G.R. No. 123581




Manila SECOND DIVISION G.R. No. 123581 August 29, 1997 RODRIGO B. BANGAYAN, BENJAMIN B. BANGAYAN, ET. AL., petitioners, vs. THE HONORABLE COURT OF APPEALS and ANGELITA OCAMPO LIM, respondents. PUNO, J.: In this petition for review, petitioners assail the decision of the Court of Appeals dated February 21, 1995, in CA-G.R. SP No. 136101 reversing and setting aside the decision of the Regional Trial Court of Manila, Branch 10, dated February 9, 1994, in Civil Case No. 90-54459. The facts show that on July 6, 1988, Teofista Ocampo and Petronilla Lingat entered into a Contract of Lease involving a piece of land with a two storey building of mixed materials located at 2309 Severino Street, Sta. Cruz, Manila, at a monthly rental of P7,000.00. The lease contract contains the following provisions: x x x x x x x x x 4. The lessee hereby expressly warrants that the leased premises shall be used exclusively by her for an automobile supply and parts company and partly as a dwelling place for her employees only and the lessee is strictly prohibited from using the said premises for any other purpose without the written consent of the lessor. 5. The lessee shall not directly or indirectly sublease, assign, transfer, convey, mortgage or in any manner encumber its (sic) right of 1ease over the leased premises or any portion thereof under any circumstances whatsoever. 8. The lessee hereby expressly acknowledges the right of the lessor to sell the leased premises, but in the event of the sale, the lessee shall be given by the lessor the FIRST OPTION to purchase the property. And in the event that it is sold to a third person, the lessor is duty bound to place a condition on the deed of sale to the effect that this Lease Contract shall be binding and shall be honored by the vendee.ℒαwρhi৷ x x x x x x x x x On January 2, 1990, Atty. Almario Amador, counsel of Petronilla Lingat, notified Teofista Ocampo by mail that she could exercise her right of first option within 30 days from receipt of his letter. In response, Ocampo asked Atty. Amador for the selling price of the property. In a letter dated February 3, 1990, Atty. Amador informed Ocampo that she should make a written offer to buy and indicate the price she was willing to pay for the property. The parties' negotiation appears to have bogged down on who should first make the offer with a price. In a letter dated February 9, 1990, Ocampo reiterated to Atty. Amador her desire to buy the property and again inquired about its price. On February 22, 1990, Atty. Amador terminated the negotiation by sending the following letter to Ocampo's counsel, viz: Since she failed and refused and still failing and refusing to exercise her FIRST OPTION within the period stated in our letter, our client is now free to offer the subject property to other interested buyers and to entertain and receive offers for her consideration. Meanwhile, your client is not precluded to make the offer. Moreover, it shall now be on a "FIRST COME, FIRST SERVE" basis as your client has waived her above mentioned privilege.1 In March 1990, Petronilla Lingat agreed to sell the above property to Rodrigo, Roberto, and Benjamin, Jr., all surnamed Bangayan, at P1,000,000.00. The Bangayans partially paid the consideration.2 On April 5, 1990, Atty. Amador advised Ocampo of the sale of the property to the Bangayans. He also cancelled the Contract of Lease for breach of its terms and conditions. Ocampo was asked to vacate the premises and to pay the rentals in arrears. Ocampo did not heed the demand and an ejectment case against her was filed by the Bangayans before the Metropolitan Trial Court. On May 7, 1990, Petronilla Lingat executed a Deed of Absolute Sale involving the said property to the Bangayans. A new Transfer Certificate of Title No. 193035 was issued by the Register of Deeds of Manila in favor of the Bangayans with the adverse claim of Teofista Ocampo annotated therein. On September 18, 1990, Ocampo filed a complaint against Petronilla Lingat and the Bangayans for the annulment of their deed of sale, cancellation of title issued to the Bangayans, reconveyance of title and damages before the Regional Trial Court of Manila, Branch 10. The case was docketed as Civil Case No. 90-54459. While Civil Case No. 90-54459 was pending in the Regional Trial Court, the ejectment case was decided against Ocampo by the Metropolitan Trial Court on February 21, 1991. The assailed decision was affirmed by the Regional Trial Court, the Court of Appeals and by this Court on October 2, 1991. It appears that Teofista Ocampo died in October 1991. She was substituted in Civil Case No. 90-54459 by her daughter, Angelita Ocampo Lim. Allegedly, Teofista Ocampo assigned her right of first option to buy the leased property to Angelita Ocampo Lim before she died. On February 9, 1994, the Regional Trial Court of Manila3 dismissed the case of Ocampo. It found that Teofista Ocampo cannot be substituted by her daughter. It held that the death of Ocampo terminated her lease contract with Lingat and extinguished all her rights therein, including her right of first option. Angelita Ocampo Lim appealed to the Court of Appeals. In a Decision dated February 21, 1995, the appellate court reversed the trial court. The dispositive portion of the Decision states: x x x x x x x x x WHEREFORE, this petition is GRANTED. The challenged decision of the Regional Trial Court of Manila, Branch 10, is hereby REVERSED and SET ASIDE. A