Tala Realty Services Corporation vs. Court of Appeals

An implied trust created to circumvent the statutory limit on a bank's real estate holdings is void and unenforceable, and where both parties are in pari delicto, neither may obtain affirmative relief from the courts. Under the doctrine of stare decisis, a prior ruling on the nullity of the same trust agreement binds all subsequent cases involving substantially the same facts.

Banco Filipino Savings and Mortgage Bank, a savings and mortgage bank, sought to expand its branch network in 1979 but was constrained by Sections 25(a) and 34 of the General Banking Act (Republic Act No. 337), which limited a bank's allowable investments in real estate to 50% of its capital assets. To circumvent this limitation, Banco Filipino's board of directors decided to "warehouse" some of its existing properties and branch sites by transferring them to a separately incorporated entity, Tala Realty Services Corporation, organized by major stockholders and directors of the bank — Nancy L. Ty, Pedro Aguirre, and Tomas Aguirre — with the understanding that Tala Realty would hold the properties in trust for Banco Filipino. Tomas Aguirre later endorsed his Tala Realty shares to his sister Remedios Dupasquier, who registered them under her controlled corporation, Add International Services, Inc. Control over Tala Realty was thus divided among Nancy, Remedios, and Pedro Aguirre through their respective nominees. Tala Realty simultaneously leased the transferred properties back to Banco Filipino for 20 years, renewable for another 20 years at the bank's option, with a right of first refusal in favor of the bank.

In 1979, Banco Filipino Savings and Mortgage Bank sought to expand its branch operations and needed to acquire new sites. Constrained by Sections 25(a) and 34 of the General Banking Act, which limited a bank's investments in real estate to 50% of its capital assets, the bank's board of directors decided to "warehouse" some of its existing properties and branch sites by transferring them to a separate corporate entity. Nancy L. Ty, a major stockholder and director of Banco Filipino, persuaded Pedro Aguirre and his brother Tomas Aguirre, both major stockholders, to organize and incorporate Tala Realty Services Corporation to hold and purchase real properties in trust for the bank. After the transfer of Banco Filipino's properties to Tala Realty, Tomas Aguirre endorsed his shares in Tala Realty to his sister Remedios Dupasquier, who registered them in the name of her controlled corporation, Add International Services, Inc. Control over Tala Realty was thus divided among Nancy (through nominees Pilar Ongking, Cynthia Messina, and Dolly Lim), Remedios (through Add International and nominee Elizabeth Palma), and Pedro Aguirre (through his own nominees, the latest being Tala Realty's president, Rubencito del Mundo).

In implementation of the trust arrangement, Banco Filipino sold some of its properties to Tala Realty, which simultaneously leased them back to the bank for 20 years, renewable for another 20 years at Banco Filipino's option, with a right of first refusal in favor of the bank in the event Tala Realty decided to sell. In August 1992, Tala Realty repudiated the trust, claimed the titles for itself, and demanded payment of rentals, deposits, and goodwill, threatening to eject Banco Filipino from the properties.

Banco Filipino responded by filing 17 complaints for reconveyance against Tala Realty and the individual stockholders and nominees before 17 Regional Trial Courts nationwide, docketed in various branches in Lucena, Iloilo, Batangas City, Urdaneta, La Union, Cotabato, Quezon City, Malabon, Parañaque, Marikina, Manila (three cases), Davao City, Las Piñas, and Cabanatuan City. Petitioners uniformly moved to dismiss all complaints on the grounds of forum shopping, lack of cause of action, and pari delicto. The RTCs rendered divergent rulings: some dismissed, some denied the motions, and some denied subject to further proceedings. The present five consolidated petitions originated from four of those civil cases — the Cabanatuan City case (Civil Case No. 2176-AF), the Urdaneta case (Civil Case No. U-6026), the Lucena case (Civil Case No. 95-127), and the Davao City case (Civil Case No. 23,821-95). In the interim, on November 22, 2002, the Supreme Court ruled in a separate ejectment case arising from the same trust agreement that the implied trust was void for being contrary to law and that both parties were in pari delicto, precluding affirmative relief to either.

