ANG YU ASUNCION v CA G.R. No. 109125 December 2, 1994

FACTS:

A complaint for Specific Performance was filed by Ang Yu Asuncion et al., against Bobby Cu Unjieng and Jose Tan. The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in Binondo. On several conditions defendants informed the plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same.

During negotiations, Cu Unjieng offered a price of P6- million while plaintiffs made a counter of offer of P5-million.Plaintiff thereafter asked the defendants to put their offer in writing to which the defendants acceded. In reply to defendants’ letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another letter with the same request. Since defendants failed to specify the terms and conditions of the offer to sell and because of information received that the defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action.

The court dismissed the complaint on the ground that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contact of sale at all. The lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Aggrieved by the decision, plaintiffs appealed to Court of Appeals which ruled that there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific performance will not lie. The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied the appeal for insufficiency in form and substances.

The Cu Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty and Development Corporation. Buen Realty, as the new owner of the subject property, wrote to the lessees demanding the latter to vacate the premises. In its reply, it stated that Buen Realty and Development Corporation brought the property subject to the notice of lis pendens. Buen Realty, as the new owner of the subject property, wrote to the lessees demanding the latter to vacate the premises. The lessees filed a Motion for Execution. The court ruled in favor of the petitioners and ordered the defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer and ruled that the issuance of another title to Buen Realty Corporation, has been executed in bad faith.

In its reply, it stated that Buen Realty and Development Corporation brought the property subject to the notice of lis pendens.

ISSUE:

1. WON Buen Realty can be bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter’s purchase of the property on 15 November 1991 from the Cu Unjiengs.

RULING:

Right of first refusal is not a perfected contract of sale under Article 1458 of the Civil Code In the law on sales, the so-called “right of first refusal” is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.

In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

The proper action for violation of the right of first refysal is to file an action for damages and NOT writ of execution The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a “right of first refusal” in favor of petitioners (Ang Yu et. al). The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Unconditional mutual promise to buy vs. Accepted unilateral promise An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted.

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . . An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. (1451a)

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings.

Buen Realty cannot be ousted from the ownership and possession of the property Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.