G.R. No. 215014. February 29, 2016.*

 
REBECCA FULLIDO, petitioner, vs. GINO GRILLI,
respondent.

Remedial Law; Special Civil Actions; Unlawful Detainer;

Unlawful detainer is an action to recover possession of real
property from one who unlawfully withholds possession thereof
after the expiration or termination of his right to hold possession
under any contract, express or implied.—Unlawful detainer is an
action to recover possession of real property from one who
unlawfully withholds possession thereof after the expiration or
termination of his right to hold possession under any contract,
express or implied. The possession of the defendant in unlawful
detainer is originally legal but became illegal due to the
expiration or termination of the right to possess. The only issue to
be resolved in an unlawful detainer case is the physical or
material possession of the property involved, independent of any
claim of ownership by any of the parties.
Civil Law; Contracts; Void Contracts; Article 1409 of the New
Civil Code explicitly states that void contracts also cannot be
ratified; neither can the right to set up the defense of illegality be
waived.—A void or inexistent contract may be defined as one
which lacks, absolutely either in fact or in law, one or some of the
elements which are essential for its validity. It is one which has
no force and effect from the very beginning, as if it had never been
entered into; it produces no effect whatsoever either against or in
favor of anyone. Quod nullum est nullum producit effectum.
Article 1409 of the New Civil Code explicitly states that void
contracts also cannot be ratified; neither can the right to set up
the defense of illegality be waived. Accordingly, there is no need
for an action to set aside a void or inexistent contract. A review of
the relevant jurisprudence reveals that the Court did not hesitate
to set aside a void contract even in an action for unlawful
detainer. In Spouses Alcantara v. Nido, 618 SCRA 333 (2010),
which involves an action for unlawful detainer, the petitioners
therein raised a defense that the subject land was already sold to
them by the agent of the owner. The Court rejected their defense
and

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*  SECOND DIVISION.
  
 

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held that the contract of sale was void because the agent did
not have the written authority of the owner to sell the subject
land.
Same; Same; Contracts may be declared void even in a
summary action for unlawful detainer because, precisely, void
contracts do not produce legal effect and cannot be the source of
any rights.—Clearly, contracts may be declared void even in a
summary action for unlawful detainer because, precisely, void
contracts do not produce legal effect and cannot be the source of
any rights. To emphasize, void contracts may not be invoked as a
valid action or defense in any court proceeding, including an
ejectment suit. The next issue that must be resolved by the Court
is whether the assailed lease contract and MOA are null and void.
Same; Prohibited Transfer of Land; The purpose of
prohibiting the transfer of lands to foreigners is to uphold the
conservation of our national patrimony and ensure that
agricultural resources remain in the hands of Filipino citizens.—
Under Section 1 of Article XIII of the 1935 Constitution, natural
resources shall not be alienated, except with respect to public
agricultural lands and in such cases, the alienation is limited
to Filipino citizens. Concomitantly, Section 5 thereof states
that, save in cases of hereditary succession, no private
agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or
hold lands of the public domain in the Philippines. The
prohibition on the transfer of lands to aliens was adopted in the
present 1987 Constitution, under Sections 2, 3 and 7 of Article XII
thereof. Agricultural lands, whether public or private, include
residential, commercial and industrial lands. The purpose of
prohibiting the transfer of lands to foreigners is to uphold the
conservation of our national patrimony and ensure that
agricultural resources remain in the hands of Filipino citizens.
Same; Same; If an alien is given not only a lease of, but also
an option to buy, a piece of land by virtue of which the Filipino
owner cannot sell or otherwise dispose of his property, this to last
for fifty (50) years, then it becomes clear that the arrangement is a
virtual transfer of ownership whereby the owner divests himself in
stages not only of the right to enjoy the land but also of the right to
dispose of it — rights which constitute ownership.—The
prohibition, however, is not limited to the sale of lands to
foreigners. It also covers leases of
  
 

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280 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

lands amounting to the transfer of all or substantially all the

rights of dominion. In the landmark case of Philippine Banking
Corporation v. Lui She, 21 SCRA 52 (1967), the Court struck
down a lease contract of a parcel of land in favor of a foreigner for
a period of ninety-nine (99) years with an option to buy the land
for fifty (50) years. Where a scheme to circumvent the
Constitutional prohibition against the transfer of lands to aliens
is readily revealed as the purpose for the contracts, then the illicit
purpose becomes the illegal cause rendering the contracts void.
Thus, if an alien is given not only a lease of, but also an
option to buy, a piece of land by virtue of which the
Filipino owner cannot sell or otherwise dispose of his
property, this to last for 50 years, then it becomes clear
that the arrangement is a virtual transfer of ownership
whereby the owner divests himself in stages not only of the right
to enjoy the land but also of the right to dispose of it — rights
which constitute ownership. If this can be done, then the
Constitutional ban against alien landholding in the Philippines, is
indeed in grave peril.
Same; Lease of Lands to Aliens; Presidential Decree (P.D.) No.
471 provides that the maximum period allowable for the duration
of leases of private lands to aliens or alien-owned corporations,
associations, or entities not qualified to acquire private lands in
the Philippines shall be twenty-five (25) years, renewable for
another period of twenty-five (25) years upon mutual agreement of
both lessor and lessee.—Presidential Decree (P.D.) No. 471 was
enacted to regulate the lease of lands to aliens. It provides that
the maximum period allowable for the duration of leases of
private lands to aliens or alien-owned corporations, associations,
or entities not qualified to acquire private lands in the Philippines
shall be twenty-five (25) years, renewable for another period of
twenty-five (25) years upon mutual agreement of both lessor and
lessee. It also provides that any contract or agreement made
or executed in violation thereof shall be null and void ab
initio. Based on the above cited constitutional, legal and
jurisprudential limitations, the Court finds that the lease contract
and the MOA in the present case are null and void for virtually
transferring the reigns of the land to a foreigner.
Remedial Law; Special Civil Actions; Unlawful Detainer; A
complaint sufficiently alleges a cause of action for unlawful
detainer if it recites the following: (1) initially, possession of
property by the
  
