Rosencor v Inquing

March 08, 2001

Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando Magbanua, and Liza Tiangco, herein respondents, averred that they are the lessees, since 1971, of a two-story residential apartment located at Tomas Morato Ave., Quezon City owned bythe spouses Faustino and Cresencia Tiangco.

The lease was not covered by a contract and the lessees were assured by the Spouses Tiangco that they had the pre-emptive right to purchase the property if ever there was a decision to sell it..

The original lessors died and their heir also promised the lessees the same pre-emptive right to purchase. The new lessors represented by Eufrocina de Leon demanded the lessees to vacate the property because the building will allegedly be demolished but after the lessees declined, she sent them a letter offering to sell the property for 2M. Lessees made a counter offer of 1M but no reply was made by the lessors.

De leon subsequently informed the lessees that the property was already sold to Rosencor. Lessees claimed that they were deceived because the property was already sold to Rosencor before it was offered to them. They offered to reimburse the payment to the lessors but the offer was declined as hence, this petition.

ISSUE:

WON the contract of sale is rescissible

HELD:

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 proven that the lessors admit the right of first refusal given to them when the property was offered to them by 2M.

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 Under Article 1381 of the Civil Code, paragraph 3, a contract validly agreed upon may be rescinded if it is “undertaken in fraud of creditors when the latter cannot in any manner collect the claim due them.”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 point to the letter by Atty. Aguila as proof. However, no mention about the rights of first refusal was made in said letter. Neither was there any showing that respondents notified Rosencor of Atty. Aguila of their right of first refusal after they received the said letter.

Respondents also point to the letter by De Leon where she recognized the right of first refusal of the respondents. However, De Leon was writing on her behalf and not on behalf of petitioners and, as such, it only shows that De Leon was aware of the existence of the rights. It does not show that petitioners were aware of such rights. Clearly, De Leon is the only party in bad faith in this case.

Considering the there was no showing of bad faith on the part of the petitioners, the CA erred in ordering for the rescission of the Deed of Absolute Sale between Rosencor and De Leon.

Rosencor could not have acted in bad faith because they are not aware of the right of first refusal given verbally. 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.