THIRD DIVISION

[G.R. No. 154765. March 29, 2007.]

PEDRO T. BERCERO , petitioner, vs . CAPITOL DEVELOPMENT

CORPORATION , 1 respondent.

DECISION

AUSTRIA-MARTINEZ , J : p

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court assailing the Decision 2 dated February 11, 2002 of the Court of Appeals
(CA) in CA-G.R. CV No. 56484 which set aside the Decision 3 dated May 27, 1996 of the
Regional Trial Court, Branch 88, Quezon City (RTC-Branch 88) in Civil Case No. Q-92-11732,
and the CA Resolution 4 dated August 29, 2002 which denied petitioner's Motion for
Reconsideration.
The factual background of the case is as follows:
On January 31, 1983, Capitol Development Corporation (respondent) leased its
commercial building and lot located at 1194 EDSA, Quezon City to R.C. Nicolas
Merchandising, Inc., (R.C. Nicolas) for a 10-year period or until January 31, 1993 with the
option for the latter to make additional improvements in the property to suit its business
and to sublease portions thereof to third parties. 5 DAcaIE

R.C. Nicolas converted the space into a bowling and billiards center and subleased
separate portions thereof to Midland Commercial Corporation, Jerry Yu, Romeo Tolentino,
Julio Acuin, Nicanor Bas, and Pedro T. Bercero (petitioner). Petitioner's sublease contract
with R.C. Nicolas was for a three-year period or until August 16, 1988. 6
Meanwhile, for failure to pay rent, respondent led an ejectment case against R.C.
Nicolas before the Metropolitan Trial Court, Branch 41, Quezon City (MeTC-Branch 41),
docketed as Civil Case No. 52933. Respondent also impleaded the sub-lessees of R.C.
Nicolas as parties-defendants. THEDcS

During the pendency of Civil Case No. 52933, several sub-lessees including
petitioner, entered into a compromise settlement with respondent. 7 In the compromise
settlement, the sub-lessees recognized respondent as the lawful and absolute owner of
the property and that the contract between respondent and R.C. Nicolas had been lawfully
terminated because of the latter's non-payment of rent; and that the sub-lessees
voluntarily surrendered possession of the premises to respondent; that the sub-lessees
directly executed lease contracts with respondent considering the termination of
leasehold rights of R.C. Nicolas.
Petitioner entered into a lease contract with respondent for a three-year period,
from August 16, 1988 to August 31, 1991. 8 EDIaSH

On October 21, 1988, respondent and petitioner, as well as several other sub-
lessees of R.C. Nicolas, led a Joint Manifestation and Motion in Civil Case No. 52933,
manifesting to the MeTC-Branch 41 that they entered into a compromise settlement and
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 moved that the names of the sub-lessees as parties-defendants be dropped and excluded.
9

On November 14, 1988, R.C. Nicolas led a complaint for ejectment and collection
of unpaid rentals against petitioner before the Metropolitan Trial Court, Branch 39, Quezon
City (MeTC-Branch 39), docketed as Civil Case No. 0668. 1 0 On April 18, 1989, MeTC-
Branch 39 rendered a Decision in favor of R.C. Nicolas and ordered the eviction of
petitioner from the leased premises. 1 1 aTIEcA

Dissatis ed, petitioner led an appeal before the Regional Trial Court, Branch 78,
Quezon City (RTC-Branch 78). R.C. Nicolas led a Motion for Execution Pending Appeal
which was opposed by petitioner.
In an Order dated October 4, 1990, RTC-Branch 78 directed the issuance of a writ of
execution pending appeal since petitioner failed to le a supersedeas bond and
periodically deposit the rentals due during the pendency of the appeal. 1 2 Accordingly, on
October 22, 1990 a writ of execution was issued. 1 3 Sometime in November 1990,
petitioner was evicted from the leased premises. 1 4
Petitioner assailed the Order dated October 4, 1990 in a petition for certiorari with
the CA, docketed as CA-G.R. SP No. 23275, but the petition was denied due course and
dismissed by the CA in a Decision dated December 28, 1990. 1 5 HEDSIc

On September 3, 1991, respondent led a Manifestation in Civil Case No. 52933

urging MeTC-Branch 41 to order R.C. Nicolas to desist from harassing respondent and
petitioner, and to con rm respondent's right of possession to the premises in the light of
the ejectment case filed by R.C. Nicolas against petitioner. 1 6
Two months later, or on November 13, 1991, MeTC-Branch 41 rendered a Decision
in Civil Case No. 52933 in favor of respondent and ordered R.C. Nicolas to pay its unpaid
rentals from September 1986 until October 1988. 1 7 HTDAac

