GUZMAN, BOCALING & CO. v BONNEVIEG.R. No.

86150 March 2, 1992

Facts: Africa Valdez de Reynoso leased a parcel of land with two buildings constructed thereon to Raoul S. Bonnevie
and Christopher Bonnevie, for a period of one year beginning August 8, 1976, at a monthly rental of P4,000.00, with an
agreement that should Africa decide to sell the property, the respondent lessee shall be given the first priority to purchase
the same.

Then on November 1976, Africa sent a letter to the respondents that she was selling the property for the amount
of P600,000 less a mortgage loan of P100,000, giving them 30 days to exercise their right of first priority. Failure to
exercise the said right, respondents should vacate the property not later than March 1977. Then on January 1977, Africa
informed that the property have been sold to the petitioner,because respondents failed to exercise their right to do such.

Respondents on the other hand informed Africa that they have not received their letter and refused to vacate the
property. And on April of the same year, Africa demanded that they vacate the property for failure to pay rent for four
months, which they refused. Hence a complaint for ejectment was filed against them. During the pendency of the
ejectment case, respondent filed an action for annulment of the sale between Africa and the herein petitioner and for the
cancellation of the transfer certificate of title in the name of the latter. Asking also that Africa be required to sell the
property to them under the same terms and conditions agreed upon in the Contract of Sale in favor of the petitioner.

Then on May 1980, the City Court ruled that the respondent to vacate the premises,and deliver possession of the
property to the petitioner as well as pay the rent due to them. Upon appeal to the Court of First Instance of Manila,
affirmed the said ejection case with modification and granted respondents petition to cancel the Deed of Sale executed
between Africa and the petitioner and ordered her to sell the property to respondent, and for petitioner and Africa to
pay respondent for damages. CA affirmed the said decision but with modification on the amount of damages. Hence the
petition

WON the respondent court erred in ruling that the grant of first priority to purchase the subject properties by the judicial
administratrix needed no authority from theprobate court;

WON the Contract of Sale executed between the parties was not voidable but rescissible;

WON petitioner is a buyer in bad faith

Ruling: On the first issue, Africa failed to show that the letter sent by registered mail was received by the respondents,
only a photocopy of the letter without any receiving signature coming from the latter. Furthermore, even if the latter
received the lette rand did not exercise their right of first priority, Africa would still be guilty of violating Paragraph 20 of
the Contract of Lease which specifically stated that the private respondents could exercise the right of first priority, "all
things and conditions being equal." Since Africa had offered a lesser amount to the petitioner and more advantageous
offer than that was offered to the respondent. Also, respondent court is correct that it was not necessary to secure the
approval by the probate court of the Contract of Lease because it did not involve an alienation of real property of the
estate nor did the term of the lease exceed one year so as to make it fall under Article 1878(8) of the Civil Code

In the second issue, private respondents have the right to rescind the contract of sale because Africa had failed to comply
with her duty to give them first opportunity to purchase the subject property

The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could bring an action to
annul it pursuant to Article 1397 of the Civil Code. It is stressed that private respondents are strangers to the agreement
and therefore have no personality to seek its annulment. The respondent court correctly held that the Contract of Sale
was not voidable but rescissible. Under Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may
nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be
validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to
the petitioner without recognizing their right of first priority under the Contract of Lease

Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for
damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition
at the moment prior to the celebration of said contract. It is a relief allowed for the protection of one of the contracting
parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and
preferential right created by the contract. Recession implies a contract which, even if initially valid, produces a lesion or
pecuniary damage to someone that justifies its invalidation for reasons of equity

It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its
rescission where it is shown that such third person is in lawful possession of the subject of the contract and that he did no
tact in bad faith. However, this rule is not applicable in the case before us because the petitioner is not considered a third
party in relation to the Contract of Sale normally its possession of the subject property be regarded as acquired lawfully
and in good faith. Petitioner was aware of the lease in favor of the Bonnevies, who were actually occupying the subject
property at the time it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in
the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such lease which
was equivalent to and indeed more binding than presumed notice by registration A purchaser in good faith and for value
is one who buys the property of another without notice that some other person has a right to or interest in such property
and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of
some other person in the property. Good faith connotes an honest intention to abstain from taking unconscientious
advantage of another. Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it
had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to look deeper
into the agreement to determine if it involved stipulations that would prejudice its own interests. Petitioner’s insistence
that it was not aware of the right of first priority granted by the Contract of Lease, If Guzman-Bocaling failed to inquire
about the terms of the Lease Contract, which includes Par. 20 on priority right given to the Bonnevies, it had only itself to
blame. Having known that the property it was buying was under lease, it behooved it as a prudent person to have required
Reynoso or the broker to show to it the Contract of Lease in which Par. 20 is contained.

