Facts:

In the case of Paulo Ballesteros vs. Rolando Abion, the petitioner, Paulo Ballesteros, sought to contest the rulings of the Regional Trial Court (RTC) and the Court of Appeals (CA) regarding his right to possess a commercial property consisting of a two-door, three-story building and a 229 sq.m. parcel of land located in Iriga City. The original owner of the property was Ruperto Ensano, evidenced by Transfer Certificate of Title (TCT) No. 6178. Ownership was later transferred to the Development Bank of the Philippines (DBP), which sold the property to Dr. Rodolfo Vargas via an absolute sale on March 30, 1988. Despite these transactions, the property was not registered in the names of DBP and Dr. Vargas until February 21, 1996. On March 14, 1991, Ballesteros entered a lease contract with Ronald Vargas, Dr. Vargas's son, under the representation that Ronald was the absolute owner, although the lease was left unregistered. This lease was supposed to terminate on April 1, 1996.

...

Facts:

Parties and Property Background

• The petitioner, Paulo Ballesteros, is in dispute with the respondent, Rolando Abion.
• The property involved is a two-door, three-story commercial building along with a 229 sq.m. parcel of land.
• Original ownership was with Ruperto Ensano (as evidenced by TCT No. 6178).
• The title passed to the Development Bank of the Philippines (DBP) and subsequently to Dr. Rodolfo Vargas via a deed of absolute sale dated March 30, 1988.
• Despite these transfers, the property was not registered in the name of DBP or Dr. Vargas until February 21, 1996 (as shown by TCT Nos. 941 and 942).

Lease Agreements and Transactions

• On March 14, 1991, petitioner entered into a lease contract for one door of the building with Ronald Vargas, who represented himself as the absolute owner, even though this contract was not registered with the Register of Deeds. The lease was set to run until April 1, 1996.
• On September 27, 1995, Dr. Vargas sold the property to respondent, evidenced by a deed of absolute sale and the issuance of TCT No. 949 on April 10, 1996.
• On October 30, 1995, petitioner entered into a second lease contract with Ronald Vargas (once again misrepresenting himself as the owner).
• This new contract extended the terms of the original lease and included an additional door of the building.
• The term of the second lease was to run for five years from November 1, 1995 (or until November 1, 2000).
• Petitioner made advance rental payments for the two doors until June 1997 and attempted to register this second lease contract; however, registration was restricted to a primary book entry because of:
• Non-payment of the requisite tax,
• The absence of a documentary stamp, and
• The property’s tax declaration not being in the lessor’s name.

Demands, Legal Proceedings, and Possession

• On April 30, 1996, petitioner received a letter from respondent demanding the vacation of the property. A subsequent letter from respondent’s counsel on June 20, 1996 reiterated this demand.
• Despite these demands, petitioner refused to vacate, prompting respondent to file a complaint for unlawful detainer with damages on September 4, 1996 in the Municipal Trial Court in Cities (MTCC) of Iriga City, Branch 2.
• The MTCC initially dismissed the complaint for failure to state a cause of action.
• On appeal, the Regional Trial Court (RTC) of Iriga City, Branch 37 reversed the dismissal and ordered petitioner to vacate the premises, deliver possession to respondent, and pay:
• P50,000 as attorney’s fees, and

ii. P7,000 per month as rental from September 1995 until actual vacation of the property.

Appeal to the Court of Appeals (CA)

• Petitioner subsequently filed a petition for review with the CA, docketed as CA-G.R. SP No. 46065.
• On July 15, 1999, the CA affirmed the RTC’s decision with modifications:
• It ruled that petitioner’s right to possession derived solely from the second lease contract with Ronald Vargas—which was invalid as Ronald Vargas was not the owner and lacked authority.
• The CA found petitioner’s possession after respondent’s purchase to be merely by tolerance, rendering it unlawful once respondent demanded vacation.
• The award of attorney’s fees was reduced from P50,000 to P20,000 due to lack of factual support, and the rent assessment was modified.
• Petitioner moved for reconsideration of the CA decision, but the motion was denied.

