OBLICON CASE DIGEST

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HEIRS OF FLORES RESTAR v. HEIRS OF DOLORES R.
CICHON
475 SCRA 73 (2005)
Ordinary acquisitive prescription requires possession of
things in good faith and with just title for a period of ten
years while extraordinary acquisitive prescription only
requires uninterrupted adverse possession for thirty years.
Emilio
Restar
died
intestate,
leaving
eight
children-compulsory heirs. Restar’s eldest child, Flores, on
the basis of a Joint Affidavit he executed with Helen Restar,
caused the cancellation of Tax Declaration in Restar’s
name. The same covers a 5,918 square meter parcel of
land in Aklan which was among the properties left by
Restar. Flores thereafter sought the issuance of another
Tax Declaration in his name. Flores later on died.
Ten years later, the heirs of Flores’ sisters, Dolores R.
Cichon, et. al. (Heirs of Cichon) filed a Complaint against
Flores’ heirs for “partition of the lot, declaration of nullity of
documents, ownership with damages and preliminary
injunction” before the Regional Trial Court (RTC) of Aklan
alleging that the widow Esmenia appealed to them to allow
her to hold on to the lot to finance the education of her
children, to which they agreed on the condition that after
the children had finished their education, it would be
divided into eight equal parts; and upon their demand for
partition of the lot, the defendants Flores‘ heirs refused,
they claiming that they were the lawful owners thereof as
they had inherited it from Flores. Flores‘ heirs claimed that
they had been in possession of the lot in the concept of
owner for more than thirty (30) years and have been
realty taxes since time immemorial. And they denied
having shared with the plaintiffs the produce of the lot or
that upon Flores’ death in 1989, Esmenia requested the
plaintiffs to allow her to hold on to it to finance her
education, they contending that by 1977, the children had
already finished their respective courses.
The RTC of Kalibo, Aklan held that Flores and his heirs
performed acts sufficient to constitute repudiation of the
co-ownership, concluded that they had acquired the lot by
prescription.
The Court
of
Appeals reversed
the decision finding that there was no adequate notice by
Flores to his co-heirs of the repudiation of the
and neither was there a categorical assertion by
the defendants of their exclusive right to the entire lot that
barred the plaintiffs’ claim of ownership.
ISSUE:
Whether or not Heirs of Flores acquired ownership over
lot by extraordinaryprescription
HELD:
Acquisitive prescription of dominion and other real rights
may be ordinary or extraordinary. Ordinary acquisitive
prescription requires possession of things in good faith
with just title for a period of ten years. Without good faith
and just title, acquisitive prescription can only
be extraordinary in character which requires uninterrupted
adverse possession for thirty years.
When Restar died in 1935, his eight children became pro
indiviso co-owners of the lot by intestate succession. Heirs
of Chichon never possessed the lot, however, much less
asserted their claim thereto until January 21, 1999 when
they filed the complaint for partition subject of the present
petition. In contrast, Flores took possession of the lot after
Restar’s death and exercised acts of dominion thereon —
tilling and cultivating the land, introducing improvements,
and enjoying the produce thereof. Flores’ possession thus
ripened into ownership through acquisitive prescription
after the lapse of thirty years in accordance with the earlier
quoted Article 1137 of the New Civil Code.
Heirs of Cichon did not deny that aside from the verbal
partition of one parcel of land in Carugdog, Lezo, Aklan
way back in 1945, they also had an amicable partition of
the lands of Emilio Restar in Cerrudo and Palale, Banga
Aklan on September 28, 1973 (exhibit “20”). If they were
able to demand the partition, why then did they not
the inclusion of the land in question in order to settle once
and for all the inheritance from their father Emilio Restar,
considering that at that time all of the brothers and sisters,
the eight heirs of Emilio Restar, were still alive and
participated in the signing of the extra-judicial partition?
Indeed, the following acts of Flores show possession
adverse to his co-heirs: the cancellation of the tax
declaration certificate in the name of Restar and securing
another in his name; the execution of a Joint Affidavit
stating that he is the owner and possessor thereof to
the exclusion of respondents; payment of real estate tax
and irrigation fees without respondents having ever
contributed any share therein; and continued enjoyment of
the property and its produce to the exclusion of
respondents. And Flores’ adverse possession was
continued by his heirs.
