Ballesteros V Abion

Internal
PAULO BALLESTEROS, Petitioner, vs. ROLANDO ABION, Respondent.

G.R. No. 143361, February 9, 2006
CORONA, J.:
FACTS:
The property subject of this petition is a two-door, three-story commercial building and the 229
sq.m. parcel of land on which it stands. The property was originally owned by Ruperto Ensano.
Ownership was subsequently transferred to the DBP which, in turn, sold the property to Dr.
Rodolfo Vargas in a deed of absolute sale dated March 30, 1988. Despite these transfers of
ownership, however, the property was registered in the names of DBP and Dr. Vargas only on
February 21, 1996
Meanwhile, on March 14, 1991, petitioner entered into a contract of lease for one door of the
building with Ronald Vargas, son of Dr. Vargas, who represented himself as the absolute owner
of the property. Under the agreement,which was not registered in the Register of Deeds, the lease
was to run until April 1, 1996.
On September 27, 1995, Dr. Vargas sold the property to respondent as evidenced by a deed of
absolute sale of even date and a new TCT in the name of the respondent issued on 10 April 1996.
In the meantime, petitioner entered into a new contract of lease with Ronald Vargas who again
misrepresented himself as the absolute owner of the property. This new agreement extended the
term of the original contract of lease between the parties and included the remaining door of the
building in its coverage. It was to be effective for a period of five years from November 1, 1995,
or until November 1, 2000.
Since respondent had not yet taken possession of the building, petitioner immediately occupied
the additional door upon the execution of the new contract of lease. He made advance payments
for the rent of the two doors until June 1997. He also sought to register the new contract of lease
with the Register of Deeds of Iriga City. However, the contract was entered only in the primary
book because it could not be registered for several reasons: (a) the requisite tax had not been
paid (b) the contract lacked a documentary stamp and (c) the tax declaration of the property was
not in the name of the lessor.2
On April 30, 1996, petitioner received respondent’s April 25, 1996 letter demanding that he vacate
the property and surrender its possession. On June 20, 1996, petitioner received another letter
from respondent’s counsel reiterating the demand for him to vacate the property. All this
notwithstanding, petitioner refused to vacate the premises prompting a complaint for unlawful
detainer to be filed against the petitioner, before the MTCC of Iriga. This, however, was dismissed
for failure to state an action.
On appeal to the RTC, the decision of the MTC was reversed and petitioner was ordered to vacate
the property and pay Php 7,000 per month as rental of the property from September 1995 until
such premises is vacated. Petitioner moved for reconsideration but was denied.
Petitioner filed a petition for review with the CA which later affirmed the RTC decision with
modification. The CA ruled that petitioner’s right of possession to the property was only by virtue
Internal
of the second lease contract dated October 30, 1995 between petitioner and Ronald Vargas. It
was clear, however, that Ronald Vargas was not the owner of the property and therefore had no
right to lease it out. Petitioner himself admitted respondent’s ownership of the property. Neither
was there any evidence that Ronald Vargas had been authorized by respondent or even by Dr.
Vargas himself to transact the second lease on their behalf.
ISSUE:
Whether or not petitioner could be validly ejected or terminate the lease.
RULING:
YES. The first premise of petitioner’s argument, that both lease agreements were valid, is
erroneous. As correctly observed by the RTC and the CA, Ronald Vargas was not the owner of
the property and had no authority to let it.
Although the lessor need not be the owner of the property being leased, he should have a right
or at least an authority to lease it out. Here, Ronald Vargas had neither the right nor the authority
to grant petitioner the lease of the property.
Dr. Vargas is deemed to have ratified the first lease because he never objected to it and in fact
allowed petitioner to occupy the property for five years despite his knowledge of his son Ronald’s
misdeed. Thus, we consider the first lease valid. But the same cannot be said of the second lease.
Under the principle of relativity of contracts, the sale of the property by Dr. Vargas to respondent
bound Ronald Vargas as an heir of the seller. Neither did respondent authorize him to enter into
a new lease contract with petitioner. Thus, Ronald Vargas could not have validly executed the
second lease agreement upon which petitioner now bases his right to the continued possession
of the property.
The river cannot rise higher than its source. Where the purported lessor is bereft of any right or
authority to lease out the property, then his supposed lessee does not acquire any right to the
possession or enjoyment of the property.
Suffice it to say that the second lease contract was legally inexistent for lack of an object certain.
Under Arts. 1318 and 1409 (3) of the Civil Code, contracts the cause or object of which did not
exist at the time of the transaction are inexistent and void ab initio.
Petitioner’s claim of good faith is of no moment. The good faith of a party in entering into a contract
is immaterial in determining whether it is valid or not. Good faith, not being an essential element
of a contract, has no bearing on its validity. No amount of good faith can validate an agreement
which is otherwise void. A contract which the law denounces as void is necessarily no contract at
all and no effort or act of the parties to create one can bring about a change in its legal status.
Any presumption of good faith on the part of petitioner disappeared after he learned from the
Register of Deeds that the property was already registered in the name of another person.
Possession in good faith ceases from the moment defects in the title are made known to the
possessor by extraneous evidence or by a suit for recovery of the property by the true owner.
Every possessor in good faith becomes a possessor in bad faith from the moment he becomes
aware that what he believed to be true is not so.
Internal
When petitioner presented the second lease contract to the Register of Deeds a day after its
execution, his attention was called to the fact that the "lessor" (Ronald Vargas) whom he believed
to be the owner of the property had no authority to lease it out. From that moment, his possession
ceased to be in good faith.
Petitioner’s reliance on our ruling in the Garcia case is misplaced. Garcia involved the lease of a
residential unit and was governed by a special law, BP 25. In this case, the property involved is a
commercial building, not a residential unit. The Garcia case is therefore inapplicable.
Assuming arguendo that Garcia is applicable, petitioner’s argument would still be untenable. We
held in Garcia that, while a successor-in-interest would be in breach of contract if he were to eject
a lessee of his predecessor-in-interest during the existence of the lease, "where the lease has
expired, there is no more contract to breach." Since the lease between petitioner and Ronald
Vargas had expired on April 1, 1996, there was no existing lease contract that could have been
breached when respondent made a demand on petitioner to vacate the property on April 30, 1996.

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PAULO BALLESTEROS, Petitioner, vs. ROLANDO ABION, Respondent.

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