ARTICLE 776 CASES

Testate Estate of Ramirez v. Vda. De Ramirez

FACTS:

Jose Eugenio Ramirez, a Filipino national, died in Spain with only his widow as
compulsory heir. His will was admitted to probate by the Court of First Instance of
Manila, Branch X. The administratrix of the estate submitted a project of partition
giving one part of the estate to the widow “en pleno dominio” in satisfaction of her
legitime while the other part of the “free portion” to his two grandnephews Roberto
and Jorge Ramirez. Furthermore, one third of the free portion is charged with the
widow’s usufruct and the remaining two thirds (2/3) with a usufruct in favor of Wanda
Wrobleski.

Jorge and Roberto Ramirez opposed the project of partition, as well as the substitutions
provided by the testator as to the usufructs of the widow and of Wanda. Nonetheless,
the lower court approved the project of partition in its order dated May 1967. Jorge and
Roberto appealed before the Supreme Court.

ISSUE:

Whether or not the usufruct over real property in favor of Wanda violates the
Constitutional prohibition against ownership of lands by alien.

HELD:

The Court upheld the validity of the usufruct given to Wanda on the ground that the
Constitution covers not only succession by operation of law, but also testamentary
succession. Any alien would be able to circumvent the prohibition by paying money to
a Philippine landowner in exchange for a devise of a piece of land. In the present case,
the usufruct in favor of Wanda, although a real right, does not vest title to the land in
the usufructuary. It is the vesting of title in favor of aliens which is proscribed by the
Constitution.
Estate of Eugenio Ramirez is DISTRIBUTED according to the SC’s order.

