Ang Yu Asuncion, Arthur Go and Keh Tiong vs. The Hon. Court of Appeals and Buen Realty Development Corporation
Facts:
In Civil Case No. 87-41058, petitioners Ang Yu Asuncion, Arthur Go, and Keh Tiong, among others, filed a complaint for specific performance against Bobby Cu Unjieng, Rose Cu Unjieng, and Jose Tan before the RTC in Manila, seeking to compel the defendants to sell a property in Binondo, Manila, which petitions have been leasing since 1935. Plaintiffs claimed that defendants had initially expressed an offer to sell the property for PHP 6 million, which was countered by plaintiffs at PHP 5 million. Negotiations were undertaken, with plaintiffs requesting a formal written offer. Fearing a pending sale to another party due to defendants’ lack of response, they initiated the complaint.
The trial court granted defendants’ motion for summary judgment, finding that no contract of sale was perfected due to the lack of an agreement on the terms and conditions. However, the court provided that if defendants later decide to offer the property for sale at or below PHP 11 million, plaintiffs will have the right of first refusal. Plaintiffs’ appeal to the Court of Appeals was also dismissed, but it modified the right of first refusal to cover any sale price, due to the fluctuating market economy.
During the pendency of the appeal, defendants sold the property to Buen Realty and Development Corporation for PHP 15 million, and a new title was issued to Buen Realty, notwithstanding a notice of lis pendens on the title from the pending litigation.
Plaintiffs moved for execution of the judgment, asserting their right of first refusal, and the trial court issued orders directing defendants to execute a deed of sale in favor of plaintiffs for PHP 15 million, setting aside previous transactions and ordering the title issued to Buen Realty to be cancelled. The Court of Appeals, however, invalidated the trial court’s orders on appeal by Buen Realty, finding that the decision in Civil Case No. 87-41058 did not decree the execution of a deed of sale or fix the sale price.
Issues:
1. Whether Buen Realty Development Corporation is bound by a writ of execution in accordance with the notice of lis pendens on the title due to the litigation in Civil Case No. 87-41058.
2. Whether the right of first refusal recognised in Civil Case No. 87-41058 can be the subject of a writ of execution.
3. Whether the Court of Appeals erred in finding that the writ of execution varies from the terms of the judgment in Civil Case No. 87-41058.
Court’s Decision:
The Supreme Court upheld the decision of the Court of Appeals and set aside the trial court’s orders. It stated that the right of first refusal is not a perfected contract of sale and thus cannot justify a writ of execution on the judgment. The potential breach of this right could warrant a recovery for damages, but not the execution process to specifically enforce rights yet to be fully materialised. Regarding Buen Realty, the Court pronounced that the company could not be subject to the writ of execution as it was not a party to the Civil Case No. 87-41058 and had not been given its day in court. Moreover, the judgment did not decree the execution of a deed of sale nor the fixing of the sale price, making the court’s orders incongruent with the judgment’s terms.
Doctrine – The Supreme Court established that the right of first refusal is a juridical relation which does not constitute a perfected contract of sale and does not per se within the second paragraph of Article 1479 of the Civil Code regarding options, or possibly of an offer under Article 1319.
Class Notes –
1. Right of First Refusal – A non-perfected contractual agreement which gives the holder the opportunity to match an offer before the property is sold to someone else.
2. Notice of Lis Pendens – A notice to the public that a property is subject to a legal proceeding and may be bound by an adverse judgment.
3. Writ of Execution – A court order granted at the end of a lawsuit which allows the winning party to collect damages or enforce specific actions.
Historical Background – The case took place in the context of evolving real estate transactions in Philippine law, such as the introduction and legal treatment of rights like the right of first refusal, purchase options, and contracts to sell, all of which involve a degree of future performance contingent upon specific terms and conditions. The historical development impacted how these juridical relations were interpreted legally, particularly when linked to the doctrine of consensuality in the perfection of contracts.
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