State Investment

Defendant CBY (Cheng Ban Yek) is a domestic corporation engaged in the business of manufacturing
edible oil (Baguio Oil) and incurred millions of pesos of obligations with plaintiff SIHI in the amount of
P10M.
On December 28, 1982, defendant, plaintiff and other creditors of CBY entered into an Agreement for
the restructuring of CBYs existing obligations to its creditors but excluding defendant ALLIED and other
creditors who

Riviera
Riviera instituted a civil action to compel defendants Reyes, Cypress, Cornhill and Urban Development
Bank to transfer the title covering a parcel of land along EDSA, QC for alleged violation of Rivieras
right of first refusal.
It appears that respondent Reyes executed a Contract of Lease with Riviera over a parcel of land and
which is for ten years. Said land was subject of a REM executed by Reyes in favor of Prudential Bank. The
loan remained unpaid and the mortgage was foreclosed extrajudicially. The bank was also the highest
bidder at the public auction sale.
Realizing that he could not raise the money needed to redeem the property, Reyes decided to sell the
same. Reyes offered to sell the property to Riviera thru its President for P5k/sqm. Angeles bargained for
P3,500/sqm.
7 months later, Angeles communicated with Reyes the offer of Riviera to purchase the property for
P4k/sqm. Reyes did not accept the offer. This time he asked for P6k/sqm since the value of the property
appreciated.
Counsel for Reyes informed Riviera that Reyes was selling the property for 6k/sqm.
(The parties cannot agree as to the price of the property)
Meanwhile, Reyes confided to Traballo (close family friend) his predicament about the nearing expiry
date of the redemption period of the foreclosed mortgaged property. Traballo expressed his interest in

buying and when they met the day after, Reyes accepted Traballos offer (P5,300/sqm) But since
Traballo did not have the amount yet, he told Reyes that he will look for a partner. (Rivieras last offer,
P5k)
In January 1989, Reyes reapproached Riviera for the offer. (March 1989 ang expiration) Rivieras
President, Angeles reaffirm that the offer was P5k/sqm but Reyes asked for an increase. Reyes did not
expressly offer the property at P5,300/sqm.
Traballo (Cypress) and its partner were able to come up with the amount sufficient to cover the
redemption money and a DOAS was executed thereafter. (P5, 395, 400)
On the same day, Cypress and Cornhill mortgaged the subject property to Urban Devt Bank for P3M.
Riviera sought a resale from Reyes, Cypress and Cornhill but it failed. Hence the action was filed.
TC: dismissed the complaint of Riviera; no violation of RFR
CA: affirmed TC
WON CA ERRED IN DECIDING PETITIONERS APPEAL AT A TIME WHEN THE PRINCIPAL APPELLEE IS
ALLEGEDLY DEAD AND NO PROPER SUBSTITUTION HAS BEEN MADE; HENCE THE DECISION WAS NULL
AND VOID
Reyes died during the pendency of the appeal .The necessary motion for substitution of deceased Reyes
was filed by the heirs and acting on the motion for substitution, CA granted the same.
NWS the foregoing, Sections 16 and 17 of Rule 3 of the Revised Rules of Court were already been
amended by the 1997 Rules of Civil Procedure. Even applying the old rules, failure of counsel to inform
the court of the death of his client and no substitution of such is effected, will not invalidate the
proceedings and the judgment thereon if the action survives the death of such party, as this case does,
since the death of Reyes did not extinguish his civil personality. The appellate court was well within its
jurisdiction to proceed as it did with the case since the death of a party is not subject to its judicial
notice.
(Purpose: right to due process)
Court has acquired jurisdiction over the heirs by voluntarily submitting themselves to its jurisdiction
CA affirmed.