Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.

Facts:
Carmelo and Bauermann, Inc. owned a parcel of land, together with two 2-storey
buildings constructed thereon. It entered into a contract of lease with Mayfair for a period of 20
years covering a portion of the second floor and the mezzanine, which will be turned into a
movie house. Section 8 of the said contract states thatifthelessorshoulddesiretoselltheleased
premises,thelesseeshallbegiven30daysexclusiveoptiontopurchasethesame.Sometimein
August1974,CarmeloinformedMayfairofitsdesiretosellthepropertytoEquatorial.Inreply,
Mayfair expressed its interest in acquiring the property but only to the extent of the leased
premises. Notwithstanding Mayfairs intention, Carmelo sold the property to Equatorial. Mayfair
instituted an action for specific performance and annulment of the sale of the leased premises to
Equatorial. The trial court rendered a decision in favor of Equatorial. But, the CA subsequently
reversed it.
Issue:
Whether or not the sale to Equatorial is valid
Held:
NO. The provision granting Mayfair 30-days exclusive option to purchase the leased
premises is not an option in the context of Arts. 1324 and 1479, second paragraph, of the Civil
Code. The deed of option or the option clause in a contract, in order to be valid and
enforceable, must indicate the definite price at which the person granting the option, is
willing to sell. However, in the case at bar, although the provision is certain as to the object (the
sale of the leased premises), the price for which the object is to be sold is not stated.
The contractual stipulation provides for a right of first refusal. It was incorporated into
the contracts of lease for the benefit of Mayfair which wanted to be assured that it shall be given
the first option to buy the property at the price which Carmelo is willing to accept. However,
Carmelo violated such right when without prior notice to Mayfair, it sold the property to
Equatorial.