CASE DIGEST: BANCO FILIPINO

SAVINGS AND MORTGAGE BANK V.

TALA REALTY SERVICES CORPORATION
The majority of the stockholders of Banco Filipino Savings and Mortgage Bank agreed to form a
corporation known as the Tala Realty Services Corporation (Tala) to which some
of Banco Filipino‘s existing branch sites could be unloaded. The arrangement was
that Banco Filipino would transfer some of its existing branch sites to Tala, and the latter would
simultaneously lease them back to it.
Banco Filipino executed in favor of Tala a Deed of Absolute Sale transferring to it one of
its branchsites located at Poblacion, San Fernando, La Union (the property) at the agreed
purchase price. On even date, Tala in turn leased the property to Banco Filipino for a period of
20-years, renewable for another 20 years at the option of Banco Filipino, at a monthly rental
rate. The contract further required Banco Filipino to pay Tala a certain amount as advance
rentals for the 11th to the 20th years of the lease.
Tala claims that on that same day, the parties executed another lease contract which modified
the previous lease contract. The second lease contract shortened the term of the lease to 11 years,
renewable for 9 years at the option of Banco Filipino. The contract required Banco Filipino to
pay a certain amount as security deposit to secure its faithful compliance with its obligations, to
answer for any damage to the property, or for any damage that may be sustained by Tala on
account of any breach or default on the part of Banco Filipino.
More than 11 years after the execution of the contract of lease, Tala‘s director, Elizabeth H.
Palma, sent Banco Filipino a letter informing it that the lease contract had expired as of August
1992, and that starting September 1992, the contract had been extended on a monthly basis
under different terms and conditions including the monthly lease rental. Tala noted, however,
that as Banco Filipino had failed to take any definite action towards the renewal of the contract,
Tala was free to lease, dispose, sell and/or alienate the property. Tala subsequently
notified Banco Filipino that the lease contract would no longer be renewed, hence, it demanded
that it vacate the property and pay the unpaid rentals.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT CONCLUDED THAT PETITIONERS

OMNIBUS MOTION WAS INTENDED TO DELAY THE PROCEEDINGS BEFORE THE TRIAL
COURT AND NOT TO AVAIL OF THE LEGAL REMEDIES PROVIDED BY THE RULES OF
COURT TO ENSURE THAT HER CONSTITUTIONAL RIGHT TO DUE PROCESS IS
PROTECTED AND GUARANTEED. [14]

Issue: due process

Ruling:

In the case at bar, the consistency and regularity with which respondent judge issued the
assailed directives gives rise, not to a fanciful suggestion or to a superficial impression of
partiality, but to a clear and convincing proof of bias and prejudice. While we are not unmindful
of this Courts previous pronouncements that to warrant the judges inhibition from the case, bias
or prejudice must be shown to have stemmed from an extra-judicial or extrinsic source,[20] this
rule does not apply where the judge, as in the instant case, displays an inordinate predisposition
to deviate from established procedural precepts that demonstrate obvious partiality in favor of
one party. It is also true that the Supreme Court, on several occasions, ruled that the issuance
of the complained orders and decision that pertain to the judges judicial functions may not be
proper considerations to charge a judge of bias though these acts may be
erroneous.[21] However, where said complained orders, taken not singly but collectively,
ineluctably show that the judge has lost the cold neutrality of an impartial magistrate, due
process dictates that he voluntarily inhibits himself from the case.