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THIRD DIVISION

[G.R. No. 143263.  January 29, 2004]

TALA REALTY SERVICES CORPORATION, petitioner, vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

At bar is a petition for review on certiorari challenging the Decision[1] dated July 23, 1999 of the Court of Appeals and its Resolution[2] dated May 16, 2000 in CA-G.R. SP No. 47943 which affirmed the Decision[3] of the Regional Trial Court (RTC), Branch 272, Marikina City in SCA Case No. 95-56-Mk, entitled “Tala Realty Services Corporation vs. Banco Filipino Savings and Mortgage Bank.

Sometime in 1979, Banco Filipino Savings and Mortgage Bank (Banco Filipino), respondent, had to unload some of its branch sites since it has reached its allowable limit under Section 25(a) and 34 of Republic Act 337, as amended, otherwise known as the General Banking Act.  Under this law, a bank may purchase, hold and convey real estate as necessary for its accommodation in the transaction of its business, provided, that the total investment in such real estate and improvements thereof, including bank equipment, shall not exceed 50% of its net worth.

Thus, the major stockholders of Banco Filipino formed a corporation known as TALA Realty Services Corporation, herein petitioner.  TALA stands for the names of Banco Filipino’s four major stockholders, namely, Antonio Tiu, Tomas Aguirre, Nancy Lim and Pedro Aguirre.  TALA then would purchase the existing bank sites of Banco Filipino and lease them back to the latter.

On August 25, 1981, respondent bank executed in favor of petitioner TALA eleven (11) deeds of sale transferring to the latter its branch sites in (1) Urdaneta, Pangasinan, (2) Malabon, (3) Plaza Cervantes, (4) Davao, (5) Iloilo, (6) La Union, (7) Cabanatuan, (8) Lucena, (9) Plaza Sta. Cruz, (10) Malolos, Bulacan, and (11) Marikina City, the subject of the instant suit.  In turn, petitioner leased these branch sites to respondent through separate contracts of lease for a period of twenty (20) years, renewable for another twenty (20) years, at the option of respondent, with a monthly rental of P12,000.00.  Each contract requires respondent bank to pay petitioner P602,500.00 as advance rentals.

On the same day, another lease contract was executed by the parties covering each branch site providing for a period of eleven (11) years, renewable for another nine (9) years at the option of respondent.  This time, respondent bank was required to pay P602,500.00 as security deposit for its faithful performance of the terms and conditions of the contract.

In 1985, the Central Bank ordered the closure of respondent bank.  After a long legal battle, this Court declared the closure illegal and ordered the reopening of the bank.

In August 1992, petitioner wrote respondent informing it of the expiration of the 11-year lease contract.  Thereupon, they started to negotiate for its renewal, but they failed to reach an agreement.  Thus, on April 14, 1994, petitioner notified respondent that the lease shall no longer be renewed and demanded that it vacate the premises and pay the rents in arrears amounting to P2,057,600.00.  Respondent did not heed such demand, prompting petitioner to file with the Metropolitan Trial Court (MeTC), Branch 75, Marikina City, Civil Case No. 94-5786 for illegal detainer.

On January 24, 1995, the MeTC rendered judgment holding that the complaint for illegal detainer is premature since the 20-year lease contract has not yet expired.  Thus, it dismissed the complaint without prejudice to its filing at the right time.[4]

Both parties appealed.  On December 12, 1995, the RTC rendered a Decision reversing the MeTC judgment and ordering the remand of the entire records to said court for further proceedings.  The RTC held that there exists a proper case for illegal detainer based primarily on non-payment of rent.[5]

Respondent elevated the matter to the Court of Appeals via a petition for review, docketed as CA-G.R. SP No. 41114.  In a Decision dated July 16, 1997, the Court of Appeals reversed the Decision of the RTC and directed it to resolve the case based on the records.[6]

On February 5, 1998, the RTC rendered its Decision[7] dismissing petitioner’s complaint, the dispositive portion of which reads:

“WHEREFORE, foregoing premises considered, the decision of the court a quo is hereby set aside and a new judgment is hereby rendered in favor of the defendant Banco Filipino Savings and Mortgage Bank and against the plaintiff TALA Realty Services Corporation dismissing the complaint for ejectment for lack of merit on the grounds aforecited thereof.

“Costs against the plaintiff TALA Realty Services Corporation.

“SO ORDERED.”

