Exactly, thanks for the tip, Daryl.

Additionally to the resolv.conf change I had to adjust dnsmasq.conf as well 
with two listen-addresses:

listen-address=127.0.0.1
listen-address=192.168.1.1 #SERVER1 IP
server=8.8.8.8 #the upstream DNS for WAN resolving, I chose google here, this 
could be open-dns or a 3rd party dns provider.

With that change in place "dig CLIENT1" does finally resolve as well to the 
CLIENT1 lease, not only the other way around.

Thank for pointing me to the right direction.

Regards,

Mayk

>
> Date: Thu, 6 Aug 2015 10:51:13 -0400
> From: da...@isletech.net
> To: meski...@outlook.com; dnsmasq-discuss@lists.thekelleys.org.uk
> Subject: Re: [Dnsmasq-discuss] dnsmasq server can't resolve dnsmasq leases‏
> 
> I would say that you need to change the server's /etc/resolv.conf to 
> point to 127.0.0.1 as the nameserver...
> 

                                          
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