Equatorial Realty Development v. Mayfair Theater

Summary

This case involved the interpretation of paragraph 8 in lease contracts between Carmelo & Bauermann and Mayfair Theater, which granted Mayfair a '30-days exclusive option to purchase' the leased premises. The Supreme Court ruled that this provision constituted a right of first refusal rather than an option contract, as it lacked a specified purchase price. When Carmelo sold the entire property to Equatorial without properly offering it to Mayfair first, both parties acted in bad faith. Carmelo violated Mayfair's contractual rights, while Equatorial purchased with full knowledge of the existing lease agreements. The Court ordered rescission of the sale and directed that Mayfair be allowed to purchase the property at the same price Equatorial paid (P11,300,000.00), emphasizing that right of first refusal provisions in lease contracts should be given effect rather than rendered ineffectual, and that parties acting in bad faith should not be rewarded for their wrongdoing.