Sps.

Litonjua vs L&R Corporation

FACTS: This stems from loans obtained by the spouses Litonjua from L&RCorporation
in the aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6,
1974 and the remaining P200,000.00obtained on March 27, 1978. The loans were
secured by a mortgageconstituted by the spouses upon their two parcels of land and
theimprovements thereon. The mortgage was duly registered with theRegister of
Deeds.Spouses Litonjua sold to Philippine White House Auto Supply, Inc.(PWHAS) the
parcels of land they had previously mortgaged to L & RCorporation for the sum of
P430,000.00. Meanwhile, with the spousesLitonjua having defaulted in the payment of
their loans, L & RCorporation initiated extrajudicial foreclosure proceedings with the Ex-
Oficio Sheriff of Quezon City.
The mortgaged properties were sold atpublic auction to L & R Corporation as the only
bidder for the amountof P221,624.58.On April 22, 1981, L & R Corporation wrote a letter
to the Sheriff, copyfurnished to the Register of Deeds, stating: (1) that the sale of
themortgaged properties to PWHAS was without its consent, incontravention of
paragraphs 8 and 9 of their Deed of Real EstateMortgage; and (2) that it was not the
spouses Litonjua, but PWHAS,who was seeking to redeem the foreclosed properties,
when underArticles 1236 and 1237 of the New Civil Code, the latter had no
legalpersonality or capacity to redeem the same.On the other hand, the spouses
Litonjua asked the Register of Deeds toannotate their Certificate of Redemption as an
adverse claim on thetitles of the subject properties on account of the refusal of L &
RCorporation to surrender the owner’s duplicate copies of the titles tothe subject
properties. With the refusal of the Register of Deeds toannotate their Certificate of
Redemption, the Litonjua spouses filed aPetition on July 17, 1981 against L & R
Corporation for the surrender of the owner’s duplicate of Transfer Certificates of Title
No. 197232 and197233 before the then CFI.
ISSUE: WON there was a Valid and enforceable stipulation granting the mortgagee the
right of first refusal

RULING: 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. We note that L & R Corporation had always
expressed its willingness to buy the mortgaged properties on equal terms as PWHAS.
Indeed, in its Answer to the Complaint filed, L & R Corporation expressed that it was
ready, willing and able to purchase the subject properties at the same purchase price of
P430,000.00, and was agreeable to pay the difference between such purchase price
and the redemption price of P249,918.77, computed as of August 13, 1981, the
expiration of the one-year period to redeem. That it did not duly exercise 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.
The sale between the spouses Litonjua and PWHAS is valid, notwithstanding the
absence of L & R Corporation's prior written consent thereto. Inasmuch as the sale to
PWHAS was valid, its offer to redeem and its tender of the redemption price, as
successor-in-interest of the spouses Litonjua, within the one-year period should have
been accepted as valid by the L & R Corporation. However, while the sale is, indeed,
valid, the same is rescissible because it ignored L & R Corporation's right of first refusal.
Foreseeing a possible rescission of the sale, the spouses Litonjua contend that with the
restoration of the original status quo, with no sale having been made, they should now
be allowed to redeem the subject properties, the period of redemption having been
suspended during the period of litigation. In effect, the spouses Litonjua want to retain
ownership of the same. We cannot, however, sanction this belated reversal of the
spouses Litonjua's decision to sell. To do so would afford them undue advantage on
account of the appreciation of the value of the subject properties in the intervening
years when they precisely were the ones who violated and ignored the right of first
refusal of L & R Corporation over the same. Moreover, it must be stressed that in
rescinding the sale made to PWHAS, the purpose is to uphold and enforce the right of
first refusal of L &R Corporation.