Title
Ras vs. Sua
Case
G.R. No. L-23302
Decision Date
Sep 25, 1968
Alejandro Ras sued Sua spouses for breaching lease contracts on a 4-hectare land, violating Republic Act 477. Court annulled leases, ordered land return, and upheld Ras's rights despite violations.
supreme court
lease
possession

Case Summary (G.R. No. L-23302)

Factual Background

Ras alleged that, on 25 February 1958, while in need of money and unaware of Republic Act 477, he leased a four-hectare parcel designated as Lot No. 52, located at Balactasan, Lamitan District, Basilan City, to the spouses Sua for an initial term of three years, from 1 April 1958 to 1 April 1961, for a consideration of P2,500.00. Ras further alleged that the lessees agreed to pay the government the yearly installments due on the land, as well as the taxes thereon, for the duration of the lease. He stated that the parties thereafter executed additional contracts extending the lease for a total period of ten years.

Ras alleged that the Sua spouses failed to pay the taxes on the land and the installments due to NAFCO, and that when the defendants refused to pay those dues to the government and also refused, despite demand, to return possession of the land, Ras filed suit. Ras also claimed that since 1958 the defendants had harvested not less than 120,000 coconuts, and he sought, among other relief, the value of the harvested nuts, damages, and attorney’s fees. The complaint prayed for declarations null and void of the lease-contract executed on 25 February 1958 and the subsequent contracts, and for delivery of possession to Ras.

Lease Extensions and Contracts Entered Within the Prohibited Period

The original lease was executed on 25 February 1958, but the parties later entered into a series of extension contracts. The decision noted that the subsequent contracts—Exhibits D, E, F, and G—contained provisions that the parties incorporated the stipulations of the original lease into the amended agreements and that each extension took effect and terminated within distinct periods.

In particular, Exhibit D extended the lease for two more years, taking effect on 2 April 1961 and terminating on 2 April 1963; Exhibit E took effect on 2 April 1963 and terminated on 2 April 1964; Exhibit F took effect on 2 April 1964 and terminated on 2 April 1966; and Exhibit G took effect on 2 April 1966 and terminated on 2 April 1968. The Court emphasized that these extension contracts did not merely modify the original lease in a continuous manner. Rather, by their own terms, they operated as individual contracts effective during the specific periods stated therein. Accordingly, Exhibit D had a life from 2 April 1961 to 2 April 1963, Exhibit E from 2 April 1963 to 2 April 1964, Exhibit F from 2 April 1964 to 2 April 1966, and Exhibit G from 2 April 1966 to 2 April 1968.

Defendants’ Answer and Counterclaims; Motion to Dismiss on Prescription

The spouses Sua denied having violated any condition of the lease. They contested the jurisdiction of the trial court to order the return of the land to Ras and disputed Ras’s right to reacquire possession. They also filed a counterclaim for damages and attorney’s fees.

After trial on the merits, with proper leave of court, the defendants moved for dismissal, asserting two principal grounds: (a) that the cause of action had prescribed and (b) that Ras failed to prove his case. They argued that, because Ras’s action was for rescission of contract under Article 1191 of the Civil Code, the prescriptive period was four years. Since the original lease agreement was executed on 25 February 1958 and the complaint was filed on 6 May 1963, they claimed the action was already time-barred.

They further argued that Ras failed to establish any violation of the lease terms by the defendants, and that any breach, if proven, would have been casual and slight and insufficient to justify rescission.

Trial Court Ruling

On 3 April 1964, the trial court rendered judgment for Ras. The Court of First Instance ruled that the defendants had violated the lease by failing to pay taxes on the land. It also found that the lease was prohibited under Section 8 of Republic Act 477. As a result, the trial court declared the contracts executed on 29 July 1960 (Exhibit F) and 26 January 1962 (Exhibit G) annulled. The trial court ordered the defendants to pay Ras P110.00 a month from 2 April 1964 until possession was restored. It also ordered Ras to return to the defendants P1,200.00, the consideration of the two invalidated contracts, with legal interest until fully paid.

