**Facts:**
Philippine Holding, Inc., owning a land and a two-storey building in Sta. Cruz, Manila, decided to demolish the building. A compromise agreement in an unrelated civil case granted Antonio S. Young and Rebecca C. Young (the petitioner) a right of first refusal to the property. Unknown to them at the time, Philippine Holding, Inc. had already transferred the property via dacion in payment to PH Credit Corporation. Subsequently, PH Credit Corporation sold parts of the property to third parties, including the spouses Fong Yook Lu and Ellen Yee Fong.
Rebecca C. Young, along with other plaintiffs, filed a case for the annulment of these sales, asserting their right of first refusal to purchase the subdivided units they occupied. The Regional Trial Court of Manila dismissed their claims, a decision affirmed by the Court of Appeals. Rebecca C. Young then elevated the matters to the Supreme Court, citing errors in the lower courts’ decisions regarding her enforceability of the right of first refusal despite not being a direct party to the compromise agreement.
The procedural journey involved motions for dismissal, orders for the filing of comments and replies, ultimately culminating in the Supreme Court’s decision to give the petition due course and request memoranda from the involved parties.
**Issues:**
1. Whether Rebecca C. Young can enforce a right of first refusal included in a compromise agreement she was not a party to.
2. Whether the stipulation granting Rebecca C. Young the right of first refusal qualifies as a stipulation pour autrui that she can enforce.
**Court’s Decision:**
The Supreme Court held that Rebecca C. Young could not enforce the right of first refusal because she was not a party to the compromise agreement containing the stipulation. Citing previous jurisprudence, the Court established that such agreements are binding only to the parties involved. Despite the agreement’s intention to benefit her, the failure to implead her into the action and her non-signature on the agreement were critical in the Court’s decision.
The Court further analyzed the stipulation pour autrui and found that even if the stipulation were considered one, Rebecca Young failed to communicate her acceptance of the benefit before its revocation—actual sale to other entities effectively revoking the stipulation. Therefore, regardless of whether it was a stipulation pour autrui, Rebecca C. Young’s claim could not proceed.
**Doctrine:**
This case reiterates the doctrine that a compromise agreement has limited effectivity to the parties involved and mentioned therein, and cannot bind third parties. Additionally, it underscores the requirements for a stipulation pour autrui, notably, the necessity for the third party to communicate acceptance of the stipulation before its revocation.
**Class Notes:**
– **Compromise Agreement:** A legal agreement to settle a dispute where parties make mutual concessions. Not enforceable by those not party to the agreement.
– **Right of First Refusal:** A contractual right to enter into a business transaction with a person or company before anyone else can. Requires explicit stipulation and agreement.
– **Stipulation pour autrui:** A provision in a contract made in favor of a third person who can demand its fulfillment provided he or she communicated acceptance to the obligor before its revocation, without the contracting parties bearing legal representation or authorization of the third party.
**Historical Background:**
This case elucidates the complex interplay between individual property rights and contractual obligations. It’s situated in a period where emerging jurisprudence on rights of first refusal began to clarify the conditions and limitations of their enforceability, especially in contractual disputes involving properties and their sale. Such decisions have crucial implications for property and contract law in the Philippines, revealing the necessity for clear, deliberate inclusion and active participation in contractual agreements to enforce rights therewith.
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