Art. 776. The inheritance includes all the property, rights and obligations of a person
which are not extinguished by his death.
Article 776 gives us the definition of INHERITANCE. What are the subjects of
succession? What can be passed on from the decedent to the heirs? We have: a)
Properties, b) Rights, and c) Obligations. So these are the subjects of succession.
HEIRS OF CIRIACO BAYOG-ANG v. FLORENCE QUINONES, GR No. 205680, 2018-
11-21
Facts:
In 1998, an action for Specific Performance and Damages was filed by Florence
Quinones (Florence), together with her husband Jeremias Donasco (respondents),
before the RTC of Midsayap Cotabato against the heirs of Bayog-Ang (petitioners). The
subject of this dispute is a 10,848 square-meter parcel of land which is part of the
property previously owned by Ciriaco Bayog-Ang (Bayog-Ang), located at Barrio
Sadaan, Municipality of Midsayap, Province of North Cotabato covered by Original
Certificate of Title (OCT) No. RP-1078 (1596) (subject land). Respondents claimed that
the said parcel of land was sold to her by Bayog-Ang as evidenced by a Deed of
Absolute Sale dated February 25, 1964, and she demanded from the petitioners that the
said portion be segregated and transferred but the same went unheeded. Worse, the
petitioners, through alleged malicious manipulation, executed an Extrajudicial
Settlement of Estate in 1996 adjudicating the land in their favor, and as a result of
which, OCT No. RP-1078 (1596) was canceled and Transfer Certificate of Title No. T-
91543 was issued on April 3, 1997 under their names.[3] Respondents prayed for the
nullification of the Deed of Extra-Judicial Settlement and for the segregation of the
parcel of land which they bought from Bayog-Ang, and asked for moral damages,
attorney's fees and litigation expenses.[4]Petitioners, in their Answer, denied any
knowledge of the deed of sale executed by Bayog-Ang in favor of Florence nor of the
latter's claim over the land. They also claimed that before the execution of the extra-
judicial settlement, they went to the Register of Deeds to verify the status of the land
and found nothing was annotated on the certificate of title. By way of affirmative
defenses, they claimed that the respondents' action was barred by prescription and
laches, and that respondents were never in possession of the subject lot. They averred
that the action was one based on written contract which prescribed in 10 years
reckoned from the execution of the Deed of Absolute Sale in 1964, and the complaint,
filed only in 1998,[5] is thus belatedly filed.In the proceedings before the RTC, Florence
testified that she purchased a parcel of land from Bayog-Ang which was paid for by her
father Pedro Quinones (Pedro). As a result, a Deed of Absolute Sale was executed on
February 25, 1964 and notarized before a certain Atty. Cambronero. Furthermore, the
pertinent documents (including the certificate of title and tax declaration) were given by
Bayog-Ang to Pedro who in turn gave them to Atty. Domingo for purposes of
transferring title to her name. It was only in 1980 when Atty. Domingo returned the
papers to her that she learned that the papers to the land were not processed.
[6]Florence also presented Antonio Gasparillo, a resident of BPH, Sadaan, Midsayap,
Cotabato, who testified that he was staying on the land owned by Florence, which was
formerly owned by Bayog-Ang. He further testified that after Pedro bought the land, he
allowed him to enter and work there as a tenant from 1964 until 1995, when he stopped
tilling the land because of sickness. After Pedro's death, Gasparillo remitted Pedro's
share in the produce of the land to the latter's children.[7]Petitioners did not present
evidence, and instead asked the court for leave to file a demurrer to evidence, which the
RTC granted.[8]
In ruling in favor of the petitioners, the RTC applied the rule on double sales under
Article 1544 of the Civil Code and concluded that since petitioners were the first to
register the land in good faith, they have a superior right over the subject land, to
wit:This action is for specific performance and was also ruled upon earlier by the court
as similar to reconveyance. The plaintiffs demand that the deed of extra-judicial
settlement executed by the defendants [sic] and that they segregated [sic] that portion
of land sold to them by the late Ciriaco Bayog-Ang.The existence and due execution of
the deed of absolute sale executed by Ciriaco Bayog-ang in favor of Florence Quiñones
Donasco is not disputed. This is made the basis in the claim of the plaintiffs of
ownership of the subject land. It is noted, however, that at the time the plaintiffs laid
claim to the land, the same has already been registered, titled in the names of the
defendants.
Issues:
Therefore, the proper question that should have been addressed was whether Florence
was able to prove by preponderance of evidence that she already acquired ownership
of the subject lot from Bayog-Ang, as this will determine whether the subject lot
remained part of Bayog-Ang's estate which passed to his heirs by succession at the
moment of his death.[28]
Ruling:
Under Article 712 of the Civil Code, tradition as a consequence of contracts and
succession are modes of acquiring or transferring ownership, to wit:
Art. 712. Ownership is acquired by occupation and by intellectual creation.Ownership
and other real rights over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain contracts, by
tradition.They may also be acquired by means of prescription. (609a)Succession is a
mode of acquisition by virtue of which the property, rights and obligations to the extent
of the value of the inheritance, of a person are transmitted through his death to another
or others either by his will or by operation of law.[29] The inheritance includes all the
property, rights and obligations of a person which are not extinguished by his death.[30]
These provisions emphasize that what is passed by a decedent to his heirs by
succession are those which he owned at the time of his death. It follows then that his
heirs cannot inherit from him what he does not own anymore.Under the law on sales,
Article 1496 of the New Civil Code provides that "the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any other manner signifying an agreement that
the possession is transferred from the vendor to the vendee." In particular, Article 1497
provides that "the thing sold shall be understood as delivered, when it is placed in the
control and possession of the vendee," while Article 1498 states that "when the sale is
made through a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred."
The existence and due execution of the deed of absolute sale executed by Ciriaco
Bayog-ang in favor of Florence Quiñones Donasco is not disputed. This is made the
basis in the claim of the plaintiffs of ownership of the subject land. It is noted, however,
that at the time the plaintiffs laid claim to the land, the same has already been
registered, titled in the names of the defendants.
Thus, in accordance with Article 1498, the sale of the subject land through the Deed of
Absolute Sale dated February 25, 1964, which is a public instrument, transferred
ownership from Bayog-Ang to Florence, there being no indication of any intention to the
contrary.The action is not barred byprescription or lachesAs a result of this Court's
pronouncement that respondents have already acquired ownership of the subject land,
We also rule that the respondents' complaint has not prescribed nor were they guilty of
laches.
In Sapto, et al. v. Fabiana,[42] this Court, speaking through Justice J.B.L. Reyes, held
that an action to quiet title where the plaintiff under claim of ownership, is in actual
possession of the land, does not prescribe, citing American Jurisprudence, to wit:The
prevailing rule is that the right of a plaintiff to have his title to land quieted, as against
one who is asserting some adverse claim or lien thereon, is not barred while the plaintiff
or his grantors remain in actual possession of the land, claiming to be owners thereof,
the reason for this rule being that while the owner in fee continues liable to an action,
proceeding, or suit upon the adverse claim, he has a continuing right to the aid of a
court of equity to ascertain and determine the nature of such claim and its effect on his
title, or to assert any superior equity in his favor. He may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right. But the rule
that the statute of limitations is not available as a defense to an action to remove a
cloud from title can only be invoked by a complaint when he is in possession. One who
claims property which is in the possession of another must, it seems, invoke his remedy
within the statutory period.[43] (Citations omitted)
Furthermore, it has been held that "the purpose of registration is merely to notify and
protect the interests of strangers to a given transaction, who may be ignorant thereof,
and the non-registration of the deed evidencing said transaction does not relieve the
parties thereto of their obligations thereunder."[49] In this case, the petitioners cannot
be held to be third persons to the contract between their grandfather and Florence, for
as heirs, they were bound by the same. Article 1311 of the New Civil Code provides that
"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 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.[50] In the present case, it is not alleged nor proved that the sale
between Bayog-Ang and Florence falls within any of the exceptions provided under the
aforementioned provision of law.IN VIEW OF ALL THE FOREGOING, the petition for
review on Certiorari is DENIED for lack of merit. The Decision dated February 8, 2012
of the Court of Appeals (CA)-Cagayan De Oro City is hereby AFFIRMED.
Principles:
ESTATE OF K.H. HEMADY, deceased,
vs.
LUZON SURETY CO., INC., claimant and appellant.
No. L-8437. November 28, 1956.
REYES, J.B. L., J.

