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^{CONCURRING AND DISSENTING OPINION}

VITUG, J.:

At the pith of the controversy are two stipulations in a real estate mortgage contract, to wit: (a) that the mortgagor cannot sell the mortgaged property without the written consent of the mortgagee, and (b) that the latter has a right of first refusal in any projected sale of the hypothecated property.

Outlined below is a factual backdrop of the case.

The spouses Reynaldo and Erlinda Litonjua (Litonjua spouses) contracted a loan from L & R Corporation in the sum of P400,000.00 drawn in two tranches P 200,000.00 on 06 August 1974 and the other P200,000.00 on 27 March 1978. The loan was secured by a real estate mortgage constituted by the spouses on their two parcels of land located in Cubao, Quezon City, covered by Transfer Certificates of Title (TCT) No. 197232 and 197233, measuring 599 and 1,436 sq. m., respectively. The contract provided, inter alia, that the mortgagors were enjoined from conveying the mortgaged property without the written consent of the mortgagee and that the mortgagee had a right of first refusal in the event the mortgagors decided to sell the property.¹ The mortgage was duly registered with the Register of Deeds of Quezon City.

While the mortgage obligation was still outstanding, the Litonjua spouses sold the two parcels of land to Philippine White House Auto Supply, Inc. (PWHAS), for the amount of P 430,000.00. The sale was annotated at the back of the certificate of title.

When the Litonjuas defaulted in the payment of the loan, L & R Corporation initiated extrajudicial foreclosure of the mortgage. The mortgaged parcels were sold at public auction to L & R Corporation, it being the sole bidder, on 23 July 1980. On 15 August 1980, when L & R presented its certificate of sale to the Register of Deeds of Quezon City, it was informed of the previous sale made by the Litonjua spouses to PWHAS. L & R Corporation thereupon sought from the Register of Deeds the cancellation of the annotation of sale to PWHAS calling attention to the proviso in the mortgage agreement enjoining the Litonjua spouses from selling the property.

Later, PWHAS, for the account of the Litonjua spouses, tendered payment of the full redemption price to L & R Corporation. Upon the latters refusal to honor the redemption, PWHAS tendered the amount with the Branch Clerk of Court; correspondingly, the Deputy Sheriff issued a certificate of redemption in favor of the Litonjua spouses. The Certificate of Redemption, however, could not be registered because L & R Corporation would not surrender the owners duplicate certificates of title. When the Register of Deeds likewise refused to annotate the certificate of redemption as an adverse claim on the titles covering the two parcels of land, the Litonjuas filed a petition with the then Court of First Instance of Quezon City to compel L & R Corporation to surrender the duplicate certificates of title.

During the pendency of the case, L & R Corporation executed an Affidavit of Consolidation of Ownership, on the basis of which the Register of Deeds cancelled TCT No. 197232 and 197233 and, in lieu thereof, issued TCT No. 280054 and 280055 in favor of L & R Corporation free from any lien or encumbrance. L & R Corporation thereupon advised the tenants of the apartment units on the subject lots to tender rental payments to the corporation as being the new owner.

Apprised of the foregoing, the Litonjua spouses filed a complaint for Quieting of Title, Annulment of Title and Damages. The trial court dismissed the complaint on the thesis that the sale between the spouses Litonjua and PWHAS, as well as the redemption subsequently made, was null and void and unenforceable against L & R Corporation.

On appeal, the judgment of the trial court was set aside by the Court of Appeals in its decision of 22 June 1994; however, on 11 September 1997, the appellate court reconsidered and reversed its previous stand.

There appears to be some merit in the instant petition.

The stipulation in the real estate mortgage which prohibits the mortgagor from selling the mortgaged property without the written consent of the mortgagee contravenes the law. Article 2130 of the New Civil Code holds that a stipulation forbidding the owner from alienating the immovable mortgaged shall be void. The phrase without (the) written consent of the mortgagee, added by the parties in their contract is of no real comfort to the mortgagee and did nothing but to stress, indeed, the restriction against what should otherwise be an unimpeded right of the mortgagor to alienate the property. The clear intention of the law is to outlaw a stipulation that would effectively prevent the mortgagor from freely conveying the property during the life of the mortgage. Needless to state, the injunction of the law may not be circumvented, whether directly or indirectly, by the parties.

