ANG YU ASUNCION vs. THE HON.

COURT OF APPEALS
G.R. No. 109125 December 2, 1994
FACTS:
Ang Yu Asuncion and Keh Tiong, et al., are tenants or lessees of residential and
commercial spaces owned by Cu Unjieng, Rose Cu Unjieng and Jose Tan. They have occupied said
spaces since 1935 and have been religiously paying the rental and complying with all the conditions of
the lease contract. On several occasions before October 9, 1986, the owners informed Ang Yus party that
they are offering to sell the premises and are giving them priority to acquire the same. During the
negotiations, Bobby Cu Unjieng offered a price of P6-million while Asuncion and Keh Tiong made a
counter offer of P5-million. They thereafter asked the owners to put their offer in writing to which request
they acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they
specify the terms and conditions of the offer to sell; that when Asuncion did not receive any reply, they
sent another letter dated January 28, 1987 with the same request. Since the owners failed to specify the
terms and conditions of the offer to sell and because of information received that the owners were about
to sell the property, Ang Yu Asuncion and Keh Tiong were compelled to file the complaint to compel
defendants to sell the property to them.
The trial court found that Cu Unjieng, Rose Cu Unjieng and Jose Tan offer to sell was never accepted by
the Ang Yu Asuncion and Keh Tiong, et al., for the reason that the parties did not agree upon the terms
and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, 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 that there was no contract of sale at all, the lessees brought a petition for
review on certiorari to the Supreme Court. The Supreme Court denied the appeal on May 6, 1991.
On November 15, 1990, while the case filed by the lessees was pending consideration, the Cu Unjieng
spouses executed a Deed of Sale, transferring the property in question to Buen Realty and Development
Corporation for 15M.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was
cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3,
1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees
demanding that the latter vacate the premises.
The decision that should the the owners decide to offer the property for sale for a price of P11 Million or
lower, and considering the mercurial and uncertain forces in our market economy today, the same right of
first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess
of Eleven Million pesos or more had become final to the effect
The owners were 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. All previous transactions involving the same property notwithstanding the issuance of another
title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith.

A writ of execution was subsequently issued.

ISSUE:
Whether or not a Writ of Execution may be decreed on a judgment recognizing the right
of first refusal.
HELD:

NO. Writ of Execution is not a remedy.

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. Neither can the
right of first refusal, understood in its normal concept, per se be brought within the purview of an option
under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the
same Code. An option or an offer would require, among other things, 10 a clear certainty on both the object
and the cause or consideration of the envisioned contract. 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.
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action for specific performance without thereby negating
the indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that
the right of first refusal would be inconsequential for, such as already intimated above, an unjustified
disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can
warrant a recovery for damages.
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. 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.
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.

PARAAQUE KINGS ENTERPRISES, INC. vs. COURT OF APPEALS.

G.R. No. 111538 February 26, 1997
Catalina L. Santos is the owner of eight (8) parcels of land located at Paraaque, Metro Manila. On
November 28, 1977, a certain Frederick Chua leased the property from defendant Catalina L. Santos.
Subsequently, Chua assigned all his rights and interest and participation in the leased property to Lee
Ching Bing, by virtue of a deed of assignment and with the conformity of defendant Santos, the said
assignment was also registered.
Ching Bing also assigned all his rights and interest in the leased property to Paraaque Kings
Enterprises, Incorporated by virtue of a deed of assignment and with the conformity of defendant Santos.
Paragraph 9 of the assigned leased contract provides among others that:
"9. That in case the properties subject of the lease agreement are sold or encumbered, Lessors shall
impose as a condition that the buyer or mortgagee thereof shall recognize and be bound by all the
terms and conditions of this lease agreement and shall respect this Contract of Lease as if they are
the LESSORS thereof and in case of sale, LESSEE shall have the first option or priority to buy the
properties subject of the lease;"
On September 21, 1988, defendant Santos sold the eight parcels of land subject of the lease to defendant
David Raymundo for a consideration of FIVE MILLION PESOS. The said sale was in contravention of the
contract of lease, for the first option or priority to buy was not offered by defendant Santos to Paraaque
Kings Enterprises, Incorporated (plaintiff).
Upon learning of this fact plaintiff's representative wrote a letter to defendant Santos, requesting her to
rectify the error and consequently realizing the error, she had it reconveyed to her for the same
consideration of FIVE MILLION (P5,000,000.00) PESOS.
Subsequently the property was offered for sale to plaintiff by the defendant for the sum of FIFTEEN
MILLION (P15,000,000.00) PESOS. Plaintiff was given ten (10) days to make good of the offer.
On May 8, 1989, before the period given in the letter offering the properties for sale expired, plaintiff's
counsel wrote counsel of defendant Santos offering to buy the properties for FIVE MILLION PESOS.
On May 15, 1989, before they replied to the offer to purchase, another deed of sale was executed by
defendant Santos (in favor of) defendant Raymundo for a consideration of NINE MILLION PESOS.
Defendant Santos violated again paragraph 9 of the contract of lease by executing a second deed of sale
to defendant Raymundo.
ISSUE: Whether or not there is a violation on the right of first refusal.
HELD. Yes.

