NATIVIDAD STA. ANA VICTORIA, G.R. No.

179673 On January 25, 2006 the MeTC rendered a decision,[2] granting the application
for registration and finding that Victoria sufficiently established her claim and
Petitioner, right under the land registration law to have the subject property registered in
her name.
Present:

CARPIO, J., Chairperson,

The Republic appealed the MeTC decision to the Court of Appeals (CA),
- versus - PERALTA,
pointing out in its brief that Victoria failed to present evidence that the subject
ABAD, property is alienable and disposable land of the public domain and that she
failed to establish the kind of possession required for registration.
PEREZ,* and

MENDOZA, JJ.
In her brief, Victoria replied that the Conversion/Subdivision Plan she
REPUBLIC OF THE PHILIPPINES, submitted carried a notation that the subject property is within alienable and
disposable area. Further, she attached to her brief a Certification [3] dated
Respondent. Promulgated: November 6, 2006 issued by the Department of Environment and Natural
Resources (DENR), verifying the subject property as within the alienable and
disposable land of the public domain.
June 8, 2011

x --------------------------------------------------------------------------------------- x
On June 19, 2007 the CA rendered judgment, reversing and setting aside the
MeTC decision because Victoria failed to prove that the subject lot is alienable
and disposable land of the public domain. She could not, said the CA, rely on
DECISION the notation in the Conversion/Subdivision Plan she submitted before the
MeTC, although it carried a notation that the land is alienable and disposable as
certified by the Chief of Survey of the Land Management Services of the DENR
on January 3, 1968, because such notation was made only in connection with
ABAD, J.:
the approval of the plan.

This case is about the need for an applicant for registration of title to land to
prove that the same has been officially declared alienable and disposable land
of the public domain.
On the other hand, the CA could not take cognizance of the DENR Certification
of November 6, 2006 that she submitted together with her appellees brief even
if it were to the same effect since she did not offer it in evidence during the
hearing before the trial court. The CA found it unnecessary to pass upon the
evidence of Victorias possession and occupation of the subject property. It
denied Victorias motion for reconsideration on September 11, 2007.

The Facts and the Case

Issues Presented

On November 2, 2004 petitioner Natividad Sta. Ana Victoria applied for

registration under the law[1] of a 1,729-square meter lot in Bambang, City of
Taguig, before the Metropolitan Trial Court (MeTC) of that city. The Office of The issues in this case are:
the Solicitor General (OSG), representing the respondent Republic of
the Philippines, opposed the application in the usual form.
1. Whether or not Victoria amply proved that the subject lot is alienable and
disposable land of the public domain; and
Victoria testified and offered documentary evidence to show that the subject
lot, known as Lot 5176-D, Mcadm-590-D of the Taguig Cadastral Mapping is
a portion of a parcel of land with an area of 17,507 sq m originally owned by 2. Whether or not she has amply proved her claim of ownership of the property.
Victorias father Genaro Sta. Ana and previously declared in his name for tax
purposes. Upon Genaros death, Victoria and her siblings inherited the land and
divided it among themselves via a deed of partition.

Courts Ruling
The Conversion/Subdivision Plan Victoria presented in evidence showed that
the land is inside the alienable and disposable area under Project 27-B as per
L.C. Map 2623, as certified by the Bureau of Forest Development on January
Section 14(1)[4] of the Property Registration Decree has three requisites for
3, 1968. Victoria testified that she and her predecessors-in-interest have been in
registration of title: (a) that the property in question is alienable and disposable
possession of the property continuously, uninterruptedly, openly, publicly,
land of the public domain; (b) that the applicants by themselves or through their
adversely and in the concept of owners since the early 1940s or for more than
predecessors-in-interest have been in open, continuous, exclusive and notorious
30 years and have been declared as owners for taxation purposes for the last 30
possession and occupation; and (c) that such possession is under a bona
years. The Republic did not present any evidence in support of its opposition.
fide claim of ownership since June 12, 1945 or earlier.[5]

