G.R. No. 143590 (2001)
Topics:
Contract of repurchase, contract of sale, perfection of a contract of sale
Summary:
Consolidated Petition for Review with PUP assailing the decision of the lower court and the appellate court in favor of Firestone’s right of first refusal.
Doctrines:
Right of first refusal
Facts:
In the sixties, National Development Corporation (NDC), a government owned and controlled corporation created had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC compound.
Firestone Ceramics Inc. (FIRESTONE) manifested its desire to lease a portion of the property for its ceramic manufacturing business. Subsequently, NDC and FIRESTONE entered into a contract of lease for the subject property with a term of ten (10) years, renewable for another ten (10) years under the same terms and conditions. FIRESTONE constructed on the leased premises several warehouses and other improvements needed for the fabrication of ceramic products.
Consequently, NDC adopted a resolution extending the term of the lease, subject to several conditions among which was that in the event NDC “with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to the LESSEE”. Pursuant the resolution, the parties entered into a new agreement for a ten-year lease of the property, renewable for another ten (10) years, expressly granting FIRESTONE the first option to purchase the leased premises. The parties’ lessor-lessee relationship went smoothly until early 1988 when FIRESTONE informed the NDC through several correspondence that it was renewing its lease over the property. Antonio A. Henson, General Manager of NDC, promised immediate action on the matter, but the rest of its communications remained unacknowledged. FIRESTONE’s predicament worsened when rumors of NDC’s supposed plans to dispose of the subject property in favor of Polytechnic University of the Philippines (PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal.
FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. Meanwhile, PUP moved to intervene and asserted its interest in the subject property, referring to Memorandum Order No. 214 issued by then President Aquino ordering the transfer of the whole NDC compound to the National Government, which in turn would convey the aforementioned property in favor of PUP at acquisition cost.
Issue:
Whether FIRESTONE can rightfully invoke its right of first refusal
Ruling:
Yes. It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the lessor’s first offer shall be in his favor.
In this case, the right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the right is built into the reciprocal obligations of the parties. Thus, it is not correct for PUP to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the stipulation is part and parcel of the contract of lease making the consideration for the lease the same as that for the option. The option in this case was incorporated in the contracts of lease by NDC for the benefit of FIRESTONE which, in view of the total amount of its investments in the property, wanted to be assured that it would be given the first opportunity to buy the property at a price for which it would be offered.
Thus, NDC should have first offered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to petitioner PUP.