G.R. No. 215014 - Fullido vs. Grilli

Case Summary (G.R. No. 215014)

Petitioner’s Contentions

Fullido contended the lease and MOA were null and void for violating the Constitution, statutory law, public policy, morals and customs. She argued (a) the MOA unconstitutionally prevented her from disposing of her land, (b) the 50‑year plus automatic renewal lease unlawfully circumvented the constitutional prohibition on alien landholding, (c) the Temporary Protection Order (TPO) later made Permanent (PPO) under R.A. No. 9262 should prevent an ejectment that would defeat her residence and safety, and (d) the Court of Appeals erred procedurally in denying her motion for reconsideration for failure to liberally apply procedural rules.

Respondent’s Contentions

Grilli asserted he had the better right of possession by virtue of the lease, MOA and SPA; that he financed construction and thus had rights in the residence; that the lot had already been transferred to Guibone (TCT No. 101‑2011000335); and that Fullido’s remedy, if she sought to challenge the contracts, was a separate action to annul them (which she filed separately as Civil Case No. 8094). He thus maintained he had cause of action for unlawful detainer.

Key Dates and Procedural History

Relationship and construction: 1994–1995 (met 1994; house built 1995); lease, MOA and SPA executed in 1998.
MCTC (Civil Case No. 244) decision: March 31, 2011 — dismissed Grilli’s unlawful detainer case; awarded damages to Fullido.
RTC, Branch 47, Tagbilaran (Civil Case No. 7895) decision: April 26, 2012 — reversed MCTC, finding Grilli had possessory rights under the lease.
Court of Appeals decision: May 31, 2013 — affirmed RTC, holding possession was governed by the lease and MOA and that Fullido should seek annulment in a separate action. CA denied reconsideration on September 24, 2014 for lack of proof of service.
Supreme Court decision: petition for review granted; CA decision and resolution reversed; Grilli’s unlawful detainer complaint dismissed for lack of cause of action.

Issues Presented to the Supreme Court

I. Whether the CA erred in affirming Fullido’s ejectment based on contracts that are patently null and void.
II. Whether the CA erred by allowing ejectment despite an earlier TPO/PPO excluding Grilli from the residence.
III. Whether the CA erred in denying Fullido’s motion for reconsideration on procedural grounds.

Relevant Legal Framework and Precedent

Constitutional basis: 1987 Constitution — provisions prohibiting transfer or alienation of private lands to foreigners (Sections of Article XII referenced in the decision). The decision applies the 1987 Constitution given the case date.
Statutory regulation: P.D. No. 471 (limits leases of private lands to aliens to 25 years, renewable for another 25 years; contracts in violation are null and void ab initio); R.A. No. 7652 (Investors’ Lease Act) — allows longer leases only for qualifying foreign investors who make requisite investments and SEC registration; not shown to apply to Grilli.
Civil Code: Article 1409 (void contracts cannot be ratified; defense of illegality cannot be waived).
Unlawful detainer law: Rule 70, Sec. 1, Rules of Court — requires the plaintiff in ejectment to be a person deprived of possession by force, intimidation, or a lessor/vendor/vendee against whom possession is unlawfully withheld after expiration/termination of right to hold possession. Jurisprudence cited establishes that an unlawful detainer action focuses on possession, but rights asserted must be valid.
Jurisprudence: Cases cited include Philippine Banking Corporation v. Lui She (lease plus option to buy struck down as scheme to circumvent alien landholding prohibition), Llantino v. Co Liong Chong (permissible reasonable leases to aliens absent scheme to circumvent constitutional prohibition), Spouses Alcantara v. Nido; Roberts v. Papio; Ballesteros v. Abion (void contracts cannot be the source of possessory rights and may be invalidated even in unlawful detainer proceedings).

Court’s Analysis — Void Contracts in Unlawful Detainer

The Court reiterated that unlawful detainer is a summary remedy focused on possession, but that a void contract produces no legal effect and therefore cannot be the source of any possessory right. A void or inexistent contract lacks essential elements for validity and is treated as if never entered into; Article 1409 confirms void contracts cannot be ratified and illegality defenses cannot be waived. The Court observed precedent where void contracts were disregarded in unlawful detainer proceedings and concluded that when a contract is void ab initio because it contravenes constitutional or statutory prohibitions, it need not be set aside in a separate plenary action before being disregarded in an ejectment case.

Court’s Analysis — Constitutionality of the Lease and MOA

Applying the 1987 Constitution and governing statutes, the Court found the lease and MOA in the present case were designed to effectively transfer dominion over the land to a foreign national in circumvention of the constitutional ban on alien landholding. Key points of application were: (a) the lease term was 50 years with automatic renewal for another 50 years — far exceeding the maximum terms under P.D. No. 471; (b) the lease contract prohibited the lessor from selling, donating, or encumbering the land without the lessee’s written consent, thereby depriving the lessor of the jus disponendi; (c) the MOA expressly declared ownership in favor of Grilli, restricted Fullido’s power to transfer, granted Grilli lifetime residence and a right to require conveyance upon termination of the relationship, and anticipated future transfer if law permitted foreigners to own land; and (d) the SPA empowered Grilli to transfer the property (which was later exercised to transfer title to Guibone). Together, these documents functioned as a scheme to vest ownership and the bundle of ownership rights (jus possidendi, jus utendi, jus fruendi, jus abutendi, and jus disponendi) in the foreign national for over a century, thereby violating Section 7, Article XII of the 1987 Constitution and relevant statutes.

