PHILIPPINE NATIONAL BANK, PETITIONER, VS. THE COURT OF FIRST INSTANCE OF RIZAL, PASIG – BRANCH XXI, PRESIDED BY JUDGE GREGORIO G. PINEDA, CHUNG SIONG PEK @ BONIFACIO CHUNG SIONG…

This is a petition
for certiorari under Rule 65 of the Rules of Court seeking to annul and
set aside the orders of respondent Court of First Instance of Rizal, Pasig,
Branch 21 (now Regional Trial Court) dated April 22,1982, September 14, 1982
and January 12, 1983 in LRC Case No. R-2744 on the ground that they had been
issued without or in excess of jurisdiction and with grave abuse of discretion.

The antecedent facts of this case are as follows:

Private respondents are the registered owners of three parcels of
land in Pasig, Metro Manila covered by OCT No. 853, TCT Nos. 32843 and 32897 of the Registry of Deeds of Rizal.

On March 1, 1954, private respondents entered into a contract of
lease with Philippine Blooming Mills, Co., Inc., (PBM for brevity) whereby the
latter shall lease the aforementioned parcels of land as factory site. PBM was duly organized and incorporated on
January 19, 1952 with a corporate term of twenty-five (25) years. This leasehold right of PBM covering the
parcels of land was duly annotated at the back of the above stated certificates
of title as Entry No. 9367/T-No. 32843.

The contract of lease provides that the term of the lease is for
twenty years beginning from the date of the contract and “is extendable
for another term of twenty years at the option of the LESSEE should its term of
existence be extended in accordance with law.” (p. 76, Rollo). The contract also states that the lessee
agrees to “use the property as factory site and for that purpose to
construct whatever buildings or improvements may be necessary or convenient
and/or x x x for any purpose it may deem fit; and before the termination of the
lease to remove all such buildings and improvements” (pp. 76-77 Rollo).

In accordance with the contract, PBM introduced on the land,
buildings, machineries and other useful improvements. These constructions and improvements were registered with the
Registry of Deeds of Rizal and annotated at the back of the respondents’
certificates of title as Entry
No. 85213/T-No. 43338.

On October 11, 1963, PBM executed in favor of Philippine National
Bank (PNB for brevity) petitioner herein, a
deed of assignment, conveying and transferring all its rights and
interests under the contract of lease which it executed with private
respondents. The assignment was for and
in consideration of the loans granted by PNB to PBM. The deed of assignment was registered and annotated at the back
of the private respondents’ certificates of title as Entry No. 85215/T-No.
32843.

On November 6, 1963 and December 23, 1963 respectively, PBM
executed in favor of PNB a real estate mortgage for a loan of P100,000.00
and an addendum to real estate mortgage for another loan of P1,590,000.00,
covering all the improvements constructed by PBM on the leased premises. These mortgages were registered and
annotated at the back of respondents’ certificates as Entry No. 85214/T-No.
43338 and Entry No. 870971/T-No. 32843, respectively.

PBM filed a petition for registration of improvements in the
titles of real property owned by private respondents docketed as Case No. 6530.

On October 7, 1981, private respondents filed a motion in the
same proceedings which was given a different case number to wit, LRC Case No.
R-2744, because of the payment of filing fees for the motion. The motion sought to cancel the annotations
on respondents’ certificates of title pertaining to the assignment by PBM to
PNB of the former’s leasehold rights, inclusion of improvements and the real
estate mortgages made by PBM in favor of PNB, on the ground that the contract
of lease entered into between PBM and respondents-movants had already expired
by the failure of PBM and/or its assignee to exercise the option to renew the
second 20-year lease commencing on March 1, 1974 and also by the failure of PBM
to extend its corporate existence in accordance with law. The motion also states that since PBM failed
to remove its improvements on the leased premises before the expiration of the
contract of lease, such improvements shall accrue to respondents as owners of
the land.

On April 22, 1982, respondent court issued an order directing the
cancellation of the inscriptions on respondents’ certificates of title. The dispositive portion of the order
provides:

“WHEREFORE, the Register of Deeds having jurisdiction over the movant’s land
Certificates of Title Nos. 853, 32843 and 32897 is hereby ordered, upon the
payment of the corresponding fees, to
cancel therein memoranda/inscriptions/entries Nos. 85213/T-No. 43338,
85215/T-No. 32843, 85214/T-No. 43338 and 87097/T-No. 32843.

“SO ORDERED.”
(pp. 147-148, Rollo)

Petitioner PNB filed a motion for reconsideration of the above
order of the respondent court but the latter denied it on June 28, 1982.

On August 25, 1982, private respondents filed a motion for entry
of final judgment and issuance of a writ of execution of the order of April 22,
1982.

On September 14, 1982, respondent court granted the aforesaid
motion for entry of final judgment and ordered to the Register of Deeds of
Pasig, Rizal to cancel the entries on respondents’ certificates of title stated
in the order of April 22, 1982.