• Prior Jurisdiction (G.R. No. 130088): Petitioners argued that the Court of Appeals issued its assailed resolutions in disregard of the prior jurisdiction already assumed by the Supreme Court over the same matters in G.R. No. 127611, and that the appellate court substituted certiorari for a lost appeal in violation of doctrinal instructions.
• Procedural Remedy (G.R. No. 130088): Petitioners contended that Banco Filipino's petition before the Court of Appeals was filed out of time, the RTC order having already lapsed into finality, and that certiorari was improperly used as a substitute for a lost appeal.
• Mandatory Duty to Resolve Motion to Dismiss (G.R. No. 131469): Petitioners argued that the RTC gravely abused its discretion in refusing to resolve their Motion to Dismiss in evasion of the mandatory obligation under Rule 16, Section 3 of the 1997 Rules of Civil Procedure, which prohibits deferring resolution of a motion to dismiss on the ground that the issue is not indubitable.
• Finality of Interlocutory Orders (G.R. No. 131469): Petitioners contended that the RTC erred in holding that interlocutory orders could attain finality, arguing that such orders are appealable only through certiorari.
• Conclusiveness of Judgment (G.R. No. 166608): Petitioners argued that the Court of Appeals failed to apply the binding pronouncement in G.R. No. 137533, which had declared the trust agreement void and the parties in pari delicto, in violation of the principle of conclusiveness of judgment and adherence to judicial precedents.
• Forum Shopping and Splitting Cause of Action (G.R. Nos. 155201 and 155171): Petitioners maintained that Banco Filipino engaged in deliberate forum shopping and splitting of a single cause of action by filing 17 complaints predicated on the same single trust agreement across different courts nationwide, and by filing the civil cases during the pendency of a derivative suit before the SEC filed by Banco Filipino's minority stockholders.
• Lack of Cause of Action (G.R. No. 155171): Nancy Ty argued that no warehousing agreement was reflected in or could be deduced from the April 17, 1979 minutes of the board meeting, and that the existence of the alleged agreement was disputed.
• Prescription (G.R. No. 155171): Nancy Ty contended that Banco Filipino's claim had clearly prescribed.
• Defective Certification on Non-Forum Shopping (G.R. No. 155171): Nancy Ty argued that the petition before the Court of Appeals was fatally defective for failure to attach proof that the purported representative of Banco Filipino had legal capacity to execute the affidavit and certification on non-forum shopping.

• Inappropriate Remedy (G.R. No. 130088): Banco Filipino argued that certiorari was not the appropriate remedy for petitioners to challenge the Court of Appeals' resolutions.

• Propriety of Certiorari: Whether certiorari under Rule 65 is the proper remedy for petitioners to challenge the Court of Appeals' resolutions and the RTC orders in the underlying cases.
• Validity of the Trust Agreement: Whether the implied trust or "warehousing agreement" between Banco Filipino and Tala Realty is valid and enforceable.
• Pari Delicto: Whether both parties being in pari delicto bars either from obtaining affirmative relief.
• Stare Decisis: Whether the prior ruling in G.R. No. 137533 declaring the trust agreement void and the parties in pari delicto should apply to the present consolidated petitions under the doctrine of stare decisis.
• Forum Shopping and Splitting Cause of Action: Whether Banco Filipino engaged in forum shopping and splitting of a single cause of action by filing 17 complaints for reconveyance nationwide.

• Propriety of Certiorari: No. Certiorari was not the appropriate remedy, as petitioners had other plain and adequate remedies available — filing an answer in the Court of Appeals proceedings or proceeding with trial on the merits. The Court nevertheless relaxed procedural rules to rule on the merits of the motions to dismiss.
• Validity of the Trust Agreement: No. The implied trust or "warehousing agreement" is void for being contrary to law, having been created to circumvent the General Banking Act's real estate holdings limit.
• Pari Delicto: Yes. Both Banco Filipino and Tala Realty are in pari delicto, and no affirmative relief should be given to one against the other.
• Stare Decisis: Yes. The prior ruling in G.R. No. 137533 on the nullity of the trust agreement applies to the present petitions under the doctrine of stare decisis, the facts being substantially the same.
• Forum Shopping and Splitting Cause of Action: Rendered moot by the dismissal of all cases on the ground that the trust agreement is void and the parties are in pari delicto.

• Propriety of Certiorari: One of the conditions for certiorari to lie under Rule 65 is that there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. In G.R. No. 130088, petitioners could have filed their answer in CA-G.R. SP No. 43344 after the Court of Appeals ordered them to do so within ten days from notice. In G.R. No. 131469, petitioners had the remedy of proceeding with the trial of the case on the merits. Certiorari therefore did not lie. Nevertheless, in view of the merits of petitioners' Motions to Dismiss, the Court relaxed the application of procedural rules and passed upon the substantive issues.

• Validity of the Trust Agreement: The Court had already ruled in Tala Realty Services Corporation vs. Banco Filipino Savings and Mortgage Bank (G.R. No. 137533, November 22, 2002) that the implied trust or "warehousing agreement" was inexistent and void for being contrary to law. The agreement was a scheme to circumvent Sections 25(a) and 34 of the General Banking Act, which limited a bank's real estate holdings to 50% of its capital assets. Where a purchase is made in violation of an existing statute and in evasion of its express provisions, no trust can result in favor of the party guilty of the fraud. The bank was well aware of the statutory limitations and deliberately structured the transaction to evade them, opting not to put the agreement in writing and disguising its right to reconveyance as a "first preference to buy." The clean hands doctrine bars the creation or use of a juridical relation such as a trust to subvert the law.

