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Lease Obligations of Successor Agencies

1) In 1976, the Cultural Center of the Philippines leased land to Philippine International Corporation for 25 years, renewable for another 25 years. 2) In 1987, the land was transferred to the Asset Privatization Trust to be administered and disposed. 3) In 2000, the Privatization and Management Office inherited the Asset Privatization Trust's powers and now holds the land. 4) The Supreme Court ruled that the Privatization and Management Office is bound by the original lease agreement as the successor agency to the Asset Privatization Trust.

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150 views1 page

Lease Obligations of Successor Agencies

1) In 1976, the Cultural Center of the Philippines leased land to Philippine International Corporation for 25 years, renewable for another 25 years. 2) In 1987, the land was transferred to the Asset Privatization Trust to be administered and disposed. 3) In 2000, the Privatization and Management Office inherited the Asset Privatization Trust's powers and now holds the land. 4) The Supreme Court ruled that the Privatization and Management Office is bound by the original lease agreement as the successor agency to the Asset Privatization Trust.

Uploaded by

Rob Gozun
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TICKLER: Obligation to respect the lease contract as the former's successor agency.

DOCTRINE: When the statutory term of a non-incorporated agency expires, the powers, duties
and functions, as well as the assets and liabilities of that agency, revert to and are re-assumed
by the Republic of the Philippines (Republic)

REPUBLIC OF THE PHILIPPINES THROUGH ITS TRUSTEE, THE PRIVATIZATION AND


MANAGEMENT OFFICE, Petitioner, v. PHILIPPINE INTERNATIONAL CORPORATION, G.R.
No. 181984, March 20, 2017

Ponente, C.J. Sereno

FACTS:

In 1976, the Cultural Center of the Philippines (CCP) and respondent PIC entered into a Lease Agreement. In
that agreement, CCP leased to PIC a parcel of land located within the CCP Complex in Pasay City, including
the building erected on a portion thereon (subject property).The Lease Agreement stipulated, among others,
“The term of the lease shall be twenty five (25) years from and after the date of this Contract, renewable
for a like period under the same terms and conditions at the option of the LESSEE. The LESSEE may
however terminate this lease at any time by giving the LESSOR sixty (60) days notice in advance.” Eight
years later, CCP alienated the subject property in favor of Philippine National Bank (PNB) through a
Deed of Dacion in Payment with Lease. On 8 December 1986, Proclamation No. 50 was issued. It launched
a program for the privatization of certain government corporations and/or assets and created the Committee on
Privatization and the Asset Privatization Trust (APT). Subsequently, on 27 February 1987, PNB assigned
the subject property to the national government under a Deed of Transfer pursuant to Proclamation No.
50. On the same day, the national government executed a Trust Agreement with APT, whereby the former
conveyed the leased premises in trust to the latter for administration and disposition. PTC then requested PNB
to annotate the former's leasehold rights on TCT No. 90816. However, PNB refused the request in view of the
transfer of the subject property to APT and the latter's insistence that it was not bound by the Lease Agreement
between CCP and PIC. By virtue of Executive Order (E.O.) No. 323 dated 6 December 2000, the
Privatization and Management Office (PMO) was created. It was mandated to take over the
assets of APT and inherit the latter's powers and functions. Thus, PMO now holds the subject
property on behalf of the national government. PMO informed PIC that its request to
exercise its option to renew the lease had been denied.

ISSUE:

Whether or not PMO is bound by the Lease Agreement.

HELD:

Yes. PMO is the successor agency of APT. Consequently, it assumes the existing obligations of
APT upon the termination of the latter's existence. The Court explained that when the statutory
term of a non-incorporated agency expires, the powers, duties and functions, as well as the
assets and liabilities of that agency, revert to and are re-assumed by the Republic of the
Philippines (Republic). This rule holds in the absence of special provisions of law specifying some
other manner of disposition - the devolution or transmission of such powers, duties, and
functions - to some other identified successor agency or instrumentality of the Republic. On the
matter of the alleged prejudice to the government caused by the unconscionably low rental rates
and for a period that amounts to perpetuity, we find these allegations to be premature and
without clear basis.

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