Petitioner PNB filed an omnibus motion to set aside the entry of
judgment as ordered by the respondent court on the ground that it has no prior
notice or knowledge of the order of respondent court dated June 28, 1982 which
denied its motion for reconsideration of the order of April 22, 1982 and that
while there was a certification from the Bureau of Posts that three registry
notices were sent to petitioner’s counsel, there was no allegation or
certification whatsoever that said notices were actually received by the
addressee.

On January 12,1983, the
respondent court denied the omnibus motion.

Hence, this petition.

Petitioner alleges that
respondent court acted capriciously and arbitrarily in issuing the orders of September 14, 1982 and January 12,1983 which
considered its previous order of April 22, 1982 as having become final on the
ground that it had no notice or knowledge that the order of June 28, 1982
denying its motion for
reconsideration was issued; that the notices of registered mail allegedly
containing the order of June 28, 1982 were not received by petitioner’s counsel of record, and that the
certification of the Bureau of Posts refers only to the fact that registry notices were sent, and not
to the fact that the notices were actually received by the addressee.

In resolving this matter,
the respondent court stated in the questioned order of January 12, 1983 as
follows:

“The respondent PNB filed a motion of May 20, 1982 to set
aside the Order of April 22, 1982. This
was denied by the Order of June 28, 1982. Then the movants filed a motion of August 25, 1982 for entry of
judgment, based on the postmaster’s certification that not only one but three
notices of the registered mail containing a copy of the order of June 28, 1982
was sent to respondent PNB’s counsel at the PNB Building at Escolta, Manila
which is his address of record in this case. Consequently the entry of judgment Order of September 14,1982.

^“x x x.

“The respondent PNB’s counsel at the hearing of said incidents on
October 12, 1982 admitted that the aforesaid registered notices could have been
received by PNB’s regular Receiving Section at the PNB Building at the Escolta
but could not have been forwarded by said Receiving Section to said counsel’s
Litigation and Collection Division, Legal Department at an upper floor of the
same building. Thus the presumption
that official duty was regularly performed by the postmaster was not overcome,
as most recently reiterated by the Supreme Court in Feraren vs. Santos
promulgated on April 27,1982, 113 SCRA 707 x x x.” (p. 195, Rollo)

Section 8 of Rule 13 of the Rules of Court, as amended, provides
that service by registered mail is complete upon actual receipt by the
addressee; but if he fails to claim his mail from the post office within five (5)
days from the date of first notice of the postmaster, service shall take effect
at the expiration of such time. The
fair and just application of that exception depends upon the conclusive proof
that the first notice was sent by the postmaster to the addressee. The best evidence of that fact would be the
certification from the postmaster (Barrameda v. Castillo, L-27211, July 6,
1977, 78 SCRA 1).

In the instant case, the
respondent court found that the postmaster’s certification stated that
three (3) notices of the registered mail which contained the order of June 28,
1982 denying the motion for reconsideration of the order of April 22, 1982, were sent to petitioner PNB’s counsel at Escolta, Manila which
is the address stated in the record of the case. The factual findings of the trial court bear great weight and is
binding upon this Court. Hence, as
between the denial of the petitioners’ counsel that he received the notice of
the registered mail and the postmaster’s certification that said notices were
sent to him, the postmaster’s claim
should prevail. The postmaster
has the official duty to send notices of registered mail and the presumption is
that official duty was regularly performed (Aportadera, Sr. v. Court of Appeals, G.R. No. 41358, March 16,1988,158 SCRA 695).

Petitioner alleges that it is not the respondent court but the
Securities and Exchange Commission which has jurisdiction over the private
respondents’ motion, which raised as issue the corporate existence of PBM. Petitioner further submits that the
respondent court committed grave abuse of discretion in ordering the
cancellation of entries in the certificates of title of respondents on the
following grounds: 1) the motion for
cancellation would amount to a collateral attack upon the due incorporation of
PBM which cannot be done legally, 2) the contract of lease between PBM as
petitioner’s assignor and private respondents did not expire since PBM
exercised its option to renew the lease with the acquiescence of private
respondents, and 3) respondent court’s ruling that ownership over the
improvements passed from PBM to private respondents upon the expiration of
lease violates the law and the contract between the parties.

Even if We were to set aside the questioned orders directing the
entry of finality of the order cancelling entries in the titles, petitioner’s
case must still fail on the merits.

Private respondent’s motion with the respondent court was for the
cancellation of the entries on their titles on the ground that the contract of
lease executed between them and PBM had expired. This action is civil in nature
and is within the jurisdiction of the respondent court. The circumstance
that PBM as one of the contracting parties is a corporation whose corporate
term had expired and which fact was made the basis for the termination of the
lease is not sufficient to confer jurisdiction on the Securities and Exchange
Commission over the case. Presidential
Decree No. 902-A, as amended,
enumerates the cases over which the SEC has exclusive jurisdiction and
authority to resolve. The case at bar
is not covered by the
enumeration.

Anent the issue of whether the cancellation of the entries on
respondent’s certificates of title is valid and proper, We find that the
respondent court did not act in excess of its jurisdiction, in ordering the
same.

