G.R. No. 123581 August 29, 1997
RODRIGO B. BANGAYAN, BENJAMIN B. BANGAYAN, ET. AL., petitioners, vs. THE HONORABLE COURT OF APPEALS and ANGELITA OCAMPO LIM, respondents.

FACTS

On July 6, 1988, Teofista Ocampo (lessee) and Petronilla Lingat (lessor) entered into a Contract of Lease for a property in Manila. The contract contained provisions: (1) the lessee warranted the premises would be used exclusively by her for an automobile supply and parts company and partly as a dwelling for her employees only; (2) the lessee was prohibited from subleasing, assigning, transferring, or conveying her right of lease under any circumstances; and (3) the lessor had the right to sell the property, but the lessee would be given the FIRST OPTION to purchase, and if sold to a third person, the lease contract would be binding on the vendee.
On January 2, 1990, Lingat’s counsel notified Ocampo she could exercise her right of first option within 30 days. Ocampo inquired about the selling price. Negotiations stalled over who should first make an offer with a price. On February 22, 1990, Lingat’s counsel terminated negotiations, stating Ocampo had waived her privilege, and the property would be offered on a “first come, first serve” basis.
In March 1990, Lingat agreed to sell the property to Rodrigo, Roberto, and Benjamin Bangayan. On April 5, 1990, Ocampo was advised of the sale, and her lease was cancelled for breach of terms. The Bangayans filed an ejectment case against Ocampo. On May 7, 1990, Lingat executed a Deed of Absolute Sale to the Bangayans.
On September 18, 1990, Ocampo filed a complaint against Lingat and the Bangayans for annulment of the deed of sale, cancellation of title, reconveyance, and damages (Civil Case No. 90-54459). The ejectment case was decided against Ocampo and became final.
Teofista Ocampo died in October 1991. She was substituted in the civil case by her daughter, Angelita Ocampo Lim, based on an alleged assignment of the right of first option made by Ocampo to Lim on August 23, 1990. The Regional Trial Court dismissed the case, ruling Ocampo’s death terminated the lease and extinguished all her rights, including the first option, and her daughter could not substitute her. The Court of Appeals reversed, declaring the deed of sale null and void, ordering cancellation of the title, and directing Lingat to offer the property to Lim. The Bangayans filed this petition for review.

ISSUE

Whether Teofista Ocampo’s right of first option under the lease contract was assignable to her daughter, Angelita Ocampo Lim, thereby allowing Lim to continue the civil case.

RULING

No. The Supreme Court reversed the decision of the Court of Appeals and reinstated the decision of the Regional Trial Court.
The right of first option was not independently assignable. It was an integral part of the lease contract, given to Ocampo because she was the lessee. Paragraphs 4 and 5 of the lease contract expressly limited the lease relationship to the parties: paragraph 4 stipulated the premises were for Ocampo’s exclusive use; paragraph 5 prohibited Ocampo from directly or indirectly assigning, transferring, or conveying her right of lease under any circumstances. This prohibition, consistent with Article 1649 of the Civil Code, meant the lessee could not assign the lease without the lessor’s consent. Since the right of first option was a component of the lease consideration, the prohibition on assigning the lease necessarily barred the assignment of the first option. Therefore, the assignment from Ocampo to Lim had no legal warrant. Consequently, Angelita Ocampo Lim had no right to substitute her mother in the civil case.