new judgment is entered (1) declaring the deed of absolute sale between Petronilla Lingat and the Bangayans to be null and void; (2) directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No. 193035; and (3) ordering Petronilla Lingat to offer to sell the property to the petitioner in accordance with the above discussion. In this petition for review, the Bangayans pose the following issues for resolution: (1) whether or not the termination of the Contract of Lease pursuant to the decision in the ejectment case extinguished Teofista Ocampo's right of first option; (2) whether or not Teofista Ocampo's right of first option provided for under the Contract of Lease was violated by Petronilla Lingat and the Bangayans; and (3) whether or not the Court of Appeals decided the case in a way not in accord with the applicable decision of the Supreme Court. We find merit in the petition. The threshold issue is whether the late Teofista Ocampo has the right to assign her right of first option under the lease contract to her daughter, Angelita Ocampo Lim. If Ocampo's right is assignable, then her daughter, Angelita Ocampo Lim, can continue Civil Case No. 90-54459. The respondent Court of Appeals held that the said right of Ocampo is transmissible, viz: x x x x x x x x x We found no legal or factual basis for concluding that the lease contract between Teofista Ocampo and Lingat was automatically extinguished upon the death of the former. There is no provision in the law which so provides. It also appears from the pleadings and the decision of the trial court that the lease contract in question does not provide for such an eventuality. Indeed, the right to continue a lease contract either as lessor or lessee is not automatically extinguished by death of either of the contracting parties without any express provision either by will or agreement in this regard. It becomes part of the inheritance so that the heirs of the decedent succeed to the rights and obligations of the latter arising from the lease contract (III Tolentino: Civil Code of the Philippines 14-15, 1979 ed.; III Paras: Civil Code of the Philippines Annotated 7, 12th ed.). We find this ruling erroneous. Firstly, the respondent Court of Appeals harbored the wrong notion that Angelita Ocampo Lim inherited from Teofista Ocampo her right of first option upon the latter's death. The evidence, however, shows that Ocampo assigned her right of first option to Angelita even during her lifetime. The assignment was made on August 23, 1990. This assignment has no legal warrant. Article 1311 of the Civil Code is too clear to be misinterpreted. It 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. . . ." In the case at bar, paragraphs 4 and 5 of the lease contract specifically provide: 4. The lessee hereby expressly warrants that the leased premises shall be used exclusively by her for an automobile supply and parts company and partly as a dwelling place for her employees only and the latter is strictly prohibited from using the said premises for any other purpose without the written consent of the lessor. 5. The lessee shall not directly or indirectly sublease, assign, transfer, convey, mortgage or in any manner encumber its (sic) right of lease over the leased premises or any portion thereof under any circumstances whatsoever. These stipulations are consistent with Article 1649 of the Civil Code which provides that "the lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary." We have held that the consent of the lessor is necessary because the assignment of the lease would involve the transfer, not only of rights but also of obligations. It constitutes novation by a substitution of the person of one of the parties.4 A reasonable perusal of paragraphs 4 and 5 of the lease contract reveals the intent of the parties to limit their lease relationship to themselves alone. Paragraph 4 provides that "the leased premises shall be used exclusively by her," referring to the late Teofista Ocampo. Paragraph 5 prohibits Ocampo from directly or indirectly assigning, transferring or conveying her right of lease over the leased premises or any portion thereof under any circumstances whatsoever. It cannot be denied that Ocampo's right of first option to buy the leased property in case of its sale is but part of the bigger right to lease said property from Lingat. The option was given to Ocampo because she was the lessee of the subject property. It was a component of the consideration of the lease. The option was by no means an independent right which can be exercised by Ocampo. It ought to follow that if Ocampo is barred by the contract from assigning her right to lease the subject property to any other party, she is similarly barred from assigning her first option to buy the leased property to her daughter, Angelita Ocampo Lim. Needless to state, Angelita Ocampo Lim had no right to substitute her mother, Teofista Ocampo, in Civil Case No. 90-54459. IN VIEW WHEREOF, the decision of the respondent Court of Appeals dated February 21, 1995 is reversed and the decision of the RTC of Manila, Branch 10, dated February 9, 1994 in Civil Case No. 90-54459 is reinstated. No costs. SO ORDERED. Romero, Mendoza and Torres, Jr., JJ., concur. Regalado, J., is on leave. Footnotes 1 Rollo, pp. 17-19, 26, 51-54. 2 Original Records, pp. 13-14. 3 Decision penned by Judge Amor A. Reyes. 4 Vda. e Hijos de Barretto v. Sevilla, Inc., 62 Phil. 593. The Lawphil Project - Arellano Law Foundation