Civil Law,  Legally Yours

Equatorial Realty Development v. Mayfair Theater, Inc.

Equatorial Realty Development & Carmelo & Bauerman, Inc. v. Mayfair Theater, Inc.

G.R. No. 106063; November 21, 1996

FACTS:

Petitioner Carmelo & Bauermann, Inc. leased its parcel of land with a 2-storey building to respondent Mayfair Theater, Inc. They entered a contract which provides that if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.

Carmelo informed Mayfair that it will sell the property to Equatorial Realty Development. Mayfair Theater made known its interest to buy the property but only to the extent of the leased premises. Notwithstanding Mayfair Theater’s intention, Carmelo sold the property to Equatorial.

ISSUE:

Whether or not the sale of the property to Equatorial Realty Development is rescissible

HELD:

Yes.  The sale of the property should be rescinded because Mayfair has the right of first refusal. Both Equatorial and Carmelo are in bad faith because they knew of the stipulation in the contract regarding the right of first refusal.

The stipulation is a not an option contract but a right of first refusal. and as such, the requirement of a separate consideration for the option has no applicability in the instant case. The consideration is built in the reciprocal obligation of the parties.

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