Tala Realty Services Corp. vs. Banco Filipino Savings and Mortgage Bank

The twenty (20)-year lease contract is the real and genuine agreement between Tala Realty and Banco Filipino and remains subsisting until 2001, but the lessee may nevertheless be ejected for stopping payment of any rent beginning April 1994. Expiration was thus unavailable as a ground for ejectment, while non-payment at even the original rate justified restoration of possession to the lessor with back rentals.

Banco Filipino Savings and Mortgage Bank, as a savings and mortgage bank, was subject under Republic Act No. 337 to the limitation that investment in real estate for its immediate accommodation, including improvements and equipment, shall not exceed fifty percent of net worth. To expand operations within that ceiling, Tala Realty Services Corporation was organized by Banco Filipino's four major stockholders under a scheme where Tala would acquire existing and new branch sites and lease them back to the bank. Pursuant to that arrangement, Banco Filipino sold eleven branch sites nationwide to Tala with simultaneous leasebacks.

On August 25, 1981, Banco Filipino sold its eleven branch sites all over the country to Tala, and on the same day Tala leased those sites back to Banco Filipino under contracts of lease executed by both parties. Two versions of the Iloilo City lease later surfaced. According to Tala, the governing contract provided for a term of eleven years, renewable for another nine years at the lessee's option under mutually agreeable terms, and therefore expired on August 31, 1992. According to Banco Filipino, the governing contract provided for a term of twenty years, renewable for another twenty years at the lessee's option under mutually agreeable terms, and thus remained subsisting.

After the claimed 1992 expiration, Tala on June 2, 1993 imposed new terms requiring payment of P70,050.00 as monthly rental retroactive to September 1, 1992, with ten percent yearly escalation, plus advance deposit equivalent to four months' rent and P500,000.00 goodwill. Banco Filipino did not comply with those terms and in April 1994 stopped paying rents altogether. By letter dated April 14, 1994, Tala notified the bank that the lease would no longer be renewed and demanded payment of back rentals, goodwill, deposit and adjusted rentals totaling P2,059,540.00 and vacation of the premises on or before April 30, 1994, followed by a second demand letter dated May 2, 1994 to pay rents and vacate.

Thereafter Tala filed the Iloilo illegal detainer action, one of a chain of similar suits over other branch sites. The trial courts credited Tala's eleven-year contract, with the MTC ordering ejectment for expiration and non-payment of adjusted rental and directing payment of P79,050.00 in back rentals from May 1994 until surrender, as affirmed by the RTC and initially by the Court of Appeals before reconsideration.

• Law of the Case: Petitioner argued that the Court of Appeals erred in treating its decision in C.A.-G.R. SP No. 39104 as the law of the case warranting dismissal, maintaining that said decision was not a precedent.
• Non-Decision on Merits: Petitioner maintained that the Supreme Court's termination of G.R. No. 127586 rested only on untimely perfection of appeal and did not decide the merits of whether the twenty-year contract governed.

• Controlling Twenty-Year Term: Respondent countered that it never executed the eleven-year lease and that its contract with Tala was for twenty years, renewable for another twenty years at the lessee's option.
• Law of the Case: Respondent argued on reconsideration that the Court of Appeals decisions in C.A.-G.R. SP Nos. 39104 and 40524, which upheld the twenty-year lease, constituted the law of the case between the parties and barred ejectment before expiry.

• Law of the Case: Whether the Court of Appeals decision in C.A.-G.R. SP No. 39104, terminated by the Supreme Court in G.R. No. 127586 without a merits ruling, constitutes the law of the case.
• Controlling Lease Term: Whether the governing agreement is the eleven-year lease expiring in 1992 or the twenty-year lease expiring in 2001.
• Ejectment for Non-Payment: Whether respondent may be ejected for stopping payment of rentals beginning April 1994 despite the subsistence of the twenty-year lease.

• Law of the Case: No. The C.A.-G.R. SP No. 39104 ruling was not controlling as law of the case because G.R. No. 127586 was terminated for untimely appeal without deciding the merits.
• Controlling Lease Term: The twenty-year contract controls. It was found genuine and subsisting until 2001, while the eleven-year contract bore badges of fraud and simulation.
• Ejectment for Non-Payment: Yes. Ejectment lies for complete non-payment from April 1994, since disagreement with a unilateral increase did not excuse failure to pay even the original rent.

