REPUBLIKA NG PILIPINAS

PASEGURUHAN NG MGA NAGLILINGKOD SA PAMAHALAAN

(GOVERNMENT SERVICE INSURANCE SYSTEM)
Financial Center, Roxas Boulevard, Pasay City 1308

LEGAL SERVICES GROUP

MEMORANDUM
24 January 2022

FOR : ROSALINDA G. MENDOZA

Branch Manager
Gen. Santos Branch Office

SUBJECT : REQUEST FOR LEGAL OPINION ON THE

CONTRACT OF LEASE BETWEEN GSIS AND
NLEON REALTY

We refer to the query of Ms. Michelle M. Duroy, Staff Officer I, of Gen.

Santos Branch Office regarding the provision in the contract of lease
between GSIS and NLEON Realty on Security Deposit.

FACTS:

 The contract of lease between LNL Realty and GSIS on the

land and building being occupied by the Gen. Santos Branch
Office expired on 31 December 2021. LNL Realty, the lessor,
is a sole proprietor entity owned by Mr. Leon S.Llido Sr.
(hereafter, “Mr. Llido Sr.”)

 After the death of Mr. Llido Sr., his heirs executed an Extra-
Judicial Settlement (EJS) of his estate, which includes the
building and land subject of the aforesaid contract of lease. His
son, Jugger Llido (hereafter, “Jugger”), was authorized by all
the heirs through a Special Power of Attorneyn (SPA) to
represent them in the subsequent contract of lease with the
GSIS.

 Some of the aforesaid heirs were residents of the United States

of America (USA). Per information disclosed by Jugger to the
undersigned, copies of the EJS and SPA were sent to the USA
for the heirs’ signature and mailed back to the Philippines for
his signature and notarization by a notary public. The heirs
also sent private letters1 addressed to the notary public in
order to acknowledge their respective signatures as affixed in
the said documents.

 Consequently, a new sole proprietorship entity was

established, named as NLEON Realty and owned by Jugger.
NLEON Realty became the new lessor of the subject land and
1
Attached hereto as Annex “A”.

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 building and continued to lease the premises to GSIS
beginning on 01 January 2022.

 As there is a provision in the old Contract of Lease providing

for the payment of security deposit 2, which was paid by the
GSIS to LNL Realty on 14 September 2016, the Gen. Santos
Branch Office is uncertain if it will be required to place another
security deposit on the supposition that the Lessor, NLEON
Realty, is a new entity.

ISSUES:

1. Whether the absence of apostillization affect the validity of the EJS and
SPA signed by the heirs in the USA in view of the membership of the
USA and the Philippines to the Apostille Convention; and

2.
3. Whether it is proper for GSIS Gen. Santos Branch Office to place a new
security deposit.

DISCUSSION:

On the first issue, it is our humble opinion that the absence of

apostillization affects the validity of the EJS and SPA.

First, let us lay down the effects of an Apostille.

According to the official website of the Department of Foreign

Affairs3, “an Apostille only certifies the origin of the public document
to which it relates: it certifies the authenticity of the signature or seal
of the person or authority that signed or sealed the public document
and the capacity in which this was done. An Apostille does not certify
the content of the public document to which it relates.”

“Once apostillized, these documents can be validly used in any

Apostille-contracting countries, without the need for authentication
or legalization by their respective Embassies or Consulates in the
Philippines.”4

As clearly stated above, apostillization is necessary in order to certify

the authenticity of the signature in the document. “The Apostille

2
Paragraph 2.4, Article II.
3
https://dfa.gov.ph/dfa-news/dfa-releasesupdate/22280-question-and-answer-and-
infographics-onauthenticationthrough-apostille#:~:text=On%2014%20May
%202019%2C%20the,%22)%20as%20proof%20of%20authentication.
4
https://romepe.dfa.gov.ph/images/2019/Advisory/FAQs_on_Apostille-revised.pdf

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replaces the Authentication Certificate as proof of authenticity of
public documents for use in Apostille countries. ”5

“The Apostille Convention only applies if both the country where the
public document was issued and the country where the public
document is to be used are parties to the Convention. ”6 Both the USA
and the Philippines are parties to the 2019 Apostille Convention or
are considered as Apostille-contracting countries.

