Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

80194 March 21, 1989 EDGAR JARANTILLA, petitioner, vs. COURT OF APPEALS and JOSE KUAN SING, respondents. Corazon Miraflores and Vicente P. Billena for petitioner. Manuel S. Gemarino for private respondent. REGALADO, J.: The records show that private respondent Jose Kuan Sing was "side-swiped by a vehicle in the evening of July 7, 1971 in lznart Street, Iloilo City" 1 The respondent Court of Appeals concurred in the findings of the court a quothat the said vehicle which figured in the mishap, a Volkswagen (Beetle type) car, was then driven by petitioner Edgar Jarantilla along said street toward the direction of the provincial capitol, and that private respondent sustained physical injuries as a consequence. 2 Petitioner was accordingly charged before the then City Court of Iloilo for serious physical injuries thru reckless imprudence in Criminal Case No. 47207 thereof. 3 Private respondent, as the complaining witness therein, did not reserve his right to institute a separate civil action and he intervened in the prosecution of said criminal case through a private prosecutor. 4 Petitioner was acquitted in said criminal case "on reasonable doubt".5 On October 30, 1974, private respondent filed a complaint against the petitioner in the former Court of First Instance of Iloilo, Branch IV, 6 docketed therein as Civil Case No. 9976, and which civil action involved the same subject matter and act complained of in Criminal Case No. 47027. 7 In his answer filed therein, the petitioner alleged as special and affirmative detenses that the private respondent had no cause of action and, additionally, that the latter's cause of action, if any, is barred by the prior judgment in Criminal Case No. 47207 inasmuch as when said criminal case was instituted the civil liability was also deemed instituted since therein plaintiff failed to reserve the civil aspect and actively participated in the criminal case. 8 Thereafter, acting on a motion to dismiss of therein defendant, the trial court issued on April 3, 1975 an order of denial, with the suggestion that "(t)o enrich our jurisprudence, it is suggested that the defendant brings (sic) this ruling to the Supreme Court by certiorari or other appropriate remedy, to review the ruling of the court". 9

On June 17, 1975, petitioner filed in this Court a petition for certiorari, prohibition and mandamus, which was docketed as G.R. No. L-40992, 10 assailing the aforesaid order of the trial court. Said petition was dismissed for lack of merit in the Court's resolution of July 23, 1975, and a motion for reconsideration thereof was denied for the same reason in a resolution of October 28, 1975. 11 After trial, the court below rendered judgment on May 23, 1977 in favor of the herein private respondent and ordering herein petitioner to pay the former the sum of P 6,920.00 for hospitalization, medicines and so forth, P2,000.00 for other actual expenses, P25,000.00 for moral damages, P5,000.00 for attorney's fees, and costs. 12 On July 29, 1987, the respondent Court of Appeals 13 affirmed the decision of the lower court except as to the award for moral damages which it reduced from P25,000.00 to P18,000.00. A motion for reconsideration was denied by respondent court on September 18, 1987. 14 The main issue for resolution by Us in the present recourse is whether the private respondent, who was the complainant in the criminal action for physical injuries thru reckless imprudence and who participated in the prosecution thereof without reserving the civil action arising from the act or omission complained of, can file a separate action for civil liability arising from the same act or omission where the herein petitioner was acquitted in the criminal action on reasonable doubt and no civil liability was adjudicated or awarded in the judgment of acquittal. Prefatorily, We note that petitioner raises a collateral issue by faulting the respondent court for refusing to resolve an assignment of error in his appeal therein, said respondent court holding that the main issue had been passed upon by this Court in G.R. No. L-40992 hereinbefore mentioned. It is petitioner's position that the aforesaid two resolutions of the Court in said case, the first dismissing the petition and the second denying the motion for reconsideration, do not constitute the "law of the case' which would control the subsequent proceed ings in this controversy. 1. We incline favorably to petitioner's submission on this score. The "doctrine of the law of the case" has no application at the aforesaid posture of the proceedings when the two resolutions were handed down. While it may be true that G.R. No. L-40992 may have involved some of the issues which were thereafter submitted for resolution on the merits by the two lower courts, the proceedings involved there was one for certiorari, prohibition and mandamus assailing an interlocutory order of the court a quo, specifically, its order denying therein defendants motion to dismiss. This Court, without rendering a specific opinion or explanation as to the legal and factual bases on which its two resolutions were predicated, simply dismissed the special civil action on that incident for lack of merit. It may very well be that such resolution was premised on the fact that the Court, at that stage and on the basis of the facts then presented, did not consider that the