Rule Synopsis

The obligation of a surety is not strictly personal. Hence, transmissible to the heirs by
succession upon his death.

Case Summary

Luzon Surety Co., Inc. (Luzon) was a surety to some 20 indemnity agreements. KH
Hemedy executed counterbonds in favor of Luzon whereby he was made a surety
solidary guarantor in all of the indemnity agreements entered into by the latter. This
means that Hemedy will indemnify Luzon in case the latter was made to pay. Hemedy
died.

Luzon filed a claims against the estate of Hemedy, pertaining to contingent claims for
the value of the 20 bonds.

The lower court dismissed the claim on the ground that upon Hemady’s death, his
obligation as a surety. It justified such ruling by essentially saying that the obligation of a
guarantor is strictly personal. Hence, terminated upon the death of said guarantor and
not transmitted to his heirs.

The SC reversed this decision saying that the liability of a surety or guarantor is not
strictly personal. Hence, transmitted to his heirs upon his death. The contingent claims
against the estate were therefore allowed.

Issues resolved —

May the obligations of a decedent as a surety or guarantor be

transmitted to his heirs?

HELD – YES.

The heirs succeed not only to the rights of the deceased but also to his
obligations (Arts. 774 anb 776 NCC).
— Contracts take effect only as between the parties, their assigns and heirs, except in
the case where the rights and obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law (Art. 1257 NCC). When a party
enters into a contract, he is deemed to have contracted for himself and his heirs and
assigns.

— The binding effect of the contract upon the heirs is not altered by the requirements
under the Rules of Court (Rule 89) saying that money claims against the estate shall be
settled first before distribution of the same to the heirs may be made. The reason is that,
the payment for those claims against the estate were ultimately payments made by the
heirs since the amounts so paid constitute diminution or reduction in the eventual share
of the heirs in the estate.

The obligation of a surety or guarantor does not fall in any of the exceptions
provided for under Art. 1257.

— As to the nature of the obligation. The obligation of a Hemady is to reimburse sum of

money paid by Luzon. It is an obligation to give. It is not relevant whether the payment
was made by Hemady himself or by another person so long as the payment was made.

— As to the stipulation of the parties. Failure to expressly provide in the contract that

the obligations arising therefrom shall transmit to the heirs upon the death of Hemady
does not show of the intent of the parties to have such obligation termination upon
Hemady’s death. In fine, such need not be provided for as the law already expressly
provided for the same.

— As to the provision of law. The provisions of the civil code regulating guaranty and
suretyship do not provide that the obligation shall of a surety or guarantor shall be
extinguished upon his death.

Analita Inocencio v. Hospicio de San Jose

Facts:

Hospicio de San Jose (HDSJ) leased a parcel of land to German Inocencio (German).
German then constructed two buildings over the land which he subleased. Ramon, his
son, was designated to administer the properties) German died but Ramon did not
inform HDSJ. Nonetheless, Ramon collected rentals from the sublessees and paid rent
to HDSJ. HDSJ acknowledged the existence of an implied lease between Ramon and
HDSJ, as the latter has been receiving rental payments from the former. HDSJ informed
Ramon that the contract shall expire on 31 March 2001 and it has no intention of
renewing the same since Ramon did not inform HDSJ of the sublease HDSJ then
demanded Ramon to vacate the property within 30 days. HDSJ also entered into lease
agreements with other parties. HDSJ now filed a complaint for unlawful detainer. While
pending, Ramon passed away and substituted now by Analita Inocencio, his wife. MTC
o Ordered defendants to pay RTC o Ramon had no right to sublease the property CA o
Affirmed RTC. Merely modified the award for damages Hence, this Petition.

