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    (Digest) PNB Vs CFI of Rizal

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    Wilfred Martinez
    This case involves a dispute over ownership of buildings and machinery installed on leased land between landowners and Philippine National Bank (PNB). The landowners leased land to Philippine Blooming Mills (PBM) for 20 years, extendable if PBM extended its corporate term. PBM installed buildings and machinery but did not renew the lease or extend its corporate term. When PBM dissolved, the landowners sued to cancel PNB's mortgage on the structures, as the lease expired. The court ruled in favor of the landowners, finding the lease expired when PBM dissolved without extending, so the structures automatically belonged to the landowners per the lease terms. PNB failed to remove the structures before the lease expired.

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    (Digest) PNB Vs CFI of Rizal

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    Wilfred Martinez
    381 views2 pages
    This case involves a dispute over ownership of buildings and machinery installed on leased land between landowners and Philippine National Bank (PNB). The landowners leased land to Philippine Blooming Mills (PBM) for 20 years, extendable if PBM extended its corporate term. PBM installed buildings and machinery but did not renew the lease or extend its corporate term. When PBM dissolved, the landowners sued to cancel PNB's mortgage on the structures, as the lease expired. The court ruled in favor of the landowners, finding the lease expired when PBM dissolved without extending, so the structures automatically belonged to the landowners per the lease terms. PNB failed to remove the structures before the lease expired.

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    [Digest] PNB vs CFI of Rizal

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    This case involves a dispute over ownership of buildings and machinery installed on leased land between landowners and Philippine National Bank (PNB). The landowners leased land to Philippine Blooming Mills (PBM) for 20 years, extendable if PBM extended its corporate term. PBM installed buildings and machinery but did not renew the lease or extend its corporate term. When PBM dissolved, the landowners sued to cancel PNB's mortgage on the structures, as the lease expired. The court ruled in favor of the landowners, finding the lease expired when PBM dissolved without extending, so the structures automatically belonged to the landowners per the lease terms. PNB failed to remove the structures before the lease expired.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    381 views2 pages

    (Digest) PNB Vs CFI of Rizal

    Uploaded by

    Wilfred Martinez
    This case involves a dispute over ownership of buildings and machinery installed on leased land between landowners and Philippine National Bank (PNB). The landowners leased land to Philippine Blooming Mills (PBM) for 20 years, extendable if PBM extended its corporate term. PBM installed buildings and machinery but did not renew the lease or extend its corporate term. When PBM dissolved, the landowners sued to cancel PNB's mortgage on the structures, as the lease expired. The court ruled in favor of the landowners, finding the lease expired when PBM dissolved without extending, so the structures automatically belonged to the landowners per the lease terms. PNB failed to remove the structures before the lease expired.

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    © All Rights Reserved
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    of 2

    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 PEK
    AND VICTORIA CHING GENG TY @ VICTORIA CHENG GENG TY, and THE REGISTER OF
    DEEDS OF RIZAL, PASIG, METRO MANILA AND/OR HIS DEPUTIES AND AGENTS,
    respondents.

    FACTS:
    Chung Siong Pek, Bonifacio Chung Siong Pek, Victoria Ching Geng, and Victoria
    Cheng Geng Ty etc. (lets call them Landowners) are the owners of 3 parcels of land in
    Pasig City.

    Philippine Blooming Mills, Co., Inc. (PBM) is a corporation formed in 1952 and, based
    on its Articles of Incorporation, it only has a corporate life of 25 years or until 1977 (in
    other words PBM was “born” in 1952 so it will “die” in 1977).

    In 1954, the Landowners rented out their lands PBM for a period of 20 years (1974)
    extendable for another 20 years if the corporate term of PBM is also extended.

    PBM then installed a lot of expensive buildings and machineries on the land.

    Under the lease contract, if PBM does not renew the lease contract and does not
    remove the buildings and machineries it installed, the same will automatically belong to
    the Landowners.

    In 1963, while PBM was renting the land, it obtained a loan from the Philippine National
    Bank (PNB). As security for the loan, PBM did 2 things:

    1. PBM executed in favor of PNB a real estate mortgage for all the buildings
    and machineries it constructed and installed on the land of the
    Landowners. The real estate mortgage was written and annotated in
    the back of the title of the land.

    2. PBM assigned all of its rights and obligations to PNB under the lease
    contract. This means that if PBM does not pay its loan, PNB will take over
    all of the buildings and machineries PBM installed on the land for
    purposes of selling them to pay for the loan.

    PBM failed to pay its loan but PNB never removed the buildings and machineries
    installed on the land.

    On October 7, 1981, 7 years after the expiration of the lease contract, the
    Landowners filed a case in the Court of First Instance of Rizal (CFI of Rizal) asking for
    the written and annotated real estate mortgages in their title to be erased. The
    Landowners told the court the lease contract entered into between PBM and them had
    already expired 7 years ago because PBM did not renew their lease contract nor did
    PBM extend its corporate life of 25 years which ended 4 years ago. Since the PBM
    failed to remove its improvements on the leased premises before the expiration of
    the contract of lease, such improvements will now automatically belong to the
    Landowners.

    On April 22, 1982, CFI of Rizal issued an order directing the erasure of the writings and
    annotations on Landowners' certificates of title.

    ISSUE: Whether the cancellation of the entries on respondent's certificates of title is


    valid and proper. (Yes. It is proper. The Supreme Court ruled sided with the
    Landowners)

    The contract of lease expressly provides that the term of the lease shall be 20 years
    from the execution of the contract but can be extended for another period of 20 years at
    the option of PBM should the corporate term be extended. Clearly, the option of PBM
    to extend the lease for another 20 years can be done only if PBM extends its
    corporate life. 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 started on March 1, 1954 and ended on March 1,
    1974. PBM as a corporation had a corporate life of only 25 years which ended on
    January 19, 1977 which PBM did not extend. Upon the expiration of the period
    fixed in the Articles of Incorporation, and the same is not extended, the
    corporation is dissolved automatically.

    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, PBM could no longer
    extend the lease. From then on, the Landowners can exercise their right under the
    lease contract to terminate the lease. Since PBM did not remove the buildings and
    the machinery in the land, the provisions in the lease contract saying that they
    will automatically be owned by the Landowners will apply.

    Since PBM failed to pay its loan to PNB, PNB had the right to remove and sell the
    buildings and machineries. With this, PNB is at fault for not removing the buildings
    and machineries BEFORE the lease contract has expired. Since PNB did not do
    this, then the buildings and machineries will now go to the Landowners as per the
    lease contract.

    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.

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