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 Deeds of Quezon City thru Deputy Sheriff ROBERTO R. GARCIA, respondents.

FACTS

The spouses Litonjua obtained a loan from L & R Corporation, secured by a real estate mortgage on two parcels of land. The mortgage contract contained two key stipulations: first, that the mortgagors could not sell the property without the mortgagee’s written consent, and second, that the mortgagee had a right of first refusal should the mortgagors decide to sell. While the loan was outstanding, the Litonjuas sold the mortgaged properties to Philippine White House Auto Supply, Inc. (PWHAS) without securing L & R’s consent.
Upon the Litonjuas’ default, L & R extrajudicially foreclosed the mortgage and purchased the properties at auction. PWHAS, acting for the Litonjuas, subsequently tendered the redemption price, which L & R refused. After the Register of Deeds refused to annotate the certificate of redemption and L & R consolidated ownership, the Litonjuas and PWHAS filed a complaint to quiet title. The trial court dismissed the complaint, a decision initially reversed but later reinstated by the Court of Appeals.

ISSUE

The core issues are: (1) the validity of the sale by the mortgagors without the mortgagee’s consent; (2) the effect of the mortgagee’s right of first refusal; and (3) the consequent right to redeem the foreclosed property.

RULING

Justice Vitug, in his concurring and dissenting opinion, agreed with the majority that the stipulation prohibiting sale without the mortgagee’s consent is void under Article 2130 of the Civil Code, which invalidates any clause forbidding the owner from alienating the mortgaged immovable. Therefore, the sale to PWHAS was valid despite the lack of consent, making PWHAS a successor-in-interest with a right to redeem.
However, Justice Vitug dissented from the majority’s view that the sale was rescissible for violating L & R’s right of first refusal. He argued that a right of first refusal is not a perfected contract, an option, or a definitive offer under the law. It is merely a contractual grant that creates a mechanism for future negotiation, dependent on the grantor’s decision to sell and on terms yet to be fixed. Its breach does not automatically render a subsequent sale rescissible under Article 1381 of the Civil Code, as such rescission requires a showing of fraud or prejudice to creditors, which was not established here. Consequently, while the right may give rise to an action for damages if breached, it does not invalidate the sale to PWHAS or negate its right of redemption.