Issues: -

Whether the sublease is valid

Ruling: -

Despite the non-transferability of the contract without the consent of the lessor, HDSJ
nonetheless acknowledged that Ramon is its month-to-month lessee. Thus, German’s
death did not terminate the lease. (Validity of the lease to Ramon) Ramon likewise had
the right to sublease the property since the lease contract did not contain any
prohibitions on sublease, pursuant to Article 1650. Thus, the sublease contracts entered
into by Ramon were valid. (Validity of sublease) Inocencios claim ownership over the
property since they claim that these are separate and distinct from the land on which
they were built. Thus, they argue that they have a right to lease the buildings to 3rd-
parties, even after the termination of the lease. Further, the Inocencios argue that when
they entered into lease contracts with tenants for the lease of portions of the said
buildings, these contracts were independent contracts of lease over their own building
and not sub-leases of the parcel of land which they leased from Respondent The Court
DISAGREES with the Inocencios by stating the ruling in the case of Duellome v. Gotico:

o The lease of a building includes the lease of the lot and consequently, the rentals of
the building include the rentals of the lot. o Accordingly, they pointed out that the
ARGUMENT of HDSJ is CORRECT when they stated the following:  When the
Inocencios leased the buildings to third parties, they also "leased" to the third parties the
plot of land on which the buildings stood — either by implied transfer of the lease
covering the plot of the land, or by sublease. Either way, x x x the Inocencios
themselves must have a valid lease contract with [HDSJ] over the land. However, when
the lease contract x x x with HDSJ ended on 31March 2001, Ramon lost his status as
lessee of the land, and therefore, had no authority to transfer the lease or sublease the
land.

Analita P. Inocencio vs. Hospicio De San Jose

G.R. No. 201787, 25 September 2013

In this case, the Supreme Court held the clause "contract is non-transferable unless
prior consent of the lessor is obtained in writing" to refer to transfers inter vivos and not
transmissions mortis causa.

Since lease contracts are not personal in character, the SC explained that the rights of a
lessee may be transferred to an heir via intestate succession and unless prohibited, the
heir can exercise the same rights as the lessee-predecessor-in-interest.

A lessee is also not prohibited from sub-leasing the leased property or premises
provided no express prohibition exists in the contract of lease. When there is a sub-
lease, there is likewise no novation of the contract of lease, since the original juridical
relation between the lessor-lessee remains (as opposed to an Assignment of the Lease
when the lessee is replaced by the assignee).

Another notable point made in this case is the fact the simultaneous lease of the
building likewise includes with it, the lease of the land on which the property is located.
Thus, rental payment for the building includes rental for the lot.

With respect to improvements introduced by the lessor in good faith on the property, the
SC held that the lessor is entitled to be paid 1/2 value of the improvements introduced
at the time the lease is terminated, provided that the following requirements are present:
(1) the improvements were introduced in good faith; (2) the improvements are useful;
and (3) suitable to the use for which the lease is intended, without altering the form and
substances.

Should the lessee refuse to reimburse the lessor, the latter may then cause the
demolition of the improvements introduced.

G.R. No. 118248. April 5, 2000 DKC HOLDINGS CORPORATION V. CA

FACTS:
The subject of the controversy is a 14,021 square meter parcel of land located in
Valenzuela, which was originally owned by private respondent Victor U. Bartolome’s
deceased mother, Encarnacion Bartolome, under TCT No. B-37615 of the Register of
Deeds of Metro Manila, District III. 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. On March
16, 1988, 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 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. The contract also provided that in case petitioner chose to
lease the property, it may take actual possession of the premises. In such an event, the
lease shall be for a period of six years, renewable for another six years, and the monthly
rental fee shall be P15,000 for the first six years and P18,000 for the next six years, in
case of renewal. Petitioner regularly paid the monthly P3,000 provided for by the
Contract to Encarnacion until her death in January 1990. Thereafter, petitioner coursed
its payment to private respondent Victor Bartolome, being the sole heir of Encarnacion.
Victor, however, refused to accept these payments. Meanwhile, on January 10, 1990,
Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion,
including the subject lot. Accordingly, respondent Register of Deeds cancelled TCT No.
B-37615 and issued Transfer Certificate of Title No. V-14249 in the name of Victor
Bartolome. On March 14, 1990, petitioner served upon Victor, via registered mail, notice
that it was exercising its option to lease the property, tendering the amount of P15,000
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. 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. RTC dismissed the complaint.

ISSUE: W/N the Contract of Lease with Option to Buy entered into by the late
Encarnacion Bartolome with petitioner was terminated upon her death and does not
bind her sole heir, Victor, even after her demise

HELD: No, under both Article 1311 of the Civil Code and jurisprudence, the legal heir,
Victor, is bound by the subject Contract of Lease with Option to Buy executed by his
predecessor-in-interest, Encarnacion. 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. 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.

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." 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 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. As early as
1903, it was held that "(H)e who contracts does so for himself and his heirs ." In 1952, it
was ruled that if the predecessor was duty-bound to reconvey land to another, and at
his death the reconveyance had not been made, the heirs can be compelled to execute
the proper deed for reconveyance. This was grounded upon the principle that heirs
cannot escape the legal consequence of a transaction entered into by their
predecessor-in-interest because they have inherited the property subject to the liability
affecting their common ancestor. 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.

