G.R. No. 139137 - Arquelada vs. Philippine Veterans Bank

Petitioners, consisting of Alfredo Arquelada, Cresencia Egos, Nelson Egos, Salvador Empaynado, Danilo Gibe, Ricardo Frilles, Antonio Laboy, Felicisima Logero, Bienvenido Lumbang, Adelia Mendoza, Welkenie Palomar, Isabel Tayawa, Margarito Yu, and John and Jane Does, were lessees of a fourteen-door apartment located at No. 1708 M. Lazaro corner M. Hizon Streets, Sta. Cruz, Manila.
Originally, the apartment complex was owned by Ernesto Singson and Socorro Singson, who entered into a verbal lease agreement with the petitioners on a month-to-month basis with a stipulated rent.
During the lease period, the spouses Singson executed a real estate mortgage over the apartments as security for a loan obtained from Philippine Veterans Bank.

Due to non-payment on the spouses’ part, the Bank foreclosed on the mortgage, ultimately acquiring title to the properties under new Transfer Certificate of Title Nos. 225493 and 225494.
Despite the change in ownership, the Bank allowed the existing lease arrangement to continue under the same monthly payment terms.
Petitioners, however, accrued rental arrearages over several months for each individual lessee, as reflected in a Statement of Account and repeated demands made by the Bank.

On 30 January 1998, the Bank sent individual Statements of Account to petitioners showing their respective arrearages.
Following several demands, the Bank issued a Final Notice on 8 February 1998, compelling petitioners to vacate the premises and settle outstanding rental arrears.
On 12 February 1998, for failing to comply with the notice, the Bank filed a complaint for Unlawful Detainer in the Metropolitan Trial Court (MTC), alleging termination of the month-to-month lease on the ground that the lessor needed the premises for its own use.

The MTC, after trial on 28 September 1998, rendered judgment in favor of the Bank, ordering petitioners’ ejectment and directing payment of outstanding arrearages along with monthly subsequent rents and attorney’s fees.
The Regional Trial Court (RTC) affirmed the decision of the MTC on 23 February 1999, and subsequently denied petitioners’ motion for reconsideration while granting the Bank’s motion for execution.
Petitioners then sought review before the Court of Appeals (CA) twice – initially under Rule 65 (dismissed for lack of proper remedy) and subsequently under Rule 42 – raising issues including the jurisdiction of the MTC and allegations of forum shopping.

The CA resolved three primary issues: whether the MTC acquired jurisdiction over the unlawful detainer action, whether the RTC correctly denied the motion for reconsideration and granted execution, and whether petitioners committed forum shopping by filing multiple petitions.
The CA ruled that the MTC had jurisdiction because the ejectment was based on the expiration of the lease rather than mere non-payment or violation of specific lease conditions – circumstances which do not require a prior demand to vacate under Section 2, Rule 70 of the Rules of Civil Procedure.
On 29 July 1999, petitioners filed an Urgent Motion for a Temporary Restraining Order and/or Writ of Preliminary Injunction to stop the execution of the MTC’s order, which was temporarily enjoined by the Court on 4 August 1999.
Subsequently, movants (representing parties who purchased the apartments from the Bank) sought substitution to prosecute the case in lieu of the Bank, with their comment being allowed on 13 September 1999.
The factual record also detailed that despite the absence of a specified term in the verbal lease, payment was made monthly, thereby instituting a month-to-month lease which, upon non-payment or demand to vacate, automatically terminates.

Whether the MTC acquired jurisdiction over an unlawful detainer action when it was filed only four days after the Bank’s final notice, given Section 2, Rule 70 requires a five-day waiting period in cases based on non-payment or non-compliance.

Whether the expiration of the verbal, month-to-month lease constitutes a valid ground for ejectment under the applicable rent control law (B.P. Blg. 877), despite petitioners’ contention that a lease without a definite period does not expire in the manner required for judicial ejectment.
Whether petitioners’ failure to pay rent, and their subsequent continuation of occupancy after the lease expired, legally renders them unlawful occupants.

Whether the requirement of prior demand to vacate is applicable when the action for ejectment is based exclusively on the expiration of the lease contract.
Whether the Bank’s inaction between its demands can be construed as tacit consent to extend the lease.

Whether petitioners committed forum shopping by filing two successive petitions before the CA under different Rules (first under Rule 65 and then under Rule 42).

Whether the court may exercise its discretionary power under the second sentence of Article 1687 of the Civil Code to extend the term of the lease despite the petitioners’ arrearages and the verbal nature of the contract.