Delpher Trades Corp. v.

IAC
FACTS: Delphin Pacheco and Pelagia Pacheco were the owners of a real estate. They leased to Construction Components
Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to
sell the property leased shall first offer the same to the lessee and the latter has the priority to buy under similar
conditions. Lessee Construction Components Inc. assigned its rights and obligations under the Contract of lease in favor
of Hydro Pipes Phil. Inc. with the signed conformity and consent of lessors Delphin and Pelagia. Then, a deed of
exchange was executed between lessors Delphin and Pelagia an Delpher Trades Corp. whereby the former conveyed to
the latter the leased property pursuant to the proviso in the lease agreement. CFI and IAC ruled in favor of the plaintiff
and stated that the deed of exchange between the Pachecos and Delpher Trades Corp. in exchange for 2,500 shares of
stocks was actually a deed of sale which violated a right of first refusal under the lease contract. Hence, this petition.
ISSUE: Whether or not "Deed of Exchange" of property between the Pachecos and Delpher Trades Corp. can be
considered a contract of sale?
RULING: No. The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corp cannot be considered
a contract of sale. There was no transfer of actual ownership interest by the Pachecos to a third party. The Pacheco family
merely changed their ownership from one form to another. The ownership remains in the same hands. Hence, Hydro Pipes
Phil. Inc. has no basis for its claim of a right of first refusal under the lease contract. Furthermore, the Delpher Trades
Corp. is a business conduit of the Pachecos. What they really did was to invest their properties and change the nature of
their ownership from unincorporated to incorporated form by organizing Delpher Trades Corp. to take control of their
properties.