denial order of the court a quo was tainted with grave abuse of discretion. 15 To repeat, no rationale for such resolutions having been expounded on the merits of that action, no law of the case may be said to have been laid down in G.R. No. L-40992 to justify the respondent court's refusal to consider petitioner's claim that his former acquittal barred the separate action. 'Law of the case' has been defined as the opinion delivered on a former appeal. More specifically, it means that whatever is once irrevocably established, as the controlling legal rule of decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court (21 C.J.S. 330). (Emphasis supplied). 16 It need not be stated that the Supreme Court being the court of last resort, is the final arbiter of all legal questions properly brought before it and that its decision in any given case constitutes the law of that particular case . . . (Emphasis supplied). 17 It is a rule of general application that the decision of an appellate court in a case is the law of the case on the points presented throughout all the subsequent proceedings in the case in both the trial and the appellate courts, and no question necessarily involved and decided on that appeal will be considered on a second appeal or writ of error in the same case, provided the facts and issues are substantially the same as those on which the first question rested and, according to some authorities, provided the decision is on the merits . . . 18 2. With the foregoing ancillary issue out of the way, We now consider the principal plaint of petitioner. Apropos to such resolution is the settled rule that the same act or omission (in this case, the negligent sideswiping of private respondent) can create two kinds of liability on the part of the offender, that is, civil liability ex delicto and civil liability ex quasi delicto. Since the same negligence can give rise either to a delict or crime or to a quasi-delict or tort, either of these two types of civil liability may be enforced against the culprit, subject to the caveat under Article 2177 of the Civil Code that the offended party cannot recover damages under both types of liability. 19 We also note the reminder of petitioner that in Roa vs. De la Cruz, et al., 20 it was held that where the offended party elected to claim damages arising from the offense charged in the criminal case through her intervention as a private prosecutor, the final judgment rendered therein constituted a bar to the subsequent civil action based upon the same cause. It is meet, however, not to lose sight of the fact that the criminal action involved therein was for serious oral defamation which, while within the contemplation of an independent civil action under Article 33 of the Civil Code,

constitutes only a penal omen and cannot otherwise be considered as a quasi-delict or culpa aquiliana under Articles 2176 and 2177 of the Civil Code. And while petitioner draws attention to the supposed reiteration of the Roa doctrine in the later case of Azucena vs. Potenciano, et al., 21 this time involving damage to property through negligence as to make out a case of quasi-delict under Articles 2176 and 2180 of the Civil Code, such secondary reliance is misplaced since the therein plaintiff Azucena did not intervene in the criminal action against defendant Potenciano. The citation of Roa in the later case of Azucena was, therefore, clearly obiter and affords no comfort to petitioner. These are aside from the fact that there have been doctrinal, and even statutory, 22 changes on the matter of civil actions arising from criminal offenses and quasi-delicts. We will reserve our discussion on the statutory aspects for another case and time and, for the nonce, We will consider the doctrinal developments on this issue. In the case under consideration, private respondent participated and intervened in the prosecution of the criminal suit against petitioner. Under the present jurisprudential milieu, where the trial court acquits the accused on reasonable doubt, it could very well make a pronounce ment on the civil liability of the accused 23 and the complainant could file a petition for mandamus to compel the trial court to include such civil liability in the judgment of acquittal. 24 Private respondent, as already stated, filed a separate civil aciton after such acquittal. This is allowed under Article 29 of the Civil Code. We have ruled in the relatively recent case of Lontoc vs. MD Transit & Taxi Co., Inc., et al. 25that: In view of the fact that the defendant-appellee de la Cruz was acquitted on the ground that 'his guilt was not proven beyond reasonable doubt' the plaintiff-appellant has the right to institute a separate civil action to recover damages from the defendants-appellants (See Mendoza vs. Arrieta, 91 SCRA 113). The well-settled doctrine is that a person, while not criminally liable may still be civilly liable. 'The judgment of acquittal extinguishes the civil liability of the accused only when it includes a declaration that the facts from which the civil liability might arise did not exist'. (Padilla vs. Court of Appeals, 129 SCRA 558 cited in People vs. Rogelio Ligon y Tria, et al., G.R. No. 74041, July 29, 1987; Filomeno Urbano vs. Intermediate Appellate Court, G.R. No. 72964, January 7, 1988). The ruling is based on Article 29 of the Civil Code which provides: When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same