Petitioner’s Arguments and Points of Contention

• Petitioner contended that respondent could not legally eject him or terminate the lease because:
• Both lease contracts (the one from 1991 and the second one from 1995) were valid, and contracts validly executed by a predecessor-in-interest bind the successor.
• He acted in good faith under the belief he was transacting with the true owner.
• The second lease contract was “registered” (albeit only in the primary book) and known to respondent.
• Additional issues raised included:
• The proper jurisdiction of the trial court (MTCC) for the case.
• Whether petitioner’s alleged ignorance of the true ownership could validate his possession.
• The propriety of the award of attorney’s fees, given their cursory mention in the decision.
• The correct implementation period for the writ of execution and the potential contempt of court for the sheriffs.
• The appropriateness of the RTC’s July 4, 2000, order regarding further writ issuance.

Issue:

Legality of Ejectment and Termination of Lease

• Whether respondent had the legal right to eject petitioner from the premises.
• Whether the termination of petitioner’s lease was justified given the conflicting lease contracts.

Validity of the Lease Contracts

• Whether both lease contracts (the first lease dating back to 1991 and the second lease from October 30, 1995) were valid and enforceable.
• Whether Ronald Vargas, who misrepresented himself as the owner, had the authority to lease the property.

Jurisdiction and Cause of Action

• Whether the MTCC had proper jurisdiction to try the case based on the allegations in the complaint.
• Whether the complaint sufficiently established a cause of action for unlawful detainer.

Award of Attorney’s Fees

• Whether the award of attorney’s fees (initially P50,000 and later reduced to P20,000) was justified.
• Whether the award was supported by adequate findings of fact and law.

Validity of the Writ of Execution

• Whether the writ of execution issued on December 1, 1997, and implemented on December 15, 1997, was properly executed in accordance with Rule 39, Section 10 (c) of the Rules of Court.
• Whether the calculation of the three working-day period for service of notice was correctly observed.

Additional Procedural and Jurisdictional Issues

• Whether petitioner’s active participation in subsequent proceedings precluded his contest of the MTCC’s jurisdiction.
• Whether the RTC’s July 4, 2000, order concerning the issuance of a writ for enforcing civil liability was appropriate.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Validity of Lease Contracts and Authority of the Lessor

• A lease contract is valid only if executed by a person with the proper authority or standing relating to the property.

• Even if a party acts in good faith, such good faith does not cure the absence of legal authority or the existence of defects in the object of the contract.

• The principle established is that the “river cannot rise higher than its source” – a purported lessor without authority renders the contract void ab initio.

Possession by Tolerance Versus Possession as a Right

• Possession granted by the owner’s tolerance does not equate to lawful possession when the rightful owner later demands vacation.
• Once it becomes known that the contractual basis for possession is defective, any possession thereafter becomes unlawful.

Registration Requirements and Effects

• For a lease contract to be effectively registered, all requisites (tax payment, documentary stamp, and proper annotation on the owner’s duplicate certificate) must be fulfilled.
• An entry in the primary book that does not satisfy these conditions does not confer the full legal effect of a registered document.

Procedural Compliance in Execution of Judgments

• The proper calculation of service periods is essential; in this case, the period commenced upon constructive personal service, validating the writ’s implementation.
• Compliance with the Rules of Court in service and notice is critical to uphold the execution process.

Jurisdiction and Estoppel

• A party’s active participation in a proceeding binds him to the jurisdiction of that court, thereby precluding later challenges on jurisdictional grounds.
• The court emphasized that a complaint adequately alleging unlawful possession is sufficient to establish jurisdiction for summary actions of ejectment.

Award of Attorney’s Fees Requires Factual Basis

• Awarding attorney’s fees is an exceptional remedy that requires explicit fi

...continue reading