 
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Fullido vs. Grilli

defendant was by contract with or by tolerance of the plaintiff;

(2) eventually, such possession became illegal upon notice by
plaintiff to defendant of the termination of the latter’s right of
possession; (3) thereafter, the defendant remained in possession of
the property and deprived the plaintiff of the enjoyment thereof;
and (4) within one (1) year from the last demand on defendant to
vacate the property, the plaintiff instituted the complaint for
ejectment.—A complaint sufficiently alleges a cause of action for
unlawful detainer if it recites the following: (1) initially,
possession of property by the defendant was by contract with or
by tolerance of the plaintiff; (2) eventually, such possession
became illegal upon notice by plaintiff to defendant of the
termination of the latter’s right of possession; (3) thereafter, the
defendant remained in possession of the property and deprived
the plaintiff of the enjoyment thereof; and (4) within one year
from the last demand on defendant to vacate the property, the
plaintiff instituted the complaint for ejectment. The Court rules
that Grilli has no cause of action for unlawful detainer against
Fullido. As can be gleaned from the discussion above, the
complainant must either be a lessor, vendor, vendee, or other
person against whom the possession of any land or building is
unlawfully withheld. In other words, the complainant in an
unlawful detainer case must have some right of possession over
the property.
Same; Same; Ejectment; A person who does not have any right
over a property from the beginning cannot eject another person
possessing the same.—In the case at bench, the lease contract and
the MOA, from which Grilli purportedly drew his right of
possession, were found to be null and void for being
unconstitutional. A contract that violates the Constitution and
the law is null and void ab initio and vests no rights and creates
no obligations. It produces no legal effect at all. Hence, as void
contracts could not be the source of rights, Grilli had no
possessory right over the subject land. A person who does not
have any right over a property from the beginning cannot eject
another person possessing the same. Consequently, Grilli’s
complaint for unlawful detainer must be dismissed for failure to
prove his cause of action.
Civil Law; Contracts; In Pari Delicto; Neither courts of law
nor equity will interpose to grant relief to the parties, when an
illegal agreement has been made, and both parties stand in pari
delicto.—The Court deems it proper to discuss the doctrine of in
pari delicto.

 
 

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282 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

Latin for “in equal fault,” in pari delicto connotes that two or
more people are at fault or are guilty of a crime. Neither courts of
law nor equity will interpose to grant relief to the parties, when
an illegal agreement has been made, and both parties stand in
pari delicto. The application of the doctrine of in pari delicto is not
always rigid. An accepted exception arises when its application
contravenes wellestablished public policy. In this jurisdiction,
public policy has been defined as that principle of the law which
holds that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public good.
Thus, whenever public policy is advanced by either party, they
may be allowed to sue for relief against the transaction. In the
present case, both Grilli and Fullido were undoubtedly parties to
a void contract. Fullido, however, was not barred from filing the
present petition before the Court because the matters at hand
involved an issue of public policy, specifically the Constitutional
prohibition against land ownership by aliens. As pronounced in
Philippine Banking Corporation v. Lui She, the said
constitutional provision would be defeated and its continued
violation sanctioned if the lands continue to remain in the hands
of a foreigner. Thus, the doctrine of in pari delicto shall not be
applicable in this case.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
  Ramon A. Cimafranca for petitioner.
  Casilan Law and Realty Office for respondent.

MENDOZA, J.:
 
This is a petition for review on certiorari seeking to
reverse and set aside the May 31, 2013 Decision1 and the
September 24, 20142 Resolution of the Court of Appeals
(CA) in C.A.-G.R.

_______________

1   Penned by Associate Justice Ramon Paul L. Hernando, with

Associate Justices Pampio A. Abarintos and Edgardo L. Delos Santos,
concurring; Rollo, pp. 31-49.
 2  Id., at pp. 51-54.

 
 

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Fullido vs. Grilli

CEB S.P. No. 06946, which affirmed the April 26, 2012
Decision3 of the Regional Trial Court, Branch 47,
Tagbilaran City (RTC) in Civil Case No. 7895, reversing
the March 31, 2011 Decision4 of the Municipal Circuit Trial
Court, Dauis, Bohol (MCTC) in Civil Case No. 244, a case
for unlawful detainer filed by Gino Grilli (Grilli) against
Rebecca Fullido (Fullido).

