Litonjua v. L & R Corporation
GR No. 130722
December 9, 1999
Facts
The spouses Litonjua obtained a loan from L&R Corporation, which was secured by a mortgage of two parcels of land owned by the couple. In 1979, the spouses sold the parcels of land to Philippine White House Auto Supply Inc. (PWHAS), and the sale was annotated at the back of the certificates of title. When the spouses defaulted in the payment of their loans to L&R, the company initiated an extrajudicial foreclosure. The properties were successfully foreclosed and sold at a public auction, wherein L&R was the only bidder.
L&R was about to register the sale, but it learned for the first time of the Litonjuas’ sale of the lands to PWHAS.
The Deed of Real Estate Mortgage between the spouses and L&R contained the following provisions:
Section 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;
Section 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
Issues
1. Are paragraphs 8 and 9 of the Real Estate Mortgage valid and enforceable?
2. Is the sale of the properties to PWHAS without the consent of L&R valid?
Ruling
1. Paragraph 8 is invalid but paragraph 9 is valid.
Par. 8 violates Article 2130 of the Civil Code which provides that stipulation forbidding the owner from alienating the immovable shall be void. While it is true that the provisions does not absolutely prohibit the mortgagor from selling his property, 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. Being contrary to law, the provision is void and is not binding on the parties.
Par. 9, on the other hand, is perfectly valid. The right to first refusal has long been recognized as valid in Philippine jurisdiction.
2. The sale is valid but RESCISSIBLE. The Court cited the case of Guzman, Bocaling & Co v. Bonnevie, where it held that a contract of sale which violated the right of first refusal was rescissible.
It is clear from the facts that the spouses did not inform L&R of their intent to sell the properties. By doing so, they disrespected the latter’s right to first refusal. Furthermore, although the right was not exercised by the company at the opportune time, this cannot be taken against it because they were never informed of the sale in the first place.
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