G.R. No. 106063 November 21, 1996
FACTS:
Carmelo entered into a contract with respondent for the latter to lease A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 1,610 square meters and THE SECOND FLOOR AND MEZZANINE of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 150 square meters.
The contract is set for the next 20 years.
2 years later, the parties entered into yet another contract involving; A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 1,610 square meters and THE SECOND FLOOR AND MEZZANINE of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 150 square meters.
Stipulated in the contract was; That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.
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 and obligates itself, to stipulate in the Deed of Sale hereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof.
Sometime in 1974, Carmelo through Mr. Pascal by a telephone call told the respondent that it is contemplating to sell the said property and that a certain Jose Araneta is willing to buy the same for US$1,200,000. It also asked the respondent if it’s willing to the property for six to seven million pesos. Respondent through Mr. Yang told the petitioner that it would respond once a decision was made.
Respondent in its reply mentioned a stipulated part of the contract as to when Carmelo would decide to sell the property. Carmelo did not reply.
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.
Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased premises to Equatorial.
Carmelo’s defense; as special and affirmative defense (a) that it had informed Mayfair of its desire to sell the entire C.M. Recto Avenue property and offered the same to Mayfair, but the latter answered that it was interested only in buying the areas under lease, which was impossible since the property was not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for lack of consideration.
Equitorial’s allegation; that the option is void for lack of consideration (sic) and is unenforceable by reason of its impossibility of performance because the leased premises could not be sold separately from the other portions of the land and building. It counterclaimed for cancellation of the contracts of lease, and for increase of rentals in view of alleged supervening extraordinary devaluation of the currency. Equatorial likewise cross-claimed against co-defendant Carmelo for indemnification in respect of Mayfair's claims.
Trial Court rendered decision in favor of Carmelo and Equitorial.
ISSUE:
Whether or not the OPTION CLAUSE IN THE CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST REFUSAL PROVISO
HELD:
We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal.
In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:
A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to B, certain securities or properties within a limited time at a specified price.
The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing to sell
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