2. Mariano v Petron (Billy) Groups prior consent, was in obvious breach of the Contract.
The continued
January 21, 2010 | Carpio | Prescription
PETITIONER​​: Romeo D. Mariano
RESPONDENTS​​: Petron Corporation
SUMMARY​​:
(Aure Group), leased a 2,064 square meter parcel of land in Tagaytay City
(Property), to ESSO Standard Eastern, Inc., (ESSO Eastern), a foreign
corporation doing business in the country through its subsidiary ESSO Standard
Philippines, Inc. (ESSO Philippines). The lease contract (Contract) contained an
assignment veto clause barring the parties from assigning the lease without prior
consent of the other excluding certain corporations to whom ESSO Eastern may
unilaterally assign its leasehold right. ESSO Eastern sold ESSO Philippines to
the (PNOC). The Aure Group was not informed of the sale whose corporate
name was successively changed to Petrophil Corporation then to Petron Corp.
(Petron), took possession of the Propert. Romeo D. Mariano then bought the
Property from the Aure Group and obtained title to the Property issued in his
name bearing an annotation of ESSO Easterns lease. Mariano sent Petron a
notice to vacate the Property and despite notice, Petron remained on the
Property. The trial court ruled that ESSO Easterns sale to PNOC of its interest in
ESSO Philippines included the assignment to PNOC of ESSO Easterns lease
over the Property, which, breached the Contract, resulting in its termination. The
CA rejected the trial courts conclusion that PNOC acquired the leasehold right
over the Property. They found the suit barred by the 4-year prescriptive period
The issue in this case is WoN the Suit is Barred by Prescrition- Yes
Since the breach gave rise to a cause of action for the Aure Group to seek the
lessees ejectment as provided under Article 1673, paragraph 3 of the Civil Code.
Although the records don’t show that the Aure Group was formally notified of
ESSO Philippines sale to PNOC, the successive changes in the lessees name
(from ESSO Philippines to Petrophil Corporation to Petron) alerted the Aure
Group of a likely change in the personality of the lessee, for lack of the Aure
receipt of lease payments by the Aure Group (and later by Mariano) despite the
contractual breach amounted to a waiver of their option to eject the lessee.
Mariano’s waiver of Petrons contractual breach was compounded by his long
inaction to seek judicial redress. Petitioner filed his complaint nearly 22 yrs. after
PNOC acquired the leasehold rights to the Property and almost 6 years after
petitioner bought the Property from the Aure Group. More than 2 decades lapse
puts this case within the 10 year prescriptive bar to suits based upon a written
contract under Article 1144 (1) of the Civil Code.
DOCTRINE:
Art. 1144. The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
FACTS:
1. Pacita V. Aure, Nicomedes Aure Bundac, and Zeny Abundo (Aure
Group), own a 2,064 square meter parcel of land in Tagaytay City
(Property),
2. They leased the Property to ESSO Standard Eastern, Inc., (ESSO
Eastern), a foreign corporation doing business in the country through its
subsidiary ESSO Standard Philippines, Inc. (ESSO Philippines).
3. The lease was 90 years with the rent payable monthly for the first 10
years, and annually for 80 Yrs.
4. The lease contract (Contract) contained an assignment veto clause
barring the parties from assigning the lease without prior consent of the
other excluding certain corporations to whom ESSO Eastern may
unilaterally assign its leasehold right.
5. ESSO Eastern sold ESSO Philippines to the Philippine National Oil
Corporation (PNOC) The Aure Group was not informed of the sale.
6. ESSO Philippines, whose corporate name was changed to Petrophil
Corporation then to Petron Corp. (Petron), took possession of the
Property.
7. Petitioner Romeo D. Mariano bought the Property from the Aure Group
and obtained title to the Property issued in his name bearing an
annotation of ESSO Easterns lease.
8. Mariano sent Petron a notice to vacate the Property, informing Petron
that P.D. No. 471 reduced the Contracts duration from 90 to 25 years,
which ends on 13 November 1993.
9. Despite receiving the notice to vacate, Petron remained on the Property.
10. On 18 March 1999, Mariano sued Petron in the RTC to rescind the
Contract and recover possession of the Property, theorizing that the
Contract was terminated on 23 December 1977 when ESSO Eastern sold
ESSO Philippines to PNOC, without seeking the Aure Groups prior
consent.
11. Petron countered that the Contract was not breached because PNOC
merely acquired ESSO Easterns shares in ESSO Philippines, a separate
corporate entity. Petron argued that petitioners suit, filed on 18 March
1999, was barred by prescription under of the Civil Code as petitioner
should have sought rescission within 4 years from PNOCs purchase of
ESSO Philippines on 23 December 1977 or before 23 December 1981.
