Mariano v. Petron Corporation
REITERATIONFacts
The Antecedents: On November 5, 1968, the Aure Group leased a parcel of land to ESSO Standard Eastern, Inc. (ESSO Eastern) for 90 years. The contract contained an assignment veto clause, prohibiting assignment without prior consent, except to certain corporations. On December 23, 1977, ESSO Eastern sold ESSO Standard Philippines, Inc. (ESSO Philippines) to Philippine National Oil Corporation (PNOC). ESSO Philippines was later renamed Petrophil Corporation and then Petron Corporation (Petron). The Aure Group was allegedly not informed of the sale. Petitioner Romeo D. Mariano bought the property on November 18, 1993, with an annotation of ESSO Eastern's lease. On December 17, 1998, petitioner sent Petron a notice to vacate, asserting that Presidential Decree No. 471 reduced the lease duration to 25 years, ending November 13, 1993. Petron remained on the property. Procedural History: Petitioner filed a complaint to rescind the contract and recover possession, arguing PD 471 terminated the lease or that the sale to PNOC constituted an assignment without consent, breaching the contract. Petron countered that PNOC's acquisition of ESSO Philippines' shares did not transfer the leasehold right and that the suit was barred by prescription. The trial court ruled for petitioner, rescinding the contract and ordering Petron to vacate, finding an implied new lease. The Court of Appeals reversed, declaring the contract subsisting until 2058 and ordering petitioner to pay attorney's fees, finding no breach due to separate corporate personalities and that the suit was prescribed. The Petition: Petitioner sought review of the Court of Appeals' decision.
Issue(s)
Whether the Contract subsists between petitioner and Petron. Whether the sale of ESSO Philippines to PNOC constituted an assignment of the leasehold right without the lessors' consent, thereby breaching the Contract. Whether the lessors' continued acceptance of lease payments despite the alleged breach constituted a waiver. Whether petitioner's suit to rescind the contract was barred by prescription.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the Contract subsists between petitioner and Petron, but petitioner's suit was barred by prescription, and the lessors' continued acceptance of lease payments constituted a waiver of their right to eject the lessee.
Ratio Decidendi
On whether the Contract subsists: The Court held that the Contract subsists. While the sale of ESSO Philippines to PNOC, which included the leasehold right, was an assignment without prior consent, thus breaching the Contract, the lessors' continued acceptance of lease payments despite this breach amounted to a waiver of their option to eject the lessee. The Court reasoned that the breach gave rise to a cause of action for ejectment under Article 1673, paragraph 3 of the Civil Code, but the waiver extinguished this option. The Court also noted that the successive changes in the lessee's corporate name should have alerted the lessors to a potential change in lessee personality. On whether the sale constituted an assignment breaching the Contract: The Court found that PNOC's buy-out of ESSO Philippines was total and unconditional, carrying with it the transfer of ESSO Eastern's leasehold right over the Property. This was supported by Petron's admission in the Joint Motion. The Court pierced the corporate veil of ESSO Philippines, deeming it a mere alter ego or branch of ESSO Eastern for purposes of the Contract, given that ESSO Eastern was licensed to do business in the Philippines under the name ESSO Standard Philippines. Therefore, the assignment to PNOC without the Aure Group's prior consent breached the Contract's assignment veto clause. On whether the lessors' continued acceptance of lease payments amounted to a waiver: The Court held that the lessors' continued receipt of lease payments, despite the contractual breach, constituted a waiver of their right to eject the lessee. The Court reasoned that this acceptance, coupled with the lessors' inaction, effectively waived their option to terminate the lease based on the breach. This waiver meant the Contract did not automatically terminate but remained subsisting, albeit with the lessors having waived their right to seek rescission on the ground of the assignment breach. On whether petitioner's suit was barred by prescription: The Court ruled that petitioner's suit was barred by prescription. The Court found that petitioner filed his complaint nearly 22 years after PNOC acquired the leasehold rights and almost six years after he bought the property. This prolonged inaction fell within the 10-year prescriptive period for suits based on a written contract under Article 1144(1) of the Civil Code. The Court emphasized that the waiver of the breach was compounded by the long delay in seeking judicial redress, making the claim stale.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' decision, holding that while the assignment of the leasehold right without prior consent constituted a breach, the lessors' continued acceptance of lease payments amounted to a waiver of their right to eject the lessee. Furthermore, the petition was barred by prescription.