The Facts
 
Sometime in 1994, Grilli, an Italian national, met
Fullido in Bohol and courted her. In 1995, Grilli decided to
build a residential house where he and Fullido would stay
whenever he would be vacationing in the country.
Grilli financially assisted Fullido in procuring a lot
located in Biking I, Dauis, Bohol, from her parents which
was registered in her name under Transfer Certificate of
Title (TCT) No. 30626.5 On the said property, they
constructed a house, which was funded by Grilli. Upon
completion, they maintained a common-law relationship
and lived there whenever Grilli was on vacation in the
Philippines twice a year.
In 1998, Grilli and Fullido executed a contract of lease,6
a memorandum of agreement7 (MOA) and a special power
of attorney8 (SPA), to define their respective rights over the
house and lot.
The lease contract stipulated, among others, that Grilli
as the lessee, would rent the lot, registered in the name of
Fullido, for a period of fifty (50) years, to be automatically
renewed for another fifty (50) years upon its expiration in
the

_______________

3  Penned by Presiding Judge Suceso A. Arcamo; id., at pp. 112-116.

4  Penned by Acting Presiding Judge Jorge D. Cabalit; id., at pp. 106-
111.
5  Id., at pp. 55-56.
6  Id., at pp. 59-60.
7  Id., at pp. 57-58.
8  Id., at pp. 61-62.
  
 
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284 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

amount of P10,000.00 for the whole term of the lease

contract; and that Fullido as the lessor, was prohibited
from selling, donating, or encumbering the said lot without
the written consent of Grilli. The pertinent provisions of
the lease contract over the house and lot are as follows:
 
That for and in consideration of the total amount of
rental in the amount of TEN THOUSAND
(P10,000.00) PESOS, Philippine Currency, paid by
the LESSEE to the LESSOR, receipt of which is
hereby acknowledged, the latter hereby leases to the
LESSEE a house and lot, and all the furnishings
found therein, land situated at Biking I, Dauis, Bohol,
Philippines, absolutely owned and belonging to the
LESSOR and particularly described as follows, to wit:
x x x x
That the LESSOR and the LESSEE hereby agree
as they have agreed to be bound by the following
terms and conditions, to wit:
1. That the term of the lease shall be FIFTY (50)
YEARS from August 16, 1998 to August 15, 2048,
automatically renewed for the same term upon the
expiration thereof;
x x x
7. That the LESSOR is strictly prohibited to sell,
donate, encumber, or in any manner convey the
property subject of this lease to any third person,
without the written consent of the LESSEE.9
 
The said lease contract was duly registered in the
Register of Deeds of Bohol.
The MOA, on the other hand, stated, among others, that
Grilli paid for the purchase price of the house and lot; that
ownership of the house and lot was to reside with him; and
that should the common-law relationship be terminated,
Ful-

_______________

9  Id., at pp. 59-60.

 
 
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lido could only sell the house and lot to whomever Grilli
so desired. Specifically, the pertinent terms of the MOA
read:
 
NOW WHEREFORE, FOR AND IN
CONSIDERATION of the foregoing premises, the
parties hereto agree as they hereby covenant to agree
that the FIRST PARTY (Grilli) shall permanently
reside on the property as above mentioned, subject to
the following terms and conditions:
1. That ownership over the above mentioned
properties shall reside absolutely with herein FIRST
PARTY, and the SECOND PARTY (Fullido) hereby
acknowledges the same;
2. That the SECOND PARTY is expressly
prohibited to sell the above stated property, except if
said sale is with the conformity of the FIRST PARTY;
3. That the SECOND PARTY hereby grants the
FIRST PARTY, the absolute and irrevocable right, to
reside in the residential building so constructed
during his lifetime, or any time said FIRST PARTY
may so desire;
4. That in the event the common-law relationship
terminates, or when the SECOND PARTY marries
another, or enters into another common-law
relationship with another, said SECOND PARTY
shall be obliged to execute a DEED OF ABSOLUTE
SALE over the above stated parcel of land and
residential building, in favor of whomsoever the
FIRST PARTY may so desire, and be further obliged
to turn over the entire consideration of the said sale
to the FIRST PARTY, or if the law shall allow, the
FIRST PARTY shall retain ownership of the said
land, as provided for in paragraph 7 below;
x x x
7. That if the cases referred to in paragraph 4
shall occur and in the event that a future law shall be
passed allowing foreigners to own real properties in
the Philippines, the ownership of the above described
real properties shall pertain to the FIRST PARTY,
and the herein undersigned SECOND PARTY
undertakes to exe-
 
 

286
286 SUPREME COURT REPORTS ANNOTATED
Fullido vs. Grilli

cute all the necessary deeds, documents, and

contracts to effect the transfer of title in favor of the
FIRST PARTY.
x x x.10
 
Lastly, the SPA allowed Grilli to administer, manage,
and transfer the house and lot on behalf of Fullido.
Initially, their relationship was harmonious, but it
turned sour after 16 years of living together. Both charged
each other with infidelity. They could not agree who should
leave the common property, and Grilli sent formal letters to
Fullido demanding that she vacate the property, but these
were unheeded. On September 8, 2010, Grilli filed a
complaint for unlawful detainer with prayer for issuance of
preliminary injunction against Fullido before the MCTC,
docketed as Civil Case No. 244.