TANAY RECREATION CENTER AND DEVELOPMENT CORP. vs. FAUSTO Case Digest
TANAY RECREATION CENTER AND DEVELOPMENT CORP. vs. CATALINA MATIENZO FAUSTO
G.R. No. 140182. April 12, 2005

FACTS: Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter
property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto, under a Contract of Lease. On this
property stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-year term,
subject to renewal within sixty days prior to its expiration. The contract also provided that should Fausto decide to sell
the property, petitioner shall have the “priority right” to purchase the same.

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease. However, it was Fausto’s
daughter, respondent Anunciacion F. Pacunayen, who replied, asking that petitioner remove the improvements built
thereon, as she is now the absolute owner of the property. It appears that Fausto had earlier sold the property to Pacunayen
and title has already been transferred in her name. Petitioner filed an Amended Complaint for Annulment of Deed of Sale,
Specific Performance with Damages, and Injunction.

In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of sale as the latter
acknowledged her ownership when it merely asked for a renewal of the lease. According to respondent, when they met to
discuss the matter, petitioner did not demand for the exercise of its option to purchase the property, and it even asked for
grace period to vacate the premises.
ISSUE: The contention in this case refers to petitioner’s priority right to purchase, also referred to as the right of first
refusal.

RULING: When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to
anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to
accept it. The lessee has a right that the lessor's first offer shall be in his favor. Petitioner’s right of first refusal is an
integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the
lease includes the consideration for the right of first refusal and is built into the reciprocal obligations of the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto’s
relative. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed
upon. As such, there can be, between the parties and their successors in interest, no evidence of such terms other than the
contents of the written agreement, except when it fails to express the true intent and agreement of the parties. In this case,
the wording of the stipulation giving petitioner the right of first refusal is plain and unambiguous, and leaves no room for
interpretation. It simply means that should Fausto decide to sell the leased property during the term of the lease, such sale
should first be offered to petitioner. The stipulation does not provide for the qualification that such right may be exercised
only when the sale is made to strangers or persons other than Fausto’s kin. Thus, under the terms of petitioner’s right of
first refusal, Fausto has the legal duty to petitioner not to sell the property to anybody, even her relatives, at any price until
after she has made an offer to sell to petitioner at a certain price and said offer was rejected by petitioner.

LORENZO SHIPPING CORP., petitioner, vs. BJ MARTHEL INTERNATIONAL, INC., respondent.

Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It used to own the
cargo vessel M/V Dadiangas Express.

Respondent BJ Marthel International, Inc. is a business entity engaged in trading, marketing, and selling of various
industrial commodities. It is also an importer and distributor of different brands of engines and spare parts.

From 1987 up to the institution of this case, respondent supplied petitioner with spare parts for the latters marine engines

VALENTIN MOVIDO, substituted by MARGINITO MOVIDO, Petitioner,

vs.
LUIS REYES PASTOR

FACTS: Respondent alleged that he and petitioner executed a kasunduan sa bilihan ng lupa where the latter agreed to sell
a parcel of land located in Paliparan, Dasmariñas, Cavite. Supplemental condition was executed as kasunduan wchich
provides that Napocor power line traversed the subject lot, the purchase price would be lowered toP200/sq. m.

Respondent alleged that he already paid petitioner P5 million out of the original purchase price of P8.4 million
stated in the kasunduan sa bilihan ng lupa. He was willing and ready to pay the balance of the purchase price but due to
petitioner’s refusal to have the property surveyed despite incessant demands, his unpaid balance could not be determined
with certainty.

Petitioner charged respondent with delay in paying several installments due and did not pay the 7th installment in
the amount of P1 million. This was allegedly a material breach because they agreed that the survey of the property would
only be done after respondent would have paid the 7th installment.
 RTC4 ruled in favor of petitioner and held that the kasunduan preceded the kasunduan sa bilihan ng lupa. Thus,
the RTC dismissed the complaint of respondent for lack of merit and/or cause of action. It also ordered the rescission of
the kasunduan sa bilihan ng lupa as well as the forfeiture of 50% of the amount already paid by respondent (but ordered
petitioner to return to respondent 50% of the amount already paid). The RTC also directed respondent to pay
petitioner P50,000 attorney’s fees and costs of suit

Court of Appeals (CA)5 reversed the RTC and ordered respondent to pay the heirs of petitioner the balance of the
purchase price in the amount of P2,796,400