In order to have full compliance with the contractual right granting petitioner the first option to purchase,
the sale of the properties for the amount of P9 million, the price for which they were finally sold to
respondent Raymundo, should have likewise been first offered to petitioner.
The basis of the right of first refusal* must be the current offer to sell of the seller or offer to purchase of
any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same
terms and within the period contemplated, could the owner validly offer to sell the property to a third
person, again, under the same terms as offered to the optionee.
Deed of Assignment include the option to purchase
On the contention of respondent Santos that the assignment of the lease contract to petitioner did not
include the option to purchase. The provisions of the deeds of assignment with regard to matters
assigned were very clear. Under the first assignment between Frederick Chua as assignor and Lee Ching
Bing as assignee, it was expressly stated that:
. . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his rights,
interest and participation over said premises afore-described, . . . .
And under the subsequent assignment executed between Lee Ching Bing as assignor and the petitioner,
represented by its Vice President Vicenta Lo Chiong, as assignee, it was likewise expressly stipulated
that;
. . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation over said
leased premises, . . . .
One of such rights included in the contract of lease and, therefore, in the assignments of rights was the
lessee's right of first option or priority to buy the properties subject of the lease, as provided in paragraph
9 of the assigned lease contract. The deed of assignment need not be very specific as to which rights and
obligations were passed on to the assignee. It is understood in the general provision aforequoted that all
specific rights and obligations contained in the contract of lease are those referred to as being assigned.
Needless to state, respondent Santos gave her unqualified conformity to both assignments of rights.

ROSENCOR DEVELOPMENT CORPORATION vs. PATERNO INQUING

G.R. No. 140479 March 8, 2001
FACTS: This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking reversal of
the Decision1 of the Court of Appeals dated June 25, 1999 in CA-G.R. CV No. 53963. The Court of
Appeals decision reversed and set aside the Decision 2 dated May 13, 1996 of Branch 217 of the Regional
Trial Court of Quezon City in Civil Case No. Q-93-18582.1wphi1.nt
The case was originally filed on December 10, 1993 by Paterno Inquing, Irene Guillermo and Federico
Bantugan, herein respondents, against Rosencor Development Corporation (hereinafter "Rosencor"),
Rene Joaquin, and Eufrocina de Leon. Originally, the complaint was one for annulment of absolute deed
of sale but was later amended to one for rescission of absolute deed of sale. A complaint-for intervention
was thereafter filed by respondents Fernando Magbanua and Danna Lizza Tiangco. The complaint-inintervention was admitted by the trial court in an Order dated May 4, 1994. 3
The facts of the case, as stated by the trial court and adopted by the appellate court, are as follows:
"This action was originally for the annulment of the Deed of Absolute Sale dated September 4, 1990
between defendants Rosencor and Eufrocina de Leon but later amended (sic) praying for the rescission
of the deed of sale.
Paterno Inquing, Irene Guillermo and Federico Bantugan averred that they are the lessees since 1971 of
a two-story residential apartment owned by spouses Faustino and Cresencia Tiangco. The lease was not
covered by any contract. The lessees were renting the premises then for P150.00 a month and were
allegedly verbally granted by the lessors the pre-emptive right to purchase the property if ever they decide
to sell the same.
Upon the death of the spouses Tiangcos in 1975, the management of the property was adjudicated to
their heirs who were represented by Eufrocina de Leon. The lessees were allegedly promised the same
pre-emptive right by the heirs of Tiangcos since the latter had knowledge that this right was extended to
the former by the late spouses Tiangcos.
In June 1990, the lessees received a letter from Atty. Erlinda Aguila demanding that they vacate the
premises so that the demolition of the building be undertaken. They refused to leave the premises. In that
same month, de Leon refused to accept the lessees rental payment claiming that they have run out of
receipts and that a new collector has been assigned to receive the payments. Thereafter, they received a
letter from Eufrocina de Leon offering to sell to them the property they were leasing for P2,000,000.00.
xxx.
The lessees offered to buy the property from de Leon for the amount of P1,000,000.00. De Leon told
them that she will be submitting the offer to the other heirs. Since then, no answer was given by de Leon
as to their offer to buy the property. However, in November 1990, Rene Joaquin came to the leased
premises introducing himself as its new owner.
In January 1991, the lessees again received another letter from Atty. Aguila demanding that they vacate
the premises. A month thereafter, the lessees received a letter from de Leon advising them that the heirs
of the late spouses Tiangcos have already sold the property to Rosencor. The following month Atty. Aguila