The trial court’s finding and conclusion that Flores and his
heirs had for more than 38 years possessed the land in
open, adverse and continuous possession in the concept
of owner — which length of possession had never been
questioned, rebutted or disputed by any of the heirs of
Cichon, being thus duly supported by substantial evidence,
he and his heirs have become owner of the lot
by extraordinaryprescription. It is unfortunate that
respondents slept on their rights. Dura lex sed lex.
Arzadon-Crisolog v. Ranon (ART. 543)
FACTS:
According toRañon, her family had enjoyed continuous,
peaceful and uninterrupted possession and ownership
over the subject property since 1962, and had religiously
paid the taxes thereon. They had built a house on the
subject property where she and her family had resided.
Unfortunately, in 1986, when her family was already
residing in Metro Manila, fire razed and destroyed the said
house. Nonetheless, they continued to visit the subject
property, as well as pay the real estate taxes thereon.
However, in August of 1986, her daughter, Zosie Rañon,
discovered that the subject property was already in the
name of the spouses Montemayor under Tax Declaration
No. 0010563 which was purportedly issued in their favor
by virtue of an Affidavit of Ownership and Possession
which the spouses Montemayor executed themselves.
The Affidavit was alleged to have created a cloud of doubt
over Rañon’s title and ownership over the subject
property.
The spouses Montemayor, for their part, alleged that they
acquired the subject lot by purchase from Leticia del
Rosario and Bernardo Arzadon who are the heirs of its
previous owners for a consideration of P100,000.00.
The Heirs of Marcelina Arzadon-Crisologo, (represented
by Leticia A. Crisologo del Rosario), Mauricia Arzadon,
and Bernardo Arzadon (petitioners) filed an Answer in
Intervention claiming, inter alia, that they are the rightful
owners of the subject property, having acquired the same
from their predecessors-in-interest. They averred that
there existed no liens or encumbrances on the subject
property in favor of Agrifina Rañon; and that no person,
other than they and the spouses Montemayor, has an
interest in the property as owner or otherwise.
concept of owner for no one in his right mind would be
paying taxes for a property that is not in his actual or at
least constructive possession.They constitute at least
proof that the holder has a claim of title over the
property.As is well known, the payment of taxes coupled
with actual possession of the land covered by the tax
declaration strongly supports a claim of ownership.
Possession in the eyes of the law does not mean that a
man has to have his feet on every square meter of the
ground before it can be said that he is in possession.
(Ramos v. Dir. Of Lands)
Nothing was done by petitioners to claim possession over
the
subject
property
from
the
time
their
predecessors-in-interest had lost possession of the
property due to their deaths. Plainly, petitioners slept on
their rights. Vigilantibus sed non dormientibus jura
subveniunt. The law comes to the succor only to aid the
vigilant, not those who slumber on their rights.
Respondents occupied without interruption the subject
property in the concept of an owner, thereby acquiring
ownership via extraordinary acquisitive prescription.
AGUIRRE, ET AL. vs. COURT OF APPEALS, ET AL.
G.R. No. 122249 January 29, 2004
FACTS:
ISSUES:
(1) W/N the Notice of Adverse Claim filed by the
petitioners constitute an effective interruption since 1962
of respondents possession of the subject property; and
(2)W/N the respondents had acquired ownership over the
subject property through uninterrupted and adverse
possession for 30 years, without need of title or of good
faith
RULING:
Article 1123 and Article 1124 of the Civil Code underscore
the judicial character of civil interruption. For civil
interruption to take place, the possessor must have
received judicial summons. None appears in the case at
bar. The Notice of Adverse Claim which was filed by
petitioners in 1977 is nothing more than a notice of claim
which did not effectively interrupt respondents’
possession.