DKC HOLDINGS CORPORATION vs COURT OF APPEALS G.R. No. 118248. April

5, 2000 case digest

Concept: Art. 1311

Facts
·         The subject of the controversy is a 14,021 square meter parcel of land located in
Malinta, Valenzuela, Metro Manila which was originally owned by private respondent
Victor U. Bartolome’s deceased mother, Encarnacion Bartolome, under Transfer
 Certificate of Title No. B-37615 of the Register of Deeds of Metro Manila, District III.
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.
·         March 16, 1988. DKC entered a contract of lease with option to buy with
Encarnacion Bartolome (Victor’s deceased mom).  DKC 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, DKC undertook to pay
P3,000.00 a month as consideration for the reservation of its option. Within the two-year
period, DKC shall serve formal written notice upon the lessor Encarnacion Bartolome of
its desire to exercise its option. The contract also provided that in case DKC chose to
lease the property, it may take actual possession of the premises. In such an event, the
lease shall be for a period of six years, renewable for another six years, and the monthly
rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next six
years, in case of renewal.
·         DKC regularly paid Encarnacion until her death in January 1990. DKC then directed
its payment to the son of Enacarnacion who is the sole heir but Victor (Encarnacion’s
son) refused the payment.
·         January 10, 1990. Victor executed an affidavit of Self Adjudication all over her
deceased mom’s properties, including the subject lot. Victor the dick then cancelled the
deed of transfer of DKC and then issued a transfer certificate under his name, what a
dick.
·         March 14, 1990. DKC sent a notice to Victor the royal douche, stating that they are
going to exercise their option to lease, tendering the amount of P15,000 as rent. Victor
the douche, being a dick as he is, refused payment.
·         DKC then opened a saving account with the China Banking Corp. under the name of
Victor and deposited the P15,000 as rental fee while also adding another P6000 for
reservation fees
·         DKC also tried to register and annotate the Contract on the title of Victor the dick to
the property. Although respondent Register of Deeds accepted the required fees, he
nevertheless refused to register or annotate the same or even enter it in the day book or
primary register.
·         April 23, 1990. DKC filed a complaint for specific performance and damages against
Victor and the Register of Deeds. DKC 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
P500,000.00 as actual damages, P500,000.00 as moral damages, P500,000.00 as
exemplary damages and P300,000.00 as attorney’s fees.
·         During the May of 1990, some guy named Andres Lonzano filed a motion for
intervention with motion to dismiss for he was a tenant-tiller of the subject property,
dude is under the Comprehensive Agrarian Reform Law, the motion was denied by the
court, poor guy.
·         The lower court then rendered its decision, it dismissed the complaint and ordered
DKC to pay Victor for P30,000 as attorney’s fee. On appeal, the CA affirmed the
decision of the lower court
Issue: W/ON 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.

Held: No. Article 1311 of the Civil Code and jurisprudence, Victor is bound by the
subject Contract of Lease with Option to buy executed by his predecessor-in-interest. 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. The general rule, therefore, 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.

[G.R. No. 118248. April 5, 2000]

DKC HOLDINGS CORPORATION, petitioner, vs. COURT OF APPEALS, VICTOR U.

BARTOLOME and REGISTER OF DEEDS FOR METRO MANILA, DISTRICT III,
respondents

FACTS:

The subject of the controversy is a 14,021 square meter parcel of land located in
Malinta, Valenzuela, Metro Manila which was originally owned by private respondent
Victor U. Bartolomes 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.

On March 16, 1988, 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. The contract also provided that in case petitioner chose to
lease the property, it may take actual possession of the premises. In such an event, the
lease shall be for a period of six years, renewable for another six years, and the monthly
rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next six
years, in case of renewal.

Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to
Encarnacion until her death in January 1990. Thereafter, petitioner coursed its payment
to private respondent Victor Bartolome, being the sole heir of Encarnacion. Victor,
however, refused to accept these payments.

On January 10, 1990, Victor executed an Affidavit of Self-Adjudication over all the
properties of Encarnacion, including the subject lot. Accordingly, respondent Register of
Deeds cancelled the first TCT and issued a new one in favor of Victor.

On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it was
exercising its option to lease the property. 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 China Banking Corporation 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. Although respondent Register of Deeds accepted the required fees, he
nevertheless refused to register or annotate the same or even enter it in the day book or
primary register.

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 for damages.