wrote them another letter demanding the rental payment and introducing herself as counsel for
Rosencor/Rene Joaquin, the new owners of the premises.
The lessees requested from de Leon why she had disregarded the pre-emptive right she and the late
Tiangcos have promised them. They also asked for a copy of the deed of sale between her and the new
owners thereof but she refused to heed their request. In the same manner, when they asked Rene
Joaquin a copy of the deed of sale, the latter turned down their request and instead Atty. Aguila wrote
them several letters demanding that they vacate the premises. The lessees offered to tender their rental
payment to de Leon but she refused to accept the same.
In April 1992 before the demolition can be undertaken by the Building Official. It was at this instance that
the lessees were furnished with a copy of the Deed of Sale and discovered that they were deceived by de
Leon since the sale between her and Rene Joaquin/Rosencor took place in September 4, 1990 while de
Leon made the offer to them only in October 1990 or after the sale with Rosencor had been
consummated. The lessees also noted that the property was sold only for P726,000.00.
The lessees offered to reimburse de Leon the selling price of P726,000.00 plus an additional P274,000.00
to complete their P1,000.000.00 earlier offer. When their offer was refused, they filed the present action
praying for the following: a) rescission of the Deed of Absolute Sale between de Leon and Rosencor
dated September 4, 1990; b) the defendants Rosencor/Rene Joaquin be ordered to reconvey the property
to de Leon; and c) de Leon be ordered to reimburse the plaintiffs for the repairs of the property, or apply
the said amount as part of the price for the purchase of the property in the sum of P100,000.00." 4
The trial court held that the right of redemption on which the complaint was based was merely an oral one
and as such, is unenforceable under the law.
ISSUE: Whether or not a right of first refusal is indeed covered by the provisions of the New Civil Code on
the statute of frauds.
RULING: NO. It is not covered by the statute of frauds.
A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore,
the application of Article 1403, par. 2(e) of the New Civil Code presupposes the existence of a perfected,
albeit unwritten, contract of sale. A right of first refusal, such as the one involved in the instant case, is not
by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale
of the real property involved, but of the right of first refusal over the property sought to be sold.
It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As
such, a right of first refusal need not be written to be enforceable and may be proven by oral evidence.
The next question to be ascertained is whether or not respondents have satisfactorily proven their right of
first refusal over the property subject of the Deed of Absolute Sale dated September 4, 1990 between
petitioner Rosencor and Eufrocina de Leon.
Respondents have adequately proven the existence of their right of first refusal. Federico Bantugan, Irene
Guillermo, and Paterno Inquing uniformly testified that they were promised by the late spouses Faustino
and Crescencia Tiangco and, later on, by their heirs a right of first refusal over the property they were
currently leasing should they decide to sell the same. Moreover, respondents presented a letter20 dated

October 9, 1990 where Eufrocina de Leon, the representative of the heirs of the spouses Tiangco,
informed them that they had received an offer to buy the disputed property for P2,000,000.00 and offered
to sell the same to the respondents at the same price if they were interested. Verily, if Eufrocina de Leon
did not recognize respondents right of first refusal over the property they were leasing, then she would
not have bothered to offer the property for sale to the respondents. It must be noted that petitioners did
not present evidence before the trial court contradicting the existence of the right of first refusal of
respondents over the disputed property.
The final question to be resolved is May a contract of sale entered into in violation of a third partys right of
first refusal be rescinded in order that such third party can exercise said right?
The prevailing doctrine, as enunciated in some cited cases, is that a contract of sale entered into in
violation of a right of first refusal of another person, while valid, is rescissible.
There is, however, a circumstance which prevents the application of this doctrine in the case at bench. In
some cases, the Court ordered the rescission of sales made in violation of a right of first refusal precisely
because the vendees therein did not act in good faith as they were aware or should have been aware of
the right of first refusal granted to another person by the vendors therein.
In the instant case was an oral one given to respondents by the deceased spouses Tiangco and
subsequently recognized by their heirs. As such, in order to hold that petitioners were in bad faith, there
must be clear and convincing proof that petitioners were made aware of the said right of first refusal either
by the respondents or by the heirs of the spouses Tiangco. It is axiomatic that good faith is always
presumed unless contrary evidence is adduced.
On this point, we hold that the evidence on record fails to show that petitioners acted in bad faith in
entering into the deed of sale over the disputed property with the heirs of the spouses Tiangco.
Respondents failed to present any evidence that prior to the sale of the property on September 4, 1990,
petitioners were aware or had notice of the oral right of first refusal.

