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Sales - Right of First Refusal

The document summarizes a Supreme Court case regarding a right of first refusal clause in a lease agreement. Juan Reyes leased property to Riviera Filipina with a right of first refusal clause. When Reyes needed to sell the property due to a bank foreclosure, he offered it to Riviera first but they did not agree on a price. Reyes then sold the property to Philippine Cypress Construction. The Supreme Court ruled that Riviera lost its right of first refusal because Reyes properly offered the property to them first as required, but Riviera did not match or attempt to match the price offered by Reyes within the time constraint.

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472 views

Sales - Right of First Refusal

The document summarizes a Supreme Court case regarding a right of first refusal clause in a lease agreement. Juan Reyes leased property to Riviera Filipina with a right of first refusal clause. When Reyes needed to sell the property due to a bank foreclosure, he offered it to Riviera first but they did not agree on a price. Reyes then sold the property to Philippine Cypress Construction. The Supreme Court ruled that Riviera lost its right of first refusal because Reyes properly offered the property to them first as required, but Riviera did not match or attempt to match the price offered by Reyes within the time constraint.

Uploaded by

Ron Ace
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Riviera Filipina, Inc., petitioner vs. Court of Appeal, Juan L.

Reyes (deceased), substituted


by his heirs and Philippine Cypress Construction & Development Corp., et. Al.
G.R. No. 117355, April 5, 2002

Doctrine/Case Law:

The right of first refusal or the preferential right is a right which gives a party a
right to have the first opportunity to either purchase or lease a property, or to enjoy a
right. The right of first refusal is provided by contract or by law. “When a lease contract
contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to
anybody at any price until after he has made an offer to sell to the latter at a certain price
and the lessee has failed to accept it.

Facts:

Juan L. Reyes, Executed a Contract of Lease with Riviera. The ten-year (10) renewable
lease of Riviera, which started on August 1, 1982 involved a 1,018 square meter parcel of land
located along EDSA, Quezon City. The said parcel of land was subject of Real Estate Mortgage
executed by Reyes in favour of Prudential Bank. Since the loan with said bank remained unpaid
upon maturity, the mortgagee bank extra judicially foreclosed the mortgage thereon. Realizing
that he could not raise the money needed in time to redeem the subject property, and Reyes
decided to sell the same.
Reyes offered to sell the subject property to Riviera for 5,000 pesos per sqm. Although,
there were several offers and counter offers made between the two, a deal could not be made. On
May 1, 1989, a Deed of Absolute Sale covering the subject property was executed by Reyes in
favour of Phil. Cypress Corp. and said company mortgaged the subject to Urban Dev. Bank.
Riviera sought from Reyes and Cypress a resale of the subject property to it claiming that its
right of first refusal under the lease contract was violated. The trial court dismissed the complaint
filed by Riviera and ruled that the defendants therein did not violate Riviera’s right of first
refusal. Plaintiff had lost its right by refusing to buy the said property. Riviera, appealed to the
C.A. but said court affirmed the trial court’s decision.

Issue:

Whether or not the petitioner had lost its “Right of First Refusal”?

Held:

The Supreme Court ruled that Riviera lost its right of first refusal, and that Reyes did the
necessary actions as to first offering the subject property to Riviera. The right of first refusal
means identity of terms and conditions to be offered to the lessee and all other prospective
buyers and a contract of sale entered into in violation of a right of first refusal of another person,
while valid, is rescissible. However, Riviera took advantage of time constraint Reyes was in with
the bank and did not match or at least try to match the price offered by Reyes to him, thus
ultimately lost its right.

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