1

A similar right is granted under Sec. 48(b) of the Public Land Act. [6] There are
no material differences between Sec. 14(1) of the Property Registration Decree
and Sec. 48(b) of the Public Land Act. [7] Sec. 14(1) operationalizes the
registration of such lands of the public domain.[8]
Here, the only reason the CA gave in reversing the decision of the MeTC is that
Victoria failed to submit the November 6, 2006 Certification issued by the
DENR, verifying the subject property as within the alienable and disposable
land of the public domain, during the hearing before the MeTC. She belatedly
submitted it on appeal.
To prove that the land subject of the application for registration is alienable, an
applicant must establish the existence of a positive act of the government such
as a presidential proclamation or an executive order; an administrative action;
investigation reports of Bureau of Lands investigators; and a legislative act or
statute.[9] The applicant may secure a certification from the government that the
lands applied for are alienable and disposable, but the certification must show
that the DENR Secretary had approved the land classification and released the
land of the pubic domain as alienable and disposable, and that the land subject
of the application for registration falls within the approved area per verification
through survey by the PENRO or CENRO.[10] The applicant must also present
a copy of the original classification of the land into alienable and disposable, as
declared by the DENR Secretary or as proclaimed by the President. [11]
The DENR Certification submitted by Victoria reads:
This is to certify that the tract of land as shown and described at the reverse
side of this Conversion/Subdivision Plan of Lot 5176 MCadm 590-D,
Taguig Cadastral Mapping, Csd-00-000648, containing an area of 17,507
square meters, situated at Bambang, Taguig City, Metro Manila, as
surveyed by Geodetic Engineer Justa M. de las Alas for Marissa S.
Estopalla, et al., was verified to be within the Alienable or Disposable Land,
under Project No. 27-B, Taguig City, Metro Manila as per LC Map 2623,
approved on January 3, 1968.[12]
On July 28, 2010 the Court issued a resolution requiring the OSG to verify from
the DENR whether the Senior Forest Management Specialist of its National
Capital Region, Office of the Regional Technical Director for Forest
Management Services, who issued the Certification in this case, is authorized
to issue certifications on the status of public lands as alienable and disposable,
and to submit a copy of the administrative order or proclamation that declares
as alienable and disposable the area where the property involved in this case is
located, if any there be.[13]
In compliance, the OSG submitted a certification from the DENR stating that
Senior Forest Management Specialist Corazon D. Calamno, who
signed Victorias DENR Certification, is authorized to issue certifications
regarding status of public land as alienable and disposable land. [14] The OSG
also submitted a certified true copy of Forestry Administrative Order 4-1141
dated January 3, 1968,[15] signed by then Secretary of Agriculture and Natural
Resources Arturo R. Tanco, Jr., which declared portions of the public domain
covered by Bureau of Forestry Map LC-2623, approved on January 3, 1968, as
alienable and disposable.
Since the OSG does not contest the authenticity of the DENR Certification, it
seems too hasty for the CA to altogether disregard the same simply because it
was not formally offered in evidence before the court below. More so when
even the OSG failed to present any evidence in support of its opposition to the
application for registration during trial at the MeTC. The attack on Victorias
proof to establish the nature of the subject property was made explicit only
when the case was at the appeal stage in the Republics appellants brief. Only
then did Victoria find it necessary to present the DENR Certification, since she
had believed that the notation in the Conversion/Subdivision Plan of the
property was sufficient.
In Llanes v. Republic,[16] this Court allowed consideration of a CENRO
Certification though it was only presented during appeal to the CA to avoid a
patent unfairness. The rules of procedure being mere tools designed to facilitate
the attainment of justice, the Court is empowered to suspend their application
to a particular case when its rigid application tends to frustrate rather than
promote the ends of justice.[17] Denying the application for registration now on
the ground of failure to present proof of the status of the land before the trial
court and allowing Victoria to re-file her application would merely
unnecessarily duplicate the entire process, cause additional expense and add to
the number of cases that courts must resolve. It would be more prudent to
recognize the DENR Certification and resolve the matter now.
Besides, the record shows that the subject property was covered by a cadastral
survey of Taguig conducted by the government at its expense. Such surveys are
carried out precisely to encourage landowners and help them get titles to the
lands covered by such survey. It does not make sense to raise an objection after
such a survey that the lands covered by it are inalienable land of the public
domain, like a public forest. This is the City of Taguig in the middle of the
metropolis.
The CA also erred in not affirming the decision of the MeTC especially
since Victoria has, contrary to the Solicitor Generals allegation, proved that she
and her predecessors-in-interest had been in possession of the subject lot
continuously, uninterruptedly, openly, publicly, adversely and in the concept of
owners since the early 1940s. In fact, she has submitted tax declarations
covering the land way back in 1948 that appeared in her fathers name.
We find no reason to disturb the conclusion of the trial court that Victoria amply
established her right to have the subject property registered in her name, given
that she has met all the requisites for registration of title under the Property
Registration Decree.
WHEREFORE, the Court GRANTS the petition, REVERSES and SETS
ASIDE the June 19, 2007 decision and the September 11, 2007 resolution of
the Court of Appeals, and REINSTATES the January 25, 2006 decision of the
Metropolitan Trial Court, Branch 74 of the City of Taguig.
2
G.R. No. 76564 May 25, 1990
SOUTH CITY HOMES, INC., petitioner,
vs.
REPUBLIC OF THE PHILIPPINES and COURT OF
APPEALS, respondents.
Jose S. Santos, Jr. for petitioner.
CRUZ, J.:
The subject of this dispute is a strip of land between two lots owned by the
petitioner. It has an area of 613 square meters and is situated in Calabuso, Bian,
Laguna. It was discovered only in 1983 after a survey conducted by the Bureau
of Lands and is now identified as Lot No. 5005 of the Binan
Estate.1 Registration thereof in the name of the petitioner was decreed in 1984
by the trial court pursuant to the Property Registration Law. 2 On appeal, the
order was reversed by a special division of the respondent court, with two
members dissenting.3 The petitioner is now before us, claiming that the reversal
was erroneous.
The two lots bordering the subject property are Lot No. 2381, containing an
area of 36,672 square meters, and Lot No. 2386- A, containing an area of 32,011
square meters. Both are now registered in the name of the petitioner. The history
of these lots is described by the trial court as follows:
The record shows that Lot 2381 was purchased on installment basis by Basilia
Dimaranan, and Lot 2386 was acquired under similar condition by Fernando
Guico, both from the Friar Lands Division of the Bureau of Lands (Exhs. "S"
and "R") in the year 1910. Eight (8) years thereafter, installment-payment for
Lot 2386 was completed in favor of Basilia Dimaranan. On the other hand, Lot
2381 was on September 12, 1911 assigned to Bartolome Pea who continued
and completed the installment payments culminating into the issuance in his
name of Patent No. 19138 on September 26,1919. From Bartolome Pena, Lot
2381 was acquired by Fidel M. Cabrera, Sr. and the title was transferred to his
name (Exh. "F") while Lot 2386 was acquired by the Garcias (Exh. "J-2") On
August 27,1981, Lot 2386-A was sold by the Garcias to the applicant South
City Homes, Inc. (Exh. "J"). Lot 2381 was on February 25,1977 sold by Fidel
M. Cabrera, Sr. to Koo Jun Eng (Exh. "G") who in turn assigned the property
to the applicant in February of 1981 (Exh. "H"). 4
It is the position of the petitioner that Lot No. 5005 should be registered in its
name for either of two reasons. The first is that the disputed strip of land really
formed part of Lots 2381 and 2386-A but was omitted therefrom only because
of the inaccuracies of the old system of cadastral surveys. The second is that it
had acquired the property by prescription through uninterrupted possession
thereof in concept of owner, by itself and its predecessors-in-interest, for more
than forty years.
For its part, the Republic of the Philippines argues that the elongated piece of
land between the two lots now owned by the petitioner used to be a canal which
could not have been appropriated by the purchasers of the adjacent lots or their
successors-in-interest. Neither could it be deemed included in the lots now
owned by the petitioner because their respective technical descriptions indicate
otherwise. Prescription is also not applicable because the petitioner has not
established the requisite possession of the lot, as to manner and length, to justify
judicial confirmation of title in its name.
The parties also differ on the nature of the disputed lot. The petitioner insists it
is patrimonial property of the State, being part of the so-called Friar Lands,
while the Republic maintains it is part of the public domain and cannot therefore
be acquired by a private corporation. But this disagreement is irrelevant, as will
appear later.
The Court has considered the issues and the arguments of the parties and finds
that the petition has no merit .
To argue that Lot No. 5005 is really a part of the other two lots owned by the
petitioner is to oppose the obvious. What is obvious is the technical descriptions
of the two lots whose areas do not include the strip of land between them. The
petitioner points to the original survey of the lands in 1906 which states that the
two lots adjoin each other, without mention of what is now Lot No. 5005. But
it forgets that it has itself suggested that the old surveys were inaccurate, which
could explain the omission.
If it is true that there was no canal between the two lots at the time of their
survey, then the disputed strip of land should have been included as part of
either of the two adjoining lots. It was not. The petitioner itself insists that the
canal, if there ever was one, had disappeared after it had been filled with silt
and dirt. The result was the segregation of a third and separate lot, now known
as Lot No. 5005. Notably, the area of that dried-up canal is not negligible as to
come under what the petitioner calls the allowable margin of error in the
original survey.
The Republic submits that the petitioner and its predecessors-in-interest could
not have appropriated the strip of land because it used to be a canal over which
they could not have acquired any exclusive right. The applicable law is Act No.
1120, otherwise known as the Friar Lands Act, providing in its Section 19 as
follows:
No purchaser or lessee under this Act shall acquire any exclusive rights to any
canal, ditch, reservoir, or other irrigation works, or to any water supply upon
which such irrigation works are or may be dependent, but all of such irrigation