I am, therefore, in complete accord with the majority in concluding that the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior written consent of L & R Corporation, is valid, and that as such successor-in-interest of the Litonjuas, PWHAS has a right to redeem the property foreclosed by L& R Corporation.

What I find quite difficult to accept, with all due respect, is the pre-emptive and peremptory pronoucement in the ponencia that the sale between the Litonjuas and PWHAS is rescissible because it ignored the right of first refusal of L & R Corporation. I must stress that a right of first refusal is not a prefected contract.² Neither does it qualify as an option under the second paragraph of Article 1479,³ which itself must be supported by a consideration separate and distinct from the price itself,⁴ nor an offer which Article 1319⁵ of the Code requires to be definitive and certain both as to object and cause of the contemplated agreement. Even while the object in a right of first refusal might be determinate, the exercise of the right, nevertheless, would still be dependent not only on the grantors eventual intention to enter into a binding juridical relation but also on terms, including the price, that obviously are yet to be fixed. It would be absurd to suggest that a right of first refusal can be the proper subject of an action for specific performance but, of course, neither would it be correct to say that a breach of such right would be totally inconsequential. A grantor who unjustly discards his own affirmation violates the basic dogma in human relations so well expressed as in Article 19 of the Civil Code to the effect that every person is expected to act with justice, give another is due and observe honesty and good faith. When ignored, the legal feasibility of an action for damages is a matter now long settled.

Most importantly, a rescissory action in consonance with Article 1380, in relation to article 1381, paragraph (3), of the New Civil Code⁶ so invoked (by citing Guzman, Bocaling & Co. vs. Bonnevie⁷ as the authority for the rescission of the sale between the Litonjua spouses and PWHAS is here off the mark unfortunately. An action for rescission under said provisions of the Code is merely subsidiary and relates to the specific instance when a debtor, in an attempt to defraud his creditor, enters into a contract with another that deprives the creditor to recover his just claim and leaves him with no other legal means, than by rescission, to obtain reparation.⁸ Hence, the rescission is only to the extent necessary to cover the damages caused pursuant to Article 1384 of the Civil Code. Verily, the case and factual settings in the instant controversy (for Quieting of Title, Annulment of Title and Damages with Preliminary Injunction) initiated by the Litonjua spouses and PWHAS against herein respondents is neither the occasion nor the proper forum for such an issue to be considered.⁹

To sum up, the only matter called for to be said, in my view, is that part of the ponencia which concludes that the sale between the Litonjua spouses and PWHAS is a valid and subsisting contract which has accorded to PWHAS, by stepping into the shoes of the sellers, a corresponding entitlement to redeem the foreclosed property.

WHEREFORE, I vote to REVERSE and SET ASIDE the appealed amended judgment and to REINSTATE the original decision, dated 22 June 1994, of the appellate court.

Endnotes:

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¹ 8. That the MORTGAGORS shall not sell, dispose of, mortgage, nor in any other manner encumber the real property/properties subject of this mortgage without the prior consent of the MORTGAGEE (Deed and Amendment of Real Estate Mortgage).

9. That should the MORTGAGORS decide to sell the real property/properties subject of this mortgage, the MORTGAGEE shall be duly notified thereof by the MORTGAGORS, and should the MORTGAGEE be interested to purchase the same, the latter shall be given priority over all the other prospective buyers (Deed and Amendment of Real Estate Mortgage).

² Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602.

³ 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. (New Civil Code)

⁴ Cronico v. J.M. Tuason and Co., 78 SCRA 331; Serra v. Court of Appeals, 229 SCRA 60; Nool v. Court of Appeals, 276 SCRA 149.

⁵ Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.

⁶ Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by law.

Art. 1381. The following contracts are rescissible:

(1) Those which are entered into by guradians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;

(4) Those which refer to things under litigation if they have been entered into by the defendants without the knowledge and approval of the litigants or of competent judicial authority;

(5) All other contracts specially declared by law to be subject to rescission.

⁷ 206 SCRA 668.

⁸ The existence of an intention to prejudice creditors is evinced either by the presumption established in article 1387 or by proof presented in the trial of the case. (Air France v. Court of Appeals, 245 SCRA 485).

⁹ See Gatchalian v. Manalo, 68 Phil. 708.