Grilli’s Position
 
The complaint stated that the common-law relationship
between Grilli and Fullido began smoothly, until Grilli
discovered that Fullido was pregnant when he arrived in
the Philippines in 2002. At first, she told him that the child
she was carrying was his. After the delivery of the child,
however, it became apparent that the child was not his
because of the discrepancy between the child’s date of birth
and his physical presence in the Philippines and the
difference between the baby’s physical features and those
of Grilli. Later on, she admitted that the child was indeed
sired by another man.
Grilli further claimed that he was so devastated that he
decided to end their common-law relationship.
Nevertheless, he allowed Fullido to live in his house out of
liberality and generosity, but this time, using another
room. He did not demand any rent from Fullido over the
use of his property.

_______________

10  Id., at pp. 57-58.

 
 

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Fullido vs. Grilli
 After a year, Fullido became more hostile and difficult to
handle. Grilli had to make repairs with his house every
time he arrived in the Philippines because she was not
maintaining it in good condition. Fullido also let her two
children, siblings and parents stay in his house, which
caused damage to the property. He even lost his personal
belongings inside his house on several occasions. Grilli
verbally asked Fullido to move out of his house because
they were not getting along anymore, but she refused. He
could no longer tolerate the hostile attitude shown to him
by Fullido and her family, thus, he filed the instant
complaint.

Fullido’s Position
 
Fullido countered that she met Grilli sometime in 1993
when she was still 17 years old working as a cashier in
Alturas Supermarket. Grilli was then a tourist in Bohol
who persistently courted her.
At first, Fullido was hesitant to the advances of Grilli
because she could not yet enter into a valid marriage.
When he assured her and her parents that they would
eventually be married in three years, she eventually agreed
to have a relationship with him and to live as common-law
spouses. Sometime in 1995, Grilli offered to build a house
for her on a parcel of land she exclusively owned which
would become their conjugal abode. Fullido claimed that
their relationship as common-law spouses lasted for more
than 18 years until she discovered that Grilli had found a
new and younger woman in his life. Grilli began to
threaten and physically hurt her by knocking her head and
choking her.
When Fullido refused to leave their house even after the
unlawful detainer case was filed, Grilli again harassed,
intimidated and threatened to hurt her and her children.
Thus, she filed a petition for Temporary Protection Order
(TPO) and Permanent Protection Order (PPO) against
Grilli under Republic Act (R.A.) No. 9262 before the
Regional Trial Court,
 
 
288

288 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

Branch 3, Bohol (RTC-Branch 3). In an Order,11 dated

February 23, 2011, the RTC-Branch 3 granted the TPO in
favor of Fullido and directed that Grilli must be excluded
from their home.
 Fullido finally asserted that, although it was Grilli who
funded the construction of the house, she exclusively owned
the lot and she contributed to the value of the house by
supervising its construction and maintaining their
household.

The MCTC’s Ruling

In its decision, dated March 31, 2011, the MCTC dismissed

the case after finding that Fullido could not be ejected from
their house and lot. The MCTC opined that she was a co-
owner of the house as she contributed to it by supervising
its construction. Moreover, the MCTC respected the TPO
issued by RTC-Branch 3 which directed that Grilli be
removed from Fullido’s residence. The dispositive portion of
the MCTC decision reads:
 
WHEREFORE, judgment is hereby rendered:
1. Dismissing the instant case;
2. Ordering the Plaintiff to pay to Defendant the
amount of Fifty Thousand Pesos (P50,000.00) as
moral damages, and Twenty Thousand Pesos
(P20,000.00) as exemplary damages, and Twenty
Thousand Pesos (P20,000.00) as Attorney’s Fees; and
3. Denying the prayer for the issuance of
Preliminary Mandatory Injunction.
SO ORDERED.12

_______________

11  Id., at pp. 90-91.

12  Id., at p. 111.

 
 

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Not in conformity, Grilli elevated the matter before the

RTC.

The RTC’s Ruling

 
In its decision, dated April 26, 2012, the RTC reversed
and set aside the MCTC decision. The RTC was of the view
that Grilli had the exclusive right to use and possess the
house and lot by virtue of the contract of lease executed by
the parties. Since the period of lease had not yet expired,
Fullido, as lessor, had the obligation to respect the peaceful
and adequate enjoyment of the leased premises by Grilli as
lessee. The RTC opined that absent a judicial declaration of
nullity of the contract of lease, its terms and conditions
were valid and binding. As to the TPO, the RTC held that
the same had no bearing in the present case which merely
involved the possession of the leased property.
Aggrieved, Fullido instituted an appeal before the CA
alleging that her land was unlawfully transferred by Grilli
to a certain Jacqueline Guibone (Guibone), his new
girlfriend, by virtue of the SPA earlier executed by Fullido.