works and water supplies shall remain under the exclusive control of the
Government of the Philippine Islands and be administered under the direction
of the Chief of the Bureau of Public Lands for the common benefit of those
interest dependent upon them. And the Government reserves as a part of the
contract of sale in each instance the right to levy an equitable contribution or
tax for the maintenance of such irrigation works, the assessment of which shall
be based upon the amount of benefits received, and each purchaser under this
Act, by accepting the certificate of sale or deed herein provided to be given,
shall be held to assent thereto. And it is further provided that all lands leased or
conveyed under this Act shall remain subject to the right of such irrigation
canals, ditches, and reservoirs as now exist or as the Government may hereafter
see fit to construct.
According to the respondent court, the fact that the canal had been filled up did
not change its nature as a canal; it was still a canal although it had dried up. We
do not think so. A canal without water is not a canal. The status of a canal is not
perpetual. Consequently, the above provision is not applicable and cannot
defeat the petitioner's claim to the disputed property either as part of two other
lots or as a separate lot.
As we have already rejected the contention that the third lot was part of the
other two lots, the petitioner must fall back on its claim of acquisitive
prescription over it as a separate lot. Its submission is that its possession of the
lot dates back to "time immemorial," by which tired phrase it is intended to
convey the idea that the start of such possession can no longer be recollected.
Indeed, it can be. The petitioner's possession does not in fact go back to "time
immemorial," but only to the recent remembered past.
The petitioner presented only two witnesses whose testimony regarding its
supposed possession of Lot No. 5005 is essentially hearsay and inherently
inadequate. Thus, Rogelio Constantino, an employee of the petitioner, declared
on the stand:
A. Yes sir, as a matter of fact we were duly informed that since the beginning
even from the time of their predecessors-in-interest, such strip of land was
believed to be forming part of the two parcels of land and since the beginning
they have been cultivating the same and treating the said strip of land as their
own, publicly, notoriously and in the concept of owner. 5
The other witness, Meliton Casunuran, was more explicit but his testimony is
largely hearsay also, let alone the fact that the possession he sought to establish
is likewise insufficient. According to him, he worked as a tenant on the land for
the previous owners of the other two lots before these were acquired by the
petitioner and that the subject property was regarded as part of their lots by their
respective owners. Thus he declared:
3
Q Now, since you testified that you worked both on Lot 2381 and Lot 2386-A
as tenant thereof, did you as a tenant recall that you cultivated these two
particular parcels of land in its entirety?
A Yes, sir.
Q Do you know that between these two parcels of land that you were working
then, there is a strip of land included in the area you were working which is not
included in the title to the two parcels of riceland?
A Yes, sir, I came to know that. As a matter of fact, when I became tenant, my
predecessor used to tell me that there is a strip in between the two parcels of
riceland which I was working on. They even told me that the owners of the
adjoining Lots 2381 and 2386 were lucky because there was added to their
property a strip of land which they produced also rice but which is not included
in their title.
According to them, it happened this way that from time immemorial, there was
an irrigation canal constructed on this strip of land. After the cadastral survey
of the lots in Bian, this canal gradually disappeared by the filing up of dirt and
silt until such time that no one could notice anymore a canal on this strip of
land, such that the same was taken possession of by both the owners of Lot 2381
and Lot 2386 and had it planted with rice in the same way that the two parcels
of riceland were planted at that time. And I was likewise informed by my
predecessor that I have also to till the strip of land, the same having been
considered as properly owned and forming part and parcel of Lots 2381 and
2386 and owned by the respective owners. 6
The underscored portions stress the unreliableness of these declarations, which,
in the case of Constantino, is also suspect as self-serving.
The testimony falls short of establishing the manner and length of possession
required by law to vest prescriptive title in the petitioner to Lot No. 5005. For
one thing, as the Solicitor General points out in his Comment, the claim of
adverse ownership to the strip of land between their respective lots was not
exclusive but shared by the predecessors-in-interest of the petitioner. For
another, and more importantly, the length of possession claimed by the
petitioner is not sufficient to vest prescriptive title in it.
Casunurans allegation that the claim of the petitioner's predecessors-in- interest
to the disputed strip of land was "in the concept of owner, open, public and
adversely against the whole world" was fed to him with a leading question
during the ex parte hearing, thus:
MENDOZA
Q So you mean to convey to this Honorable Court that from the time of your
predecessor up to your time as tenant, the owners of Lots 2381 and 2386-A have
been in possession of this strip of land containing an area of 613 square meters
more or less in the concept of owner, open, public and adversely against the
whole world?
A Yes, sir.7
The witness was a farmer and could hardly be expected to understand the legal
significance of the question, to which he could have give only the short and
simple answer "Yes." He did not and was not asked to elaborate. The statement
was also not corroborated by other witnesses or supported by documents
showing that, indeed, the former owners of the two lots also asserted claims of
ownership over the land in question. In fact, the only other evidence of such
claim is the tax declaration on the said lot, which was made only in 1980. 8
But the more telling consideration, as the Court sees it, is this. By the testimony
of the two witnesses, the petitioner obviously meant to tack the possession of
the two lots by the previous owners to its own possession. There was no need
for this because the petitioner acquired ownership of Lot No. 2381 by
assignment and Lot No. 2386-A by purchase; and such ownership includes the
right of possession. The petitioner is not claiming prescriptive rights to these
two lots, which had previously been registered in the name of the transferors
The lot it is claiming by prescription is Lot No. 5005, which it did not acquire
from the owner of the other two lots, or from any previous private registered
owner of the lot, as there was none.
Neither of the owners of Lots Nos. 2381 or 2386-A, in their respective deeds,
transferred Lot No. 5005 to the petitioner; as already explained, Lot No. 5005
was not part of either of the two lots. The petitioner merely occupied the
disputed strip of land believing it to be included in the two lots it had acquired
from Koo Jun Eng and the Garcia spouses. However, even if it be conceded that
the previous owners of the other two lots possessed the disputed lot, their
possession cannot be tacked to the possession of the petitioner. The simple
reason is that the possession of the said lot was not and could not have been
transferred to the petitioner when it acquired Lots Nos. 2381 and 2386-
A because these two lots did not include the third lot. Article 1138 of the Civil
Code provides that
(1) The present possessor may complete the period necessary for prescription
by tacking his possession to that of his grantor or predecessor- in interest.
However, tacking of possession is allowed only when there is a privity of
contract or relationship between the previous and present possessors. In the
absence of such privity, the possession of the new occupant should be counted
only from the time it actually began and cannot be lengthened by connecting it
with the possession of the former possessors. Thus it has been held:
A deed, in itself, creates no privity as to land outside its calls. Nor is privity
created by the bare taking of possession of land previously occupied by the
grantor. It is therefore the rule, although sharply limited, that a deed does not of
itself create privity between the grantor and the grantee as to land not described
in the deed but occupied by the grantor in connection therewith, although the
grantee enters into possession of the land not described and uses it in
connection with that conveyed. 9
Where a grantor conveys a specific piece of property, the grantee may not tack
onto the period of his holding of an additional piece of property the period of
his grantor's occupancy thereof to make up the statutory period. His grantor has
not conveyed such property or his interest therein, and there is no privity. 10
It is said, in Hanlon v. Ten Hove supra, that this rule is not harsh, the court using
the following language: "If A purchases and by adverse possession obtains title
to an adjoining 40 acres, it would hardly be contended that a conveyance by
him of the 40 acquired by deed would carry with it title to the 40 acquired by
adverse possession. So if A acquires by deed a 40 acres and obtains an adjoining
strip 2 rods wide or some interest in it, his conveyance of the 40 acquired by
deed does not carry with it his interest in the adjoining strip. If the sole defense
here was that of adverse possession, we would be obliged to hold that it had not
been made out.11
It should also be noted that, according to Article 1135 of the Civil Code:
In case the adverse claimant possesses by mistake an area greater, or less, than
that expressed in his title, prescription shall be based on the possession.
This possession, following the above quoted rulings, should be limited only to
that of the successor-in-interest; and in the case of the herein petitioner, it
should begin from 1981 when it acquired the two adjacent lots and occupied as
well the lot in question thinking it to be part of the other two.
It follows that when the application for registration of the lot in the name of the
petitioner was filed in 1983, the applicant had been in possession of the property
for less than three years. This was far too short of the prescriptive period
required for acquisition of immovable property, which is ten years if the
possession is in good faith and thirty years if in bad faith, or if the land is public.
The weakness of the petitioner's position prevents this Court from affirming the
claim to the lot in question either as part of the two other lots or by virtue of
acquisitive prescription. And having made this ruling, we find it unnecessary to
determine whether the land is patrimonial in nature or part of the public domain.
The case of Director of Lands v. Intermediate Appellate Court, 12 on which the
petitioner relied so strongly (to the point of simply invoking it in a supplemental
petition instead of filing its memorandum), is not applicable. That decision,
4
which reversed the case of Manila Electric Co. v. Castro-Bartolome, 13 involved
a situation where the public land automatically became private as a result of
prescription clearly and indubitably established by the claimant. In the case at
bar, the petitioner's claim is rejected not because it is a private corporation
barred from acquiring public land but because it has failed to establish its title
to the disputed lot, whatever its nature.

