Title: #28 SPS. LITONJUA v. L&R CORP.

that in case they decide to sell the property mortgaged to it, then L
Details: G.R. No. 130722 | Dec. 9, 1999 | J. Ynares-Santiago
Topic: Option to Buy/Sell
Doctrine:
Facts:
1. This stems from loans obtained by the spouses Litonjua from L&R
Corporation in the aggregate sum of P400,000.00. The loans were
secured by a mortgage constituted by the spouses upon their two
parcels of land and the improvements thereon. T
2. Spouses Litonjua sold to Philippine White House Auto Supply, Inc.
(PWHAS) the parcels of land they had previously mortgaged to L &
R Corporation for the sum of P430,000.00.
3. Meanwhile, with the spouses Litonjua having defaulted in the
payment of their loans, L & R Corporation initiated extrajudicial
foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City.
The mortgaged properties were sold at public auction to L & R
Corporation as the only bidder for the amount of P221,624.58.
4. L & R Corporation wrote a letter to the Sheriff, copy furnished to
the Register of Deeds, stating: (1) that the sale of the mortgaged
properties to PWHAS was without its consent, in contravention of
paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and (2)
that it was not the spouses Litonjua, but PWHAS, who was seeking
to redeem the foreclosed properties, when under Articles 1236 and
1237 of the New Civil Code, the latter had no legal personality or
capacity to redeem the same.
5. On the other hand, the spouses Litonjua asked the Register of
Deeds to annotate their Certificate of Redemption as an adverse
claim on the titles of the subject properties on account of the
refusal of L & R Corporation to surrender the owner’s duplicate
copies of the titles to the subject properties.
6. With the refusal of the Register of Deeds to annotate their
Certificate of Redemption, the Litonjua spouses filed a Petition
against L & R Corporation for the surrender of the owner’s
duplicate of Transfer Certificates of Title No. 197232 and 197233
before the then CFI.
& R Corporation shall be given the right to match the offered
purchase price and to buy the property at that price.
 Thus, while the spouses Litonjua had every right to sell their
mortgaged property to PWHAS without securing the prior written
consent of L & R Corporation, it had the obligation under paragraph
9, which is a perfectly valid provision, to notify the latter of their
intention to sell the property and give it priority over other buyers.
It is only upon failure of L & R Corporation to exercise its right of
first refusal could the spouses Litonjua validly sell the subject
properties to others, under the same terms and conditions offered
to L & R Corporation.
 It was then held that the Contract of Sale there, which violated the
right of first refusal, was rescissible.
 In the case at bar, PWHAS cannot claim ignorance of the right of
first refusal granted to L & R Corporation over the subject
properties since the Deed of Real Estate Mortgage containing such
a provision was duly registered with the Register of Deeds. As
such, PWHAS is presumed to have been notified thereof by
registration, which equates to notice to the whole world.
 That it did not duly exercised its right of first refusal at the
opportune time cannot be taken against it, precisely because it
was not notified by the spouses Litonjua of their intention to sell
the subject property and thereby, to give it priority over other
buyers.

Issue:
WON there was a Valid and enforceable stipulation granting the mortgagee
the right of first refusal.

Held:
 While petitioners question the validity of paragraph 8 of their
mortgage contract, they appear to be silent insofar as paragraph 9
thereof is concerned. Said paragraph 9 grants upon L & R
Corporation the right of first refusal over the mortgaged property in
the event the mortgagor decides to sell the same. We see nothing
wrong in this provision. The right of first refusal has long been
recognized as valid in our jurisdiction.
 The consideration for the loan-mortgage includes the consideration
for the right of first refusal. L & R Corporation is in effect stating
that it consents to lend out money to the spouses Litonjua provided