12. On December 23, 1977, the Philippine National Oil Co. (PNOC), a
corporation owned by the Philippine Government, acquired ownership of
ESSO Standard Philippines, Inc., including its leasehold right over the
land in question, through the acquisition of its shares of stocks
13. The trial court ruled that ESSO Easterns sale to PNOC of its interest in
ESSO Philippines included the assignment to PNOC of ESSO Easterns
lease over the Property, which, breached the Contract, resulting in its
termination. However, because ESSO Philippines continued use of the
Property was tolerated by receiving rental payments, the law on implied
new lease governs the relationship of the Aure Group (and later Mariano)
and Petron, creating an implied new lease terminating on 21 December
1998 upon Petrons receipt of petitioners notice to vacate.
14. The CA set aside the trial courts ruling, declared the Contract until 13
November 2058 and ordered Mariano to pay ​P​300,000 as attorneys fees.
They found no reason to pierce the corporate veil, treating PNOCs
buy-out of ESSO Philippines as mere change in ESSO Philippines
stockholding.
15. the Court of Appeals rejected the trial courts conclusion that PNOC
acquired the leasehold right over the Property. They found petitioners
suit barred by the 4-year prescriptive period under Article 1389 and
Article 1146 (1) of the Civil Code, from PNOCs buy-out of ESSO
Philippines on 23 December 1977 (for Article 1389) or the execution of
the Contract on 13 November 1968 (for Article 1146
ISSUES:
1. WoN ESSO Eastern Assigned to PNOC its Leasehold Right over the
Property, Breaching the Contract – YES
2. WoN The Lessors Continued Acceptance of Lease Payments Despite
Breach of Contract Amounted to Waiver
3. Petitioners Suit Barred by Prescription(Main Issue) - YES
RATIO:
1. ESSO Eastern Assigned to PNOC its Leasehold Right over the
Property, Breaching the Contract
a. PNOCs buy-out of ESSO Philippines was total and
unconditional, leaving no residual rights to ESSO Eastern.
b. This change of ownership carried the transfer to PNOC any
proprietary interest ESSO Eastern may hold through ESSO
Philippines, including ESSO Easterns lease over the Property.
This is the import of Petrons admission in the Joint Motion that
by PNOCs buy-out of ESSO Philippines [PNOC], including its
leasehold right over the land in question, through the acquisition
of its shares of stocks.
 c. As the Aure Group gave no prior consent to the transaction 3. Petitioners Suit Barred by Prescription(Main Issue)
between ESSO Eastern and PNOC, ESSO Eastern violated the a. Petitioners waiver of Petrons contractual breach was
Contracts assignment veto clause. compounded by his long inaction to seek judicial redress.
d. the facts conclude that ESSO Philippines was a mere branch of Petitioner filed his complaint nearly 22 yrs. after PNOC
ESSO Eastern in the execution and breach of the Contract. First, acquired the leasehold rights to the Property and almost 6 years
by ESSO Easterns admission in the Contract, it is a foreign after petitioner bought the Property from the Aure Group.
corporation organized under Delaware, U.S.A., duly licensed to b. The more than 2 decades lapse puts this case well within the
transact business in the Philippines, and doing business therein territory of the 10 year prescriptive bar to suits based upon a
under the business name and style of Esso Standard Philippines. written contract under Article 1144 (1) of the Civil Code.
In effect, ESSO Eastern ​was​​ ESSO Philippines for all of ESSO
Easterns Philippine business. SEPARATE OPINIONS:
e. 2​nd​, the Contract was executed by ESSO Eastern, not ESSO CONCURRING:
Philippines, as lessee, with the Aure Group as lessor. ESSO
Eastern leased the Property for the use of ESSO Philippines,
acting as ESSO Easterns Philippine branch. Consistent with
such status, ESSO Philippines took possession of the Property
after the execution of the Contract. For purposes of the Contract,
ESSO Philippines was a mere alter ego of ESSO Eastern.
2. The Lessors Continued Acceptance of Lease Payments Despite Breach
of Contract Amounted to Waiver
a. We hold that the Contract subsists. The breach gave rise to a
cause of action for the Aure Group to seek the lessees ejectment
as provided under Article 1673, paragraph 3 of the Civil Code.
b. Although the records don’t show that the Aure Group was
formally notified of ESSO Philippines sale to PNOC, the
successive changes in the lessees name (from ESSO Philippines
to Petrophil Corporation to Petron) alert the Aure Group of a
likely change in the personality of the lessee, for lack of the
Aure Groups prior consent, was in obvious breach of the
Contract.
c. The continued receipt of lease payments by the Aure Group
(and later by Mariano) despite the contractual breach amounted
to a waiver of their option to eject the lessee.