act or omission may be instituted. Such action requires only a preponderance of evidence ... 26 Another consideration in favor of private respondent is the doctrine that the failure of the court to make any pronouncement, favorable or unfavorable, as to the civil liability of the accused amounts to a reservation of the right to have the civil liability litigated and determined in a separate action. The rules nowhere provide that if the court fails to determine the civil liability it becomes no longer enforceable. 27 Furthermore, in the present case the civil liability sought to be recovered through the application of Article 29 is no longer that based on or arising from the criminal offense. There is persuasive logic in the view that, under such circumstances, the acquittal of the accused foreclosed the civil liability based on Article 100 of the Revised Penal Code which presupposes the existence of criminal liability or requires a conviction of the offense charged. Divested of its penal element by such acquittal, the causative act or omission becomes in effect a quasi-delict, hence only a civil action based thereon may be instituted or prosecuted thereafter, which action can be proved by mere preponderance of evidence. 28 Complementary to such considerations, Article 29 enunciates the rule, as already stated, that a civil action for damages is not precluded by an acquittal on reasonable doubt for the same criminal act or omission. The allegations of the complaint filed by the private respondent supports and is constitutive of a case for a quasi-delict committed by the petitioner, thus: 3. That in the evening of July 7, 197l at about 7:00 o'clock, the plaintiff crossed Iznart Street from his restaurant situated at 220 lznart St., Iloilo City, Philippines, on his way to a meeting of the Cantonese Club at Aldeguer Street, Iloilo City and while he was standing on the middle of the street as there were vehicles coming from the Provincial Building towards Plazoleta Gay, Iloilo City, he was bumped and sideswiped by Volkswagen car with plate No. B-2508 W which was on its way from Plazoleta Gay towards the Provincial Capitol, Iloilo City, which car was being driven by the defendant in a reckless and negligent manner, at an excessive rate of speed and in violation of the provisions of the Revised Motor Vehicle (sic) as amended, in relation to the Land Transportation and Traffic Code as well as in violation of existing city ordinances, and by reason of his inexcusable lack of precaution and failure to act with due negligence and by failing to take into consideration (sic) his degree of intelligence, the atmospheric conditions of the place as well as the width, traffic, visibility and other conditions of lznart Street; 29