The open, continuous, exclusive and notorious possession
by respondents of the subject property for a period of more
than 30 years in repudiation of petitioners’ ownership had
been established. During such length of time, respondents
had exercised acts of dominion over the subject property,
and paid taxes in their name. Jurisprudence is clear that
although tax declarations or realty tax payments of
property are not conclusive evidence of ownership,
nevertheless, they are good indicia of possession in the
Leocadio Medrano and his first wife Emilia
owned a piece of land. After the death of Emilia, Leocadio
married his second wife Miguela. When Leocadio died, all
his heirs agreed that Sixto Medrano, a child of the first
marriage, should manage and administer the said property.
After Sixto died, his heirs learned that he had executed an
Affidavit of Transfer of Real Property in which he falsely
stated that he was the only heir of Leocadio. It turned out
that while Sixto were still alive, he sold a portion of the
subject land tp Tiburcio Balitaan and another portion to
Maria Bacong, Maria Bacong later sold the said portion to
Rosendo Bacong. Petitioners, all heirs of Leocadio who
were affected by the sale demanded reconveyance of the
portions sold by Sixto but the 3 vendees refused.
Resultantly, petitioners filed a suit against them seeking
the nullity of the documents and partition thereof. The
vendees contended that they acquired the property under
the valid deed of sale and petitioners’ cause of action was
barred by laches and prescription. Tiburcio also contended
that he is an innocent purchaser for value.
ISSUE:
Whether or not there was a valid sale between
Sixto Medrano and the three purchases considering the
fact that it was made without the consent of the co-owners.
HELD:
Under Article 493 of the New Civil Code, a sale
by a co-owner of the whole property as his will affect only
his own share but not those of the other co-owners who
did not consent to the sale). The provision clearly provides
that the sale or other disposition affects only the seller’s
share, and the transferee gets only what corresponds to
his grantor’s share in the partition of the property owned in
common. Since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner
without the consent of the other co-owner is not null and
void; only the rights of the co-owner-seller are transferred,
thereby making the buyer a co-owner of the property. It is
clear therefore that the deed of sale executed by Sixto in
favor of Tiburcio Balitaan is a valid conveyance only
insofar as the share of Sixto in the co-ownership is
concerned. Acts which may be considered adverse to
strangers may not be considered adverse in so far as
co-owners are concerned. A mere silent possession by a
co-owner, his receipts of rentals, fruits or profits from the
property, the erection of buildings and fences and planting
of trees thereon, and the payment of land taxes, cannot
serve as proof of exclusive ownership, if it is not borne out
by clear and convincing evidence that he exercised such
acts of possession which unequivocally constituted an
ouster or deprivation of the rights of the other co-owners.
Thus, in order that a co-owner’s possession may
be deemed adverse to the cestui que trust or the other
co-owners, the following elements must concur:
(1) that he has performed unequivocal acts of
repudiation amounting to an ouster of the cestui que trust
or the other co-owners;
(2) that such positive acts of repudiation have
been known to the cestui que trust or the other co-owners;
and
(3) that the evidence thereon must be clear and
convincing.
Tested against these guidelines, the respondents
failed to present competent evidence that the acts of Sixto
adversely and clearly repudiate the existing co-ownership
among the heirs of Leocadio Medrano. Respondent’s
reliance on the tax declaration in the name of Sixto
Medrano is unworthy of credit since we have held on
several occasions that tax declarations by themselves do
not conclusively prove title to land. Further, respondents
failed to show that the Affidavit executed by Sixto to the
effect that he is the sole owner of the subject property was
known or made known to the other co-heirs of Leocadio
Medrano.
VDA DE GUALBERTO VS GO
FACTS:
Petitioners are the heirs of the late Generoso
Gualberto, former registered owner of a parcel of land
situated at Redor Street, Barangay Redor, Siniloan,
Laguna under Transfer Certificate of Title (TCT) No. 9203,
containing an area of 169.59 square meters, more or less,
and declared for taxation purposes under Tax Declaration
No. 4869.
Sometime in 1965, the subject parcel of land was sold
by Generoso Gualberto and his wife, herein petitioner
Consuelo, to respondents father Go S. Kiang for
P9,000.00, as evidenced by a deed entitled Kasulatan
dated January 15, 1965 which deed appears to have been
duly notarized by then Municipal Judge Pascual L.
