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Digest Author: Sapnu

Equatorial Realty Development v Mayfair Theater (1996) In the instant case, the right of first refusal is an integral part of the
Petitioners: Equatorial Realty Development, & Carmelo Bauermann, Inc. contracts of lease. The consideration is built into the reciprocal
Respondent: Mayfair Theater obligations of the parties.
The Court of Appeals is correct in stating that Paragraph 8 was
DOCTRINE: It is not also correct to say that there is no consideration in incorporated into the contracts of lease for the benefit of Mayfair
an agreement of right of first refusal. The consideration is built into the which wanted to be assured that it shall be given the first crack or the
reciprocal obligations of the parties. first option to buy the property at the price which Carmelo is willing to
accept.
It is not also correct to say that there is no consideration in an
FACTS: agreement of right of first refusal. The stipulation is part and parcel of
1. Carmelo owned a parcel of land, together with two 2-storey buildings the entire contract of lease. The consideration for the lease
constructed thereon. includes the consideration for the right of first refusal. Thus,
Mayfair is in effect stating that it consents to lease the premises and
2. He entered into a K of lease with Mayfair for a portion of the second to pay the price agreed upon provided the lessor also consents that,
floor of the two-storey buildings. Mayfair thereafter constructed on should it sell the leased property, then, Mayfair shall be given the
the leased property a movie house known as Maxim Theatre. right to match the offered purchase price and to buy the property at
that price.
3. Two years later, lease K for portions of the second floor for similar The sale of the subject real property by Carmelo to Equatorial should
use as a movie threater and similar term. Mayfair put up another now be rescinded considering that Mayfair, which had substantial
movie house known as Miramer Theatre. interest over the subject property, was prejudiced by the sale of the
subject property to Equatorial without Carmelo conferring to Mayfair
4. Both Ks provided an exclusive option to purchse the same every opportunity to negotiate within the 30-day stipulated period.
leased properties if lessor should desire to sell the same.

5. Carmelo desired to sell the land. Mr. Pascal of Carmelo DISPOSITION: petition DENIED
informed the President of Mayfair (Mr. Yang) of such intent to
sell. N.B. The clause in the contracts (para. 8), verbatim:

6. Mayfair wanted to exercise the right of first refusal, which he That if the LESSOR should desire to sell the leased premises, the LESSEE
indicated in a letter sent to Mr. Pascal. shall be given 30-days exclusive option to purchase the same.

7. Carmelo sold its entire property to Equatorial.


In the event, however, that the leased premises is sold to someone other
than the LESSEE, the LESSOR is bound and obligated, as it hereby binds
8. Mayfair instituted the action a quo for specific performance and
and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser
annulment of the sale of the leased premises to Equatorial.
shall recognize this lease and be bound by all the terms and conditions
thereof.

ISSUE: WoN the clause refers to a right of first refusal

RULING + RATIO: YES
An option is a contract granting a privilege to buy or sell within an
agreed time and at a determined price. It is a separate and distinct
contract from that which the parties may enter into upon the

consummation of the option. It must be supported by consideration.