The CA’s Ruling

 
In its assailed decision, dated May 31, 2013, the CA
upheld the decision of the RTC emphasizing that in an
ejectment case, the only issue to be resolved would be the
physical possession of the property. The CA was also of the
view that as Fullido executed both the MOA and the
contract of lease, which gave Grilli the possession and use
of the house and lot, the same constituted as a judicial
admission that it was Grilli who had the better right of
physical possession. The CA stressed that, if Fullido would
insist that the said documents were voidable as her consent
was vitiated, then she must institute a separate action for
annulment of contracts. Lastly, the CA stated that the TPO
issued by the RTC-Branch 3
 
 
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290 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

under Section 21 of R.A. No. 9262 was without prejudice

to any other action that might be filed by the parties.
Fullido filed a motion for reconsideration,13 but she
failed to attach the proofs of service of her motion. For said
reason, it was denied by the CA in its assailed resolution,
dated September 24, 2014.
 
Hence, this present petition raising the following:
 
Issues
I
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED AND DEPARTED FROM
ESTABLISHED LAW AND JURISPRUDENCE IN
DENYING THE PETITION FOR REVIEW AND
IN AFFIRMING THE DECISION OF RTC
BOHOL BRANCH 47 EJECTING PETITIONER
FROM THE SUBJECT PROPERTIES, WHICH
 EJECTMENT ORDER IS ANCHORED ON
PATENTLY NULL AND VOID CONTRACTS.
II
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED AND DEPARTED FROM
ESTABLISHED LAW IN AFFIRMING THE
DECISION OF THE RTC BOHOL BRANCH 47
EJECTING PETITIONER FROM THEIR
CONJUGAL ABODE WHERE RESPONDENT
HAS BEEN EARLIER ORDERED TO VACATE
BY VIRTUE OF A PERMANENT PROTECTION
ORDER THUS EFFECTIVELY SETTING ASIDE,
NEGATING AND/OR VIOLATING AN ORDER
ISSUED BY A COURT OF COEQUAL
JURISDICTION.

_______________

13  Id., at pp. 146-162.

 
 

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Fullido vs. Grilli

III
THE HONORABLE COURT OF APPEALS
LIKEWISE ERRED AND DEPARTED FROM
ESTABLISHED LAW AND JURISPRUDENCE IN
DENYING THE PETITIONER’S MOTION FOR
RECONSIDERATION, AMONG OTHERS, FOR
NONCOMPLIANCE WITH SECTION 1, RULE 52
VIS-À-VIS SECTION 13, RULE 13 OF THE 1997
RULES OF CIVIL PROCEDURE.14
 
Fullido argues that she could not be ejected from her
own lot based on the contract of lease and the MOA
because those documents were null and void for being
contrary to the Constitution, the law, public policy, morals
and customs; that the MOA prevented her from disposing
or selling her own land, while the contract of lease favoring
Grilli, a foreigner, was contrary to the Constitution as it
was a for a period of fifty (50) years, and, upon termination,
was automatically renewable for another fifty (50) years;
that the TPO, which became a PPO by virtue of the July 5,
2011 Decision15 of RTC-Branch 3, should not be defeated by
the ejectment suit; and that the CA should have liberally
applied its procedural rules and allowed her motion for
reconsideration.
 In his Comment,16 Grilli countered that he was the
rightful owner of the house because a foreigner was not
prohibited from owning residential buildings; that the lot
was no longer registered in the name of Fullido as it was
transferred to Guibone, covered by TCT No. 101-
2011000335; that if Fullido wanted to assail the lease
contract, she should have first filed a separate action for
annulment of the said contract, which she did in Civil Case
No. 8094, pending before the Regional Trial Court of Bohol;
and that by signing the contracts, Fullido fully agreed with
their terms and must abide by the same.

_______________

14  Id., at pp. 11-12.

15  Penned by Presiding Judge Leo Moises Lison; id., at pp. 92-105.
16  Id., at pp. 246-461.

 
 

292

292 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

In her Reply,17 Fullido insisted that the contract of lease

and the MOA were null and void, thus, these could not be
the source of Grilli’s de facto possession.
 
The Court’s Ruling
 
The Court finds the petition meritorious.
Unlawful detainer is an action to recover possession of
real property from one who unlawfully withholds
possession thereof after the expiration or termination of his
right to hold possession under any contract, express or
implied. The possession of the defendant in unlawful
detainer is originally legal but became illegal due to the
expiration or termination of the right to possess. The only
issue to be resolved in an unlawful detainer case is the
physical or material possession of the property involved,
independent of any claim of ownership by any of the
parties.18
In this case, Fullido chiefly asserts that Grilli had no
right to institute the action for unlawful detainer because
the lease contract and the MOA, which allegedly gave him
the right of possession over the lot, were null and void for
violating the Constitution. Contrary to the findings of the
CA, Fullido was not only asserting that the said
contracts were merely voidable, but she was
consistently invoking that the same were completely
void.19 Grilli, on the other hand, contends that Fullido
could not question the validity of the said contracts in the
present ejectment suit unless she instituted a separate
action for annulment of contracts. Thus, the Court is
confronted with the issue of whether a contract could be
declared void in a summary action of unlawful detainer.