Since this action is based on a quasi-delict, the failure of the respondent to reserve his right to file a separate civil case and his intervention in the criminal case did not bar him from filing such separate civil action for damages. 30The Court has also heretofore ruled in Elcano vs. Hill 31 that ... a separate civil action lies against the offender in a criminal act whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is also actually charged criminally, to recover damages on both scores; and would be entitled in such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability referred to in Par. (c) of Sec. 3 Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code; whereas the civil liability for the same act considered as a quasidelict only and not as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused . . . The aforecited case of Lontoc vs. MD Transit & Taxi Co., Inc., et al. involved virtually the same factual situation. The Court, in arriving at the conclusion hereinbefore quoted, expressly declared that the failure of the therein plaintiff to reserve his right to file a separate civil case is not fatal; that his intervention in the criminal case did not bar him from filing a separate civil action for damages, especially considering that the accused therein was acquitted because his guilt was not proved beyond reasonable doubt; that the two cases were anchored on two different causes of action, the criminal case being on a violation of Article 365 of the Revised Penal Code while the subsequent complaint for damages was based on a quasi-delict; and that in the judgment in the criminal case the aspect of civil liability was not passed upon and resolved. Consequently, said civil case may proceed as authorized by Article 29 of the Civil Code. Our initial adverse observation on a portion of the decision of respondent court aside, We hold that on the issues decisive of this case it did not err in sustaining the decision a quo. WHEREFORE, the writ prayed for is hereby DENIED and the decision of the respondent Court of Appeals is AFFIRMED, without costs. SO ORDERED.

TALA REALTY SERVICES CORPORATION, petitioner, vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent. DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated December 29, 2000, of the Court of Appeals[1] and its resolution, dated April 26, 2001, denying reconsideration. The appeals court affirmed the decision of the Regional Trial Court, Branch 55, Lucena City sustaining the dismissal by the Municipal Trial Court in Cities, Branch II, Lucena City of petitioners complaint for ejectment against respondent. The facts are as follows: On August 25, 1981, petitioner Tala Realty Services Corporation leased several properties found in different parts of the country to respondent Banco Filipino Savings and Mortgage Bank for a period of 20 years, renewable for another 20 years, at the option of respondent, at a monthly rental of P19,300.00. The properties are currently the sites of major branches of respondent bank. Under the contract, respondent was to payP962,500.00 as advance monthly rentals from the eleventh to the twentieth year.[2] On the same date, another lease contract purporting to cover the lease of the same properties was allegedly executed between the same parties. The monthly rental was the same, but the period of the lease was only for 11 years, renewable for a period of nine years at the option of the lessee (herein respondent). The amount stipulated in the first contract as advance rental was converted into a security deposit for the faithful performance by the lessee of the terms and conditions of the lease contract.[3] On August 19, 1992, 11 years after the execution of the said contracts, Elizabeth H. Palma, director of petitioner Tala Realty, wrote Teodoro O. Arcenas, Jr., president of respondent Banco Filipino, notifying him of the expiration of the lease as stipulated in the second contract of lease. Petitioner Tala Realty claims that it had agreed to discuss the terms and conditions for the renewal of the lease contract, provided that any increased rental agreed upon by the parties should retroact to September 1, 1992.[4] In another letter, dated February 10, 1993, Tala Realty, through Elizabeth H. Palma, likewise demanded payment of goodwill money as condition for the renewal of the lease considering the losses allegedly incurred by petitioner during the period of the previous lease contract. Petitioner informed respondent that the failure of the parties to conclude the negotiations would be deemed a waiver of respondents option to renew the lease.[5]