Serrano of the Municipal Court of Siniloan,
On April 1, 1973, petitioner Consuelo executed an
Affidavit attesting to the fact that the aforementioned
parcel of land had truly been sold by her and her husband
Generoso to the spouses Go S. Kiang and Rosa Javier
Go, as borne by the said Kasulatan. Evidently, the affidavit
was executed for purposes of securing a new tax
declaration in the name of the spouses Go.
In December, 1973, in a case for Unlawful Detainer
filed by a certain Demetria Garcia against herein
petitioners, the latter alleged that therein plaintiff Garcia is
not a real party in interest and therefore has no legal
capacity and cause of action to sue the defendants; that
the real parties in interest of the parcel of commercial land
and the residential apartment in question are Generoso
Gualberto and Go S. Kiang respectively as shown by TCT
No. 9203 issued by the Register of Deeds of Laguna.
In a Forcible Entry case filed by respondents against
petitioners before the Municipal Circuit Trial Court of
Siniloan-Famy, Siniloan, Laguna docketed as Civil Case
No. 336, a decision was rendered in favor of respondents,
which decision was affirmed in toto by the RTC of Siniloan,
Laguna. When elevated to the Court of Appeals, that same
decision was affirmed by the latter court, saying that the
Court finds that the judgment of the court a quo affirming
the previous judgment of the municipal court is supported
by sufficient and satisfactory evidence and there is no
reason for the Court to hold otherwise.
In the meantime, on June 14, 1978, Original
Certificate of Title (OCT) No. 1388 was issued in the name
of respondent Rosa Javier Go, wife of Go S. Kiang.
August 10, 1995, in the Regional Trial Court at
Siniloan, Laguna petitioners filed against respondents their
complaint in this case for Conveyance, Accion Publiciana,
and Quieting of Title with Damages, the trial court,
dismissed petitioners complaint and ordered them to pay
attorneys fees.
On appeal, the appellate court, a affirmed that of the trial
court, minus the award of attorneys fees.
ISSUES:
I. WHETHER OR NOT A TITLED PROPERTY
CAN BE THE SUBJECT OF A FREE
PATENT TITLE.
II. WHETHER
AN
ACTION
FOR
RECONVEYANCE OF PROPERTY BASED
ON A NULLITY OF TITLE PRESCRIBES.
property ever since. The action for reconveyance
in the instant case is, therefore, not in the nature
of an action for quieting of title, and is not
imprescriptible.
Possible BAR QUESTION:
Question:
Held:
I.
No. The first issue raised by petitioners attacks
the validity of respondent Rosa Javier Gos free
patent title. This cannot be done in the present
recourse for two
(2) basic reasons: first, the validity of a torrens
title cannot be assailed collaterally; and second,
the issue is being raised for the first time before
the Supreme Court.
II.
No. An action for reconveyance of real property
based on implied or constructive trust is not
barred by the aforementioned 10-year
prescriptive period only if the plaintiff is in actual,
continuous and peaceful possession of the
property involved. In DBP vs. CA,[16] the Court
explained:
. . . [A]n action for reconveyance of a parcel
of land based on implied or constructive
prescribes in ten years, the point of
reference being the date of registration of
deed or the date of the issuance of the
certificate of title over the property, but this
rule applies only when the plaintiff or the
person enforcing the trust is not in
possession of the property, since if a person
claiming to be the owner thereof is in actual
possession of the property, as the
defendants are in the instant case, the right
to seek reconveyance, which in effect seeks
to quiet title to the property, does not
prescribe. The reason for this is that one
is in actual possession of a piece of land
claiming to be the owner thereof may wait
until his possession is disturbed or his title is
attacked before taking steps to vindicate his
right, the reason for the rule being, that his
undisturbed possession gives him a
continuing right to seek the aid of a court of
equity to ascertain and determine the nature
of the adverse claim of a third party and its
effect on his own title, which right can be
claimed only by one who is in possession.
Here, it was never established that
petitioners remained in actual possession of the
property after their fathers sale thereof to Go S.
