The contract here is the lease of a fishpond with Manuel and his children as lessors and Tino as lessee. Tino was the one who negotiated the lease with Manuel and his oldest son Junior in the office of Tino’s lawyer. After negotiations, Tino’s lawyer drafted the contract. As drafted, the contract says that "Lessors (Manuel and children) are the absolute and lawful co-owners of that area covered by a Fish Pond Application…". The term of the lease was five years with an annual rental of P40,000. Upon signing the contract, Tino occupied the fishpond and built dikes thereon. But two and a half years later, the fishpond dikes constructed by Tino were demolished by the RTC Sherrifs and possession of the subject property was delivered to other parties in a court case involving the same property where Manuel et. al., as defendants, were ordered to remove said dikes because it was illegally constructed.
So Tino sued Manuel et. al. in the Regional Trial Court (RTC) for recovery of damages as a result of the demolition of the dikes, for unearned income and for the return of the rentals he paid. In his complaint Tino alleged that Manuel et. al had violated their Contract of Lease specifically the peaceful and adequate enjoyment of the property for the entire duration of the contract. He said that Manuel et. al did not inform him of the other case.
The RTC however ruled that the Contract between Tino and Manuel et. al was null and void because under the law (PD 704), fishponds are properties of the State and do not belong to Manuel et.al. So, following the principle of "one can not give what he does not have", the contract is a patent nullity since Manuel et. al. cannot give any rights to Tino. On the other hand, Tino was equally guilty because he was fully aware that Manuel et. al. are not the owners of the fishpond without any right to sublease the same even if their application is approved. Hence the both Manuel et. al and Tino must be left where they are and no one is entitled to any damages. Was the RTC correct?
Yes. Unquestionably, Manuel et. al., leased out a property that did not belong to them, one they had no authority to sublease. The RTC correctly observed that Manuel and his children still had a pending lease application with the State at the time they entered into the Contract with Tino. The latter, on the other hand, entered into said contract knowing that Manuel et. al. were not the owners of the fishpond but only had an application to lease the same from the State which might be disapproved. The existence of a fishpond lease application necessarily contradicts a claim of ownership. That Tino did not know of Manuel et.al’s lack of ownership is therefore incredible. The presence of Tino’s counsel during the negotiations, prior to the parties’ meeting of the minds further debunks Tino’s claim of lack of knowledge. Lawyers are expected to know that fishponds belong to the State and are inalienable. The claim of Manuel and his children that they are the owners and their assurance that their fishpond lease application would be approved are clearly contradictory. This circumstance should have been sufficient to place Tino on notice and compel him to determine their right over the fishpond including the right to lease it. Tino is therefore equally at fault in entering into a void Contract of Lease. As both parties are at fault, neither may recover against the other (Menchavez vs. Teves, Jr. G.R. 153201, January 26, 2005)