_______________

17  Id., at pp. 296-310.

18  Piedad v. Gurieza, G.R. No. 207525, June 18, 2014, 727 SCRA 71,
76.
19  Rollo, pp. 138 and 207.

 
 
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Under the circumstances of the case, the Court answers

in the affirmative.

A void contract cannot be the

source of any right; it cannot
be utilized in an ejectment suit
 
A void or inexistent contract may be defined as one
which lacks, absolutely either in fact or in law, one or some
of the elements which are essential for its validity.20 It is
one which has no force and effect from the very beginning,
as if it had never been entered into; it produces no effect
whatsoever either against or in favor of anyone.21 Quod
nullum est nullum producit effectum. Article 1409 of the
New Civil Code explicitly states that void contracts also
cannot be ratified; neither can the right to set up the
defense of illegality be waived.22 Accordingly, there is no
need for an action to set aside a void or inexistent
contract.23
A review of the relevant jurisprudence reveals that the
Court did not hesitate to set aside a void contract even in
an action for unlawful detainer. In Spouses Alcantara v.
Nido,24 which involves an action for unlawful detainer, the
petitioners therein raised a defense that the subject land
was already sold to them by the agent of the owner. The
Court rejected their defense and held that the contract of
sale was void because the agent did not have the written
authority of the owner to sell the subject land.

_______________
 20   Jurado, Comments and Jurisprudence on Obligations and
Contracts, 2010 ed., p. 574, citing Manresa, 5th ed., Bk. 2, p. 608.
21  Manila Banking Corp. v. Silverio, 504 Phil. 17, 30; 466 SCRA 438,
454 (2005).
22  Article 1409, New Civil Code.
23  Rongavilla v. Court of Appeals, 355 Phil. 721, 739; 294 SCRA 289,
306 (1998).
24  632 Phil. 343; 618 SCRA 333 (2010).

 
 

294

294 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

Similarly, in Roberts v. Papio,25 a case of unlawful

detainer, the Court declared that the defense of ownership
by the respondent therein was untenable. The contract of
sale invoked by the latter was void because the agent did
not have the written authority of the owner. A void
contract produces no effect either against or in favor of
anyone.
In Ballesteros v. Abion,26 which also involves an action
for unlawful detainer, the Court disallowed the defense of
ownership of the respondent therein because the seller in
their contract of sale was not the owner of the subject
property. For lacking an object, the said contract of sale
was void ab initio.
Clearly, contracts may be declared void even in a
summary action for unlawful detainer because, precisely,
void contracts do not produce legal effect and cannot be the
source of any rights. To emphasize, void contracts may not
be invoked as a valid action or defense in any court
proceeding, including an ejectment suit. The next issue
that must be resolved by the Court is whether the assailed
lease contract and MOA are null and void.

The lease contract and the

MOA circumvent the consti-
tutional restraint against
foreign ownership of lands
 
Under Section 1 of Article XIII of the 1935 Constitution,
natural resources shall not be alienated, except with
respect to public agricultural lands and in such cases, the
alienation is limited to Filipino citizens.
Concomitantly, Section 5 thereof states that, save in cases
of hereditary succession, no private agricultural land shall
be transferred or assigned except to individuals,
corporations, or associations qualified to acquire or hold
lands of the public domain in the Philippines.

_______________

25  544 Phil. 280; 515 SCRA 346 (2007).

26  517 Phil. 253; 482 SCRA 23 (2006).

 
 

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Fullido vs. Grilli

The prohibition on the transfer of lands to aliens was

adopted in the present 1987 Constitution, under Sections 2,
3 and 7 of Article XII thereof. Agricultural lands, whether
public or private, include residential, commercial and
industrial lands. The purpose of prohibiting the transfer of
lands to foreigners is to uphold the conservation of our
national patrimony and ensure that agricultural resources
remain in the hands of Filipino citizens.27
The prohibition, however, is not limited to the sale of
lands to foreigners. It also covers leases of lands amounting
to the transfer of all or substantially all the rights of
dominion. In the landmark case of Philippine Banking
Corporation v. Lui She,28 the Court struck down a lease
contract of a parcel of land in favor of a foreigner for a
period of ninety-nine (99) years with an option to buy the
land for fifty (50) years. Where a scheme to circumvent the
Constitutional prohibition against the transfer of lands to
aliens is readily revealed as the purpose for the contracts,
then the illicit purpose becomes the illegal cause rendering
the contracts void. Thus, if an alien is given not only a
lease of, but also an option to buy, a piece of land by
virtue of which the Filipino owner cannot sell or
otherwise dispose of his property, this to last for 50
years, then it becomes clear that the arrangement is
a virtual transfer of ownership whereby the owner
divests himself in stages not only of the right to enjoy the
land but also of the right to dispose of it — rights which
constitute ownership. If this can be done, then the
Constitutional ban against alien landholding in the
Philippines, is indeed in grave peril.29
In Llantino v. Co Liong Chong,30 however, the Court
clarified that a lease contract in favor of aliens for a
reasonable

_______________
 27  Krivenko v. Register of Deeds, 79 Phil. 461, 473 (1947).
28  128 Phil. 53; 21 SCRA 52 (1967).
29  Id., at pp. 67-68; pp. 64-65.
30  266 Phil. 645; 188 SCRA 592 (1990).

