Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112) (CIVIL CODE)
Transmissible rights – refer to rights which can be transferred to another by their nature and not otherwise prohibited by a stipulation or by law.
1) Inheritance rights under Article 781 – e.g. decedents may transfers their rights to a property to their heirs; or
2) Contractual rights under Article 1311 – e.g. lease rights, intellectual property rights, usufructuary rights, and similar therewith, such as rights under a contract to repair a house may be transferred by the previous homeowner to the next homeowner unless otherwise stipulated.
By their nature, property rights are transferable.
For example, rights from a lease contract over a land is transferrable as the right is over or pertains to the property, and not to the doing of any act that is personal to another.
Tanay Recreation Center and Development Corp. v. Fausto, G.R. No. 140182, April 12, 2005, Per Austria-Martinez, J.:
• A lease contract is not essentially personal in character. Thus, the rights and obligations therein are transmissible to the heirs. 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.
• In this case, the nature of the rights and obligations are, by their nature, transmissible. There is also neither contractual stipulation nor provision of law that makes the rights and obligations under the lease contract intransmissible. The lease contract between petitioner and Fausto is a property right, which is a right that passed on to respondent and the other heirs, if any, upon the death of Fausto.
• [T]he contract of lease, with all its concomitant provisions, continues even after Fausto’s death and her heirs merely stepped into her shoes.30 Respondent, as an heir of Fausto, is therefore bound to fulfill all its terms and conditions.
• There is no personal act required from Fausto such that respondent cannot perform it. Fausto’s obligation to deliver possession of the property to petitioner upon the exercise by the latter of its right of first refusal may be performed by respondent and the other heirs, if any. 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.
Generally, rights are transferrable.
However, it may become intransmissible:
1) By stipulation or;
2) By law.
1) In a contract of lease, sublease is allowed – but may be prohibited by stipulation of the parties. (See CIVIL CODE, Article 1650)
2) Some business licenses, authority, or permit cannot be transferred due to a prohibition provided for by a law and/or a regulation
Transmissible rights – refer to rights which can be transferred to another:
1) By their nature or obligations which are purely personal;
2) By stipulation;
3) By law.
1) Those in partnership relations;
2) Those in agency relations;
3) Those that require or depend on personal qualifications or skills of the obligor; and
4) Those for the payment of money or debts as against heirs of deceased-debtor, as such monetary obligation is chargeable against the estate of the deceased and not of the latter’s heirs. (DKC Holdings Corporation v. CA, G.R. No. 118248, April 5, 2000, per Ynares-Santiago, J., citing IV Tolentino, CIVIL CODE OF THE PHILIPPINES, 430 )
In American jurisprudence, “(W)here 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.” (DKC Holdings Corporation v. CA , supra.)
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. (DKC Holdings Corporation v. CA , supra.)
DKC Holdings Corporation v. CA, G.R. No. 118248, April 5, 2000, per Ynares-Santiago, J.:
• The issue to be resolved in this case is 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.
• Art. 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.
• 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.
• 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.
• 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.
• Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject Contract of Lease with Option to Buy.
By virtue of a contract, a transmissible right may be converted to an intransmissible right by stipulating that a right is intransmissible, such as by providing a clause prohibiting rights from being transferred.
1) A lease contract may contain a stipulation prohibiting the lessee from transferring the rights over a lease to another;
2) A loan contract may contain a stipulation prohibiting the borrower from transferring the rights over a loan or credit line to another; or
3) A franchise agreement/contract may contain a stipulation prohibiting the franchisee from transferring the rights over a franchise to another.
Rights may also be intransmissible if provided for by law. Otherwise stated, a legal provision prohibiting the transfer of rights from one to another will result in such right being intransmissible.
1) Professional licenses, such as those issued by the Professional Regulatory Commission (PRC), cannot be transferred by those who obtain such licenses to another as professions have laws and/or regulations prohibiting such;
2) Some business licenses, authority, or permit cannot be transferred due to a prohibition provided for by a law and/or a regulation; or
3) Legislative franchises may contain a restriction against transferring rights thereto.