Meanwhile, since his eviction in November 1990, petitioner made repeated demands
on respondent for the restoration of his possession of the commercial space leased to
him to no avail. 1 8
Thus, on March 24, 1992, petitioner led a complaint for sum of money with
attachment and mandatory injunction with damages against the respondent before the
RTC-Branch 88, docketed as Civil Case No. Q-92-11732. 1 9
On May 27, 1996, RTC-Branch 88 rendered its Decision 2 0 in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, premises rendered, this Court nds for the plaintiff and
orders the defendant: HDICSa

1) to restore plaintiff's possession of the rented building located at 1194

EDSA, Quezon City for the next three years effective from receipt of the copy of
this decision;

2) to pay the plaintiff the following:

a. P480,000.00 — actual damages

b. P50,000.00 — moral damages

c. P50,000.00 — exemplary damages
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 d. P50,000.00 — attorney's fees

3) to pay the costs.

Accordingly, the counterclaim led by the defendant Capitol Development
Corporation is hereby DISMISSED. STaIHc

SO ORDERED. 2 1

The RTC held that respondent miserably failed to comply with its obligation under
Article 1654 of the New Civil Code due to its apathy and failure to extend any assistance to
the petitioner and was, therefore, liable for the restoration of petitioner's possession and
the payment of actual damages corresponding to lost pro t, cash, generator, and other
items petitioner lost due to the eviction, as well as moral and exemplary damages and
attorney's fees.
Dissatis ed, respondent led an appeal with the CA, docketed as CA-G.R. CV No.
56484. THcaDA

On February 11, 2002, the CA rendered its Decision 2 2 setting aside the Decision of
RTC-Branch 88, to wit:
WHEREFORE, premises considered, the Decision dated May 27, 1996 of the
Regional Trial Court of Quezon City, Branch 88, in Civil Case No. Q-92-11732, is
hereby REVERSED and SET ASIDE. No pronouncement as to costs.

Applying the equitable principle of estoppel, the CA held that although respondent as
lessor failed to ensure the peaceful possession of petitioner as its lessee in the subject
premises, the latter is not entitled to damages since he was aware of the facts which
led to his ouster from the subject premises; and that petitioner was well aware that
respondent had a 10-year lease contract with R.C. Nicolas which was subject of an
ejectment suit that was still pending litigation when petitioner executed a lease
contract with respondent.
On March 5, 2002, petitioner led his Motion for Reconsideration. 2 3 On August 29,
2002, the CA issued its Resolution denying petitioner's Motion for Reconsideration. 2 4 CSIDEc

Hence, the present Petition anchored on the following grounds:

I.

THE HONORABLE COURT OF APPEALS CLEARLY COMMITTED GRAVE ERROR

AND ABUSE OF DISCRETION IN APPLYING THE PRINCIPLE OF ESTOPPEL TO
PETITIONER

II.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR BY
DISREGARDING THE LAW, JURISPRUDENCE AND EVIDENCE IN DELETING THE
AWARD MADE BY THE LOWER COURT OF DAMAGES AND REVERSING THE
THREE (3) YEAR POSSESSION OF THE SUBJECT PROPERTY GIVEN TO THE
PETITIONER 2 5 HTSIEa

Petitioner argues that the principle of estoppel is inapplicable because he dealt with
respondent in good faith and relied upon the latter's representations that the lease of R.C.
Nicolas was already terminated at the time he contracted with the latter; that respondent
assured him that it had a valid and legal right to enter into a new lease contract with him;
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 that he is entitled to damages since respondent did not even lift a nger to protect him
when R.C. Nicolas led an ejectment case against him; and that respondent acted in utter
bad faith when it still refused to restore his possession after he was evicted in November
1990, notwithstanding that his lease contract with respondent was valid until August 31,
1991.
Respondent, on the other hand, counters that the CA correctly applied the principle
of estoppel since petitioner voluntarily entered into a lease agreement with respondent
despite full knowledge that the latter's lease with R.C. Nicolas over the subject premise
had yet to be judicially terminated; and that petitioner knew that at the time he contracted
with respondent, he still had existing obligations to R.C. Nicolas relating to their sub-lease
agreement. EDIHSC