WHEREFORE, the petition is DENIED, with costs against the petitioner.

SO ORDERED.

5
G.R. No. L-59731 January 11, 1990
ALFREDO CHING, petitioner,
vs.
THE HONORABLE COURT OF APPEALS & PEDRO
ASEDILLO, respondents.
Joaquin E. Chipeco & Lorenzo D. Fuggan for petitioners.
Edgardo Salandanan for private respondent.
PARAS, J.:
This is a petition for review on certiorari which seeks to nullify the decision of
respondent Court of Appeals (penned by Hon. Rodolfo A. Nocon with the
concurrence of Hon. Crisolito Pascual and Juan A. Sison) in CA-G.R. No.
12358-SP entitled Alfredo Ching v. Hon. M. V. Romillo, et al. which in effect
affirmed the decision of the Court of First Instance of Rizal, now Regional Trial
Court (penned by Judge Manuel V. Romillo, Jr. then District Judge, Branch
XXVII Pasay City) granting ex-parte the cancellation of title registered in the
name of Ching Leng in favor of Pedro Asedillo in Civil Case No. 6888-P
entitled Pedro Asedillo v. Ching Leng and/or Estate of Ching Leng.
The facts as culled from the records disclose that:
In May 1960, Decree No. N-78716 was issued to spouses Maximo Nofuente
and Dominga Lumandan in Land Registration Case No. N-2579 of the Court of
First Instance of Rizal and Original Certificate of Title No. 2433
correspondingly given by the Register of Deeds for the Province of Rizal
covering a parcel of land situated at Sitio of Kay-Biga Barrio of San Dionisio,
Municipality of Paranaque, Province of Rizal, with an area of 51,852 square
meters (Exhibit "7", p. 80, CA, Rollo).
In August 1960, 5/6 portion of the property was reconveyed by said spouses to
Francisco, Regina, Perfects, Constancio and Matilde all surnamed Nofuente and
Transfer Certificate of Title No. 78633 was issued on August 10, 1960
accordingly (Exhibit "8", pp. 81 and 82, Ibid.).
By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street,
Pasay City, Transfer Certificate of Title No. 91137 was issued on September
18, 1961 and T.C.T. No. 78633 was deemed cancelled. (Exhibit "5-2", pp. 76-
77 and 83, Ibid.).
On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States
of America. His legitimate son Alfredo Ching filed with the Court of First
Instance of Rizal (now RTC) Branch III, Pasay City a petition for administration
of the estate of deceased Ching Leng docketed as Sp. Proc. No. 1956-P. Notice
of hearing on the petition was duly published in the "Daily Mirror", a newspaper
of general circulation on November 23 and 30 and December 7, 1965. No
oppositors appeared at the hearing on December 16, 1965, consequently after
presentation of evidence petitioner Alfredo Ching was appointed administrator
of Ching Leng's estate on December 28, 1965 and letters of administration
issued on January 3, 1966 (pp. 51-53, Rollo). The land covered by T.C.T. No.
91137 was among those included in the inventory submitted to the court (p.
75, Ibid.).
Thirteen (13) years after Ching Leng's death, a suit against him was commenced
on December 27, 1978 by private respondent Pedro Asedillo with the Court of
First Instance of Rizal (now RTC), Branch XXVII, Pasay City docketed as Civil
Case No. 6888-P for reconveyance of the abovesaid property and cancellation
of T.C.T. No. 91137 in his favor based on possession (p. 33, Ibid.). Ching
Leng's last known address is No. 44 Libertad Street, Pasay City which appears
on the face of T.C.T. No. 91137 (not No. 441 Libertad Street, Pasay City, as
alleged in private respondent's complaint). (Order dated May 29, 1980, p.
55, Ibid.). An amended complaint was filed by private respondent against Ching
Leng and/or Estate of Ching Leng on January 30, 1979 alleging "That on
account of the fact that the defendant has been residing abroad up to the
present, and it is not known whether the defendant is still alive or dead, he or
his estate may be served by summons and other processes only by publication;"
(p. 38, Ibid.). Summons by publication to Ching Leng and/or his estate was
directed by the trial court in its order dated February 7, 1979. The summons and
the complaint were published in the "Economic Monitor", a newspaper of
general circulation in the province of Rizal including Pasay City on March 5,
12 and 19, 1979. Despite the lapse of the sixty (60) day period within which to
answer defendant failed to file a responsive pleading and on motion of counsel
for the private respondent, the court a quo in its order dated May 25, 1979,
allowed the presentation of evidence ex-parte. A judgment by default was
rendered on June 15, 1979, the decretal portion of which reads:
WHEREFORE, finding plaintiffs causes of action in the complaint to be duly
substantiated by the evidence, judgment is hereby rendered in favor of the
plaintiff and against the defendant declaring the former (Pedro Asedillo) to be
the true and absolute owner of the property covered by T.C.T. No. 91137;
ordering the defendant to reconvey the said property in favor of the plaintiff;
sentencing the defendant Ching Leng and/or the administrator of his estate to
surrender to the Register of Deeds of the Province of Rizal the owner's copy of
T.C.T. No. 91137 so that the same may be cancelled failing in which the said
T.C.T. No. 91137 is hereby cancelled and the Register of Deeds of the Province
of Rizal is hereby ordered to issue, in lieu thereof, a new transfer certificate of
title over the said property in the name of the plaintiff Pedro Asedillo of legal
age, and a resident of Estrella Street, Makati, Metro Manila, upon payment of
the fees that may be required therefor, including the realty taxes due the
Government.
IT IS SO ORDERED. (pp. 42-44, Ibid.)
Said decision was likewise served by publication on July 2, 9 and 16, 1979
pursuant to Section 7 of Rule 13 of the Revised Rules of Court (CA Decision,
pp. 83-84, Ibid.). The title over the property in the name of Ching Leng was
cancelled and a new Transfer Certificate of Title was issued in favor of Pedro
Asedillo (p. 77, CA Rollo) who subsequently sold the property to Villa
Esperanza Development, Inc. on September 3, 1979 (pp. 125-126, Ibid.).
On October 29, 1979 petitioner Alfredo Ching learned of the abovestated
decision. He filed a verified petition on November 10, 1979 to set it aside as
null and void for lack of jurisdiction which was granted by the court on May
29, 1980 (penned by Hon. Florentino de la Pena, Vacation Judge, pp. 54-
59, Rollo).
On motion of counsel for private respondent the said order of May 29, 1980
was reconsidered and set aside, the decision dated June 15, 1979 aforequoted
reinstated in the order dated September 2, 1980. (pp. 60-63, Ibid.)
On October 30, 1980, petitioner filed a motion for reconsideration of the said
latter order but the same was denied by the trial court on April 12, 1981 (pp.
77-79, Ibid.)
Petitioner filed an original petition for certiorari with the Court of Appeals but
the same was dismissed on September 30, 1981. His motion for reconsideration
was likewise denied on February 10, 1982 (pp. 81-90, Ibid.)
Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro
Manila during the pendency of the case with the Court of Appeals (p. 106,
CA Rollo).
Hence, the instant petition.
Private respondent's comment was filed on June 1, 1982 (p. 117, Ibid.) in
compliance with the resolution dated April 26, 1982 (p. 109, Ibid.) Petitioner
filed a reply to comment on June 18, 1982 (p. 159, Ibid ), and the Court gave
due course to the petition in the resolution of June 28, 1982 (p. 191, Ibid.)
Petitioner raised the following:
ASSIGNMENTS OF ERROR
I
6
WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS ESTATE
MAY BE VALIDLY SERVED WITH SUMMONS AND DECISION BY
PUBLICATION.
II
WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF
