DKC Holdings Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner DKC Holdings Corporation entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome for a 14,021 square meter parcel of land. The contract granted petitioner a two-year option to lease or buy the property, with a monthly reservation fee of P3,000.00. Encarnacion Bartolome died in January 1990. Petitioner continued paying the reservation fees to her sole heir, Victor Bartolome, who refused to accept them. Procedural History: On March 14, 1990, petitioner notified Victor Bartolome of its exercise of the option to lease and tendered P15,000.00 as rent for March. Victor refused to accept the payment and surrender possession. Petitioner deposited the rent and reservation fees in a savings account in Victor's name. Petitioner attempted to register the contract on Victor's title, but the Register of Deeds refused. Petitioner filed a complaint for specific performance and damages. A motion for intervention by a tenant was denied. The RTC dismissed the complaint and ordered petitioner to pay attorney's fees. The Court of Appeals affirmed the RTC decision. The Petition: Petitioner seeks reversal of the CA decision, arguing that the contract and the option to exercise it are transmissible to the heir, that the notice was properly served, that the contract was not one-sided, and that the existence of a tenancy was not fatal to the contract.
Issue(s)
Whether the Contract of Lease with Option to Buy was terminated upon the death of Encarnacion Bartolome or if it binds her sole heir, Victor Bartolome. Whether the provision on the notice to exercise the option was transmissible and whether the notice of option must be served personally upon the lessor. Whether the contract was one-sided and onerous in favor of the petitioner. Whether the existence of a registered tenancy was fatal to the validity of the contract. Whether the petitioner was liable for attorney's fees.
Ruling
The Supreme Court granted the petition, setting aside the decisions of the Court of Appeals and the Regional Trial Court. It ordered Victor Bartolome to surrender and deliver possession of the land by way of lease to petitioner, to perform his predecessor's obligations under the contract, and to surrender his title for annotation. The Register of Deeds was ordered to register and annotate the contract.
Ratio Decidendi
On the transmissibility of the contract upon the death of the lessor: The Court held that contracts generally bind heirs, except when rights and obligations are intransmissible by nature, stipulation, or law. In this case, the obligation to deliver possession of the property is a property right, not a purely personal act, and is therefore transmissible. The Court cited Article 1311 of the Civil Code and jurisprudence, including Eleizegui v. Lawn Tennis Club and Carillo v. Salak de Paz, to support the principle that heirs inherit the rights and liabilities of their predecessors. Victor Bartolome, as heir, stepped into the shoes of his mother and was bound by the contract. On the notice to exercise the option: The Court found that the notice of exercise of the option was served via registered mail within the two-year period stipulated in the contract. Given that Encarnacion Bartolome had passed away, addressing the notice to her heir, Victor Bartolome, was legitimate and complied with the contractual provisions. The argument that the notice must be served personally upon the deceased lessor was deemed without merit. On the nature of the contract: The Court found no evidence that the contract was one-sided or onerous. The terms were clearly stipulated, and the petitioner regularly paid the reservation fees. The obligation to deliver possession upon exercise of the option was a standard contractual provision. On the issue of tenancy: The Court noted that the motion to intervene by the alleged tenant was denied by the lower court and was not appealed. Therefore, the issue of tenancy was not for the Supreme Court to pass upon in the present petition, and any rights of the tenant could be ventilated in a separate proceeding. On attorney's fees: Since the Court ruled in favor of the petitioner, the award of attorney's fees against the petitioner by the lower courts was set aside.
Main Doctrine
Contracts take effect only between the parties, their assigns and heirs, except when the rights and obligations arising from the contract are not transmissible by their nature, by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. In the case at bar, the obligation of the lessor to deliver possession of the property upon the exercise of the option to lease is a property right that is transmissible to the heir.