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SUPREMECOURTREPORTSANNOTATED
obvious intendment.Clearly,theoptionofthelesseetoextendthe
leaseforanotherperiodoftwentyyearscanbeexercisedonlyifthe
lessee as corporation renews or extends its corporate term of
existenceinaccor
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*FIRSTDIVISION.
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dissolution
of a corporation
under a quo warranto
proceedings.The quo warranto proceeding under Rule 66 of the
Rules of Court, as amended, may be instituted by the Solicitor
Generalonlyfortheinvoluntarydissolutionofacorporationonthe
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 nonuser; c) when it has
committed or omitted an act which amounts to a surrender of its
corporate rights, privilege or franchises; d) when it has misused a
right, privileges or franchise conferred upon it by law, or when it
hasexercisedaright,privilegeorfranchiseincontraventionoflaw.
PETITIONforcertioraritoreviewtheordersofthethen
CourtofFirstInstanceofPasig,MetroManila,Br.21.
ThefactsarestatedintheopinionoftheCourt.
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Thecontractofleaseprovidesthatthetermoftheleaseis
fortwentyyearsbeginningfromthedateofthecontractand
"isextendableforanothertermoftwentyyearsattheoption
oftheLESSEEshoulditstermofexistencebeextendedin
accordancewithlaw."(p.76,Rollo).Thecontractalsostates
that the lessee agrees to "use the property as factory site
and for that purpose to construct whatever buildings or
improvementsmaybenecessaryorconvenientand/orxxx
foranypurposeitmaydeemfit;andbeforethetermination
oftheleasetoremoveallsuchbuildingsandimprovements"
(pp.7677Rollo).
Inaccordancewiththecontract,PBMintroducedonthe
land, buildings, machineries and other useful
improvements.Theseconstructionsandimprovementswere
registeredwiththeRegistryofDeedsofRizalandannotated
atthebackoftherespondents'certificatesoftitleasEntry
No.85213/TNo.43338.
On October 11, 1963, PBM executed in favor of
Philippine National Bank (PNB for brevity), petitioner
herein,adeedofassignment,conveyingandtransferringall
itsrightsandinterestsunderthecontractofleasewhichit
executedwithprivate
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OnOctober7,1981,privaterespondentsfiledamotionin
the same proceedings which was given a different case
number to wit, LRC Case No. R2744, because of the
paymentoffilingfeesforthemotion.Themotionsoughtto
cancel the annotations on respondents' certificates of title
pertaining to the assignment by PBM to PNB of the
former'sleaseholdrights,inclusionofimprovementsandthe
realestatemortgagesmadebyPBMinfavorofPNB,onthe
groundthatthecontractofleaseenteredintobetweenPBM
and respondentsmovants had already expired by the
failureofPBMand/oritsassigneetoexercisetheoptionto
renew the second 20year lease commencing on March 1,
1974andalsobythefailureofPBMtoextenditscorporate
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
ownersoftheland,
On April 22,1982, respondent court issued an order
directingthecancellationoftheinscriptionsonrespondents'
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/TNo.
43338,
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SUPREMECOURTREPORTSANNOTATED
Philippine National Bank vs. CFI of Rizal, Pasig, Br. XXI
85215/TNo.32843,85214/TNo.43338and87097/TNo.32843.
"SOORDERED."(pp.147148,Rollo)
respondents'certificatesoftitlestatedintheorderofApril
22,1982.
PetitionerPNBfiledanomnibusmotiontosetasidethe
entryofjudgmentasorderedbytherespondentcourtonthe
groundthatithasnopriornoticeorknowledgeoftheorder
of respondent court dated June 28, 1982 which denied its
motionforreconsiderationoftheorderofApril22,1982and
thatwhiletherewasacertificationfromtheBureauofPosts
thatthreeregistrynoticesweresenttopetitioner'scounsel,
therewasnoallegationorcertificationwhatsoeverthatsaid
noticeswereactuallyreceivedbytheaddressee.
On January 12, 1983, the respondent court denied the
omnibusmotion.
Hence,thispetition.
Petitioner alleges that respondent court acted
capriciously and arbitrarily in issuing the orders of
September14,1982andJanuary12,1983whichconsidered
itspreviousorderofApril22,1982ashavingbecomefinal
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
thatregistrynoticesweresent,andnottothefactthatthe
noticeswereactuallyreceivedbytheaddressee.
In resolving this matter, the respondent court stated in
thequestionedorderofJanuary12,1983asfollows:
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yearsattheoptionofthelesseeshouldthecorporateterm
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
applicablelaw.Contractsaretobeinterpretedaccordingto
theirliteralmeaningandshouldnotbeinterpretedbeyond
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 twentyfive (25) years which
endedonJanuary19,1977.Itshouldbenotedhoweverthat
PBMalloweditscorporatetermtoexpirewithoutcomplying
withtherequirementsprovidedbylawfortheextensionof
itscorporatetermofexistence.
Section 11 of Corporation Code provides that a
corporation shall exist for a period not exceeding fifty (50)
yearsfromthedateofincorporationunlesssoonerdissolved
orunlesssaidperiodisextended.Upontheexpirationofthe
periodfixedinthearticlesofincorporationintheabsenceof
compliancewiththelegalrequisitesfortheextensionofthe
period,thecorporationceasestoexistandisdissolvedipso
facto (16 Fletcher 671 cited by Aguedo F. Agbayani,
Commercial Laws of the Philippines,Vol.3,1988Editionp.
617). When the period of corporate life expires, the
corporationceasestobeabodycorporateforthepurposeof
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,forthepurposeofprosecutinganddefendingsuits
by or against it and of enabling it gradually to settle and
closeitsaffairs,todisposeofandconveyitspropertyandto
divide its assets (Sec. 122, Corporation Code). There is no
needfortheinstitutionofaproceedingforquo warrantoto
determinethetimeordateofthedissolutionofacorporation
becausetheperiodofcorporateexistenceisprovidedinthe
articles of incorporation. When such period expires and
withoutanyextensionhavingbeenmade
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thereby.Heshall
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