PROPERTY AND CANCELLATION OF TITLE IS IN PERSONAM, AND IF
SO, WOULD A DEAD MAN AND/OR HIS ESTATE BE BOUND BY
SERVICE OF SUMMONS AND DECISION BY PUBLICATION.
III
WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE AND
CANCELLATION OF TITLE CAN BE HELD EX-PARTE.
IV
WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION
OVER THE SUBJECT MATTER AND THE PARTIES.
V he could not have been notified at all and the trial court never acquired
WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES
IN INSTITUTING THE ACTION FOR RECONVEYANCE AFTER THE
LAPSE OF 19 YEARS FROM THE TIME THE DECREE OF
REGISTRATION WAS ISSUED.
Petitioner's appeal hinges on whether or not the Court of Appeals has decided
a question of substance in a way probably not in accord with law or with the
applicable decisions of the Supreme Court.
Petitioner avers that an action for reconveyance and cancellation of title is in
personam and the court a quo never acquired jurisdiction over the deceased
Ching Leng and/or his estate by means of service of summons by publication
in accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil.
448 [1950].
On the other hand, private respondent argues that an action for cancellation of
title is quasi in rem, for while the judgment that may be rendered therein is not
strictly a judgment in in rem, it fixes and settles the title to the property in
controversy and to that extent partakes of the nature of the judgment in rem,
hence, service of summons by publication may be allowed unto Ching Leng
who on the face of the complaint was a non-resident of the Philippines in line
with the doctrine enunciated in Perkins v. Dizon, 69 Phil. 186 [1939].
The petition is impressed with merit.
An action to redeem, or to recover title to or possession of, real property is not
an action in rem or an action against the whole world, like a land registration
proceeding or the probate of a will; it is an action in personam, so much so that
a judgment therein is binding only upon the parties properly impleaded and duly
heard or given an opportunity to be heard. Actions in personam and actions in
rem differ in that the former are directed against specific persons and seek
personal judgments, while the latter are directed against the thing or property
or status of a person and seek judgments with respect thereto as against the
whole world. An action to recover a parcel of land is a real action but it is an
action in personam, for it binds a particular individual only although it concerns
the right to a tangible thing (Ang Lam v. Rosillosa, supra).
Private respondent's action for reconveyance and cancellation of title being in
personam, the judgment in question is null and void for lack of jurisdiction over
the person of the deceased defendant Ching Leng. Verily, the action was
commenced thirteen (13) years after the latter's death. As ruled by this Court
in Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision
of the lower court insofar as the deceased is concerned, is void for lack of
jurisdiction over his person. He was not, and he could not have been validly
served with summons. He had no more civil personality. His juridical
personality, that is fitness to be subject of legal relations, was lost through death
(Arts. 37 and 42 Civil Code).
The same conclusion would still inevitably be reached notwithstanding joinder
of Ching Leng's estate as co-defendant. it is a well-settled rule that an estate can
sue or be sued through an executor or administrator in his representative
capacity (21 Am. Jr. 872). Contrary to private respondent's claims, deceased
Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death
certificate and T. C. T. No. 91137 and there is an on-going intestate proceedings
in the same court, Branch III commenced in 1965, and notice of hearing thereof
duly published in the same year. Such misleading and misstatement of facts
demonstrate lack of candor on the part of private respondent and his counsel,
which is censurable.
The complaint for cancellation of Ching Leng's Torrens Title must be filed in
the original land registration case, RTC, Pasig, Rizal, sitting as a land
registration court in accordance with Section 112 of the Land Registration Act
(Act No. 496, as amended) not in CFI Pasay City in connection with, or as a
mere incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748
[1982]).
Section 112 of the same law requires "notice to all parties in interest." Since
Ching Leng was already in the other world when the summons was published
jurisdiction over his person. The ex-parte proceedings for cancellation of title
could not have been held (Estanislao v. Honrado, supra).
The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since
petitioner Perkins was a non-resident defendant sued in Philippine courts and
sought to be excluded from whatever interest she has in 52,874 shares of stocks
with Benguet Consolidated Mining Company. The action being a quasi in
rem summons by publication satisfied the constitutional requirement of due
process.
The petition to set aside the judgment for lack of jurisdiction should have been
granted and the amended complaint of private respondent based on possession
and filed only in 1978 dismissed outrightly. Ching Leng is an innocent
purchaser for value as shown by the evidence adduced in his behalf by petitioner
herein, tracing back the roots of his title since 1960, from the time the decree of
registration was issued.
The sole remedy of the landowner whose property has been wrongfully or
erroneously registered in another's nameafter one year from the date of the
decreeis not to set aside the decree, but respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the
ordinary court of justice for damages if the property has passed unto the hands
of an innocent purchaser for value (Sy, Sr. v. Intermediate Appellate Court,
G.R. No. 66742; Teoville Development Corporation v. IAC, et al., G.R. No.
75011, June 16, 1988).
Failure to take steps to assert any rights over a disputed land for 19 years from
the date of registration of title is fatal to the private respondent's cause of action
on the ground of laches. Laches is the failure or neglect, for an unreasonable
length of time to do that which by exercising due diligence could or should have
been done, earlier; it is negligence or omission to assert a right within a
reasonable time warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert it (Bailon-Casilao v. Court of
Appeals, G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals, G.R.
No. 41508, June 27, 1988).
The real purpose of the Torrens system is to quiet title to land and to stop forever
any question as to its legality. Once a title is registered, the owner may rest
secure, without the necessity of waiting in the portals of the court, or sitting on
the "mirador su casa," to avoid the possibility of losing his land (National Grains
Authority v. IAC, 157 SCRA 388 [1988]).
A Torrens title is generally a conclusive evidence of the ownership of the land
referred to therein (Section 49, Act 496). A strong presumption exists that
Torrens titles are regularly issued and that they are valid. A Torrens title is
incontrovertible against any "information possessoria" or title existing prior to
the issuance thereof not annotated on the title (Salamat Vda. de Medina v. Cruz,
G.R. No. 39272, May 4, 1988).
7
PREMISES CONSIDERED, (1) the instant petition is hereby GRANTED; (2)
the appealed decision of the Court of Appeals is hereby REVERSED and SET
ASIDE; (3) the trial court's decision dated June 15, 1979 and the Order dated
September 2, 1980 reinstating the same are hereby declared NULL and VOID
for lack of jurisdiction and (4) the complaint in Civil Case No. 6888-P is hereby
DISMISSED.