296

296 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

period was valid as long as it did not have any scheme to

circumvent the constitutional prohibition, such as
depriving the lessors of their right to dispose of the land.
The Court explained that “[a]liens are not completely
excluded by the Constitution from use of lands for
residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary
rights such as a lease contract which is not forbidden by
the Constitution. Should they desire to remain here forever
and share our fortune and misfortune, Filipino citizenship
is not impossible to acquire.”31 The lessee-foreigner therein
eventually acquired Filipino citizenship.
Consequently, Presidential Decree (P.D.) No. 471 was
enacted to regulate the lease of lands to aliens. It provides
that the maximum period allowable for the duration of
leases of private lands to aliens or alien-owned
corporations, associations, or entities not qualified to
acquire private lands in the Philippines shall be twenty-
five (25) years, renewable for another period of twenty-five
(25) years upon mutual agreement of both lessor and
lessee.32 It also provides that any contract or agreement
made or executed in violation thereof shall be null
and void ab initio.33

_______________

31  Id., at p. 651; p. 596.

32  Section 1, P.D. No. 471.
33   Section 2, P.D. No. 471; see also R.A. No. 7652 or the Investors’
Lease Act which provides that a lease contract in favor of a foreign
investor may be granted for a period of for a period exceeding fifty (50)
years, renewable once for a period of not more than twenty-five (25) years.
To be considered as a foreign investor, an alien must make an equity
investment in the Philippines through actual remittance of foreign
exchange or transfer of assets, whether in the form of capital goods,
patents, formulae, or other technological rights or processes, upon
registration with the Securities and Exchange Commission (SEC).
Pursuant to such definition, Grilli cannot be considered as a foreign
investor because it was neither shown that he made an equity investment
in the country nor that he had registered the same with the SEC. Hence,
R.A. No. 7652 cannot apply in his favor.

 
 
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Fullido vs. Grilli

Based on the above cited constitutional, legal and

jurisprudential limitations, the Court finds that the lease
contract and the MOA in the present case are null and void
for virtually transferring the reigns of the land to a
foreigner.
As can be gleaned from the contract, the lease in favor of
Grilli was for a period of fifty (50) years, automatically
extended for another fifty (50) years upon the expiration of
the original period. Moreover, it strictly prohibited Fullido
from selling, donating, or encumbering her land to anyone
without the written consent of Grilli. For a measly
consideration of P10,000.00, Grilli would be able to
absolutely occupy the land of Fullido for 100 years, and she
is powerless to dispose the same. The terms of lease
practically deprived Fullido of her property rights and
effectively transferred the same to Grilli.
Worse, the dominion of Grilli over the land had been
firmly cemented by the terms of the MOA as it reinforced
Grilli’s property rights over the land because, first, it
brazenly dictated that ownership of the land and the
residential building resided with him. Second, Fullido was
expressly prohibited from transferring the same without
Grilli’s conformity. Third, Grilli would permanently reside
in the residential building. Fourth, Grilli may capriciously
dispose Fullido’s property once their common-law
relationship is terminated. This right was recently
exercised when the land was transferred to Guibone.
Lastly, Fullido shall be compelled to transfer the land to
Grilli if a law would be passed allowing foreigners to own
real properties in the Philippines.
Evidently, the lease contract and the MOA operated
hand-in-hand to strip Fullido of any dignified right over her
own property. The term of lease for 100 years was
obviously in excess of the allowable periods under P.D. No.
471. Even Grilli admitted that “this is a case of an
otherwise valid contract of lease that went beyond the
period of what is legally
 
 
298
298 SUPREME COURT REPORTS ANNOTATED
Fullido vs. Grilli

permissible.”34 Grilli had been empowered to deprive

Fullido of her land’s possession, control, disposition and
even its ownership. The jus possidendi, jus utendi, jus
fruendi, jus abutendi and, more importantly, the jus
disponendi — the sum of rights which composes ownership
— of the property were effectively transferred to Grilli who
would safely enjoy the same for over a century. The title of
Fullido over the land became an empty and useless vessel,
visible only in paper, and was only meant as a dummy to
fulfill a foreigner’s desire to own land within our soils.
It is disturbing how these documents were methodically
formulated to circumvent the constitutional prohibition
against land ownership by foreigners. The said contracts
attempted to guise themselves as a lease, but a closer
scrutiny of the same revealed that they were intended to
transfer the dominion of a land to a foreigner in violation of
Section 7, Article XII of the 1987 Constitution. Even if
Fullido voluntary executed the same, no amount of consent
from the parties could legalize an unconstitutional
agreement. The lease contract and the MOA do not deserve
an iota of validity and must be rightfully struck down as
null and void for being repugnant to the fundamental law.
These void documents cannot be the source of rights and
must be treated as mere scraps of paper.

