DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW

DKC HOLDINGS CORPORATION, PETITIONER, -VERSUS- COURT OF APPEALS, VICTOR U.

The Petitioner entered into a Contract of Lease with Option to Buy with the mother of the Respondent.
When the mother of the Respondent died, the latter refused to honor the said contract and alleged that
said obligation was extinguished by the death of his mother and was not transmitted to his as the heir.
In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the
obligation of Encarnacion in the contract to deliver possession of the subject property to petitioner upon
the exercise by the latter of its option to lease the same may very well be performed by her heir Victor.
It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article
1311 of the Civil Code. Indeed, being an heir of Encarnacion, there is privity of interest between him and
his deceased mother. He only succeeds to what rights his mother had and what is valid and binding
against her is also valid and binding as against him.

FACTS:

The subject of the controversy is a parcel of land located in Malinta, Valenzuela, Metro Manila which
was originally owned by private respondent Victor U. Bartolome's deceased mother, Encarnacion
Bartolome. This lot was in front of one of the textile plants of petitioner and, as such, was seen by the
latter as a potential warehouse site.

Petitioner entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome, whereby
petitioner was given the option to lease or lease with purchase the subject land, which option must
be exercised within a period of two years counted from the signing of the Contract. In turn, petitioner
undertook to pay P3, 000.00 a month as consideration for the reservation of its option. Within the
two-year period, petitioner shall serve formal written notice upon the lessor Encarnacion Bartolome
of its desire to exercise its option. Petitioner regularly paid the monthly P3, 000.00 provided for by
the Contract to Encarnacion until her death. Thereafter, petitioner coursed its payment to private
respondent Victor Bartolome, being the sole heir of Encarnacion. Victor, however, refused to accept
these payments.

Meanwhile, Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion,
including the subject lot. Accordingly, respondent Register of Deeds issued a Transfer Certificate in
the name of Victor Bartolome.

Petitioner served upon Victor a notice that it was exercising its option to lease the property, tendering
the amount of P15, 000.00 as rent for the month of March. Again, Victor refused to accept the
tendered rental fee and to surrender possession of the property to petitioner.

Petitioner thus opened a Savings Account with the China Banking Corporation, Cubao Branch, in the
name of Victor Bartolome and deposited therein the P15, 000.00 rental fee for March as well as P6,
000.00 reservation fees for the months of February and March.

Petitioner also tried to register and annotate the Contract on the title of Victor to the property but
the Register of Deeds refused to register or annotate the same or even enter it in the day book or
primary register.

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 DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW

Thus, on April 23, 1990, petitioner filed a complaint for specific performance and damages against
Victor and the Register of Deeds. Petitioner prayed for the surrender and delivery of possession of
the subject land in accordance with the Contract terms; the surrender of title for registration and
annotation thereon of the Contract; and the payment of damages.

After trial on the merits, the trial court rendered its Decision, dismissing the Complaint and ordering
petitioner to pay Victor P30, 000.00 as attorney's fees. On appeal to the CA, the Decision was
affirmed in toto.

Hence, this Petition.

ISSUE:

Whether or not the Contract of Lease with Option to Buy entered into by the late Encarnacion
Bartolome with petitioner was terminated upon her death or whether it binds her sole heir, Victor,
even after her demise?

RULING:

The general rule is that heirs are bound by contracts entered into by their predecessors-in-interest
except when the rights and obligations arising therefrom are not transmissible by (1) their nature,
(2) stipulation or (3) provision of law.

In the case at bar, there is neither contractual stipulation nor legal provision making the rights and
obligations under the contract intransmissible. More importantly, the nature of the rights and
obligations therein are, by their nature, transmissible.
The nature of intransmissible rights as explained by Arturo Tolentino, an eminent civilist, is as
follows:

Among contracts which are intransmissible are those which are purely personal, either by
provision of law, such as in cases of partnerships and agency, or by the very nature of the
obligations arising therefrom, such as those requiring special personal qualifications of the
obligor. It may also be stated that contracts for the payment of money debts are not
transmitted to the heirs of a party, but constitute a charge against his estate. Thus, where the
client in a contract for professional services of a lawyer died, leaving minor heirs, and the
lawyer, instead of presenting his claim for professional services under the contract to the
probate court, substituted the minors as parties for his client, it was held that the contract
could not be enforced against the minors; the lawyer was limited to a recovery on the basis
of quantum meruit.”

In American jurisprudence, "(W)here acts stipulated in a contract require the exercise of special
knowledge, genius, skill, taste, ability, experience, judgment, discretion, integrity, or other personal
qualification of one or both parties, the agreement is of a personal nature, and terminates on the
death of the party who is required to render such service."

It has also been held that a good measure for determining whether a contract terminates upon the
death of one of the parties is whether it is of such a character that it may be performed by the
promissor's personal representative. Contracts to perform personal acts which cannot be as well
performed by others are discharged by the death of the promissor. Conversely, where the service or

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 DEAN’S CIRCLE 2019 – UST FACULTY OF CIVIL LAW

act is of such a character that it may as well be performed by another, or where the contract, by its
terms, shows that performance by others was contemplated, death does not terminate the contract
or excuse nonperformance.

In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the
obligation of Encarnacion in the contract to deliver possession of the subject property to petitioner
upon the exercise by the latter of its option to lease the same may very well be performed by her heir
Victor.

It is futile for Victor to insist that he is not a party to the contract because of the clear provision of
Article 1311 of the Civil Code. Indeed, being an heir of Encarnacion, there is privity of interest
between him and his deceased mother. He only succeeds to what rights his mother had and what is
valid and binding against her is also valid and binding as against him.

In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. The
death of a party does not excuse nonperformance of a contract which involves a property right and
the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the other party has a property interest
in the subject matter of the contract.

Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject
Contract of Lease with Option to Buy.

WILLIAM ONG GENATO, Petitioner, -versus- BENJAMIN BAYHON, MELANIE BAYHON,

The loan in this case was contracted by respondent. He died while the case was pending before the Court
of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No
property or portion of the inheritance may be transmitted to his heirs unless the debt has first been
satisfied. Notably, throughout the appellate stage of this case, the estate has been amply represented by
the heirs of the deceased, who are also his co-parties in the Civil Case.

FACTS:

On October 18, 1990, respondents Benjamin M. Bayhon, Melanie Bayhon, Benjamin Bayhon Jr.,
Brenda Bayhon, Alina Bayhon-Campos, Irene Bayhon-Tolosa and the minor Gino Bayhon, as
represented by his mother Jesusita M. Bayhon, filed an action before the RTC. In their Complaint,
respondents sought the declaration of nullity of a dacion en pago allegedly executed by respondent
Benjamin Bayhon in favor of petitioner William Ong Genato.

Respondent Benjamin Bayhon alleged that he obtained from the petitioner a loan amounting and that
to cover the loan, he executed a Deed of Real Estate Mortgage over the property. However, the
execution of the Deed of Real Estate Mortgage was conditioned upon the personal assurance of the
petitioner that the said instrument is only a private memorandum of indebtedness and that it would
neither be notarized nor enforced according to its tenor.