• Pari Delicto: Because both Banco Filipino and Tala Realty entered into the void agreement to circumvent the law, they are in pari delicto. No affirmative relief should be given to one against the other. The bank should not be allowed to dispute the sale of its lands to Tala Realty, nor should Tala Realty be allowed to further collect rent from the bank. Neither party came to court with clean hands, and neither will obtain relief.

• Stare Decisis: Under the doctrine of stare decisis, once 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. The Court's prior ruling in G.R. No. 137533 on the nullity of the trust agreement — arising from the same trust agreement in the reconveyance cases subject of the present petitions — thus applies to all the present petitions, the facts being substantially the same.

• Forum Shopping and Splitting Cause of Action: The dismissal of all underlying civil cases on the ground that the trust agreement is void and the parties are in pari delicto renders the issues of forum shopping and splitting of cause of action moot, as no affirmative relief is available to either party regardless of how many cases were filed.

• Stare Decisis — Once 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. The Court applied this doctrine to extend its prior ruling in G.R. No. 137533 — which declared the trust agreement void and the parties in pari delicto — to all the present consolidated petitions, since they arose from the same trust agreement.

• Pari Delicto — Where both parties are equally at fault (in pari delicto), no affirmative relief should be given to one against the other. The Court held that both Banco Filipino and Tala Realty entered into the void warehousing agreement to circumvent the General Banking Act, and thus neither party may obtain relief from the courts.

• Clean Hands Doctrine — One who seeks equity and justice must come to court with clean hands; the courts will not assist a party in achieving an improper purpose by enforcing a resultant trust where the purpose was contrary to law. The Court applied this to bar both parties from enforcing the void trust agreement.

• Implied Trust in Violation of Statute — Where a purchase is made in violation of an existing statute and in evasion of its express provisions, no trust can result in favor of the party guilty of the fraud. The Court held that no implied trust could have been formed between Banco Filipino and Tala Realty because the warehousing agreement was designed to circumvent the General Banking Act's real estate holdings limit.

• "An implied trust could not have been formed between the Bank and Tala as this Court has held that 'where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud.'" — This passage articulates the core legal principle rendering the trust agreement void: a trust cannot arise in favor of a party whose purpose in creating it was to evade statutory law.

• "The Bank and Tala are in pari delicto, thus, no affirmative relief should be given to one against the other. 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 nor the use of a juridical relation such as a trust to subvert, directly or indirectly, the law." — This passage defines the pari delicto and clean hands doctrines as applied to the parties, establishing that neither may obtain judicial relief from the void agreement.

• "Under the doctrine of stare decisis, once 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." — This is the canonical formulation of stare decisis as applied by the Court to extend its prior ruling to the consolidated petitions.

• Tala Realty Services Corporation vs. Banco Filipino Savings and Mortgage Bank, G.R. No. 137533, November 22, 2002, 392 SCRA 506 — Controlling precedent. The Court ruled in an ejectment case arising from the same trust agreement that the implied trust was void for being contrary to law and that both parties were in pari delicto. This ruling was applied via stare decisis to all the present consolidated petitions.

• Banco Filipino Savings and Mortgage Bank vs. Tala Realty Corporation, G.R. No. 142672, September 27, 2006, 503 SCRA 442 — Cited for the doctrine of stare decisis, reinforcing the principle that prior rulings on the same facts must be applied to subsequent cases.

• Springfield Development Corporation, Inc. vs. Presiding Judge, RTC, Misamis Oriental, Br. 40, Cagayan de Oro City, G.R. No. 142628, February 6, 2007, 514 SCRA 326 — Cited in support of the Court's decision to relax procedural rules and pass upon the merits of the motions to dismiss despite the availability of other remedies.

• Sections 25(a) and 34, General Banking Act (Republic Act No. 337) — These provisions limit a bank's allowable investments in real estate to 50% of its capital assets. The Court found that Banco Filipino's "warehousing agreement" with Tala Realty was a scheme to circumvent these statutory limitations, rendering the implied trust void for being contrary to law.

• Section 51, General Banking Law of 2000 — Noted as containing a provision similar to Sections 25(a) and 34 of the General Banking Act, confirming the continuing statutory policy limiting bank real estate holdings.

• Rule 65, Section 1, Rules of Court — Governs the remedy of certiorari, requiring that there be no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. The Court found that certiorari did not lie because petitioners had other available remedies.

• Rule 16, Section 3, 1997 Rules of Civil Procedure — Provides that the court shall not defer the resolution of a motion to dismiss on the ground that the ground relied upon is not indubitable. Petitioners invoked this provision to argue that the RTC erred in deferring resolution of their motion to dismiss.

Leonardo A. Quisumbing (Chairperson), Dante O. Tinga, Presbitero J. Velasco, Jr., and Diosdado M. Peralta concurred in the decision. No separate concurring opinions were written.