On July 4, 1990, the lower court issued another Order[6] referring the case to Branch
172 of the RTC of Valenzuela which was designated to hear cases involving agrarian
land, after the Department of Agrarian Reform issued a letter-certification stating that
referral to it for preliminary determination is no longer required.
After trial on the merits, the RTC of Valenzuela, branch 172 rendered its Decision on
January 4, 1993, dismissing the Complaint and ordering petitioner to pay Victor
P30,000.00 as attorneys fees. On appeal to the CA, the Decision was affirmed in toto.

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: NO

Article 1311 of the Civil Code provides, as follows-

"ART. 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.

x x x x x x x x x."

The general rule, therefore, 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. X X X X"

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.

Heirs can be compelled to execute the proper deed for reconveyance. This was
grounded upon the principle that heirs cannot escape the legal consequence of a
transaction entered into by their predecessor-in-interest because they have inherited the
property subject to the liability affecting their common ancestor.

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.

 
FRANK N. LIU, deceased, substituted by his surviving spouse Diana Liu, and children,
namely: Walter, Milton, Frank, Jr.,Henry and Jockson, all surnamed Liu, Rebecca Liu
Shui andPearl Liu Rodriguez, petitioners, vs. ALFREDO LOY, JR.,TERESITA A. LOY
and ESTATE OF JOSE VAÑO, respondents.

LIU vs. LOY

G.R. No. 145982, September 13, 200

FACTS:
Teodoro Vaño, in his capacity as Attorney-in-Fact of Jose Vaño, sold Lot Nos.5 and 6 to
BENITO LIU on 13 January 1950, or priorto the death of Jose Vaño on28 January
1950.On 22 April 1966, Benito Liu sold the lots to Frank Liu.On 19August 1968,
Teodoro Vaño sold Lot No. 6 to Teresita Loy while Lot No. 5 was sold to Alfredo Loy, Jr.
on 16 December1969. Prior to the sale of the above-mentioned lots to the Loys,
Teodoro Vaño wrote Frank Liu a letter and it was apparently shown that the latter
offered to settle the whole balance of the lot should the title be immediately transferred
in his brother’s name and Mr. Pangalo’s.
 
The letter also informed Liu of Supreme Court’s decision regarding all the sales Vaño
had made over the properties of his father to be legal. The Loys, on the other hand,
insisted that the transaction between Teodoro Vaño and Benito Liu was a contract to
sell while the transaction between the former and Teodoro Vaño was a contract of sale
and that the contracts of sale in favor ofthe Loys transferred ownership as the
conveyances were absolute.

ISSUE:
W/N the sale of the lots by Teodoro Vaño to Benito Liu was valid.

HELD:YES.
The SC held that a prior contract to sell made by the decedent during his lifetime
PREVAILS over a subsequent contract of sale made by the administrator without
probatecourt approval.It is immaterial if the prior contract is a mere contract to selland
does not immediately convey ownership. Moreover, Frank Liu’s contract to sell became
valid and effective, upon its execution and bound the estate to convey the property on
fullpayment of the consideration. The orders of the probate court dated 19 and 23
March 1976 approving the contracts of sale to the Loys are VOID and did not ratify the
sales because there was already a prior order of the probate courted dated 24 February
1976 approving the sale of Lot Nos. 5 and 6 to Frank Liu. Hence, the probate court had
already lost jurisdiction over Lot Nos. 5 and 6 since the lots no longer formed part of the
Estate of Jose Vaño.
NOTE

The Loys reiterate their contention that Teodoro Vaño, as administrator

and sole heir to the properties, can sell the lots to them since the rights of an
heir are transmitted from the moment of death of the testator. Although a
property under estate proceedings cannot be sold without judicial approval,
the Loys allege that in their case, the probate court later approved the sales to
them, thereby ratifying the sales. [7]

Well-settled is the rule that an administrator needs court approval to sell

estate property, otherwise the sale is void.  Court approval of the sale of
[8]

estate property is clearly required under Rule 89 of the Rules of Court, which
enumerates the instances when the court may allow the sale or encumbrance
of estate property. Section 7 of Rule 89 of the Rules of Court even provides
for the regulations for granting authority to sell, mortgage or otherwise
encumber estate property.

ALVAREZ vs. IAC

May 7, 1990

FACTS:        

Aniceto Yanes owned 2 parcels of land Lot 773-A and Lot 773-B.    Aniceto Yanes was
survived by his children, Rufino, Felipe and Teodora. Herein private respondents, Estelita,
Iluminado and Jesus, are the children of Rufino who died in 1962 while the other private
respondents, Antonio and Rosario Yanes, are children of Felipe. Teodora was survived by
her child, Jovita (Jovito) Albib. It is established that Rufino and his children left the
province to settle in other places as a result of the outbreak of World War II. According to
Estelita, from the "Japanese time up to peace time", they did not visit the parcels of land in
question but "after liberation", when her brother went there to get their share of the sugar
produced therein, he was informed that Fortunato Santiago, Fuentebella (Puentevella) and
Alvarez were in possession of Lot 773. After  Fuentebella's death, Arsenia Vda. de
Fuentebella sold said lots for P6,000.00 to Rosendo Alvarez.