Kiang in 1965 and up to the filing of their
complaint in this case on August 10, 1995. On the
contrary, the trial courts factual conclusion is that
respondents had actual possession of the subject
Can a petitioner file an action to
recover based on implied trust; prescribes
after 10 years?
Answer:
Yes. An action for reconveyance of real property
based on implied or constructive trust is not barred by the
10-year period of prescription only if the plaintiff is in
actual, continuous and peaceful possession of the
property involved. In DBP vs. CA, (2000) it was said that
generally an action for reconveyance based on an implied
or constructive trust prescribes in 10-years from the date
of issuance of the decree of registration. However, this
rule does not apply when the plaintiff is in actual
possession of the land.
If property is acquired through mistake or
fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the
benefit of the person from whom the property
comes. (Art. 1456, NCC). Thus, the law thereby
creates the obligation of the trustee to reconvey
the property and the title thereto in favor of the
true owner. The prescriptive period for the
reconveyance for fraudulently registered real
property is ten (10) years reckoned from the date
of the issuance of the certificate of title. (Consuelo
Vda. de Alberto, et al. vs. Francis Go, et al., G.R.
No. 139843, July 21, 2005).
Solid Homes Inc v Spouses Tan
When the prescription should count
Facts:
1. In 1980, Petitioner Solid Homes sold to Sps. Uy a
1069sqm lot in their QC subdivision project. Said
lot was registered in the name of Uy’s and TCT
was in their name
2. Afterwards, the Uys sold it to herein Respondent
Sps. Tan in 1985, TCT transferred to them
subsequently.
3. Afterwards, after several visits to their property,
Respondents found out the sad state of the
development of the property. There was no
infrastructure or utility systems as announced in
the approved plans and advertisement of the
subdivision project, and squatters occupy the
property and its surrounding areas.
4. Respondents then demanded Petitioners in a
letter dated 1995, to provide the promised
developments for the project and rid their property
of the squatters conformably with PD 957
5. Petitioner did not reply, hence, in 1996, they
complained before the HLURB Arbiter with the
same prayers.
a. HLURB Arbiter ruled IFO Respondents
b. Petitioner appealed to HLURB Board, but
the Arbiter was affirmed.
c. Petitioner appealed to OP, but affirmed
HLURB with modification that if they
cannot deliver the prayers, they should
pay back the Respondents with the
purchase price plus interests
6. Both parties appealed to CA. Respondents appeal
because the payment should at least be based on
fair market value and not purchase price.
Petitioners appeal is for obvious reasons, kasi
natalo parin sila.
a. CA modified OP decision, payment should
be based on fair market value.
7. Hence, this petition
Issue: W/N Respondent’s action has prescribed
Held: No.
Ratio:
Petitioners claim that the action has prescribed because
more than 10 years has lapsed since the sale in 1980 or
the subsequent sale in 1985 up to the filing of the case in
1996.
SC disagrees. While it is true that Art 1144 of NCC
provides that 10 years is the prescriptive period to which
an action should be brought upon, it must be counted
when the cause of action has arisen. Art 1144 says that an
action must be brought within ten years upon a written
contract, upon an obligation created by law, or upon a
judgment. If not on a written contract, it must be upon an
obligation created by law. According to PD 957, the
developer has the obligation to provide adequate utilities.
Citing Banco Filipino Savings v CA, a cause of action
arises when that which should not have been done is
done; or that which should have been done is not done.
The elements of cause of action are (1) right of the
applicant, (2) obligation of defendant to respect such right,
(3) act or omission of defendant that violates the
applicant’s right. It is only upon the happening of the last
element that a cause of action arises.
In this case, it was only when the Respondents demanded
in 1995 did the cause of action arise. Also in SSS v
Moonwalk, an obligor violates his obligation from the time
the obligee demands. Absent any demand thereto, the
obligor does not incur delay. As long as he is not in delay,
he cannot be guilty of some violation of the obligee’s
rights. As a result, the prescriptive period does not run until
demand is made.
