G.R. No. 106063 November 21, 1996
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners,
vs.
MAYFAIR THEATER, INC., respondent.
vs.
MAYFAIR THEATER, INC., respondent.
F: Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro M Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila.
On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter's lease of a portion of Carmelo's property particularly described, to wit:
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.
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.
for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair thereafter constructed on the leased property a movie house known as "Maxim Theatre."
Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of another portion of Carmelo's property, to wit:
A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto Avenue, Manila, with a floor area of 1,064 square meters.
THE TWO (2) STORE SPACES AT THE GROUND FLOOR and MEZZANINE of the two-storey building situated at C.M. Recto Avenue, Manila, with a floor area of 300 square meters and bearing street numbers 1871 and 1875,
for similar use as a movie theater and for a similar term of twenty (20) years. Mayfair put up another movie house known as "Miramar Theatre" on this leased property.
Both contracts of lease provides (sic) identically worded paragraph 8, which reads:
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 August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos.
Mr. Yang replied that he would let Mr. Pascal know of his decision. On August 23, 1974, Mayfair replied through a letter stating as follows:
It appears that on August 19, 1974 your Mr. Henry Pascal informed our client's Mr. Henry Yang through the telephone that your company desires to sell your above-mentioned C.M. Recto Avenue property.
On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring not only the leased premises but "the entire building and other improvements if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second letter.
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.
In September 1978, Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased premises to Equatorial.
Carmelo Arg:
(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.
ISSUE:
1. WON buying only the leased property is Impossible.
CA ruling on this issue: No. The deed of sale executed consists of 4 deeds. The existence of four separate parcels of land covering the whole Recto property demonstrates the legal and physical possibility that each parcel of land, together with the buildings and improvements thereof, could have been sold independently of the other parcels.
2.
Held:
RTC: RTC considered par 8 as an non binding option contract because of lack of consideration. (CC.1479)
"The trial court adjudged the identically worded paragraph 8 found in both aforecited lease contracts to be an option clause which however cannot be deemed to be binding on Carmelo because of lack of distinct consideration therefor."
RTC favored Carmelo and Equitorial and ordered Mayfair to compensation for the use of the premises until they vacate.
CA: REVERSED RTC ruling.
CA differentiated between A1324 and A 1479 of the Civil Code
concluded that since paragraph 8 of the two lease contracts does not state a fixed price for the purchase of the leased premises, which is an essential element for a contract of sale to be perfected, what paragraph 8 is, must be a right of first refusal and not an option contract.
"Firstly, the court a quo misapplied the provisions of Articles 1324 and 1479, second paragraph, of the Civil Code.
Article 1324 speaks of an "offer" made by an offeror which the offeree may or may not accept within a certain period. Under this article, the offer may be withdrawn by the offeror before the expiration of the period and while the offeree has not yet accepted the offer. However, the offer cannot be withdrawn by the offeror within the period if a consideration has been promised or given by the offeree in exchange for the privilege of being given that period within which to accept the offer. The consideration is distinct from the price which is part of the offer. The contract that arises is known as OPTION."
Article 1479, second paragraph, on the other hand, contemplates of an "accepted unilateral promise to buy or to sell a determinate thing for a price within (which) is binding upon the promisee if the promise is supported by a consideration distinct from the price." That "unilateral promise to buy or to sell a determinate thing for a price certain" is called an offer. An "OFFER", in laws, is a proposal to enter into a contract (Rosenstock vs. Burke, 46 Phil. 217). To constitute a legal offer, the proposal must be certain as to the object, the price and other essential terms of the contract (Art. 1319, Civil Code).
It is evident that the provision granting Mayfair "30-days exclusive option to purchase" the leased premises is NOT AN OPTION because the clause does not specify the price for the subject property.
Although the provision giving Mayfair "30-days exclusive option to purchase" cannot be legally categorized as an option, it is, nevertheless, a valid and binding stipulation.
What the trial court failed to appreciate was the intention of the parties behind the questioned proviso.
The provisions was meant to protect Mayfair. To provide Mayfair the opportunity to purchase and acquire the leased property in the event that Carmelo should decide to dispose of the property.
In order to realize this intention, the implicit obligation of Carmelo once it had decided to sell the leased property, was not only to notify Mayfair of such decision to sell the property, but, more importantly, to make an offer to sell the leased premises to Mayfair, giving the latter a fair and reasonable opportunity to accept or reject the offer, before offering to sell or selling the leased property to third parties.
The right vested in Mayfair is analogous to the right of first refusal, which means that Carmelo should have offered the sale of the leased premises to Mayfair before offering it to other parties, or, if Carmelo should receive any offer from third parties to purchase the leased premises, then Carmelo must first give Mayfair the opportunity to match that offer.
In fact, Mr. Pascal understood the provision as giving Mayfair a right of first refusal when he made the telephone call to Mr. Yang in 1974
Option contract 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.
In the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is built into the reciprocal obligations of the parties.
It is not also correct to say that there is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire contract of lease. The consideration for the lease includes the consideration for the right of first refusal.
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
DAMAGE:
Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their right of first priority under the Contract of Lease.
It is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent right created by the contract.
Since Carmelo sold the property for P11,300,000.00 to Equatorial, the price at which Mayfair could have purchased the property is, therefore, fixed. It can neither be more nor less. There is no dispute over it. The damages which Mayfair suffered are in terms of actual injury and lost opportunities. The fairest solution would be to allow Mayfair to exercise its right of first refusal at the price which it was entitled to accept or reject which is P11,300,000.00.
DOCTRINE:
Difference of Option Contract to Right of first refusal (check CA's ruling)
additional notes:
In option contract, the selling price of the object thereof is always predetermined and specified in the option clause in the contract or in the separate deed of option.
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. (1451a).
Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy.
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