Under Article 1654 (3) of the New Civil Code, to wit:

Art. 1654. The lessor is obliged:

xxx xxx xxx

(3) To maintain the lessee in the peaceful and adequate enjoyment of the
lease for the entire duration of the contract.

it is the duty of the lessor to place the lessee in the legal possession of the premises
and to maintain the peaceful possession thereof during the entire term of the lease. 2 6
To fully appreciate the importance of this provision, the comment of Manresa on said
article is worth mentioning: DEIHAa

The lessor must see that the enjoyment is not interrupted or disturbed,
either by others' acts . . . or by his own. By his own acts, because, being the person
principally obligated by the contract, he would openly violate it if, in going back on
his agreement, he should attempt to render ineffective in practice the right in the
thing he had granted to the lessee; and by others' acts, because he must
guarantee the right he created, for he is obligated to give warranty in the manner
we have set forth in our commentary on article 1553, and, in this sense, it is
incumbent upon him to protect the lessee in the latter's peaceful enjoyment. 2 7

The obligation of the lessor arises only when acts, termed as legal trespass
(perturbacion de derecho), disturb, dispute, object to, or place di culties in the way of
the lessee's peaceful enjoyment of the premises that in some manner or other cast
doubt upon the right of the lessor by virtue of which the lessor himself executed the
lease, in which case the lessor is obligated to answer for said act of trespass. 2 8 The
lessee has the right to be respected in his possession and should he be disturbed
therein, he shall be restored to said possession by the means established by the law or
by the Rules of Court. 2 9 Possession is not protection against a right but against the
exercise of a right by one's own authority. 3 0
Petitioner claims that respondent as lessor was obliged to restore his possession
following his eviction from the premises. The Court disagrees.
Void are all contracts in which the cause or object does not exist at the time of the
transaction. 3 1 In the present case, the lease contract between petitioner and respondent
is void for having an inexistent cause — respondent did not have the right to lease the
property to petitioner considering that its lease contract with R.C. Nicolas was still valid
and subsisting, albeit pending litigation. Having granted to R.C. Nicolas the right to use and
enjoy its property from 1983 to 1993, respondent could not grant that same right to
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 petitioner in 1988. When petitioner entered into a lease contract with respondent, the latter
was still obliged to maintain R.C. Nicolas's peaceful and adequate possession and
enjoyment of its lease for the 10-year duration of the contract.
Respondent's unilateral rescission of its lease contract with R.C. Nicolas, without
waiting for the nal outcome of the ejectment case it led against the latter, is unlawful. A
lease is a reciprocal contract and its continuance, effectivity or ful llment cannot be made
to depend exclusively upon the free and uncontrolled choice of just one party to a lease
contract. 3 2 Thus, the lease contract entered into between petitioner and respondent,
during the pendency of the lease contract with R.C. Nicolas, is void. ETAICc

There is no merit to petitioner's claim of good faith in dealing with respondent. Good
faith is ordinarily used to describe that state of mind denoting "honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry; 3 3
an honest intention to abstain from taking any unconscientious advantage of another, even
through technicalities of law, together with absence of all information, notice, or bene t or
belief of facts which render the transaction unconscientious." 3 4 Being privy to the
pendency of the ejectment case involving the leasehold rights of R.C. Nicolas since he was
impleaded as a party-defendant in said ejectment case, petitioner cannot feign innocence
of the existence thereof. Petitioner was fully aware that R.C. Nicolas had a lease contract
with respondent which was subject of a pending litigation.
It is well-settled that parties to a void agreement cannot expect the aid of the law;
the courts leave them as they are, because they are deemed in pari delicto or "in equal
fault". 3 5 No suit can be maintained for its speci c performance, or to recover the property
agreed to be sold or delivered, or the money agreed to be paid, or damages for its
violation, and no a rmative relief of any kind will be given to one against the other. 3 6 Each
must bear the consequences of his own acts. 3 7 They will be left where they have placed
themselves since they did not come into court with clean hands.
In sum, the underlying case for sum of money led by petitioner against respondent
cannot prosper, his right of action being anchored on a contract which, for all intents and
purposes, has no legal existence and effect from the start. A void or inexistent contract is
equivalent to nothing; it is absolutely wanting in civil effects; it cannot be the basis of
actions to enforce compliance. 3 8
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision
and Resolution of the Court of Appeals in CA-G.R. CV No. 56484 are AFFIRMED.
Petitioner's Complaint and respondent's Counterclaim in Civil Case No. Q-92-11732 are
DISMISSED. Costs against petitioner.
SO ORDERED.
Ynares-Santiago, Callejo, Sr., Chico-Nazario and Nachura, JJ., concur.