Issues Raised on Appeal

On appeal, the defendants reiterated that Ras’s cause of action was barred by prescription and that Ras had no right to repossess the land. They supported the prescription argument by emphasizing the difference between rescission and annulment, pointing out that the complaint was captioned for rescission and referred in its allegations to “rescind” rather than “annul.” They maintained that the complaint, taken as one for rescission, was filed beyond the four-year prescriptive period.

They also insisted that, if the case were treated as one for annulment, Ras lacked personality to bring the action because the proper party would be the Republic of the Philippines. They further argued that the jurisdiction to order the return of the land belonged not to the courts but to the Board of Liquidators, and that Ras could no longer recover the property under the pari delicto doctrine.

The Court’s Treatment of Prescription

The Court held that the alleged distinction between rescission and annulment did not help the defendants. Even if the action were characterized as one for rescission, the Court reasoned that the prescriptive argument failed as to the contracts that were actually annulled by the trial court.

The Court recognized that the complaint was filed on 6 May 1963, more than four years after the original lease agreement dated 25 February 1958. However, the Court stressed that the subsequent extension contracts did not operate as mere continuations. Each extension contract was an individual agreement with its own effective period. Thus, even if the action were treated as one for rescission with respect to later periods, the cause of action still subsisted insofar as Exhibits F and G were concerned. The Court explained that Exhibit F was effective only from 2 April 1964 to 2 April 1966, and Exhibit G from 2 April 1966 to 2 April 1968. Consequently, the complaint filed on 6 May 1963 could not be considered barred with respect to those contracts, the latter being within time when their prohibited terms would have taken effect.

The Court noted that the lower court annulled only Exhibits F and G and that the annulment of those contracts was consistent with this structure of discrete extension periods.

The Court added that there was an even stronger ground to affirm the trial court’s ruling if the action were treated as one for annulment of an agreement prohibited by law. The Court held that the right to seek a declaration of the inexistence of a contract for violating a statute is imprescriptible.

Nature of the Action: Caption Not Controlling

The Court addressed the defendants’ insistence that Ras’s complaint was captioned for rescission and that it referred to “rescind.” The Court held that it is not the caption that determines the nature of the action; it is the allegations in the complaint. It found that although the pleading was captioned “for rescission of contract with damages,” the complaint alleged that Ras leased the land “while in need of money and unaware of the provisions of Republic Act No. 477,” thereby putting the legality of the lease in issue. The Court held that such allegations sufficiently informed the defendants of the nature of Ras’s claims and enabled them to prepare their defense.

The Court also observed that the allegations and evidence supported a finding of violation of Section 8 of Republic Act 477. This violation was established through the deed of sale from NAFCO to Ras (dated 31 August 1951, Exhibit A) and through the lease contracts executed within the prohibited 10-year period (Exhibits C, D, E, F, and G).

Personality, Proper Forum, and Pari Delicto

The Court rejected the defendants’ contention that Ras had no personality to bring the action and that the proper party was the Republic of the Philippines. It also rejected the argument that the return of the land was within the exclusive competence of the Board of Liquidators, not the courts.

The Court treated these arguments as premised on an assumption that, upon violation of Republic Act No. 477, the individual plaintiff automatically loses all rights over the land and that such rights immediately revert to the State. The Court held that this assumption was incorrect.

First, the Court noted that unlike transfers of applicants’ rights made before the award or signing of the contract of sale, which were explicitly declared void and disqualified the applicant from acquiring further land from NAFCO, Republic Act 477 did not specify the consequences of alienation or encumbrance after the execution of the contract of sale and within the relevant period. The Court reasoned that reversion was penal in character and cannot be implied from a statutory provision that merely prohibits certain acts. In view of the individual interest outweighing the public interest, the Court considered a strict construction of a penal provision warranted.

Second, the Court relied on Article 1416 of the Civil Code, which provides that where the agreement is not illegal per se but is merely prohibited for the protection of the plaintiff, and public policy is thereby enhanced, the plaintiff may recover what he has paid or delivered. In addition, the Court invoked the principle that disregard or violation of the conditions of land grants does not produce automatic reversion to t

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