While the heirs recognize the signatures as appearing in the EJS and
SPA as their genuine signatures that they themselves have affixed in
the mentioned documents, it is also true that their said
acknowledgment in a handwritten letter, sans any competent
authority or witness to prove the genuineness of their signatures, is
with all due respect, self-serving.

Lest the interest of the GSIS be prejudiced in the worst event that the
EJS and SPA would be declared void and with no legal effect with the
absence of apostillization, prudence dictates that it is best to require
the heirs who reside in the US to have the said documents apostilled
there before sending the same for notarization in the Philippines in
order to give proper authority to Jugger to execute the contract of
lease with the GSIS.

With the foregoing considered, it is respectfully recommended that

the EJS and SPA executed by the heirs residing in the US bear the
required Apostille.

On the second issue, We we opine in the negative.

Article 1311 of the New Civil Code provides:

“Contracts take effect only between the parties, their assigns and
heirs, except in cases where the rights and obligations arising from
the contract are not transmissible by their nature, or by stipulation or
provision of law. The heir is not liable beyond the value of the
property he received from the decedent.”

Lease contracts are by their nature, not personal. In Analita P.

Inocencio vs. Hospicio de San Jose 7, citing Sui Man Hui Chan vs.
Court of Appeals8, the Supreme Court illuminated in this wise:

“A lease contract is not essentially personal in character.

Thus, the rights and obligations therein are transmissible
to the heirs. The general rule, therefore, is that heirs are
bound by contracts entered into by their predecessors-in-
5
Supra.
6
Supra.
7
G.R. No. 201787, 25 September 2013.
8
468 Phil 244 (2004).

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 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 subject
Contract of Lease, not only were there no stipulations
prohibiting any transmission of rights, but by its very
terms and conditions explicitly provided for the
transmission of the rights of the lessor and of the lessee
to their respective heirs and successors. The contract is
the law between the parties. 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 successors or representatives of
the deceased. Similarly, nonperformance is not excused
by death of the party when the other party has a property
interest in the subject matter of the contract.”
(Underscoring supplied)

In addition, Paragraph 5.4, Article V of the mentioned Contract of

Lease stipulates the following:

“5.4. Successors-in-Interest. This Contract shall be

binding and enforceable on the parties and their
respective assigns and their successors-in-interest.”

Granting that The the Extra-Judicial SettlementEJS and Special

Power of AttorneySPA submitted by Jugger to the GSIS Gen. Santos
Branch Office were validly executed, they established that he
represents all the heirs of their deceased father, Mr. Llido, Sr., the
owner/proprietor of LNL Realty.

Applying the afore-quoted provision in the New Civil Code and quoted
in case law, the rights and obligations of Mr. Llido, Sr. in the contract
of lease were transmitted to his heirs. Such transmissibility is even
supported by the stipulation in the Contract of Lease above cited.

To infer, the obligation of Mr. Llido, Sr. to recognize that a security

deposit had been placed by the GSIS Gen. Santos Branch Office in
the amount of Three Hundred Seventy-Four Thousand Six Hundred
Seventy-Six Pesos and 50/100 (Php 374, 676.50) on 14 September
2016 in favor of LNL Realty is passed on to his heirs, being his
successors-in-interest. The change of the lessor’s name from LNL
Realty to NLEON Realty is immaterial.

Accordingly, it is humbly recommended that a provision in the

contract of lease to be subsequently executed between NLEON
Realty and the GSIS reflect that NLEON Realty recognize the
aforesaid security deposit already placed by the GSIS.

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This opinion is based on your submissions and representations
without regard for extraneous matters of which we may have not
been informed.

For your consideration.

HALIE C. CONCEPCION
Field Office Attorney for Gen. Santos and Cotabato

NB: In accordance with Civil Service Memorandum Circular No. 10, Series of 2020, and GSIS
Office Order No. 490-20, service of this document is transmitted via email, in PDF copy, in view
of the alternative work arrangement being implemented in various government agencies, including
the GSIS.

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