On appeal via a petition for review, the Court of Appeals, on July 23, 1999, promulgated the challenged Decision dismissing the petition and upholding the 20-year lease contract between the parties.  The Appellate Court held:

“All told, this Court rules and so holds that the Demaisip (20 year contract) contract is the real and authentic contract that should govern the relation of the parties and embody all the terms and conditions of the lease of the property in question.  As such, their respective rights and obligations ought to be sourced therefrom.  Hence, the allegation of non-payment of rent, goodwill money and deposit as a ground for ejectment, does not hold water in this case.  The Demaisip contact merely provides for a P12,000.00 monthly rental and advance rental but not for payment of an adjusted rate, goodwill money and deposit.  Those not being one of the terms and conditions included in the governing contract naturally cannot be exacted from the lessee.  Violation of any terms not specifically agreed upon by all the parties does not bind them, therefore, violation thereof also does not give rise to a cause of action.”

Petitioner filed a motion for reconsideration but was denied.

Hence, this petition raising the following assignments of error:

“l.       THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT APPLYING THE PRINCIPLE OF THE LAW OF THE CASE IN THE CASE AT BENCH.

ll.       THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERED IN FINDING AS OBITER DICTUM THE RULING IN CA-G.R. SP NO. 41114 THAT IT IS THE ELEVEN (11) YEAR LEASE CONTRACT WHICH GOVERNS THE CONTRACTUAL RELATIONS OF THE PARTIES.

lll.      WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS MISAPPRECIATED AND MISAPPREHENDED THE FACTS OF THE INSTANT CASE IN FINDING THAT IT IS THE TWENTY (20) YEAR LEASE CONTRCT WHICH GOVERNS THE CONTRACTUAL RELATIONS OF THE PARTIES.

lV.      GRANTING THAT IT IS THE TWENTY YEAR LEASE CONTRACT THAT GOVERNS THE CONTRACTUAL RELATIONS OF THE PARTIES, THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE RULING IN THE DECISION AND RESOLUTION IN CA-G.R. SP NO. 39104 DATED 30 AUGUST 1996 AND 17 DECEMBER 1996, RESPECTIVELY, WHICH DECISION AND RESOLUTION WAS AFFIRMED BY THIS HONORABLE COURT IN G.R. NO. 128565 WHEREBY THE NON-PAYMENT OF STIPULATED RENTALS BY RESPONDENT FROM APRIL 1994 WAS FOUND AND SO FOR SAID NON-PAYMENT, IT SHOULD BE EJECTED FROM THE LEASED PREMISES.”[8]

Petitioner maintains that the Court of Appeals erred in holding that the lease contract between the parties is for a period of twenty (20) years.  Even granting that the lease is for twenty (20) years, still respondent should have been ejected from the premises for non-payment of rent, following our ruling in G.R. No. 128565[9] that respondent’s failure to pay the monthly rental constitutes sufficient basis for its ejectment.

This is not the first time that we have passed upon the same controversy between the same parties.  In G.R. No. 129887 (involving the Urdaneta property),[10] we ruled that the twenty-year contract is the real and genuine contract between the parties.  Applying the principle of stare decisis, this Court, in G.R. No. 137980 (Davao property),[11] G.R. No. 132051 (Iloilo property),[12] G.R. No. 147997 (Lucena property)[13] and G.R. No. 137533 (Bulacan property),[14] consistently upheld the 20-year lease contract and dismissed petitioner’s complaint for illegal detainer by reason of prematurity.

However, with respect to the issue of whether respondent may be ejected from the leased premises for non-payment of rent, our rulings vary.  In G.R. Nos. 129887 and 147977, we held that under the contract of lease for twenty (20) years, respondent may not be evicted for non-payment of rent.  In G.R. Nos. 137980 and 132051, we held that when respondent stopped paying rent beginning April 1994, “it gave petitioner good ground for instituting ejectment proceedings.”

Such discord in our rulings was finally laid to rest in our En Banc Decision in G.R. No. 137533 dated November 22, 2002, penned by Senior Associate Justice Reynato S. Puno.  In that case, we ruled that the parties deliberately circumvented the real estate investment limit under Sections 25(a) and 34 of the General Banking Act.  Being in pari delicto, they should suffer the consequences of their deception by denying them any affirmative relief, thus:

“Equity dictates that Tala should not be allowed to collect rent from the Bank.  The factual milieu of the instant case clearly shows that both the Bank and Tala participated in the deceptive creation of a trust to circumvent the real estate investment limit under Sections 25(a) and 34 of the General Banking Act.  Upholding Tala’s right to collect rent from the period during which the Bank was arbitrarily closed would allow Tala to benefit from the illegal ‘warehousing agreement.’ This would result in the application of the Bank’s advance rentals covering the eleventh to the twentieth years of the lease, to the rentals due for the period during which the Bank was arbitrarily closed.  With the advance rentals already used up, and the Bank having stopped payment of the rent on the thirteenth year of the lease or in April 1994, rentals would be due Tala from the time the Bank stopped paying rent in April 1994 up to the expiration of the lease period.  Just as the Bank should not be allowed to benefit from its deceptive ‘warehousing agreement,’ Tala should not also benefit from the arrangement as it was the Bank’s major stockholders that proposed the arrangement and incorporated Tala.  Tala committed deception by participating in the ‘warehousing agreement,’ and committed another deception when it turned the tables on the Bank and denied the arrangement.  Allowing Tala to further benefit from the ‘warehousing agreement’ is unconscionable, to say the least.