On May 26, 1960, Teodora Yanes and the children of her brother Rufino filed a
complaint against Fortunato Santiago, Arsenia Vda. de Fuentebella, Alvarez and the
Register of Deeds of Negros Occidental for the "return" of the ownership and possession of
Lots 773 and 823. During the pendency of said case, Alvarez sold the Lots   for P25,000.00
to Dr. Rodolfo Siason. CFI rendered judgment ordering defendant Rosendo Alvarez to
reconvey to plaintiffs the lots.

ISSUE:

WON the liability of Rosendo Alvarez arising from the sale of Lots Nos. 773-A and
773-B could be legally passed or transmitted by operation of law to the petitioners without
violation of law and due process.

RULING: 

The doctrine obtaining in this jurisdiction is on the general transmissibility of

the rights and obligations of the deceased to his legitimate children and
heirs. The binding effect of contracts upon the heirs of the deceased party is not altered by
the provision of our Rules of Court that money debts of a deceased must be liquidated and
paid from his estate before the residue is distributed among said heirs (Rule 89). The reason
is that whatever payment is thus made from the estate is ultimately a payment by the heirs
or distributees, since the amount of the paid claim in fact diminishes or reduces the shares
that the heirs would have been entitled to receive.

"Under our law, therefore, the general rule is that a party's contractual rights and
obligations are transmissible to the successors. The rule is a consequence of the progressive
'depersonalization' of patrimonial rights and duties. From the Roman concept of a relation
from person to person, the obligation has evolved into a relation from patrimony to
patrimony, with the persons occupying only a representative position, barring those rare
cases where the obligation is strictly personal, in consideration of its performance by a
specific person and by no other. . . ."Petitioners being the heirs of the late Rosendo Alvarez,
they cannot escape the legal consequences of their father's transaction, which gave rise to
the present claim for damages.

WILLIAM ONG GENATO, Petitioner, -versus- BENJAMIN BAYHON, MELANIE BAYHON, BENJAMIN
BAYHON, JR., BRENDA BAYHON, ALINA BAYHON-CAMPOS, IRENE BAYHONTOLOSA, and the minor GINO
BAYHON, as represented herein by his natural mother as guardian-ad-litem, JESUSITA M. BAYHON,
Respondents. G.R. No. 171035, FIRST DIVISION, August 24, 2009, PUNO, CJ.

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.

Respondent further alleged that he filed a separate proceeding for the reconstitution of the TCT of the
property before the RTC. Petitioner William Ong Genato filed an Answer in Intervention in the said
proceeding and attached a copy of an alleged dacion en pago covering said lot. Respondent assailed the
dacion en pago as a forgery alleging that neither he nor his wife, who had died 3 years earlier, had
executed it.

In his Answer, petitioner Genato denied the claim of the respondent regarding the death of the latter’s
wife. He alleged that on the date that the real estate mortgage was to be signed, respondent introduced
to him a woman as his wife. He alleged that the respondent signed the dacion en pago and that the
execution of the instrument was above-board.

Meanwhile, petitioner William Ong Genato filed a separate Civil Case for specific performance, before
the RTC. In his Complaint, petitioner alleged that respondent obtained a loan from him and that
respondent failed to pay the loan and executed a dacion en pago in favor of the petitioner. The dacion
en pago was inscribed and recorded with the Registry of Deeds of Quezon City.

The two cases were consolidated. RTC found that respondent obtained a loan in the amount of PhP
1,000,000.00 from the petitioner. The trial court likewise found that at the time of the execution of the
real estate mortgage, the wife of respondent, Amparo Mercado, was already dead. It held that the
property covered by TCT No. 38052 was owned in common by the respondents and not by respondent
Benjamin Bayhon alone. It concluded that the said lot could not have been validly mortgaged by the
respondent alone; the deed of mortgage was not enforceable and only served as evidence of the
obligation of the respondent.

The Court of Appeals rendered a decision reversing the trial court. The Court of Appeals held that the
real estate mortgage and the dacion en pago were both void. The appellate court ruled that at the time
the real estate mortgage and the dacion en pago were executed, the wife of respondent Benjamin
Bayhon was already dead. Thus, she could not have participated in the execution of the two documents.
The Court of Appeals held further that while the principal obligation is valid, the death of respondent
Benjamin Bayhon extinguished it. The heirs could not be ordered to pay the debts left by the deceased.

Petitioner now comes before this Court assailing the decision of the Court of Appeals.

