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Author: DKC Holdings Corporation v. CA (2000)

Petition:Petition to review on certiorari the of the Court of Appeals (seeking the reversal)Petitioner: DKC Holdings CorporationRespondent: CA, Victor Bartolome, Register of Deeds for Metro ManilaPonencia:Ynares-Santiago

DOCTRINE: (RelativityThe 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 the law.

FACTS:

1. Subject: 14,021 sq.meter parcel of land located in Malinta, Valenzuela which was located infront of one of the textile plants of the petitioner.2. On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome. DKC was given the option to lease or lease with option to buy. (Note: option must be exercised within 2 years from signing of contract and that DKC must serve its written notice upon the lessor Encarnacion of its desire to exercise its option)3. Contract also provided that in case the petitioner chose to lease the property, it may take actual possession of the premises. Lease shall be for period of 6 years at P15,000 per month rent, renewable for another 6 years at P18,000 per month.4. As a consideration for the reservation of its option, DKC undertook to pay P3,000 a month. DKC regularly paid the monthly P3000 reservation fee until the death of Encarnacion in January 1990.5. After the death of Encarnacion, DKC coursed its payment (reservation) to Victor Bartolome being the sole heir of the deceased. Victor refused to accept payments.6. Victor then executed an Affidavit of Self-Adjudication over all the properties of Encarnacion, including the subject lot, on January 10, 1990.7. On March 14, 1990, DKC, via registered mail, served upon Victor a notice that it was exercising its option to lease the property, tendering 15,000 as rent for March. Victor refused payment and likewise refused to surrender the possession of property to DKC.8. DKC opened saving account in Chinabank in the name of Victor Bartolome and deposited therein the 15000 rental fee plus 2 months worth of reservation fee. (DKC also tried to register and annotate the Contract on the title but the Register of Deeds refused)9. On April 23, 1990, petitioner filed a complaint for specific performance and damages against Victor and the register of deeds.10. TC dismissed complaint. CA affirmed.

ISSUES:1. WoN the Contract of Lease with Option to Buy entered into by DKC with Encarnacion was terminated upon her death (WoN the contract binds the sole heir even after her death)a. WoN DKC had complied with its obligations under the Contract

PROVISIONs:

Article 1311.Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

RULING + RATIO:1. No. The Contract still subsists and Victor Bartolome, as the sole heir of Encarnacion, is bound to the contract (based on Art. 1311 and jurisprudence). From Art. 1311, 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 the law. In the case at bar, there is no contractual stipulation or legal provision making the contract/obligation intransmissible. Moreover, the nature of the rights and obligations therein are, by their nature, transmissible. A good measure for determining whether or not a contract terminates upon the death of one of the parties is whether it is of such character that it may be performed by the promissors personal representative. Contracts to perform personal acts which cannot be as well performed by others are discharged by the death of the promissory. In this case, no personal act is required from Encarnacion. The obligation to deliver the possession of the lot can be very well be performed by her heir (property interest). Being an heir of Encarnacion, there is privity of interest between him and his deceased mother. HE succeeds to what rights his mother had and what is valid to her and binding against her is also valid and binding against him.a) Yes. Regular payments(reservation fee) were made by the petitioner. Court also appreciated the payment done by DKC (opening the savings account) as full compliance of its obliugationj to pay. As such, the Court held that the exercise of DKC of its option to lease was made in accordance with the contractual provisions.DISPOSITION: Petition granted. Decision of RTC and CA reversed.