HELD: reading of the kasunduan sa bilihan ng lupa and the kasunduan would readily reveal that payment of the purchase
price does not depend on the survey of the property. In other words, the purchase price should be paid whether or not the
property is surveyed. Petitioner cannot successfully reject respondent’s demand for petitioner to perform his obligation to
have the property surveyed. Under the kasunduan sa bilihan ng lupa, petitioner is obligated to conduct the survey on or
before the due date of the last installment

First, respondent may be ordered to pay his remaining balance in the kasunduan sa bilihan ng lupa representing
the 7th and 8th installments or the amount of P3.4 million in which case Marginito will be ordered to immediately conduct
the survey of the property and thereafter to refund to respondent the excess of the amount paid. Second, Marginito may be
ordered to have the property surveyed first within a reasonable period and thereafter respondent will have to pay his
corresponding balance (which, naturally, will be less than P3.4 million).

Rescission is only allowed when the breach is so substantial and fundamental as to defeat the object of the parties
in entering into the contract.8 We find no such substantial or material breach. Failure to pay the 7 & 8 installment is not a
serious breach. The kasunduan sa bilihan ng lupa and the kasunduan should both be given effect rather than be declared
conflicting, if there is a way of reconciling them. Thus, considering that there was a breach on the part of petitioner (and
no material breach on the part of respondent), he cannot properly invoke his right to rescind the contract.

FONTANA RESORT AND COUNTRY CLUB, INC. AND RN DEVELOPMENT CORP., Petitioners,
vs.
SPOUSES ROY S. TAN AND SUSAN C. TAN, Respondents.

FACTS: Respondent spouses Roy S. Tan and Susana C. Tan bought from petitioner RN Development Corporation
(RNDC) two class "D" shares of stock in petitioner Fontana Resort and Country Club, Inc. (FRCCI),
worth P387,300.00, enticed by the promises of petitioners’ sales agents that petitioner FRCCI would construct a
park with first-class leisure facilities in Clark Field, Pampanga and entitled them to use park facilities and stay at a
two-bedroom villa for "five (5) ordinary weekdays and two (2) weekends every year for free."5

Respondents narrated that they were able to book and avail themselves of free accommodations at an FLP
villa on September 5, 1998, a Saturday, however subsequently they are unjustly denied of reservation.

Petitioners filed their Answer7 in which they asserted that respondents had been duly informed of the
privileges given to them as shareholders of FRCCI class "D" shares of stock since these were all explicitly provided
in the promotional materials for the country club, the Articles of Incorporation, and the By-Laws of FRCCI.
Petitioners called attention to the following paragraph in their ads and Petitioners further denied that they unjustly
cancelled respondents’ reservation for an FLP villa on April 1, 1999,
 Respondent file for refund and complaint sufficiently state a cause of action for the annulment of a voidable
contract of sale based on fraud under Article 1390, in relation to Article 1398, of the Civil Code, and/or rescission of
a reciprocal obligation under Article 1191, in relation to Article 1385, of the same Code.

ISSUE: Whether or not petitioners committed fraud or defaulted on their promises as would justify the
annulment or rescission of their contract of sale with respondents – requires us to reexamine evidence submitted by
the parties and review the factual findings by the SEC and the Court of Appeals.

HELD: In this case, indemnity for damages may be demanded from the person causing the loss. In this
case, respondents have miserably failed to prove how petitioners employed fraud to induce respondents to buy
FRCCI shares. It can only be expected that petitioners presented the FLP and the country club in the most positive
light in order to attract investor-members. There is no showing that in their sales talk to respondents, petitioners
actually used insidious words or machinations, without which, respondents would not have bought the FRCCI
shares.

Respondents appear to be literate and of above-average means, who may not be so easily deceived into
parting with a substantial amount of money. What is apparent to us is that respondents knowingly and willingly
consented to buying FRCCI shares, but were later on disappointed with the actual FLP facilities and club
membership benefits. Similarly, we find no evidence on record that petitioners defaulted on any of their obligations
that would have called for the rescission of the sale of the FRCCI shares to respondents.

Yet, petitioners were able to satisfactorily explain, based on clear policies, rules, and regulations governing
FLP club memberships, why they rejected respondents’ request for reservation on October 17, 1998.

WHEREFORE, in view of the foregoing, the Petition is hereby GRANTED. The Decision dated May 30, 2002
and Resolution dated August 12, 2002 of the Court Appeals in CA-G.R. SP No. 67816 are REVERSED and SET
ASIDE. Petitioners are ORDERED to pay respondents the amount of P5,000.00 as nominal damages for their
negligence as regards respondents’ cancelled reservation for April 1, 1999, but respondents’ Complaint, in so far as
the annulment or rescission of the contract of sale of the FRCCI class "D" shares of stock is concerned, is
DISMISSED for lack of merit.