letter of PWHAS to Sheriff Roberto Garcia, id.
8 See Exhibit "X", id.
9 Exhibit"F", id.
10 See Exhibit "E", Letter of Sheriff Roberto Garcia to L & R Corporation, id.
11 See Exhibit "I", Letter of the Register of Deeds of Quezon City to L & R Corporation, id.
12 See Exhibits "Y" and "13", Letter of L & R Corporation to Sheriff Roberto Garcia, id.
13 Exhibit "J", id.
14 Exhibit "O" and "8", id.
15 Exhibit "P" and "9", id.
16 Exhibit "Q" and "10", id.
17 See Annex "O" of Complaint; Records, p. 38.
18 Exhibit "V", id.
19 Exhibit "W", id.
20 Records, pp. 1-39.
21 Id., pp. 437-447.
22 Petition, Annex "B"; Rollo, pp. 69-81.
23 Petition, Annex "A"; Rollo, pp. 46-68.
24 Exhibit "14-A", Folder of Exhibits.
25 G.R. No. 20482, 45 Phil. 336 [1923].
26 G.R. No. 4602, 89 Phil. 801 [1951].
27 G.R. No. 44072, 66 Phil. 402 [1938].
28 G.R. No. 49101, 125 SCRA 122, 135 [1983].
29 G.R. No. 90369, 191 SCRA 170, 173 [1990].
30 G.R. Nos. 54224-25, 176 SCRA 493, 502-503 [1989].
31 G.R. No. 22538, 128 SCRA 747 [1967].
32 G.R. No. 98334, 208 SCRA 887 [1992].
33 G.R. No. 86150, 206 SCRA 668, 675 [1992].
VITUG, J., concurring and dissenting opinion;
1 8. That the MORTGAGORS shall not sell, dispose of, mortgage, nor in any other manner encumber the real property/properties subject of this mortgage without the prior consent of the MORTGAGEE (Deed and Amendment of Real Estate Mortgage).
9. That should the MORTGAGORS decide to sell the real property/properties subject of this mortgage, the MORTGAGEE shall be duly notified thereof by the MORTGAGORS, and should the MORTGAGEE be interested to purchase the same, the latter shall be given priority over all the other prospective buyers (Deed and Amendment of Real Estate Mortgage).
2 Ang Yu Asuncion vs. Court of Appeals, 238 SCRA 602.
3 Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price. (New Civil Code)
4 Cronico vs. J. M. Tuason and Co., 78 SCRA 331; Serra vs. Court of Appeals, 229 SCRA 60; Nool vs. Court of Appeals, 276 SCRA 149.
5 Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.
6 Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by law.
Art. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendants without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
7 206 SCRA 668.
8 The existence of an intention to prejudice creditors is evinced either by the presumption established in Article 1387 or by proof presented in the trial of the case. (Air France vs. Court of Appeals, 245 SCRA 485).
9 See Gatchalian vs. Manalo, 68 Phil. 708.
The Lawphil Project - Arellano Law Foundation