Footnotes
1. The present petition impleaded the Court of Appeals as respondent. However, under Rule 45,
Section 4 of the Revised Rules of Court, the present petition may be filed without
impleading the lower courts and judges thereof as petitioners or respondents. Hence, the
Court deleted The Court of Appeals from the title.

2. Penned by Justice Mercedes Gozo-Dadole and concurred in by Justices Salvador J. Valdez,

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 Jr. and Juan Q. Enriquez, Jr.; CA rollo, pp. 92-103.

3. Original Records, pp. 258-266.

4. CA rollo, p. 143.
5. Records, p. 56.

6. Id. at 53.
7. Id. at 84.

8. Id. at 4.
9. Id. at 61.
10. Id. at 171.
11. Exhibits "H", folder of exhibits, p. 5.

12. Records, p. 216.

13. Id. at 219.
14. TSN, August 17, 1993, testimony of Pedro T. Bercero, p. 14.
15. Records, p. 221.

16. Id. at 64.

17. Id. at 55-60.
18. Id. at 13.
19. Id. at 1.
20. Supra note 3.

21. Id. at 266.

22. Supra note 2.
23. Id. at 106.
24. Supra note 4.

25. Rollo, p. 254.

26. Limitless Potentials, Inc. v. Quilala, G.R. No. 157391, July 15, 2005, 463 SCRA 586, 611-612;
De la Cruz v. Seminary of Manila, 18 Phil. 330, 335 (1911).
27. CMS Investment and Management Corporation v. Intermediate Appellate Court, No. L-
64325, October 3, 1985, 139 SCRA 75, 84; Goldstein v. Roces, 34 Phil. 562, 564 (1916).

28. Liwayway Publications, Inc. v. Permanent Concrete Workers Union, 195 Phil. 51, 64 (1981).
29. NEW CIVIL CODE, Article 539, provides:
Art. 539. Every possessor has a right to be respected in his possession; and should he be
disturbed therein he shall be protected in or restored to said possession by the means
established by the laws and the Rules of Court.

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 A possessor deprived of his possession through forcible entry may within ten days from
the filing of a complaint present a motion to secure from the competent court, in the
action for forcible entry, a writ of preliminary mandatory injunction to restore him in his
possession. The court shall decide the motion within thirty (30) days from filing thereof.
30. Tolentino, NEW CIVIL CODE (1987), Vol. II, p. 241.
31. NEW CIVIL CODE, Article 1409, reads:
Art. 1409. The following contracts are inexistent and void from the beginning:
xxx xxx xxx

(3) Those whose cause or object did not exist at the time of the transaction;
xxx xxx xxx
These contracts cannot be ratified. Neither can the right to set up the defense of illegality
be waived.
32. Limitless Potentials, Inc. v. Quilala, supra note 27, at 613; LL and Company Development
and Agro-Industrial Corporation v. Huang Chao Chun, 428 Phil. 665, 677 (2002). aHADTC

33. Wooden v. Civil Service Commission, G.R. No. 152884, September 30, 2005, 471 SCRA 512,
531; De Guzman v. Delos Santos, 442 Phil. 428, 438 (2002).
34. Civil Service Commission v. Maala, G.R. No. 165253, August 18, 2005, 467 SCRA 390, 399;
Black's Law Dictionary, 6th ed., 1990, p. 693.
35. Menchavez v. Teves, Jr., G.R. No. 153201, January 26, 2005, 449 SCRA 380, 393.
36. Rellosa v. Gaw Chee Hun, 93 Phil. 827, 831 (1953); Pomeroy's Equity Jurisprudence, Vol. 3,
5th ed., p. 728.
37. The City of Angeles v. Court of Appeals, 329 Phil. 812, 838 (1996); Teja Marketing v.
Intermediate Appellate Court, G.R. No. L-65510, March 9, 1987, 148 SCRA 347, 352.
38. Republic v. La'o, G.R. No. 141941, May 4, 2006, 489 SCRA 424, 430; Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 2001 ed.,
pp. 629-630.

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