• Law of the Case: Termination in G.R. No. 127586 declared the case terminated and the judgment final and executory for failure to timely perfect appeal, with no merits adjudication. Hence that Court of Appeals decision could not by itself supply precedential force, although the identical lease-validity issue was later resolved on the merits in other Supreme Court decisions.
• Controlling Lease Term: Application of G.R. No. 129887 and G.R. No. 137980 was required because the parties were the same and the validity issue was identical, differing only in branch site. The eleven-year contract was rejected because the bank's executive vice-president denied signing it, the attesting typist disowned her marginal initials, the notarizing counsel retained no copy for the clerk of court, and only the twenty-year contract was submitted to the Central Bank, indicating the former's inexistence rather than prejudice by a third party's omission.
• Ejectment for Non-Payment: Although expiration failed as a ground since the twenty-year term subsisted, complete cessation of payment from April 1994 created an independent ground under Article 1673 of the New Civil Code. Even if the demanded P70,050.00 rate with escalation, deposit and goodwill was unilateral and unagreed, the lessee was bound to tender the original rent through judicial authorities or a bank account in the lessor's name with notice; advance rental for the eleventh to twentieth years had already been exhausted for August 1985 to November 1989.

• Stare decisis et non quieta movere — When a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases where the facts are substantially the same. Applied to hold that the rulings in G.R. No. 129887 and G.R. No. 137980, that the twenty-year lease is genuine, control the present case involving the same parties and the same validity issue, the only difference being the branch site.
• Law of the case — A final determination on the merits governs the same parties and issues in the same continuing litigation and may not be disregarded at will. Found inapplicable to C.A.-G.R. SP No. 39104 as invoked, because the Supreme Court in G.R. No. 127586 terminated the case for non-perfection of appeal without a merits ruling.
• Res inter alios acta aliis non nocet — The rights of a party cannot be prejudiced by an act, declaration or omission of another, under Section 28, Rule 130 of the Revised Rules of Court. Held not violated by treating non-submission of the eleven-year contract to the Central Bank as an indication of that contract's inexistence rather than as prejudice from another's omission.
• Ejectment for non-payment of rent — A lessor may eject a lessee for failure to pay agreed rent, and objection to an increased rate does not justify stopping all payment; the lessee must deposit the original rent with judicial authorities or in a bank in the lessor's name with notice. Applied to justify eviction where respondent paid nothing from April 1994, following T & C Development Corporation vs. Court of Appeals and Uy vs. Court of Appeals.

• "Stare decisis et non quieta movere." — States the guiding maxim for adherence to precedents to maintain stability in the law, applied throughout to the lease-validity issue.
• "It is not the eleven (11)-year lease contract but the twenty (20)-year lease contract which is the real and genuine contract between petitioner Tala Realty and private respondent Banco Filipino." — Articulates the core factual-legal finding on which expiration was rejected and possession rights were measured.
• "Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the parties may be different" — Defines the certainty rationale for applying G.R. No. 129887 even to a different branch site.
• "Considering that the twenty (20)-year lease contract is still subsisting and will expire in 2001 yet, Banco Filipino is entitled to the possession of the subject premises for as long as it pays the agreed rental and does not violate the other terms and conditions thereof (Art. 1673, New Civil Code)." — States the conditional right to possession that preserves ejectment for non-payment despite an unexpired term.

• Tala Realty Services Corp. vs. Banco Filipino, G.R. No. 129887 — Followed as controlling precedent holding the eleven-year contract a forgery and the twenty-year contract genuine and subsisting, based on denial of signature, notarial records, and Central Bank submission.
• Tala Realty Services Corp. vs. Banco Filipino, G.R. No. 137980 — Followed as reinforcing precedent applying stare decisis across different branch sites and holding that complete non-payment from April 1994 justified ejectment despite the subsisting twenty-year term.
• Negros Navigation Co., Inc. vs. Court of Appeals, G.R. No. 110398 — Cited for the stare decisis formulation that the same question on the same event litigated and decided bars relitigation, even with different parties where facts are substantially the same.
• T & C Development Corporation vs. Court of Appeals, G.R. No. 118381 — Followed on the rule that a lessee disputing a rental increase must still deposit the original rent, so total stoppage supports ejectment.
• Uy vs. Court of Appeals — Cited within T & C Development Corporation for the duty to deposit the previous rent when the new rental demanded exceeds that allowed, with delay undermining the lessee's position.

• Section 25, Republic Act No. 337 (General Banking Act) — Limits a commercial bank's investment in real estate necessary for its immediate accommodation, including improvements and equipment, to fifty percent of net worth; explains why Banco Filipino used Tala to acquire branch sites for leaseback.
• Section 34, Republic Act No. 337 — Subjects savings and mortgage banks to the same real-estate conditions governing commercial banks under Section 25; supplies the regulatory backdrop for the sale-and-leaseback scheme.
• Article 1673, New Civil Code — Governs the lessor's right to eject for violation of lease conditions including non-payment; applied to hold Banco Filipino entitled to possession only so long as it pays agreed rental, so stoppage justified eviction.
• Section 28, Rule 130, Revised Rules of Court — Provides that the rights of a party cannot be prejudiced by the act, declaration or omission of another; held not offended by treating omission of the eleven-year contract from Central Bank records as evidence of inexistence.

Melo, Vitug, and Gonzaga-Reyes, JJ., concur. Panganiban, J., no part, former counsel of a party.