G.R. No. 140479 (March 8, 2001)
Topics: Rescissible Contract; Right of first refusal
Summary:
The lessees claim they were duped into buying the property, which was already sold to Rosencor before it was made available to them.
Lessees have established that Lessors are aware of the First Refusal Right granted to them when 2M made an offer to lease the property to them. As such, a right of first refusal need not be written to be enforceable and can be proved by oral evidence. Respondents’ remedy is not rescission but an action for damages against De Leon and the heirs of the Spouses Tiangco for the unjustified disregard of their right of first refusal. The CA erred in ordering the revocation of the Deed of Absolute Sale between Rosencor and De Leon since there was no evidence of bad faith on the part of petitioners.
Doctrines:
The right of first refusal is not covered by the Statute of Frauds. The application of such statute presupposes the existence of a perfected contact which is not applicable in this case. As such, a right of first refusal need not be written to be enforceable and can be proved by oral evidence.
Under Article 1381 of the Civil Code, paragraph 3, a contract validly agreed upon may be rescinded if it is “undertaken in fraud of creditors when the latter cannot in any manner collect the claim due them.”
Under Article 1385, rescission shall not take place “when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.”
Facts:
The respondents in this case, Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando Magbanua, and Liza Tiangco, assert that they have been the lessees since 1971 of a two-story home on Tomas Morato Avenue in Quezon City that was formerly occupied by the couple Faustino and Cresencia Tiangco.
The lease was not governed by a written agreement, but the lessees were told by the Spouses Tiangco that they would have first dibs on the property in the event that it was to be put up for sale.
When the first lessors passed away, their heir also promised the lessees the same first option to buy. The claimed demolition of the building was the reason the new lessors, represented by Eufrocina de Leon, demanded that the lessees evacuate the property; however, when they refused, she issued them a letter offering to sell the property for 2 million. Lessors did not respond to the Lessees’ counteroffer of 1M.
De Leon then informed the lessees that Rosencor had already purchased the property. The land was already sold to Rosencor before it was made available to the lessees, according to the lessees, who claimed they were duped. They promised to pay the lessors back, but the offer was rejected, which is why this petition was filed.
Issue:
Whether the contract of sale is rescissible.
Ruling:
The right of first refusal is not covered by the Statute of Frauds. The application of such statute presupposes the existence of a perfected contact which is not applicable in this case. As such, a right of first refusal need not be written to be enforceable and can be proved by oral evidence.
Lessees have established that Lessors are aware of the First Refusal Right granted to them when 2M made an offer to lease the property to them.
The prevailing doctrine is that a contract of sale entered in violation of right of first refusal is rescissible. However, that doctrine cannot be applied to the case at bar.
Under Article 1381 of the Civil Code, paragraph 3, a contract validly agreed upon may be rescinded if it is “undertaken in fraud of creditors when the latter cannot in any manner collect the claim due them.”
Moreover, under Article 1385, rescission shall not take place “when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.”
Good faith is always presumed unless contrary to the evidence is adduced. In the case at bar, there clear and convincing evidence should have been shown to prove that petitioners were aware of the right of first refusal accorded to the respondents.
Respondents use Attorney Aguila’s letter as evidence. However, the letter in question made no mention of the rights of first refusal. Furthermore, there was no evidence to suggest that after receiving the aforementioned letter, respondents informed Rosencor or Attorney Aguila of their right to first refusal.
The respondents also cite De Leon’s letter, in which she acknowledged the respondents’ right of first refusal. De Leon’s letter merely demonstrates that she was aware of the rights because it was written on her behalf and not on behalf of the petitioners. It doesn’t demonstrate that the petitioners knew about these rights. De Leon is the only party acting in bad faith in this matter, without a doubt.
The CA erred in ordering the revocation of the Deed of Absolute Sale between Rosencor and De Leon since there was no evidence of bad faith on the part of the petitioners.
Because Rosencor is unaware of the verbally granted right of first refusal, it is impossible for them to have acted in bad faith. Respondents’ remedy is not rescission but an action for damages against De Leon and the heirs of the Spouses Tiangco for the unjustified disregard of their right of first refusal.