Mariano v. Petron, G.R. No. 169438, 21 January 2010,
610 SCRA 487
Summary:
The Aure Group, owners of a parcel of land in
Tagaytay (“Property”), entered into a lease contract over
the Property with 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 contained an
assignment veto clause barring the parties from assigning
the lease without prior consent of the other.
Later, without notice to the Aure group, ESSO
Eastern sold ESSO Philippines to the Philippine National
Oil Corporation (“PNOC”). ESSO Philippines, whose
corporate name was successively changed to Petrophil
Corporation then to Petron Corporation (“Petron”), took
possession of the Property. It appears from the stipulation
of the parties during trial that the acquisition of ESSO
Philippines by PNOC included the acquisition of the
leasehold right over the Property.
Petitioner Mariano (“Petitioner”), who later bought
the Property from the Aure Group and obtained title thereto
under his name, sued Petron to rescind the lease contract
and recover possession of the Property. Among his
arguments was that the assignment veto clause in the
lease contract was violated when ESSO Eastern sold
ESSO Philippines to PNOC, thus assigning to PNOC its
lease on the Property, without seeking the Aure Group’s
prior consent.
Petron countered that the lease contract was not breached
because PNOC merely acquired ESSO Eastern’s shares
in ESSO Philippines, a separate corporate entity. The
underlying assumption of Petron’s assertion was that
ESSO Philippines (not ESSO Eastern) initially held the
leasehold right over the Property.
The Ruling of the Trial Court
In its Decision dated 30 May 2000, the trial court
ruled for petitioner, rescinded the
Contract, ordered Petron to vacate the Property, and
cancelled the annotation on petitioner’s title of Petron’s
lease.[16] The trial court ruled that ESSO Eastern’s sale to
PNOC of its interest in
ESSO Philippines included the assignment to PNOC of
ESSO Eastern’s lease over the Property, which, for lack of
the Aure Group’s consent, breached the Contract,
resulting in its termination. However, because the Aure
Group (and later petitioner) tolerated ESSO Philippines’
continued use of the Property by receiving rental
payments, the law on implied new lease governs the
relationship of the Aure Group (and later petitioner) and
Petron, creating for them an implied new lease terminating
on 21 December 1998 upon Petron’s receipt of petitioner’s
notice to vacate.[17]
Petron appealed to the Court of Appeals, distancing
itself from its admission in the Joint Motion that in buying
ESSO Philippines from ESSO Eastern, PNOC also
acquired ESSO Eastern’s leasehold right over the
Property. Petron again invoked its separate corporate
personality to distinguish itself from PNOC.
The Ruling of the Court of Appeals
In its Decision dated 29 October 2004, the Court of
Appeals found merit in Petron’s appeal, set aside the trial
court’s ruling, declared the Contract subsisting until 13
November 2058[18] and ordered petitioner to pay Petron
P300,000 as attorney’s fees. The Court of Appeals found
no reason to pierce ESSO Philippines’ corporate veil,
treating PNOC’s buy-out of ESSO Philippines as mere
change in ESSO Philippines’ stockholding. Hence, the
Court of Appeals rejected the trial court’s conclusion that
PNOC acquired the leasehold right over the Property.
Alternatively, the Court of Appeals found petitioner’s suit
barred by the four-year prescriptive period under Article
1389 and Article 1146 (1) of the Civil Code, reckoned from
PNOC’s buy-out
of ESSO Philippines on 23 December 1977 (for Article
1389) or the execution of the Contract on 13 November
1968[19] (for Article 1146 [1]).[20]
Petitioner sought reconsideration but the Court of
Appeals denied his motion in its Resolution of 26 August
2005.
Hence, this petition.
The Issue
The question is whether the Contract subsists
between petitioner and Petron.
The Ruling of the Court
We hold in the affirmative and thus sustain the
ruling of the Court of Appeals.
ESSO Eastern Assigned to PNOC its
Leasehold Right over the Property, Breaching the
Contract
PNOC’s buy-out of ESSO Philippines was total and
unconditional, leaving no residual rights to ESSO Eastern.