The contract of lease expressly provides that the term of the
lease shall be twenty years from the execution of the contract but can be
extended for another period of twenty years at the option of
the lessee should the corporate term be extended in accordance with law. Clearly, the option of the lessee to extend the lease for another period of twenty
years can be exercised only if the lessee as corporation renews or extends its
corporate term of existence in accordance
with the Corporation Code which is the applicable law. Contracts are to be interpreted according to
their literal meaning and should not be interpreted beyond their obvious
intendment. Thus, in the instant case, the initial term of
the contract of lease which commenced on March 1, 1954 ended on March 1, 1974. PBM as lessee continued to occupy the leased
premises beyond that date with the acquiescence and consent of the respondents
as lessor. Records show however, that
PBM as a corporation had a corporate
life of only twenty-five (25) years which ended on January 19,
1977. It should be noted however that
PBM allowed its corporate term to expire without complying with the
requirements provided by law for the
extension of its corporate term of existence.

Section 11 of Corporation Code provides that a corporation shall
exist for a period not exceeding fifty (50) years from the date of
incorporation unless sooner dissolved or unless said period is extended. Upon the expiration of the period fixed in
the articles of incorporation in the absence of compliance with the legal
requisites for the extension of the period, the corporation ceases to exist and
is dissolved ipso facto (16 Fletcher 671 cited by Aguedo F.
Agbayani, Commercial Laws of the Philippines,
Vol. 3, 1988 Edition p. 617). When the
period of corporate life expires, the corporation ceases to be a body corporate
for the purpose of continuing the business for which it was organized. But it shall nevertheless be continued as a
body corporate for three years after the time when it would have been so
dissolved, for the purpose of prosecuting and defending suits by or against it
and of enabling it gradually to settle and close its affairs, to dispose of and
convey its property and to divide its assets (Sec. 122, Corporation Code). There is no need for the institution of a
proceeding for quo warranto to determine the time or date of the
dissolution of a corporation because the period of corporate existence is
provided in the articles of incorporation. When such period expires and without any extension having been made
pursuant to law, the corporation is dissolve automatically insofar as the
continuation of its business is concerned. The quo warranto proceeding under Rule 66 of the Rules of
Court, as amended, may be instituted by the Solicitor General only for the
involuntary dissolution of a corporation on the following grounds: a) when the corporation has offended against
a provision of an Act for its creation or renewal; b) when it has forfeited its
privileges and franchises by non-user; c) when it has committed or omitted an
act which amounts to a surrender of its corporate rights, privileges or
franchises; d) when it has misused a right, privilege or franchise conferred
upon it by law, or when it has exercised a right, privilege or franchise in
contravention of law. Hence, there is
no need for the SEC to make an involuntary dissolution of a corporation whose
corporate term had ended because its articles of incorporation had in effect
expired by its own limitation.

Considering the foregoing in relation to the contract of lease
between the parties herein, when PBM’s corporate life ended on January 19, 1977
and its 3-year period for winding up and liquidation expired on January
19,1980, the option of extending the lease was likewise terminated on January
19, 1977 because PBM failed to renew or extend its corporate life in accordance
with law. From then on, the
respondents can exercise their right to terminate the lease pursuant to the
stipulations in the contract.

We now come to the question of the ownership over the
improvements constructed by PBM over the leased premises, which improvements
were mortgaged in favor of PNB, petitioner herein.

The rights of the lessor and the lessee over the improvements
which the latter constructed on the leased premises is governed by Article 1678
of the Civil Code which provides:

“Art. 1678. If the lessee makes, in good faith, useful
improvements which are suitable to the use for which the lease is intended,
without altering the form or substance of the porperty leased, the lessor upon
the termination of the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the
lessor refuse to reimburse said amount, the lessee may remove the improvements,
even though the principal thing may suffer damage thereby. He shall not however, cause any more
impairment upon the property leased than is necessary. x x
x”.

The aforequoted provision gives the lessee the right to remove
the improvements if the lessor chooses not to pay one-half of the value
thereof. However, in the case at bar,
the law will not apply because the parties herein have stipulated in the
contract their own terms and conditions concerning the improvements, to wit,
that the lessee, namely PBM, bound itself to remove the improvements before the
termination of the lease. Petitioner
PNB, as assignee of PBM succeeded to the obligation of the latter under the
contract of lease. It could not possess
rights more than what PBM had as lessee under the contract. Hence, petitioner was duty bound to remove
the improvements before the expiration of the period of lease as what we have
already discussed in the preceding paragraphs. Its failure to do so when the lease was terminated was
tantamount to a waiver of its rights and interests over the improvements on the
leased premises.

In view of the foregoing, this Court finds that respondent court
did not act with grave abuse of discretion in directing the cancellation of
entries on private respondents’ certificates of title as set forth in the
questioned order.

ACCORDINGLY, the petition is DISMISSED and the assailed
orders of respondent court dated
April 22, 1982, September 14, 1982 and January 12, 1983 are AFFIRMED.

SO ORDERED.

Cruz, (Chairman), Griño-Aquino, and
Bellosillo, JJ., concur.