SO ORDERED.

8
G.R. No. L-27952 February 15, 1982
TESTATE ESTATE OF JOSE EUGENIO RAMIREZ, MARIA LUISA
PALACIOS, Administratrix, petitioner-appellee,
vs.
MARCELLE D. VDA. DE RAMIREZ, ET AL., oppositors, JORGE and
ROBERTO RAMIREZ, legatees, oppositors- appellants.
ABAD SANTOS, J.:
The main issue in this appeal is the manner of partitioning the testate estate of
Jose Eugenio Ramirez among the principal beneficiaries, namely: his widow
Marcelle Demoron de Ramirez; his two grandnephews Roberto and Jorge
Ramirez; and his companion Wanda de Wrobleski.
The task is not trouble-free because the widow Marcelle is a French who lives
in Paris, while the companion Wanda is an Austrian who lives in Spain.
Moreover, the testator provided for substitutions.
Jose Eugenio Ramirez, a Filipino national, died in Spain on December 11, 1964,
with only his widow as compulsory heir. His will was admitted to probate by
the Court of First Instance of Manila, Branch X, on July 27, 1965. Maria Luisa
Palacios was appointed administratrix of the estate. In due time she submitted
an inventory of the estate as follows:
INVENTARIO
Una sexta parte (1/6) proindiviso de un te
rreno, con sus mejoras y edificaciones, situadoen
la Escolta, Manila............................................................. P500,000.00
Una sexta parte (1/6) proindiviso de dos
parcelas de terreno situadas en Antipolo, Rizal................... 658.34
Cuatrocientos noventa y uno (491) acciones
de la 'Central Azucarera de la Carlota a P17.00
por accion ................................................................................8,347.00
Diez mil ochocientos seize (10,806) acciones
de la 'Central Luzon Milling Co.', disuelta y en
liquidacion a P0.15 por accion ..............................................1,620.90
Cuenta de Ahorros en el Philippine Trust
Co.............................................................................................. 2,350.73
TOTAL.............................................................. P512,976.97
MENOS:
Deuda al Banco de las Islas Filipinas, garan-
tizada con prenda de las acciones de La Carlota ......... P 5,000,00
VALOR LIQUIDO........................................... P507,976.97
The testamentary dispositions are as follows:
A.En nuda propiedad, a D. Roberto y D. Jorge Ramirez, ambas menores de
edad, residentes en Manila, I.F., calle 'Alright, No. 1818, Malate, hijos de su
sobrino D. Jose Ma. Ramirez, con sustitucion vulgar a favor de sus respectivos
descendientes, y, en su defecto, con sustitucion vulgar reciprocal entre ambos.
El precedente legado en nuda propiedad de la participacion indivisa de la finca
Santa Cruz Building, lo ordena el testador a favor de los legatarios nombrados,
en atencion a que dicha propiedad fue creacion del querido padre del otorgante
y por ser aquellos continuadores del apellido Ramirez,
B.Y en usufructo a saber:
a. En cuanto a una tercera parte, a favor de la esposa del testador, Da. Marcelle
Ramirez, domiciliada en IE PECO, calle del General Gallieni No. 33, Seine
Francia, con sustitucion vulgar u fideicomisaria a favor de Da. Wanda de
Wrobleski, de Palma de Mallorca, Son Rapina Avenida de los Reyes 13,
b.Y en cuanto a las dos terceras partes restantes, a favor de la nombrada Da.
Wanda de Nrobleski con sustitucion vulgar v fideicomisaria a saber:
En cuanto a la mitad de dichas dos terceras partes, a favor de D. Juan Pablo
Jankowski, de Son Rapina Palma de Mallorca; y encuanto a la mitad restante, a
favor de su sobrino, D. Horace V. Ramirez, San Luis Building, Florida St.
Ermita, Manila, I.F.
A pesar de las sustituciones fideiconiisarias precedentemente ordinadas, las
usufiructuarias nombradas conjuntamente con los nudo propietarios, podran en
cualquier memento vender a tercero los bienes objeto delegado, sin
intervencion alguna de los titulares fideicomisaarios.
On June 23, 1966, the administratrix submitted a project of partition as follows:
the property of the deceased is to be divided into two parts. One part shall go to
the widow 'en pleno dominio" in satisfaction of her legitime; the other part or
"free portion" shall go to Jorge and Roberto Ramirez "en nuda propriedad."
Furthermore, one third (1/3) of the free portion is charged with the widow's
usufruct and the remaining two-thirds (2/3) with a usufruct in favor of Wanda.
Jorge and Roberto opposed the project of partition on the grounds: (a) that the
provisions for vulgar substitution in favor of Wanda de Wrobleski with respect
to the widow's usufruct and in favor of Juan Pablo Jankowski and Horacio V.
Ramirez, with respect to Wanda's usufruct are invalid because the first heirs
Marcelle and Wanda) survived the testator; (b) that the provisions for
fideicommissary substitutions are also invalid because the first heirs are not
related to the second heirs or substitutes within the first degree, as provided in
Article 863 of the Civil Code; (c) that the grant of a usufruct over real property
in the Philippines in favor of Wanda Wrobleski, who is an alien, violates
Section 5, Article III of the Philippine Constitution; and that (d) the proposed
partition of the testator's interest in the Santa Cruz (Escolta) Building between
the widow Marcelle and the appellants, violates the testator's express win to
give this property to them Nonetheless, the lower court approved the project of
partition in its order dated May 3, 1967. It is this order which Jorge and Roberto
have appealed to this Court.
1. The widow's legitime.
The appellant's do not question the legality of giving Marcelle one-half of the
estate in full ownership. They admit that the testator's dispositions impaired his
widow's legitime. Indeed, under Art. 900 of the Civil Code "If the only survivor
is the widow or widower, she or he shall be entitled to one-half of the hereditary
estate." And since Marcelle alone survived the deceased, she is entitled to one-
half of his estate over which he could impose no burden, encumbrance,
condition or substitution of any kind whatsoever. (Art. 904, par. 2, Civil Code.)
It is the one-third usufruct over the free portion which the appellants question
and justifiably so. It appears that the court a quo approved the usufruct in favor
of Marcelle because the testament provides for a usufruct in her favor of one-
third of the estate. The court a quo erred for Marcelle who is entitled to one-
half of the estate "en pleno dominio" as her legitime and which is more than
what she is given under the will is not entitled to have any additional share in
the estate. To give Marcelle more than her legitime will run counter to the
testator's intention for as stated above his dispositions even impaired her
legitime and tended to favor Wanda.
2. The substitutions.
It may be useful to recall that "Substitution is the appoint- judgment of another
heir so that he may enter into the inheritance in default of the heir originally
instituted." (Art. 857, Civil Code. And that there are several kinds of
9
substitutions, namely: simple or common, brief or compendious, reciprocal, and
fideicommissary (Art. 858, Civil Code.) According to Tolentino, "Although the
Code enumerates four classes, there are really only two principal classes of
substitutions: the simple and the fideicommissary. The others are merely
variations of these two." (111 Civil Code, p. 185 [1973].)
The simple or vulgar is that provided in Art. 859 of the Civil Code which reads:
ART. 859. The testator may designate one or more persons to substitute the heir
or heirs instituted in case such heir or heirs should die before him, or should not
wish, or should be incapacitated to accept the inheritance.
A simple substitution, without a statement of the cases to which it refers, shall
comprise the three mentioned in the preceding paragraph, unless the testator has
otherwise provided.
The fideicommissary substitution is described in the Civil Code as follows:
ART. 863. A fideicommissary substitution by virtue of which the fiduciary or
first heir instituted is entrusted with the obligation to preserve and to transmit
to a second heir the whole or part of inheritance, shall be valid and shall take
effect, provided such substitution does not go beyond one degree from the heir
originally instituted, and provided further that the fiduciary or first heir and the
second heir are living at time of the death of the testator.
It will be noted that the testator provided for a vulgar substitution in respect of
the legacies of Roberto and Jorge Ramirez, the appellants, thus: con sustitucion
vulgar a favor de sus respectivos descendientes, y, en su defecto, con
substitution vulgar reciprocal entre ambos.
The appellants do not question the legality of the substitution so provided. The
appellants question the sustitucion vulgar y fideicomisaria a favor de Da.
Wanda de Wrobleski" in connection with the one-third usufruct over the estate
given to the widow Marcelle However, this question has become moot because
as We have ruled above, the widow is not entitled to any usufruct.
(b) There is no absolute duty imposed on Wanda to transmit the usufruct to the
substitutes as required by Arts. 865 and 867 of the Civil Code. In fact, the
appellee admits "that the testator contradicts the establishment of a
fideicommissary substitution when he permits the properties subject of the
usufruct to be sold upon mutual agreement of the usufructuaries and the naked
owners." (Brief, p. 26.)
3. The usufruct of Wanda.
The appellants claim that the usufruct over real properties of the estate in favor
of Wanda is void because it violates the constitutional prohibition against the
acquisition of lands by aliens.
The 1935 Constitution which is controlling provides as follows:
SEC. 5. 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. (Art.
XIII.)
The court a quo upheld the validity of the usufruct given to Wanda on the
ground that the Constitution covers not only succession by operation of law but
also testamentary succession. We are of the opinion that the Constitutional
provision which enables aliens to acquire private lands does not extend to
testamentary succession for otherwise the prohibition will be for naught and
meaningless. Any alien would be able to circumvent the prohibition by paying
money to a Philippine landowner in exchange for a devise of a piece of land.
This opinion notwithstanding, We uphold the usufruct in favor of Wanda
because a usufruct, albeit a real right, does not vest title to the land in the
usufructuary and it is the vesting of title to land in favor of aliens which is
proscribed by the Constitution.
IN VIEW OF THE FOREGOING, the estate of Jose Eugenio Ramirez is hereby
ordered distributed as follows:

