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Litonjua v. L & R

1. The spouses Litonjua obtained loans from L&R Corporation and mortgaged two parcels of land as security. Without L&R's consent, they later sold the land to PWHAS. L&R foreclosed and acquired the land. 2. The court ruled that requiring a mortgagee's consent before sale is invalid and circumvents law. However, the contract also gave L&R a right of first refusal, which PWHAS ignored. 3. The sale to PWHAS was valid but rescindable for ignoring L&R's right of first refusal, which PWHAS was presumed to know about from the registered mortgage. L&R was willing to

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135 views

Litonjua v. L & R

1. The spouses Litonjua obtained loans from L&R Corporation and mortgaged two parcels of land as security. Without L&R's consent, they later sold the land to PWHAS. L&R foreclosed and acquired the land. 2. The court ruled that requiring a mortgagee's consent before sale is invalid and circumvents law. However, the contract also gave L&R a right of first refusal, which PWHAS ignored. 3. The sale to PWHAS was valid but rescindable for ignoring L&R's right of first refusal, which PWHAS was presumed to know about from the registered mortgage. L&R was willing to

Uploaded by

analyn
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Litonjuav.

L&R
320SCRA405

Facts:
ThecontroversystemsfromloansobtainedbythespousesLitonjuafromL&RCorporationThe
loans were secured by a mortgage constituted by the spouses upon their two parcels of land and the
improvementsthereonlocatedinCubao,QuezonCity.

OnJuly14,1979,thespousesLitonjuasoldtoPhilippineWhiteHouseAutoSupply,Inc.(PWHAS)
theparcelsoflandtheyhadpreviouslymortgagedtoL&RCorporationforthesumofP430,000.00.
Meanwhile,withthespousesLitonjuahavingdefaultedinthepaymentoftheirloans,L&RCorporation
initiatedextrajudicialforeclosureproceedingswiththeExOficioSheriffofQuezonCity.OnJuly23,1980,
themortgagedpropertiesweresoldatpublicauctiontoL&RCorporationastheonlybidderforthe
amountofP221,624.58.WhenL&RCorporationpresenteditscorrespondingCertificateofSaleissuedby
DeputySheriffRobertoB.Garcia,totheQuezonCityRegisterofDeedsforregistrationonAugust15,
1980,itlearnedforthefirst timeofthepriorsaleofthepropertiesmadebythespousesLitonjuato
PWHASuponseeingtheinscriptionatthebackofthecertificatesoftitle.Thus,onAugust20,1980,it
wrotealettertotheRegisterofDeedsofQuezonCityrequestingforthecancellationoftheannotation
regardingthesaletoPWHAS.L&RCorporationinvokedaprovisioninitsmortgagecontractwiththe
spousesLitonjuastatingthatthemortgageespriorwrittenconsentwasnecessaryincaseofsubsequent
encumbranceoralienationofthesubjectproperties.Thus,itarguedthatsincethesaletoPWHASwas
madewithoutitspriorwrittenconsent,thesameshouldnothavebeenregisteredand/orannotated.

Issue:
1.Mayamortgagecontractprovidesthatthemortgagorcannotsellthemortgagedpropertywithoutfirst
obtainingtheconsentofthemortgagee?

2.Whetherornotthestipulationgrantingthemortgageetherightoffirstrefusalisvalid?

Ruling:

1.Beingcontrarytolaw,paragraph8ofthesubjectDeedofRealEstateMortgageisnotbindinguponthe
parties.Accordingly,thesalemadebythespousesLitonjuatoPWHAS,notwithstandingthelackofprior
writtenconsentofL&RCorporation,isvalid.

BoththelowercourtandtheCourtofAppealsinitsAmendedDecisionrationalizethatsince
paragraph8ofthesubjectDeedofRealEstateMortgagecontainsnoabsoluteprohibitionagainstthesale
of the property mortgaged but only requires the mortgagor to obtain the prior written consent of the
mortgageebeforeanysuchsale,Article2130isnotviolatedthereby.Thisobservationtakesanarrowand
technicalviewofthestipulationinquestionwithouttakingintoconsiderationtheendresultofrequiring
suchpriorwrittenconsent.True,theprovisiondoesnotabsolutelyprohibitthemortgagorfromsellinghis
mortgagedproperty;butwhatitdoesnotoutrightlyprohibit,itneverthelessachieves.Forallintentsand
purposes,thestipulationpracticallygivesthemortgageethesoleprerogativetopreventanysaleofthe
mortgagedpropertytoathirdparty.Themortgageecansimplywithholditsconsentandthereby,prevent
themortgagorfromsellingtheproperty.Thiscreatesanunconscionableadvantageforthemortgageeand
amountstoavirtualprohibitionontheownertosellhismortgagedproperty.Inotherwords,stipulations
like those covered by paragraph 8 of the subject Deed of Real Estate Mortgage circumvent the law,
specifically,Article2130oftheNewCivilCode.

2.ItwasthenheldthattheContractofSalethere,whichviolatedtherightoffirstrefusal,was
rescissible.

Inthecaseatbar,PWHAScannotclaimignoranceoftherightoffirstrefusalgrantedtoL&R
CorporationoverthesubjectpropertiessincetheDeedofRealEstateMortgagecontainingsuchaprovision
wasdulyregisteredwiththeRegisterofDeeds.Assuch,PWHASispresumedtohavebeennotifiedthereof
byregistration,whichequatestonoticetothewholeworld.

L&RCorporationhadalwaysexpresseditswillingnesstobuythemortgagedpropertiesonequal
termsasPWHAS.Indeed,initsAnswertotheComplaintfiled,L&RCorporationexpressedthatitwas
ready,willingandabletopurchasethesubjectpropertiesatthesamepurchasepriceofP430,000.00,and
wasagreeabletopaythedifferencebetweensuchpurchasepriceandtheredemptionpriceofP249,918.77,
computedasofAugust13,1981,theexpirationoftheoneyearperiodtoredeem.Thatitdidnotduly
exerciseditsrightoffirstrefusalattheopportunetimecannotbetakenagainstit,preciselybecauseitwas
notnotifiedbythespousesLitonjuaoftheirintentiontosellthesubjectpropertyandthereby,togiveit
priorityoverotherbuyers.

All things considered, what then are the relative rights and obligations of the parties? To
recapitulate:,thesalebetweenthespousesLitonjuaandPWHASisvalid,notwithstandingtheabsenceofL
&RCorporationspriorwrittenconsentthereto.InasmuchasthesaletoPWHASwasvalid,itsofferto
redeemanditstenderoftheredemptionprice,assuccessorininterestofthespousesLitonjua,withinthe
oneyearperiodshouldhavebeenacceptedasvalidbyL&RCorporation.However,whilethesaleis,
indeed,valid,thesameisrescissiblebecauseitignoredL&RCorporationsrightoffirstrefusal.

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