On June 22, 1993, 10 months after the expiration of the second contract, petitioner Tala Realty wrote another letter to respondent Banco Filipino, notifying the latter that it would charge as part of the rent the difference between what the latter had paid and the proposed new rates demanded by petitioner and that it (petitioner) had decided to exercise its rights to dispose or alienate the properties subject of the contract.[6] As the parties had failed to reach an agreement, petitioner Tala Realty gave respondent Banco Filipino until April 30, 1994 within which to vacate the Lucena property and to remit the amount of P3,090,886.00 as unpaid rentals. Respondent Banco Filipino refused to vacate the property on which its branch site in Lucena City had been built. Hence, petitioner filed on November 3, 1994 a complaint for ejectment in the Municipal Trial Court in Cities, Branch II, Lucena City, alleging that respondent had failed to pay the new rates of rentals and to comply with the other terms and conditions for the renewal of the contract. Petitioner prayed that respondent be ordered to vacate the premises in question and to pay P2,782,890.57, as unpaid rentals until September 30, 1994, and thereafter the amount of P144,301.57 as monthly rental, plus an annual 10% escalation, until the property was vacated. Petitioner likewise sought payment of the costs of suit as well as other reliefs to which it may be entitled.[7] In its answer, respondent alleged that petitioner Tala Realty was actually formed by the major stockholders of respondent for the purpose of unloading and then leasing back from petitioner properties it could not retain under banking laws and regulations; that the first contract of lease for 20 years, renewable, at the option of respondent, for another 20 years, was the valid contract between petitioner and respondent; that the second contract covering the same property was spurious, fabricated, and falsified; that petitioner was not the owner of the property, but a mere trustee holding the said property for the use and benefit of respondent; that there was a pending derivative suit before the Securities and Exchange Commission filed by respondents stockholders in its behalf, for the reconveyance of the branch sites transferred to petitioner as the sale of the said properties by respondent to the latter was simulated, fictitious, and without sufficient consideration; and that petitioner had no valid cause of action against respondent. Respondent filed a compulsory counterclaim, alleging evident bad faith on the part of petitioner in instituting the case for ejectment and sought the award of P10 million as exemplary damages, P5 million as actual damages, P5 million as moral damages, P500,000.00 as litigation expenses, and P200,000.00 as attorneys fees in its favor.[8] On April 2, 1997, the Municipal Trial Court in Cities, Branch II, Lucena City rendered a decision dismissing petitioners complaint and respondents counterclaim. The court held itself without jurisdiction as the issues raised (i.e., which of the lease contracts was valid and whether petitioner was a mere trustee of respondent) were incapable of pecuniary estimation and should thus be raised before the Regional Trial Court. The court pointed out ejectment proceedings under Rule 70

of the Rules of Civil Procedure are summary in nature and, therefore, not proper for threshing out issues such as those raised by the parties.[9] The Regional Trial Court, Branch 55, Lucena City affirmed and later denied petitioners motion for reconsideration.[10] Petitioner then sought a reversal of the lower courts judgment from the Court of Appeals, but it fared no better there. In a decision, rendered on December 29, 2000, the appeals court ruled that petitioners complaint had been correctly dismissed by the Municipal Trial Court in Cities. Nonetheless, after holding the first contract of lease to be the valid contract, the Court of Appeals ruled that respondents refusal to pay the new rate demanded was justified because the contract for a 20-year lease had not yet expired. In any event, it was held, nonpayment of rent was not the ground for petitioners complaint for ejectment and so could not be raised for the first time on appeal.[11] Petitioner filed a motion for reconsideration, but it was denied by the Court of Appeals in its resolution of April 26, 2001. Hence this petition. Petitioner contends that the Court of Appeals did not follow this Courts ruling in several cases involving leases of its other properties to respondent in which it was held that the contract for a 20-year lease was the real contract between the parties, the 11-year lease agreement being spurious and fabricated and, therefore, void. Three questions are raised in this appeal: 1. Whether the Municipal Trial Court in Cities, Branch II, Lucena City correctly dismissed petitioners complaint for ejectment against respondent. 2. Whether the lease of petitioners Lucena property was for 20 years, renewable for another period of 20 years at the option of respondent, or for 11 years, renewable for another period of nine years also at the option of respondent. 3. Whether respondent is liable for nonpayment of rentals either as provided in the original lease contract for 20 years or for the new rate after the expiration of the lease for 11 years. As already noted, several contracts were entered into on August 25, 1981 between petitioner and respondent for the lease of other properties of petitioner. These properties, 12 in all, were formerly owned by respondent. In 1979, respondent bank had been confronted with a legal problem. As a savings and mortgage bank, it could hold under the law[12] only such real estate as may be necessary for the transaction of its business, provided its total investment in such real estate and its improvements does not exceed 50 per cent of its net worth. Respondent had reached the allowable limit in its branch site holdings. Consequently, it unloaded some of its holdings to petitioner Tala Realty which was organized by respondents major stockholders Antonio Tiu, Tomas B. Aguirre, Nancy Lim, and Pedro B. Aguirre, from whose family names the acronym Tala was derived. On August 25, 1981, respondent leased back the properties, which are the sites of its major branches, from the newly formed corporation.