The appellants also question the sustitucion vulgar y fideicomisaria in One-half (1/2) thereof to his widow as her legitime;
connection with Wanda's usufruct over two thirds of the estate in favor of Juan
Pablo Jankowski and Horace v. Ramirez. One-half (1/2) thereof which is the free portion to Roberto and Jorge Ramirez
in naked ownership and the usufruct to Wanda de Wrobleski with a simple
They allege that the substitution in its vulgar aspect as void because Wanda substitution in favor of Juan Pablo Jankowski and Horace V. Ramirez.
survived the testator or stated differently because she did not predecease the
testator. But dying before the testator is not the only case for vulgar substitution The distribution herein ordered supersedes that of the court a quo. No special
for it also includes refusal or incapacity to accept the inheritance as provided in pronouncement as to costs.
Art. 859 of the Civil Code, supra. Hence, the vulgar substitution is valid.
SO ORDERED.
As regards the substitution in its fideicommissary aspect, the appellants are
correct in their claim that it is void for the following reasons:

(a) The substitutes (Juan Pablo Jankowski and Horace V. Ramirez) are not
related to Wanda, the heir originally instituted. Art. 863 of the Civil Code
validates a fideicommissary substitution "provided such substitution does not
go beyond one degree from the heir originally instituted."

What is meant by "one degree" from the first heir is explained by Tolentino as
follows:

Scaevola Maura, and Traviesas construe "degree" as designation, substitution,

or transmission. The Supreme Court of Spain has decidedly adopted this
construction. From this point of view, there can be only one tranmission or
substitution, and the substitute need not be related to the first heir. Manresa,
Morell and Sanchez Roman, however, construe the word "degree" as
generation, and the present Code has obviously followed this interpretation. by
providing that the substitution shall not go beyond one degree "from the heir
originally instituted." The Code thus clearly indicates that the second heir must
be related to and be one generation from the first heir.

From this, it follows that the fideicommissary can only be either a child or a
parent of the first heir. These are the only relatives who are one generation or
degree from the fiduciary (Op. cit., pp. 193-194.)

