G.R. No. 129887 February 17, 2000
TALA REALTY SERVICES CORPORATION, petitioner, vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent.

FACTS

Petitioner Tala Realty filed an ejectment case against respondent Banco Filipino concerning a leased property in Urdaneta, Pangasinan, used as a bank branch. The property was originally owned by Banco Filipino but was sold to Tala Realty in 1981 to comply with banking laws limiting branch site ownership. Simultaneous with the sale, lease contracts were executed. The core dispute centered on the lease term: Banco Filipino relied on a contract stipulating a 20-year term renewable for another 20 years, while Tala Realty presented an 11-year contract renewable for 9 years, claiming it amended the earlier one. Tala Realty contended the 11-year lease expired in 1992, after which the lease continued on a month-to-month basis. In 1993, Tala Realty proposed new rental terms, which Banco Filipino rejected. Tala Realty subsequently demanded vacation of the premises and filed the ejectment case in 1994.
The Municipal Trial Court (MTC) dismissed the complaint, finding Tala Realty’s 11-year lease contract spurious and upholding the validity of Banco Filipino’s 20-year lease. The Regional Trial Court (RTC) and the Court of Appeals affirmed the dismissal. Tala Realty elevated the case to the Supreme Court via a petition for review.

ISSUE

Whether the Court of Appeals erred in upholding the dismissal of the ejectment complaint, primarily by recognizing the 20-year lease contract as valid and subsisting, thereby entitling Banco Filipino to retain possession.

RULING

The Supreme Court denied the petition and affirmed the assailed decision. The Court held that the MTC properly resolved the issue of which lease contract governed, as this determination was essential to decide the issue of possession in the ejectment suit. While ejectment cases primarily concern physical possession, courts may incidentally rule on questions of ownership or contract validity if indispensable to resolve possession.
The Court agreed with the lower courts’ factual findings that the 20-year lease contract was the authentic and binding agreement. The evidence established that the 11-year contract was not intended to amend or supersede the 20-year contract. Both parties had consistently referred to and operated under the terms of the 20-year lease in their prior dealings and correspondence. Since the 20-year lease, commencing in 1981, was still subsisting and would expire only in 2001, Banco Filipino had the right to possess the property as long as it complied with the contractual terms, including rental payments.
The Court also rejected Tala Realty’s claim of ejectment due to non-payment of rent, as the demanded unpaid rentals were based on a new, unilaterally imposed rate to which Banco Filipino never agreed. The parties’ rights and obligations remained governed by the valid 20-year lease contract. Consequently, no lawful cause for ejectment existed.