Logically, this change of ownership carried with it the
transfer to PNOC of any proprietary interest ESSO
Eastern may hold through ESSO Philippines, including
ESSO Eastern’s lease over the Property. This is the import
of Petron’s admission in the Joint Motion that by PNOC’s
buy-out of ESSO Philippines “[PNOC], x x x acquired
ownership of ESSO Standard Philippines, Inc., including
its leasehold right over the land in question, through
the acquisition of its shares of stocks.” As the Aure
Group gave no prior consent to the transaction between
ESSO Eastern and PNOC, ESSO Eastern violated the
Contract’s assignment veto clause.
Petron’s objection to this conclusion, sustained by
the Court of Appeals, is rooted on its reliance on its
separate corporate personality and on the unstated
assumption that ESSO Philippines (not ESSO Eastern)
initially held the leasehold right over the Property. Petron
is wrong on both counts.
Courts are loathe to pierce the fictive veil of
corporate personality, cognizant of the core doctrine in
corporation law vesting on corporations legal personality
distinct from their shareholders (individual or corporate)
thus facilitating the conduct of corporate business.
However, fiction gives way to reality when the corporate
personality is foisted to justify wrong, protect fraud, or
defend crime, thwarting the ends of justice.[21] The fiction
even holds lesser sway for subsidiary corporations whose
shares are wholly if not almost wholly owned by its parent
company. The structural and systems overlap inherent in
parent and subsidiary relations often render the subsidiary
as mere local branch, agency or adjunct of the foreign
parent corporation.[22]
Here, the facts compel the conclusion that ESSO
Philippines was a mere branch of ESSO Eastern in the
execution and breach of the Contract. First, by ESSO
Eastern’s admission in the Contract, it is “a foreign
corporation organized under the laws of the State of
Delaware, U.S.A., duly licensed to transact business in the
Philippines, and doing business therein under the
business name and style of ‘Esso Standard
Philippines’ x x x”. In effect, ESSO Eastern was ESSO
Philippines for all of ESSO Eastern’s Philippine business.
Second, the Contract was executed by ESSO
Eastern, not ESSO Philippines, as lessee, with the Aure
Group as lessor. ESSO Eastern leased the Property for
the use of ESSO Philippines, acting as ESSO Eastern’s
Philippine branch. Consistent with such status, ESSO
Philippines took possession of the Property after the
execution of the Contract. Thus, for purposes of the
Contract, ESSO Philippines was a mere alter ego of ESSO
Eastern.
The
Lessor’s
Continued
Acceptance
of
Lease Payments
Despite Breach
of
Contract
Amounted
to
Waiver
The breach of contract notwithstanding, we hold
that the Contract subsists. Contrary to the trial court’s
conclusion that ESSO Eastern’s violation of the
assignment veto clause extinguished the Contract,
replaced by a new implied lease with a monthly term,[23]
we hold that the breach merely gave rise to a cause of
action for the Aure Group to seek the lessee’s ejectment
as provided under Article 1673, paragraph 3 of the Civil
Code.[24] Although the records do not show that the Aure
Group was formally notified of ESSO Philippines’ sale to
PNOC, the successive changes in the lessee’s name
(from ESSO Philippines to Petrophil Corporation then to
Petron) suffice to alert the Aure Group of a likely change in
the personality of the lessee, which, for lack of the Aure
Group’s prior consent, was in obvious breach of the
Contract. Thus, the continued receipt of lease payments
by the Aure Group (and later by petitioner) despite the
contractual breach amounted to a waiver of their option to
eject the lessee.
Petitioner’s Suit Barred by Prescription
Petitioner’s waiver of Petron’s contractual breach
was compounded by his long inaction to seek judicial
redress. Petitioner filed his complaint nearly 22 years after
PNOC acquired the leasehold rights to the Property and
almost six years after petitioner bought the Property from
the Aure Group. The more than two decades lapse puts
this case well within the territory of the
10 year prescriptive bar to suits based upon a written
contract under Article 1144 (1) of the Civil Code.[25]
WHEREFORE, we DENY the petition. The
Decision dated 29 October 2004 and the Resolution dated
26 August 2005 of the Court of Appeals areAFFIRMED.
SO ORDERED.
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