GR 111538; (February, 1997) (Digest)
G.R. No. 111538 February 26, 1997
Parañaque Kings Enterprises, Incorporated, petitioner, vs. Court of Appeals, Catalina L. Santos, represented by her attorney-in-fact, Luz B. Protacio, and David A. Raymundo, respondents.
FACTS
Petitioner Parañaque Kings Enterprises, Inc. is the assignee of a lease contract over eight parcels of land owned by respondent Catalina L. Santos. Paragraph 9 of the lease contract stipulated that the lessee shall have the “first option or priority to buy the properties” in case of sale. In 1988, Santos sold the properties to respondent David Raymundo for P5 million without first offering them to the petitioner. Upon the petitioner’s protest, Santos had the property reconveyed to her. She then offered the property to the petitioner for P15 million. The petitioner countered with an offer to buy at the original P5 million price. Before Santos replied to this offer, she sold the property again to Raymundo, this time for P9 million. The petitioner filed a complaint for specific performance, alleging a violation of its contractual right of first refusal.
ISSUE
Whether the allegations in the complaint, showing a violation of the contractual right of first option to buy, constitute a valid cause of action for specific performance.
RULING
Yes. The Supreme Court reversed the Court of Appeals and the trial court, which had dismissed the complaint for lack of cause of action. The legal logic is that in a motion to dismiss based on failure to state a cause of action, the test is the sufficiency of the allegations in the complaint. The court must assume the truth of the material facts alleged. The complaint sufficiently averred the existence of a lease contract containing a clear right of first refusal in favor of the petitioner, the subsequent sale of the property to a third party without extending the required offer, and the petitioner’s willingness to match the terms of that sale. These allegations, if hypothetically admitted, establish a cause of action for the enforcement of a right of first refusal through specific performance. The Court clarified that such a right, when contractual in nature, is enforceable. The grantee is entitled to be offered the property under the same terms and conditions offered to the third-party buyer. The case was remanded to the trial court for further proceedings to allow the respondents to present their evidence and for a full trial on the merits.