- Petitioner
- Sps. Reynaldo K. Litonjua
- Respondent
- L & R Corporation
- Citation
- G.R. No. 130722
- Court
- Supreme Court En Banc
- Division
- En Banc
- Ponente
- Ynares-Santiago, J.
- Decided
- December 9, 1999
Summary
This landmark Supreme Court En Banc decision addressed the validity of restrictive provisions in mortgage contracts. The spouses Litonjua mortgaged properties to L & R Corporation under a contract requiring the mortgagee's consent for any sale and granting a right of first refusal. When they sold to PWHAS without compliance, L & R Corporation foreclosed. The Court held that provisions absolutely prohibiting sale without mortgagee consent violate Article 2130 of the Civil Code as they create virtual prohibition on alienation. However, right of first refusal clauses are valid. The sale to PWHAS was valid but rescissible for violating the right of first refusal. PWHAS had redemption rights as successor-in-interest, but the rescission of the sale disallowed the redemption. The decision balances property owners' alienation rights against legitimate mortgagee protections, establishing important precedent on mortgage contract restrictions.