120 - DKC Holdings Corp V CA

DKC Holdings Corp. v.
CA
April 5, 2000
Ynares-Santiago, J.
Facts:
 Encarnacion Bartolome, the deceased mother of respondent Victor Bartolome owned
14,021 sqm. land in Malinta, Valenzuela. This land was in front of petitioner DKC
Holdings Corp.’s textile plant and was seen by petitioner as a potential warehouse site.
 March 1988 - DKC entered into a Contract of Lease with Option to Buy with
Encarnacion whereby DKC was given the option to lease or lease with purchase the land,
which option must be exercised within 2 years from signing the contract. Other
conditions were:
o DKC shall pay P3,000 monthly for the reservation of the option
o Within the 2 year period, DKC shall serve formal written notice of its desire to
exercise its option
o In case DKC chose to lease the land, the lease shall be for a period of 6 years
(P15,000/month) renewable for another 6 years (P18,000/month)
 DKC regularly paid the monthly P3,000 reservation fee to Encarnacion until her death
in January 1990. Thereafter, DKC paid to Victor, being the sole heir of Encarnacion.
Victor refused to accept such payments.
 March 1990 - DKC then served upon Victor a notice that it was exercising its option to
lease the property, tendering P15,000 as rent for March. Again, Victor refused to accept
the payment and to surrender possession of the land.
 DKC opened a savings account in China Bank Cubao in the name of Victor and
deposited therein the amount. DKC also tried to register and annotate the Contract on
the title of Victor to the property. Respondent Register of Deeds accepted the required
fees but refused to annotate the title.
 DKC filed a complaint for specific performance and damages against Victor and the
Register of Deeds. RTC dismissed the complaint. CA affirmed. Hence, this petition.
Whether the Contract of Lease with Option to Buy binds Victor, the sole heir of
Encarnacion – YES.
 Art. 1311 of the Civil Code provides the general rule 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 no contractual stipulation or 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.
 It has 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.
o Contracts to perform personal acts which cannot be as well performed by others
are discharged by the death of the promissor.
o Conversely, where the service or 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 also futile for Victor to insist that he is not a party to the contract because 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.
 Jurisprudence also holds that 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. In the case at bar, the lease is a property right.
 Thus, under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is
bound by the subject Contract of Lease with Option to Buy.
Whether DKC had complied with its obligations under the contract and the requisites to
exercise its option – YES.
 There was payment of the reservations fees within the 2 year period, there was also
payment of the P15,000 monthly rental fee which was deposited in the China Bank
savings account in the name of Victor, there was also an express notice of DKC’s
intention to exercise its option to lease the land well within the 2 year period.
Decision:
 Petition granted.
Notes:
 The nature of intransmissible rights according to Tolentino “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.”
 In American jurisprudence, “where 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.”

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