VOID CONTRACTS
“A contract is void if one of the essential requisites of contracts under Article 1318 of the New Civil Code is lacking. Article 1318 provides:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
All these elements must be present to constitute a valid contract. Consent is essential to the existence of a contract; and where it is wanting, the contract is non-existent. In a contract of sale, its perfection is consummated at the moment there is a meeting of the minds upon the thing that is the object of the contract and upon the price. Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. To enter into a valid contract of sale, the parties must have the capacity to do so. Every person is presumed to be capacitated to enter into a contract until satisfactory proof to the contrary is presented. The burden of proof is on the individual asserting a lack of capacity to contract, and this burden has been characterized as requiring for its satisfaction clear and convincing evidence.
While a corporation is a juridical person, it cannot act except through its board of directors as a collective body, which is vested with the power and responsibility to decide whether the corporation should enter into a contract that will bind the corporation, subject to the articles of incorporation, by-laws, or relevant provisions of law.7 This grant to the board of all corporate powers is explicit under Section 23 of the Corporation Code, stating: “All corporate powers shall be exercised, and all corporate business shall be conducted by the board of directors.”[1]
“Under Section 23 of B.P. 68, otherwise known as the Corporation Code of the Philippines, a corporation can act only through its board of directors. The law is settled that contracts between a corporation and third persons must be made by or under the authority of its board of directors and not by its stockholders. FPHC, for its part, was represented by its board that had the legal right to act on behalf of the corporation and gave its approval and consent to the Sale of Shares of Stock and Escrow Agreement entered into on May 24, 1984. From that standpoint therefore it is clear that the essential element of consent for the existence of a valid contract was complied with in the transaction in question.”[2]
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.1 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.”[3] (Citations omitted)
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.[4]
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.[5]
“[i]f any one party to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and, therefore, null and void by reason of its having been made after the death of the party who appears as one of the contracting parties therein.”[6]
Prescription. – “The foregoing cases on the prescriptibility of actions for reconveyance apply when the action is based on fraud, or when the contract used as basis for the action is voidable. Under Article 1390 of the Civil Code, a contract is voidable when the consent of one of the contracting parties is vitiated by mistake, violence, intimidation, undue influence or fraud. When the consent is totally absent and not merely vitiated, the contract is void. An action for reconveyance may also be based on a void contract. When the action for reconveyance is based on a void contract, as when there was no consent on the part of the alleged vendor, the action is imprescriptible. The property may be reconveyed to the true owner, notwithstanding the TCTs already issued in another’s name. The issuance of a certificate of title in the latter’s favor could not vest upon him or her ownership of the property; neither could it validate the purchase thereof which is null and void. Registration does not vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any better title than what he actually has. Being null and void, the sale produces no legal effects whatsoever.”[7]
Jurisprudence teaches that “the ‘declaration of nullity of a contract which is void ab initio operated to restore things to the state and condition in which they were found before the execution thereof.[8]
Imprescriptible- Article 1410 of the Civil Code relevantly states that “[t]he action or defense for the declaration of the inexistence of a contract does not prescribe.”76 In other words, “an action that is predicated on the fact that the conveyance complained of was null and void ab initio is imprescriptible.”[9]Citations omitted)
The passage of time in this case could not defeat the legal principle that a null and void contract can be assailed anytime due to the imprescriptibility of the action.[10]
Effect of void contracts. – “A void contract is deemed legally nonexistent. It produces no legal effect. As a general rule, courts leave parties to such a contract as they are, because they are in pari delicto or equally at fault. Neither party is entitled to legal protection.”[11]
“XX. An action for reconveyance may also be based on a void contract. When the action for reconveyance is based on a void contract, as when there was no consent on the part of the alleged vendor, the action is imprescriptible. The property may be reconveyed to the true owner, notwithstanding the TCTs already issued in another’s name. The issuance of a certificate of title in the latter’s favor could not vest upon him or her ownership of the property; neither could it validate the purchase thereof which is null and void. Registration does not vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any better title than what he actually has. Being null and void, the sale produces no legal effects whatsoever.”[12]
[1] First Philippine Holdings Corp. V. Trans Middle East (Phils) Equities, Inc., G.R. No. 179505, December 4, 2009
[2] First Philippine Holdings Corp. V. Trans Middle East (Phils) Equities, Inc., G.R. No. 179505, December 4, 2009
[3] Fullido v. Grilli, G.R. No. 215014, February 29, 2016
[4] Fullido v. Grilli, G.R. No. 215014, February 29, 2016
[5] Fullido v. Grilli, G.R. No. 215014, February 29, 2016
[6] Tolentino v. Spouses Latagan, 761 Phil. 108, 131 (2015) citing Heirs of Luga v. Sps. Arciaga, 670 Phil. 294 (2011), cited in City of Tanauan v. Millonte, G.R. No. 219292, June 28, 2021
[7] Gatmaytan v. Misibis Land, Inc, G.R. No. 222166, June 10, 2020
[8] Delos Santos v. Abejon, 807 Phil. 720, 731 (2017) citing Development Bank of the Philippines v. Court of Appeals, 319 Phil. 447, 454-455 (1995), cited in City of Tanauan v. Millonte, G.R. No. 219292, June 28, 2021
[9] City of Tanauan v. Millonte, G.R. No. 219292, June 28, 2021
[10] City of Tanauan v. Millonte, G.R. No. 219292, June 28, 2021
[11] Menchavez, et al v. Teves, Jr., G.R. No 153201, January 26, 2005
[12] Gatamaytan v. Misibis Land, Inc., G.R. No. 222166, June 10, 2020