G.R. No. 147999 ; February 27, 2004
SUI MAN HUI CHAN and GONZALO CO, petitioners, vs. HON. COURT OF APPEALS and OSCAR D. MEDALLA, respondents.

FACTS

Private respondent Oscar Medalla filed a complaint for collection of a sum of money and damages against petitioners Sui Man Hui Chan and Gonzalo Co. The claim arose from a 1988 lease contract over a hotel building in Baguio City, executed between Medalla’s predecessor, Napoleon Medalla, as lessor, and Ramon Chan, as lessee. The contract bound the parties’ heirs and successors-in-interest. Ramon Chan died in 1989, survived by his wife, petitioner Sui Man Hui Chan, who continued operating the leased restaurant. Napoleon Medalla died in 1996, succeeded by private respondent Oscar Medalla. The lease continued under its original terms with the successors.
Petitioners allegedly failed to pay monthly rentals and realty taxes as stipulated. Despite demand letters, they vacated the premises in January 1999 without settling the accrued obligations. Medalla then sued. Petitioners moved to dismiss, arguing they were neither parties nor privies to the original lease contract and thus not real parties-in-interest. They further contended any claim should be filed against the estate of the original lessee, Ramon Chan, in estate proceedings under Rule 86 of the Rules of Court.

ISSUE

Whether the Court of Appeals erred in affirming the denial of the motion to dismiss, thereby holding petitioners liable as real parties-in-interest under the lease contract.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The trial court correctly denied the motion to dismiss as petitioners were indeed the real parties-in-interest. A real party-in-interest is one who stands to be benefited or injured by the judgment in the suit. Upon Ramon Chan’s death, petitioner Sui Man Hui Chan, as his surviving spouse and successor, continued the lease operation and directly dealt with the lessor, thereby assuming the contractual obligations. Petitioner Gonzalo Co, as the active general manager and agent, also transacted with the lessor concerning the lease.
The Court emphasized that the lease contract expressly bound the heirs and successors-in-interest of the original parties. The petitioners’ continued occupation, use of the property, and direct dealings with respondent Medalla after the deaths of the original parties constituted an implied continuation and assumption of the lease agreement. Consequently, they became personally liable for the unpaid rentals and realty taxes accruing during their possession, particularly from April 1993 to December 1998.
Regarding the application of Rule 86 on claims against an estate, the Court found it inapplicable. The unpaid obligations sued upon accrued well after Ramon Chan’s death in 1989. Since the liabilities were incurred by petitioners themselves during their operation, not by the deceased lessee, the claim is properly filed against them personally, not against his estate. Thus, no error was committed in denying the motion to dismiss.