DKC Holdings Corp v CA (2000)

Contracts take effect only between the parties, their assigns, and heirs (Art. 1311)

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) nature; 2) stipulation; 3) provision of law

● Intransmissible Rights : (Tolentino) “Among contracts which are intransmissible are

those which are purely personal, either by provision of law (ex. Partnerships and agency)
or by the very nature of the obligations arising therefrom (ex. Obligations requiring
special personal qualifications of the obligor).
● Contracts for the payment of money debts: Not transmitted to the heirs of a party, but
constitutes a charge against his estate.
o Client of a lawyer dies, and the client left minor heirs, the lawyer cannot claim
professional services under the contract to the court. He cannot substitute the
minors as parties for his client.
o The contract cannot be enforced against the minors
o The lawyer was limited to a recovery on the basis of “quantum meruit”
● 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
personal nature and ​terminates on the death of the party who is required to render
such service.

● There is privity of interest between an heir and his deceased predecessor – he only
succeeds to what rights his predecessor had and what is valid and binding against the
latter is also valid and binding as against the former.
o 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.
o Indeed, being an heir of Encarnacion, there is is privity of interest between him
and his deceased mother
o 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 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.
o In this case, the subject matter of the contract is a lease - - - property right
o Death of a party: not an excuse of nonperformance of a contract which involves a
property right AND passing of rights and obligations to the personal
representatives of the deceased.
FACTS

1. DKC Holdings Corporation (petitioner) entered into a Contract of Lease with Option to
Buy with Encarnacion Bartolome on March 16, 1998.
 2. Encarnacion was given the option to lease or lease with purchase the subject land. This
option must be exercised within a period of two years counting from the signing of the
contract.
3. This is a 14, 021 square meter parcel of land located in Malinta, Valenzuela, Metro
Manila.
4. This lot is in front of one of the textile plants of petitioner and, as such, was seen by the
latter as a potential warehouse site.
5. DKC undertook to pay P 3,000 a month as consideration for the reservation of its option.
6. Contract provided: in case, DKC chose to lease the property, it may take actual
possession of the premises.
a. In this event, the lease shall be a period of six years, renewable for another six
years, and the monthly rental fee shall be P 15, 000.00 for the first six years and
P 18, 000.00 for the next six years, in case of renewal.
b. DKC regularly paid the monthly P 3,000.00 provided for by the Contract to
Encarnacion until her death in January 1990.
7. Therafter, DKC coursed its payment to Victor Bartolome (respondent). Victor is the sole
heir of Encarnacion.
8. Victor refused to accept these payments.
9. On January 10, 1990, Victor executed an Affidavit of Self-Adjudication over all the
properties of Victor’s mother, Encarnacion, including the subject lot.
10. DKC served a notice to Victor via mail on March 14, 1990. This notice was expressing
that DKC is exercising its option to lease the property. The amount of the rent is P
15,000.00.
11. Victor refused to accept the tendered rental fee and to surrender possession of the
property to DKC.
a. DKC registered and annotated the Contract on the title of Victor to the property.
b. Although Victor accepted the required fees, he refused to register or annotate the
same or ever enter it in the day book or primary register.
12. DKC filed a complaint for specific performance and damages against Victor and the
Register of Deeds.

ISSUE

WON the rights under a Contract of Lease with Option to Buy were transmissible.

RULING

Yes. The general rule provides that heirs are bound by contracts entered into by their
predecessors-in-interest. However, the exemptions are when the said rights and obligations
arise from 1) nature, 2) stipulation, or 3) provision of law.

The death of a party does not excuse nonperformance of a contract which involves a property
right, including rights and obligations to be passed to ther personal representatives of the
deceased.
Nonperformance is not excused by death especially when the other party has a property interest
in the contract.