VAZQUEZ vs. AYALA CORPORATION

G.R. No. 149734

November 19, 2004

FACTS: On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez (hereafter, Vasquez
spouses) entered into a Memorandum of Agreement (MOA) with Ayala Corporation (hereafter, AYALA)
with AYALA buying from the Vazquez spouses, all of the latter's shares of stock in Conduit Development,
Inc. (hereafter, Conduit). The main asset of Conduit was a 49.9 hectare property in Ayala Alabang,
Muntinlupa, which was then being developed by Conduit under a development plan where the land was
divided into Villages 1, 2 and 3 of the "Don Vicente Village." The development was then being undertaken
for Conduit by G.P. Construction and Development Corp.
Under the MOA, Ayala was to develop the entire property, less what was defined as the "Retained Area"
consisting of 18,736 square meters. This "Retained Area" was to be retained by the Vazquez spouses.
The area to be developed by Ayala was called the "Remaining Area". In this "Remaining Area" were 4 lots
adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the Vazquez spouses at
the prevailing price at the time of purchase. Among the relevant provisions of the MOA on this point is:
5.15. The BUYER agrees to give the SELLERS a first option to purchase four developed lots next to the
"Retained Area" at the prevailing market price at the time of the purchase."
Taking the position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area" within 3
years from the date of the MOA, the Vasquez spouses sent several "reminder" letters of the approaching
so-called deadline. However, no demand after April 23, 1984, was ever made by the Vasquez spouses for
Ayala to sell the 4 lots. On the contrary, one of the letters signed by their authorized agent, Engr. Eduardo
Turla, categorically stated that they expected "development of Phase 1 to be completed by February 19,
1990, three years from the settlement of the legal problems with the previous contractor."
By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered for sale. The four
lots were then offered to be sold to the Vasquez spouses at the prevailing price in 1990. This was rejected
by the Vasquez spouses who wanted to pay at 1984 prices, thereby leading to a suit.
The court ordered Ayala to sell to the Vazquez the relevant lots described in the Complaint in the Ayala
Alabang Village at the price of P460.00 per square meter amounting to P1,349,540.00
In its decision, the court a quo concluded that the option to purchase the 4 lots is valid because it was
supported by consideration as the option is incorporated in the MOA where the parties had prestations to
each other.
ISSUE:
whether or not paragraph 5.15 of the MOA can properly be construed as an option
contract or a right of first refusal.
HELD: Paragraph 5.15 of the MOA is a mere right of first refusal.
The Court has clearly distinguished between an option contract and a right of first refusal. An option is a
preparatory contract in which one party grants to another, for a fixed period and at a determined price, the
privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who
has given the option not to enter into the principal contract with any other person during the period
designated, and within that period, to enter into such contract with the one to whom the option was
granted, if the latter should decide to use the option. It is a separate and distinct contract from that which
the parties may enter into upon the consummation of the option. It must be supported by consideration.

In a right of first refusal, on the other hand, while the object might be made determinate, the exercise of
the right 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 are yet to be firmed up.
Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal and not an option
contract. Although the paragraph has a definite object, i.e., the sale of subject lots, the period within which
they will be offered for sale to petitioners and, necessarily, the price for which the subject lots will be sold
are not specified. The phrase "at the prevailing market price at the time of the purchase" connotes that
there is no definite period within which Ayala Corporation is bound to reserve the subject lots for
petitioners to exercise their privilege to purchase. Neither is there a fixed or determinable price at which
the subject lots will be offered for sale. The price is considered certain if it may be determined with
reference to another thing certain or if the determination thereof is left to the judgment of a specified
person or persons.
Further, paragraph 5.15 was inserted into the MOA to give petitioners the first crack to buy the subject lots
at the price which Ayala Corporation would be willing to accept when it offers the subject lots for sale. It is
not supported by an independent consideration. As such it is not governed by Articles 1324 and 1479 of
the Civil Code, viz:
Art. 1324. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn
at any time before acceptance by communicating such withdrawal, except when the option is founded
upon a consideration, as something paid or promised.
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
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.
Consequently, the "offer" may be withdrawn anytime by communicating the withdrawal to the other party.
In this case, Ayala Corporation offered the subject lots for sale to petitioners at the price of
P6,500.00/square meter, the prevailing market price for the property when the offer was made on June
18, 1990. Insisting on paying for the lots at the prevailing market price in 1984 of P460.00/square meter,
petitioners rejected the offer. Ayala Corporation reduced the price to P5,000.00/square meter but again,
petitioners rejected the offer and instead made a counter-offer in the amount of P2,000.00/square
meter. Ayala Corporation rejected petitioners' counter-offer. With this rejection, petitioners lost their right
to purchase the subject lots.
It cannot, therefore, be said that Ayala Corporation breached petitioners' right of first refusal and should
be compelled by an action for specific performance to sell the subject lots to petitioners at the prevailing
market price in 1984.