ISSUE: Whether or not the obligation was transmissible to the heirs of the deceased and the CA erred in
ruling that the liability of the respondents were extinguished by the death of Benjamin Bayhon? (YES)

RULING: As a general rule, obligations derived from a contract are transmissible. In Estate of Hemady v.
Luzon Surety Co., Inc., the Court, through Justice JBL Reyes, held:

While in our successional system the responsibility of the heirs for the debts of their decedent cannot
exceed the value of the inheritance they receive from him, the principle remains intact that these heirs
succeed not only to the rights of the deceased but also to his obligations. Articles 774 and 776 of the
New Civil Code (and Articles 659 and 661 of the preceding one) expressly so provide, thereby confirming
Article 1311 already quoted.

The Court proceeded further to state the general rule: Under our law, therefore, the general rule is that
a party's contractual rights and obligations are transmissible to the successors. The rule is a
consequence of the progressive "depersonalization" of patrimonial rights and duties that, as observed
by Victorio Polacco, has characterized the history of these institutions. From the Roman concept of a
relation from person to person, the obligation has evolved into a relation from patrimony to patrimony,
with the persons occupying only a representative position, barring those rare cases where the obligation
is strictly personal, i.e., is contracted intuitu personae, in consideration of its performance by a specific
person and by no other. The transition is marked by the disappearance of the imprisonment for debt.

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.

Pamplona vs. Moreto [G.R. No. L-33187. March 31, 1980.]

Facts: Spouses Moreto acquired lands 1495, 4545 and 1496 in Calamba, Laguna. They had 6
children. Monica (the mother) died intestate. Ursulo (one of the children) also died intestate
leaving as his heirs Vivencio and his 5 siblings. Marta, La Paz, Alipio and Pablo also died
intestate. 6 years after Monica’s death, Flaviano (the surviving spouse) without th cosent of the
heirs and before the liquidation of conjugal partnership executed a deed of absolute sale to
Pamplona. The title was cancelled and TCT was issued to Pamplona. Pamplona built a house in
the land. They thought that the subject matter of the sale was Lot no. 1495 but in fact it was Lot
No. 1496. Pamplona enlarged their house and constructed a piggery. Then Flaviano died
intestate. Moretos demanded Pamplona to vacate the land claiming that Flaviano had no right to
sell the land but they refused. Heirs of Moreto filed a suit seeking for declaration of nullity of the
deed of absolute sale. It was found out that there was mutual error between Flaviano and
Pamplona in the execution of the sale. RTC held that the sale was null and void. CA affirmed
the RTC’s decision

ISSUE: Whether under the facts and circumstances established by the evidence, Pamplonas
are entitled to the full ownership of the property or only ½ of the same.

RULING: When Monica died the conjugal partnership had already dissolved. But the conjugal
estate was not been inventoried, liquidated, settled and divided by the heirs. There was no
extra-judicial partition between the surviving spouse and the heirs. Thus, the estate becomes
the property of a community between the surviving spouse, Flaviano and his children in a
concept of co-ownership pursuant to Article 493, NCC. Pamplona is entitled to full ownership.
When Pamplona built his home in the land, the heirs of Moreto and Flaviano lived as neighbors
and they did not question the occupation, possession and ownership of the land purchased by
Pamplonas for 9 years. Thus the Moretos are in ESTOPPEL BY LATCHES to claim half of the
property. There was partial partition when at the time of sale Flaviano pointed out the area and
location of the

land. Flaviano, as aco-owner was entitled to ½ pro-indiviso of the entire land area thus he had
perfect legal and lawful right to dispose his share to Pamplona. Title may be pro-indiviso or
inchoate but the moment the co-owner as vendor POINTED OUT its location and even indicated
the boundaries over which the fences were to be erected WITHOUT the objection, protest or
complaint by other co-owners is deemed that they acquiesced and tolerated such. Factual
partition or termination of co-ownership, although partial, was created and barred Flaviano and
the heirs of Moreto. Thus, heirs of Moreto are not allowed to impugn the sale. The sale is
binding to the heirs thus Pamplona has full ownership of the whole area. Heirs of both Monica
Maniega and Flaviano Moreto, private respondents are duty-bound to comply with the
provisions of Articles 1458 and 1495, Civil Code, which is the obligation of the vendor of the
property of delivering and transferring the ownership of the whole property sold, which is
transmitted on his death to his heirs, the herein private respondents. Under Art. 1311,
paragraph 1, New Civil Code, the contract of sale executed by the deceased Flaviano Moreto
took effect between the parties, their assigns and heirs, who are the private respondents herein.
Accordingly, to the private respondents is transmitted the obligation to deliver in full ownership
the whole area of 781 sq. meters to the petitioners (which was the original obligation of their
predecessor Flaviano Moreto) and not only one-half thereof. Private respondents must comply
with said obligation.