The leases later became the subject of litigations between petitioner and respondent as the former claimed in 1992 that the leases, which were entered into on August 25, 1981, had expired and the parties had failed to reach a new agreement. Petitioner alleged its contract with respondent was the one which provided for the lease of its properties for 11 years, renewable for nine years. In G.R. No. 129887,[13] which involved petitioners property in Urdaneta, Pangasinan, this Court held in an ejectment suit brought by petitioner against the bank (1) that the Municipal Trial Court of Urdaneta had jurisdiction to decide the validity of the two lease contracts covering the same property and (2) that the lease was covered by the first contract for 20 years because the second contract for 11 years was spurious and fabricated. This Court held:

First. Petitioner Tala Realty contends that the municipal trial court has no jurisdiction to decide the issue of ownership in an ejectment case. Nothing is more settled than the rule that ejectment is solely concerned with the issue of physical or material possession of the subject land or building. However, if the issue of possession depends on the resolution of the issue of ownership which is sufficiently alleged in the complaint, the municipal trial court may resolve the latter although the resulting judgment would be conclusive only with respect to the possession but not the ownership of the property. In the instant case, the issue of ownership was not even addressed, there being no need to do so as the ejectment case hinged on the question concerning the two (2) lease contracts of the contending parties. Second. Petitioner Tala Realty insists that its eleven (11)-year lease contract controls. We agree with the MTC and the RTC, however, that the eleven (11)-year contract is a forgery because (1) Teodoro O. Arcenas, then Executive Vice-President of private respondent Banco Filipino, denied having signed the contract; (2) the records of the notary public who notarized the said contract, Atty. Generoso S. Fulgencio, Jr., do not include the said document; and (3) the said contract was never submitted to the Central Bank as required by the latters rules and regulations.

Clearly, the foregoing circumstances are badges of fraud and simulation that rightly make any court suspicious and wary of imputing any legitimacy and validity to the said lease contract. Executive Vice-President Arcenas of private respondent Banco Filipino testified that he was responsible for the daily operations of said bank. He denied having signed the eleven (11)-year contract and reasoned that it was not in the interest of Banco Filipino to do so. The fact was corroborated by Josefina C. Salvador, typist of Banco Filipinos Legal Department, who allegedly witnessed the said contract and whose initials allegedly appear in all the pages thereof. She disowned the said marginal initials. .... 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. 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.[14]
The facts of this case are substantially the same as those of G.R. No. 129887. Except for the fact that this case involves another property in Lucena City and the amount of rent is different, the ruling in G.R. No. 129887 would have constituted res judicata in the case at bar. Nonetheless, the principle of stare decisis dictates that for the sake of certainty and the stability of case law the conclusion reached in the prior case should be followed in this case.[15] Indeed, in subsequent cases involving properties of petitioner in Davao City, Iloilo City, and Malabon, which had been similarly leased to respondent bank, this Court held that the lease contract for 20 years, not the one for 11 years, was the valid contract.[16] Accordingly, the first two questions in this case must be resolved in accordance with the rulings in G.R. No. 129887 and subsequent cases, to wit: (1) the Municipal Trial Court in Cities, Branch II, Lucena City was competent to adjudicate the validity of the lease contracts and (2) the lease of the Lucena City property of petitioner is governed by the contract for 20 years, renewable for another period of 20 years, at the option of respondent, the contract relied upon by petitioner, providing for a term of 11 years, renewable for another period of nine years, being void.

