Bercero v. Capitol Development Corporation
REITERATIONFacts
The Antecedents: Respondent Capitol Development Corporation (CDC) leased a commercial building and lot to R.C. Nicolas Merchandising, Inc. (R.C. Nicolas) for 10 years. R.C. Nicolas subleased portions, including one to petitioner Pedro T. Bercero (Bercero). Due to non-payment of rent, CDC filed an ejectment case against R.C. Nicolas and its sub-lessees, including Bercero. During the pendency of this case, Bercero and other sub-lessees entered into a compromise settlement with CDC, recognizing CDC as owner, acknowledging the termination of the lease with R.C. Nicolas, surrendering possession, and executing direct lease contracts with CDC. Bercero then entered into a three-year lease contract with CDC. Procedural History: R.C. Nicolas subsequently filed an ejectment case against Bercero. The Metropolitan Trial Court (MeTC) ruled in favor of R.C. Nicolas, ordering Bercero's eviction. The Regional Trial Court (RTC) directed the issuance of a writ of execution pending appeal, and Bercero was evicted. Bercero's petition for certiorari with the Court of Appeals (CA) was dismissed. Meanwhile, the ejectment case filed by CDC against R.C. Nicolas concluded with the MeTC ordering R.C. Nicolas to pay unpaid rentals. Bercero, after his eviction, demanded restoration of possession from CDC to no avail. Bercero then filed a complaint for sum of money with damages against CDC. The Petition: The RTC ruled in favor of Bercero, ordering CDC to restore possession and pay damages. The CA reversed this decision, applying the principle of estoppel and holding Bercero not entitled to damages as he was aware of the facts leading to his ouster. The CA found the lease contract between Bercero and CDC void. Bercero's motion for reconsideration was denied, leading to the present petition for review on certiorari.
Issue(s)
Whether the Court of Appeals erred in applying the principle of estoppel to the petitioner, considering the validity of the lease contract. Whether the Court of Appeals committed grave error by disregarding the law, jurisprudence, and evidence in deleting the award of damages and reversing the grant of three (3) years possession to the petitioner, considering the principle of in pari delicto.
Ruling
The 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.
Ratio Decidendi
On the issue of estoppel and the validity of the lease contract: The Court held that the lease contract between petitioner Bercero and respondent CDC is void from the beginning due to an inexistent cause. CDC did not have the right to lease the property to Bercero because its primary lease contract with R.C. Nicolas was still valid and subsisting, despite pending litigation. Article 1654(3) of the Civil Code obliges the lessor to maintain the lessee in the peaceful enjoyment of the lease for the entire duration of the contract. By granting a lease to Bercero while the primary lease to R.C. Nicolas was still in effect, CDC violated this obligation. The Court found that Bercero cannot claim good faith because he was aware of the ejectment case involving R.C. Nicolas's leasehold rights, having been impleaded as a party-defendant. Therefore, the principle of estoppel, as applied by the CA, was not the primary basis for the ruling, but rather the void nature of the contract. On the application of the principle of in pari delicto: The Court ruled that parties to a void agreement are left where they are, being deemed in pari delicto or "in equal fault." Consequently, no affirmative relief can be granted to either party. Bercero's right of action was anchored on a contract that had no legal existence or effect from the start. The Court reiterated that a void or inexistent contract is equivalent to nothing and cannot be the basis for enforcing compliance or recovering damages. Both parties must bear the consequences of their own acts, as they did not come to court with clean hands. Thus, Bercero's claim for damages and restoration of possession was dismissed.
Main Doctrine
A lease contract entered into by a sub-lessee with the owner, while the owner's primary lease contract with the original lessee is still valid and subsisting, is void for having an inexistent cause. Parties to a void agreement are left where they are, deemed in pari delicto, and cannot seek affirmative relief from the courts.