Grilli does not have a cause

of action for unlawful de-
tainer
 
Ultimately, the complaint filed by Grilli was an action
for unlawful detainer. Section 1 of Rule 70 of the Rules of
Court lays down the requirements for filing a complaint for
unlawful detainer, to wit:
 
Who may institute proceedings, and when.—Subject
to the provision of the next succeeding section, a
person de-

_______________

34  Rollo, p. 254.

 
 

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Fullido vs. Grilli
 prived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, or a
lessor, vendor, vendee, or other person against
whom the possession of any land or building is
unlawfully withheld after the expiration or
termination of the right to hold possession, by virtue
of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one
(1) year after such unlawful deprivation or
withholding of possession, bring an action in the
proper Municipal Trial Court against the person or
persons unlawfully withholding or depriving of
possession, or any person or persons claiming under
them, for the restitution of such possession, together
with damages and costs.
[Emphasis supplied]
 
A complaint sufficiently alleges a cause of action for
unlawful detainer if it recites the following: (1) initially,
possession of property by the defendant was by contract
with or by tolerance of the plaintiff; (2) eventually, such
possession became illegal upon notice by plaintiff to
defendant of the termination of the latter’s right of
possession; (3) thereafter, the defendant remained in
possession of the property and deprived the plaintiff of the
enjoyment thereof; and (4) within one year from the last
demand on defendant to vacate the property, the plaintiff
instituted the complaint for ejectment.35
The Court rules that Grilli has no cause of action for
unlawful detainer against Fullido. As can be gleaned from
the discussion above, the complainant must either be a
lessor, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld.
In other words, the complainant in an unlawful detainer
case must have some right of possession over the property.

_______________

35   Zacarias v. Anacay, G.R. No. 202354, September 24, 2014, 736

SCRA 508, 516.

 
 

300

300 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli
 In the case at bench, the lease contract and the MOA,
from which Grilli purportedly drew his right of possession,
were found to be null and void for being unconstitutional. A
contract that violates the Constitution and the law is null
and void ab initio and vests no rights and creates no
obligations. It produces no legal effect at all.36 Hence, as
void contracts could not be the source of rights, Grilli had
no possessory right over the subject land. A person who
does not have any right over a property from the beginning
cannot eject another person possessing the same.
Consequently, Grilli’s complaint for unlawful detainer
must be dismissed for failure to prove his cause of action.

In Pari Delicto Doctrine

is not applicable
 
On a final note, the Court deems it proper to discuss the
doctrine of in pari delicto. Latin for “in equal fault,” in pari
delicto connotes that two or more people are at fault or are
guilty of a crime. Neither courts of law nor equity will
interpose to grant relief to the parties, when an illegal
agreement has been made, and both parties stand in pari
delicto.37
The application of the doctrine of in pari delicto is not
always rigid. An accepted exception arises when its
application contravenes well-established public policy. In
this jurisdiction, public policy has been defined as that
principle of the law which holds that no subject or citizen
can lawfully do that which has a tendency to be injurious to
the public or against the public good.38 Thus, whenever
public policy is advanced by

_______________

36  Chavez v. Presidential Commission on Good Government, 366 Phil.

863, 869; 307 SCRA 394, 399 (1999).
37   Constantino v. Heirs of Pedro Constantino, Jr., G.R. No. 181508,
October 2, 2013, 706 SCRA 580, 589.
38  Maltos v. Heirs of Eusebio Borromeo, G.R. No. 172720, September
14, 2015, 770 SCRA 397.

 
 

301

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Fullido vs. Grilli

either party, they may be allowed to sue for relief

against the transaction.39
 In the present case, both Grilli and Fullido were
undoubtedly parties to a void contract. Fullido, however,
was not barred from filing the present petition before the
Court because the matters at hand involved an issue of
public policy, specifically the Constitutional prohibition
against land ownership by aliens. As pronounced in
Philippine Banking Corporation v. Lui She, the said
constitutional provision would be defeated and its
continued violation sanctioned if the lands continue to
remain in the hands of a foreigner.40 Thus, the doctrine of
in pari delicto shall not be applicable in this case.
WHEREFORE, the petition is GRANTED. The May
31, 2013 Decision of the Court of Appeals and its
September 24, 2014 Resolution in C.A.-G.R. CEB S.P. No.
06946 are hereby REVERSED and SET ASIDE. The
complaint filed by Gino Grilli before the Municipal Circuit
Trial Court, Dauis-Panglao, Dauis, Bohol, docketed as Civil
Case No. 244, is DISMISSED for lack of cause of action.
SO ORDERED.

Carpio (Chairperson), Del Castillo and Leonen, JJ.,

concur.
Brion, J., On Leave.

Petition granted, judgment and resolution reversed and

set aside.

Notes.—Aliens whether individuals or corporations,

have been disqualified from acquiring lands of the public
domain; They are also disqualified from acquiring private
lands. (Matthews vs. Taylor, 590 SCRA 394 [2009])

_______________

39  De Los Santos v. Roman Catholic Church of Midsayap, 94 Phil. 405

(1954).
40  Philippine Banking Corporation v. Lui She, supra note 28 at p. 69;
pp. 65-66.

 
 
302

302 SUPREME COURT REPORTS ANNOTATED

Fullido vs. Grilli

The rule is clear and inflexible: aliens are absolutely not

allowed to acquire public or private lands in the
Philippines, save only in constitutionally recognized
exceptions. (Id.)
 
 
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