It remains to determine whether nonetheless respondent may be ejected for nonpayment of rent. The Court of Appeals held that since petitioners action is based on nonpayment of the increased rent unilaterally imposed by petitioner, there was no cause of action for ejectment against respondent. Indeed, in its complaint petitioner alleged:

6. In a letter dated June 22, 1993, plaintiff informed defendant that the new rental rates and other terms and conditions mentioned in the preceding paragraph shall be applicable to the existing month-tomonth lease between them retroactive to September 1, 1992. (Attached as Annex C and made an integral part hereof is a copy of said letter.) 7. Defendant however refused to comply with the new rental rates and with the other terms and conditions mentioned in paragraph 5 of this Complaint, including those on the payment of goodwill, deposit, and rental adjustment. 8. As a result of said unwarranted refusal, in a letter dated April 14, 1994, plaintiff sent defendant a letter informing the latter that at the end of the month the lease over the premises shall no longer be renewed and likewise demanding the payment of the outstanding amounts due plaintiff from the defendant. Said letter likewise gave the defendant until the end of the month or until April 30, 1994 to vacate the premises. (Attached as Annex D and made an integral part hereof is a copy of said letter.) 9. As of April 30, 1994, defendant has failed to pay the plaintiff by way of rent alone the amount of Two Million One Hundred Thirteen Thousand Eight Hundred Fifty Six Pesos (P2,113,856.00) which unpaid rentals amount to Two Million Seven Hundred Eighty Two Thousand Eight Hundred Ninety & 57/100 Pesos (P2,782,890.57) as of September 30, 1994.[17]
To be sure, upon the signing of lease contract on August 25, 1981, respondent paid petitioner the amount of P962,500.00 representing advance rentals for the period August 25, 1991 to August 25, 2001, that is to say, from the 11 th to the 20th year of the contract and, therefore, it would appear that respondent was not in arrears under the 20-year lease contract. Petitioner, however, claims that the advance rentals had been applied by it to the payment of rentals for the period

August 1985 to November 1989, when respondent was under liquidation by the Central Bank of the Philippines. Respondent questions the validity of such application on the ground that it was without legal basis and was not justifiable. Nonetheless, it appears that respondent made rental payments until April 1994. At the rate of P19,300.00 a month, the advance rentals in the amount of P962,500.00, which respondent had paid at the beginning of the lease, could pay for 49 monthly rents only, or the rents for the period August 1985 to August 1989, whereas the rents for 52 months (from August 1985 to November 1989) had to be paid. That is why petitioner had to pay rent up to April 1994, which is a period of 52 months counted from September 1989. In other words, the rental payments made by respondent were for the period when it was undergoing liquidation, thus preserving or protecting the advance rental required in the lease contract for 20 years, which petitioner had applied to the payments of rentals during the period of respondents liquidation. Hence, respondent had no arrearages under the valid lease contract for 20 years for nonpayment of rent. It may be asked whether respondent was not in arrears for rents falling due after April 1994 as the lease had seven (7) more years to run until September 2001. The answer is two-fold: (1) As already stated, petitioners complaint was based on the alleged expiration of the lease after eleven (11) years and, as a consequence, the failure of respondent to pay the new rate demanded by it after the alleged expiration of the lease. (2) The amount of P962,500.00 which respondent had paid at the beginning of the lease was advance rental for the remainder of the lease after September 1991 or for the period covering the 11th to the 20th year. Thus, paragraph 3 of the Contract of Lease provides: 3. That upon the signing and execution of this Contract, the LESSEE shall pay the LESSOR NINE HUNDRED SIXTY TWO THOUSAND FIVE HUNDRED PESOS ONLY (P962,500.00) Philippine Currency representing advance rental to be applied on the monthly rental for the period from the eleventh to the twentieth year;[18] There is thus no cause of action for nonpayment of rent under the first contract between the parties for the lease of the Lucena City property of petitioner for twenty (20) years. WHEREFORE, the decision of the Court of Appeals is AFFIRMED and the complaint filed by petitioner Tala Realty Services Corporation against respondent Banco Filipino Savings and Mortgage Bank is DISMISSED. SO ORDERED. Bellosillo, (Chairman), Quisumbing, and De Leon, Jr., JJ., concur.