“The Bank and Tala are in pari delicto, thus, no affirmative relief should be given to one against the other (Silangan vs. Intermediate Appellate Court, et la., 196 SCRA 774 [1991]).  The Bank should not be allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect rent from the Bank.  The clean hands doctrine will not allow the creation or the use of a juridical relation such as a trust to subvert, directly or indirectly, the law (Heirs of Lorenzo Yap, et al. vs. Court of Appeals, et al., 312 SCRA 603 [1999]).  Neither the Bank nor Tala came to court with clean hands; neither will obtain relief from the court as one who seeks equity and justice must come to court with clean hands (Roque vs. Lapuz, et al., 96 SCRA 741 [1980]).  By not allowing Tala to collect from the Bank rent for the period during which the latter was arbitrarily closed, both Tala and the Bank will be left where they are, each paying the price for its deception.

“In hindsight, the payment of rent on the subject Bulacan property covering the period August 1985 to November 1989 by the Bank’s liquidator and the lawyer of the latter was a payment by mistake because as a matter of equity, Tala did not have the right to collect nor did the Bank have the corresponding obligation to pay rent for the period of its arbitrary closure.  Tala thus holds in trust for the Bank the erroneous payment made by the Bank’s liquidator pursuant to Article 1456 of the New Civil Code, which provides:

'Art. 1456.  If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.’

“Consequently, we rule that the advance rentals paid by the Bank for the period covering the eleventh to the twentieth year of the 20-year lease contract, i.e., from 1992 to 2001, subsist as advance rentals and should not have been applied to the payment of rentals on the Bulacan property for the period covering August 1985 to November 1989 during which the Bank was arbitrarily closed.  If at all, Tala should seek remedy for its loss from the Central Bank which caused the Bank’s arbitrary closure and not from the Bank which was itself a victim of the arbitrary act of the government.

“In sum, there is no ground for ejectment in the case at bar at the time the ejectment suit was instituted in the MTC of Malolos, whether on the ground of expiration of the lease contract or non-payment of rent.  We note, however, that by this time, the lease contract over the subject Bulacan property executed between Tala and the Bank on August 25, 1981, which stipulated a twenty-year lease period beginning September 1, 1981 already expired in August 2001.  In the absence of renewal or extension of thee lease contract, Tala has the right to eject the Bank from the subject Bulacan property on the ground of expiration of the contract.”

The maxim – stare decisis et non quieta movere – invokes adherence to precedents and mandates not to unsettle things which are established.  When the court has once laid down a principle of law as applicable to a certain state of facts, it must adhere to that principal and apply it to all future cases where the facts are substantially the same.[15] In the instant case, we reiterate our ruling in G.R. No. 137533 that both parties are “in pari delicto,” thus, no affirmative relief should be given to one against the other.  They should be left where they are, each paying the price for its deception.  If at all, petitioner TALA should seek remedy for its loss from the Central Bank which caused the respondent bank’s arbitrary closure and not from the bank which was itself a victim of the arbitrary act of the government.  Indeed, there is no ground for ejectment – either expiration of the lease or non-payment of rent.

WHEREFORE, the petition is DENIED.  The challenged Decision of the Court of Appeals dated July 23, 1999 and its Resolution dated May 16, 2000 in CA-G.R. SP No. 47943 are REVERSED and SET ASIDE.

SO ORDERED.

Vitug, (Chairman), Corona, and Carpio-Morales, JJ., concur.


[1] Rollo at 84.

[2] Id. at 158.

[3] Annex “O”, Petition, Rollo at 303.

[4] Annex “K”. id. at 244.

[5] Annex “L”, id. at 247.

[6] Annex “N”, id. at 290.

[7] Annex “O”, supra.

[8] Rollo at 20.

[9] Dated September 3, 1997; Rollo at 365.

[10] Dated February 17, 2000.

[11] Dated June 20, 2000.

[12] Dated June 25, 2001.

[13] Dated April 5, 2002.

[14] Dated November 22, 2002.

[15] People vs. Canton, G.R. No. 148825, December 27, 2002, citing People vs. Aquino, G.R. No. 145371, 366 SCRA 266 (2001).