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Lao Chit v Security Bank and Trust Co.

GR No. L-11028, 17 April 1959

FACTS:

 On May 1949, Consolidated Investments Inc. leased to Domingo Dikit part of the lobby
of the lobby on the ground floor of the Consolidated Building in Plaza Goiti, Manila to be
used as offices of the proposed Bank of Manila then being organized by Dikit and Jose
Silva. Under the contract the lessee undertook to construct, at their expense, such walls,
partitions and other improvements which shall become the property of the lessor upon the
termination and/or recission of said contract.

 In another contract entered into on June 1949 between Dikit and Silva on one hand and
plaintiff Laoi Chit on the other hand, who furnished the materials and the work for the
said walls and improvements at a total cost of P59,365 payable as soon as the Bank of
Manila opens for Business and is given a permit by the Central Bank. However the
permit was never issued and the Bank of Manila did not open hence the rentals due under
the said lease contract were never paid.

 On May 1951, after a civil case against Dikit and Silva were filed and were ordered to
relinquish whatever rights of possession on the leased premises and disclaim of all right
to and over any and all improvements introduced therein, Lao Chit filed a case in the CFI
of Manila against Dikit and Silva for the recovery of what was due from them by reason
of the improvements introduced by Lao Chit. On June 1953, judgment was rendered
sentencing Dikit and Silva to pay Lao Chit but the corresponding writ of execution was
returned unsatisfied because Dikit and Silva had no properties registered in their name.
Hence, Lao Chit brought the action against Security Bank and Trust Company, to whom
the lessor, since July 1951, had leased the premises.

ISSUE: Whether or not Lao Chit was a bound by the contract between Dikit and Silva and
Security Bank and Trust Company.

HELD: YES. Security Bank and Trust Company had occupied and used the premises in question
including the partitions and improvements made therein by Lao Chit pursuant to a contract of
lease entered into with the lessor. SBTC had paid the rental sand fulfilled its other obligation
under said contract. On the other hand, it cannot be denied that the improvements introduced by
Lao Chit had become the property of the lessor because the contract between the lessor and
Dikit and Silva provided explicitly that the latter shall own those improvement upon the
expiration and/or recission of said contract, and the same had already been resolved.

Although Lao Chit was not a party to said contract, the stipulation is binding upon him, since he
only derived his right to enter the premises from his contract with DIkit and Silva. In short,
insofar as the construction thereof, Lao Chit was, vis-à-vis the lessor, a mere agent or
representative of Dikit and was privy to the undertakings of Dikit and Silva under his contract of
lease with lessor.

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