Court’s Application of Law to Facts and Conclusion on Contracts

The Court concluded that the lease contract and MOA were null and void ab initio because they circumvented the constitutional prohibition against alien land owners

Case Syllabus (G.R. No. 215014)

Facts

In 1994, Gino Grilli, an Italian national, met Rebecca Fullido in Bohol and courted her; in 1995 Grilli decided to build a residential house where they would stay when he vacationed in the Philippines.
Grilli financially assisted Fullido in procuring a lot in Biking I, Dauis, Bohol, which was registered in Fullido’s name under Transfer Certificate of Title (TCT) No. 30626.
A house was constructed on the lot funded by Grilli; thereafter they maintained a common-law relationship and lived there when Grilli visited the Philippines (twice a year).
In 1998, the parties executed: (a) a contract of lease; (b) a memorandum of agreement (MOA); and (c) a special power of attorney (SPA), to define their respective rights over the house and lot.
The relationship deteriorated after about 16–18 years, with allegations of infidelity and mutual recriminations; disputes over possession and maintenance of the house ensued.
Grilli sent formal letters demanding Fullido vacate the property; these were not heeded.
On September 8, 2010, Grilli filed a complaint for unlawful detainer with prayer for preliminary injunction before the Municipal Circuit Trial Court (MCTC), Dauis, Bohol (Civil Case No. 244).
Fullido filed a petition for Temporary Protection Order (TPO) and Permanent Protection Order (PPO) under R.A. No. 9262 before RTC Branch 3, Bohol; RTC Branch 3 granted a TPO on February 23, 2011 and later issued a decision (July 5, 2011) affecting the protection order status.

The 1998 Contract of Lease — Key Provisions

The lease stated it was for a term of fifty (50) years from August 16, 1998 to August 15, 2048, to be automatically renewed for another fifty (50) years upon expiration.
The total rental consideration stated was TEN THOUSAND PESOS (P10,000.00) for the whole term.
The lease prohibited the lessor (Fullido) from selling, donating, or encumbering the lot without the written consent of the lessee (Grilli).
The lease was registered in the Register of Deeds of Bohol.

The Memorandum of Agreement (MOA) — Key Provisions

The MOA recited that Grilli paid for the purchase price of the house and lot and declared ownership to reside with Grilli.
It expressly prohibited Fullido from selling the property except with Grilli’s conformity.
It granted Grilli the absolute and irrevocable right to reside in the residential building during his lifetime or whenever he so desired.
It obligated Fullido, upon termination of the common-law relationship or marriage/relationship with another, to execute a deed of absolute sale in favor of whomever Grilli may desire and to turn over the consideration to Grilli; alternatively, it contemplated retention of ownership by Grilli if the law allowed.
It provided that if a future law permitted foreign ownership of real property, Fullido would execute necessary deeds to transfer title to Grilli.

The Special Power of Attorney (SPA)

The SPA allowed Grilli to administer, manage, and transfer the house and lot on behalf of Fullido.
The SPA was later used by Grilli to transfer the land to Jacqueline Guibone, his alleged new girlfriend, according to Grilli’s claim.

Positions of the Parties

Grilli’s position:
- Claims the common-law relationship began smoothly and alleged Fullido had an extramarital pregnancy in 2002 not sired by him, which led him to end the relationship.
- Admitted to allowing Fullido to live in his house without demanding rent out of liberality, then encountering hostility and damage to the property during her occupancy.
- Asserted he repaired the house and lost personal belongings; verbal requests to vacate were refused; thus he filed the unlawful detainer complaint.
- Asserts he was the rightful owner/user by virtue of the lease, MOA and SPA; claims the lot was transferred to Guibone and cites a separate annulment action (Civil Case No. 8094) as available remedy if contracts are challenged.
Fullido’s position:
- Met Grilli in 1993 at age 17, entered into a long common-law relationship; claims Grilli offered to build a house on a parcel of land she exclusively owned to be their conjugal abode.
- Maintained relationship lasted more than 18 years until she discovered Grilli’s new relationship; alleged physical abuse and threats by Grilli.
- Filed for TPO and PPO under R.A. No. 9262; RTC Branch 3 granted a TPO directing Grilli be excluded from their home.
- Admitted Grilli funded construction but insisted she exclusively owned the lot and contributed to construction and household supervision.
- Contended the lease contract and MOA are null and void as contrary to the Constitution, law, public policy, morals and customs; that they unlawfully impeded her right to dispose of her land and were meant to circumvent foreign land-ownership prohibitions.
- Asserted the TPO/PPO should not be defeated by the ejectment suit; challenged CA’s denial of her motion for reconsideration on procedural grounds.

Procedural History and Rulings Below

MCTC (March 31, 2011) — Civil Case No. 244:
- Dismissed Grilli’s unlawful detainer case and found Fullido could not be ejected; held she was a co-owner of the house by supervision of its construction.
- Respected the TPO issued by RTC Branch 3 which directed Grilli’s exclusion from the residence.
- Dispositive portion awarded damages to Fullido: P50,000.00 moral damages, P20,000.00 exemplary damages, and P20,000.00 attorney’s fees; denied preliminary mandatory injunction.
RTC, Branch 47, Tagbilaran City (April 26, 2012):
- Reversed the MCTC decision and held Grilli had exclusive right to use and possess the house and lot by virtue of the contract of lease.
- Reasoned that the lease term had not expired and Fullido, as lessor, was obliged to respect Grilli’s peaceful enjoyment of the leased premises.
- Found the lease’s terms valid and binding absent judicial declaration of nullity.
- Held the TPO had no bearing on possession in the ejectment case.
Court of Appeals (May 31, 2013 decision; September 24, 2014 resolution denying reconsideration):
- Affirmed the RTC: emphasized that in an ejectment case the sole issue is physical possession; Fullido’s execution of MOA and lease constituted a judicial admission that Grilli had better right of physical possession.
- Stated that if Fullido insisted the documents were voidable or her consent vitiated, she must bring a separate annulment action.
- Noted that the TPO under Section 21 o
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