G.R. No. 219340 - Commissioner of Internal Revenue vs. Standard Insurance Co., Inc.

The Intestate Estate of Jose L. Reynoso leased a 600 sqm parcel with two buildings to Raoul S.V. and Christopher Bonnevie from August 8, 1976 to August 7, 1977 at ₱4,000/month.
Paragraph 20 of the Contract of Lease granted the lessees “first priority to purchase” the property “all things and considerations being equal.”

On November 3, 1976, administratrix Africa Valdez de Reynoso purportedly notified the Bonnevies by registered mail of her intent to sell the property for ₱600,000 less a ₱100,000 mortgage, giving them 30 days to exercise their priority right. A follow-up letter on January 20, 1977 advised that the property had already been sold. The Bonnevies denied receiving the first notice and refused to vacate.
On March 7, 1977, Reynoso sold the premises to petitioner Guzman, Bocaling & Co. for ₱400,000—₱137,500 payable immediately in cash and the ₱262,500 balance upon vacation of tenants.

April 12, 1977: Reynoso filed ejectment (City Court Manila Civil Case No. 043851-CV) for unpaid rent. September 25, 1979: parties entered a compromise for voluntary vacation by October 31, 1979. This was later set aside by agreement and remanded for trial on the merits.
April 29, 1980: Bonnevies filed annulment of sale and cancellation of title (CFI Manila Civil Case No. 131461), seeking enforcement of their first-priority right under the same terms as the petitioner. May 5, 1980: City Court ruled for Reynoso in ejectment; CFI modified the ejectment judgment and, in Civil Case No. 131461, declared the sale null and void, ordered title cancellation, and awarded damages to Bonnevies. The Court of Appeals affirmed with reductions; petition to the Supreme Court followed.

Whether the administratrix complied with Paragraph 20’s first-priority clause before selling to petitioner.
Whether lease for one year required probate-court approval before recognizing or enforcing the priority right.
Whether the Contract of Sale is voidable or rescissible and whether third-party Bonnevies may seek its rescission.
Whether petitioner acquired the property in good faith.
Whether the set-aside compromise agreement restored the Bonnevies’ original rights under the lease.