10
G.R. No. L-17587 September 12, 1967
PHILIPPINE BANKING CORPORATION, representing the estate of
JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant,
vs.
LUI SHE in her own behalf and as administratrix of the intestate estate of
Wong Heng, deceased, defendant-appellant.
Nicanor S. Sison for plaintiff-appellant.
Ozaeta, Gibbs & Ozaeta for defendant-appellant.
CASTRO, J.:
Justina Santos y Canon Faustino and her sister Lorenzo were the owners in
common of a piece of land in Manila. This parcel, with an area of 2,582.30
square meters, is located on Rizal Avenue and opens into Florentino Torres
street at the back and Katubusan street on one side. In it are two residential
houses with entrance on Florentino Torres street and the Hen Wah Restaurant
with entrance on Rizal Avenue. The sisters lived in one of the houses, while
Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been
a long-time lessee of a portion of the property, paying a monthly rental of
P2,620.
On September 22, 1957 Justina Santos became the owner of the entire property
as her sister died with no other heir. Then already well advanced in years, being
at the time 90 years old, blind, crippled and an invalid, she was left with no
other relative to live with. Her only companions in the house were her 17 dogs
and 8 maids. Her otherwise dreary existence was brightened now and then by
the visits of Wong's four children who had become the joy of her life. Wong
himself was the trusted man to whom she delivered various amounts for
safekeeping, including rentals from her property at the corner of Ongpin and
Salazar streets and the rentals which Wong himself paid as lessee of a part of
the Rizal Avenue property. Wong also took care of the payment; in her behalf,
of taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security
guard, and her household expenses.
"In grateful acknowledgment of the personal services of the lessee to her,"
Justina Santos executed on November 15, 1957 a contract of lease (Plff Exh. 3)
in favor of Wong, covering the portion then already leased to him and another
portion fronting Florentino Torres street. The lease was for 50 years, although
the lessee was given the right to withdraw at any time from the agreement; the
monthly rental was P3,120. The contract covered an area of 1,124 square
meters. Ten days later (November 25), the contract was amended (Plff Exh. 4)
so as to make it cover the entire property, including the portion on which the
house of Justina Santos stood, at an additional monthly rental of P360. For his
part Wong undertook to pay, out of the rental due from him, an amount not
exceeding P1,000 a month for the food of her dogs and the salaries of her maids.
On December 21 she executed another contract (Plff Exh. 7) giving Wong the
option to buy the leased premises for P120,000, payable within ten years at a
monthly installment of P1,000. The option, written in Tagalog, imposed on him
the obligation to pay for the food of the dogs and the salaries of the maids in
her household, the charge not to exceed P1,800 a month. The option was
conditioned on his obtaining Philippine citizenship, a petition for which was
then pending in the Court of First Instance of Rizal. It appears, however, that
this application for naturalization was withdrawn when it was discovered that
he was not a resident of Rizal. On October 28, 1958 she filed a petition to adopt
him and his children on the erroneous belief that adoption would confer on them
Philippine citizenship. The error was discovered and the proceedings were
abandoned.
On November 18, 1958 she executed two other contracts, one (Plff Exh. 5)
extending the term of the lease to 99 years, and another (Plff Exh. 6) fixing the
term of the option of 50 years. Both contracts are written in Tagalog.
In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she
bade her legatees to respect the contracts she had entered into with Wong, but
in a codicil (Plff Exh. 17) of a later date (November 4, 1959) she appears to
have a change of heart. Claiming that the various contracts were made by her
because of machinations and inducements practiced by him, she now directed
her executor to secure the annulment of the contracts.
On November 18 the present action was filed in the Court of First Instance of
Manila. The complaint alleged that the contracts were obtained by Wong
"through fraud, misrepresentation, inequitable conduct, undue influence and
abuse of confidence and trust of and (by) taking advantage of the helplessness
of the plaintiff and were made to circumvent the constitutional provision
prohibiting aliens from acquiring lands in the Philippines and also of the
Philippine Naturalization Laws." The court was asked to direct the Register of
Deeds of Manila to cancel the registration of the contracts and to order Wong
to pay Justina Santos the additional rent of P3,120 a month from November 15,
1957 on the allegation that the reasonable rental of the leased premises was
P6,240 a month.
In his answer, Wong admitted that he enjoyed her trust and confidence as proof
of which he volunteered the information that, in addition to the sum of P3,000
which he said she had delivered to him for safekeeping, another sum of P22,000
had been deposited in a joint account which he had with one of her maids. But
he denied having taken advantage of her trust in order to secure the execution
of the contracts in question. As counterclaim he sought the recovery of
P9,210.49 which he said she owed him for advances.
Wong's admission of the receipt of P22,000 and P3,000 was the cue for the
filing of an amended complaint. Thus on June 9, 1960, aside from the nullity of
the contracts, the collection of various amounts allegedly delivered on different
occasions was sought. These amounts and the dates of their delivery are
P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1, 1957); P10,000 (Dec. 6, 1957);
P22,000 and P3,000 (as admitted in his answer). An accounting of the rentals
from the Ongpin and Rizal Avenue properties was also demanded.
In the meantime as a result of a petition for guardianship filed in the Juvenile
and Domestic Relations Court, the Security Bank & Trust Co. was appointed
guardian of the properties of Justina Santos, while Ephraim G. Gochangco was
appointed guardian of her person.
In his answer, Wong insisted that the various contracts were freely and
voluntarily entered into by the parties. He likewise disclaimed knowledge of
the sum of P33,724.27, admitted receipt of P7,344.42 and P10,000, but
contended that these amounts had been spent in accordance with the instructions
of Justina Santos; he expressed readiness to comply with any order that the court
might make with respect to the sums of P22,000 in the bank and P3,000 in his
possession.
The case was heard, after which the lower court rendered judgment as follows:
[A]ll the documents mentioned in the first cause of action, with the exception
of the first which is the lease contract of 15 November 1957, are declared null
and void; Wong Heng is condemned to pay unto plaintiff thru guardian of her
property the sum of P55,554.25 with legal interest from the date of the filing of
the amended complaint; he is also ordered to pay the sum of P3,120.00 for every
month of his occupation as lessee under the document of lease herein sustained,
from 15 November 1959, and the moneys he has consigned since then shall be
imputed to that; costs against Wong Heng.
From this judgment both parties appealed directly to this Court. After the case
was submitted for decision, both parties died, Wong Heng on October 21, 1962
and Justina Santos on December 28, 1964. Wong was substituted by his wife,
Lui She, the other defendant in this case, while Justina Santos was substituted
by the Philippine Banking Corporation.
Justina Santos maintained now reiterated by the Philippine Banking
Corporation that the lease contract (Plff Exh. 3) should have been annulled
along with the four other contracts (Plff Exhs. 4-7) because it lacks mutuality;
because it included a portion which, at the time, was in custodia legis; because
the contract was obtained in violation of the fiduciary relations of the parties;
because her consent was obtained through undue influence, fraud and
11
misrepresentation; and because the lease contract, like the rest of the contracts,
is absolutely simulated.
Paragraph 5 of the lease contract states that "The lessee may at any time
withdraw from this agreement." It is claimed that this stipulation offends article
1308 of the Civil Code which provides that "the contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one
of them."
We have had occasion to delineate the scope and application of article 1308 in
the early case of Taylor v. Uy Tieng Piao.1 We said in that case:
Article 1256 [now art. 1308] of the Civil Code in our opinion creates no
impediment to the insertion in a contract for personal service of a resolutory
condition permitting the cancellation of the contract by one of the parties. Such
a stipulation, as can be readily seen, does not make either the validity or the
fulfillment of the contract dependent upon the will of the party to whom is
conceded the privilege of cancellation; for where the contracting parties have
agreed that such option shall exist, the exercise of the option is as much in the
fulfillment of the contract as any other act which may have been the subject of
agreement. Indeed, the cancellation of a contract in accordance with conditions
agreed upon beforehand is fulfillment.2
3
And so it was held in Melencio v. Dy Tiao Lay that a "provision in a lease
contract that the lessee, at any time before he erected any building on the land,
might rescind the lease, can hardly be regarded as a violation of article 1256
[now art. 1308] of the Civil Code."
The case of Singson Encarnacion v. Baldomar 4 cannot be cited in support of
the claim of want of mutuality, because of a difference in factual setting. In that
case, the lessees argued that they could occupy the premises as long as they paid
the rent. This is of course untenable, for as this Court said, "If this defense were
to be allowed, so long as defendants elected to continue the lease by continuing
the payment of the rentals, the owner would never be able to discontinue it;
conversely, although the owner should desire the lease to continue the lessees
could effectively thwart his purpose if they should prefer to terminate the
contract by the simple expedient of stopping payment of the rentals." Here, in
contrast, the right of the lessee to continue the lease or to terminate it is so
circumscribed by the term of the contract that it cannot be said that the
continuance of the lease depends upon his will. At any rate, even if no term had
been fixed in the agreement, this case would at most justify the fixing of a
period5 but not the annulment of the contract.
Nor is there merit in the claim that as the portion of the property formerly owned
by the sister of Justina Santos was still in the process of settlement in the probate
court at the time it was leased, the lease is invalid as to such portion. Justina
Santos became the owner of the entire property upon the death of her sister
Lorenzo on September 22, 1957 by force of article 777 of the Civil Code.
Hence, when she leased the property on November 15, she did so already as
owner thereof. As this Court explained in upholding the sale made by an heir
of a property under judicial administration:
That the land could not ordinarily be levied upon while in custodia legis does
not mean that one of the heirs may not sell the right, interest or participation
which he has or might have in the lands under administration. The ordinary
execution of property in custodia legis is prohibited in order to avoid
interference with the possession by the court. But the sale made by an heir of
his share in an inheritance, subject to the result of the pending administration,
in no wise stands in the way of such administration.6
It is next contended that the lease contract was obtained by Wong in violation
of his fiduciary relationship with Justina Santos, contrary to article 1646, in
relation to article 1941 of the Civil Code, which disqualifies "agents (from
leasing) the property whose administration or sale may have been entrusted to
them." But Wong was never an agent of Justina Santos. The relationship of the
parties, although admittedly close and confidential, did not amount to an agency
so as to bring the case within the prohibition of the law.
Just the same, it is argued that Wong so completely dominated her life and
affairs that the contracts express not her will but only his. Counsel for Justina
Santos cites the testimony of Atty. Tomas S. Yumol who said that he prepared
the lease contract on the basis of data given to him by Wong and that she told
him that "whatever Mr. Wong wants must be followed."7
The testimony of Atty. Yumol cannot be read out of context in order to warrant
a finding that Wong practically dictated the terms of the contract. What this
witness said was:
Q Did you explain carefully to your client, Doa Justina, the contents of this
document before she signed it?
A I explained to her each and every one of these conditions and I also told her
these conditions were quite onerous for her, I don't really know if I have
expressed my opinion, but I told her that we would rather not execute any
contract anymore, but to hold it as it was before, on a verbal month to month
contract of lease.
Q But, she did not follow your advice, and she went with the contract just the
same?
A She agreed first . . .
Q Agreed what?
A Agreed with my objectives that it is really onerous and that I was really right,
but after that, I was called again by her and she told me to follow the wishes of
Mr. Wong Heng.
xxx xxx xxx
Q So, as far as consent is concerned, you were satisfied that this document was
perfectly proper?
xxx xxx xxx
A Your Honor, if I have to express my personal opinion, I would say she is not,
because, as I said before, she told me "Whatever Mr. Wong wants must be
followed."8
Wong might indeed have supplied the data which Atty. Yumol embodied in the
lease contract, but to say this is not to detract from the binding force of the
contract. For the contract was fully explained to Justina Santos by her own
lawyer. One incident, related by the same witness, makes clear that she
voluntarily consented to the lease contract. This witness said that the original
term fixed for the lease was 99 years but that as he doubted the validity of a
lease to an alien for that length of time, he tried to persuade her to enter instead
into a lease on a month-to-month basis. She was, however, firm and unyielding.
Instead of heeding the advice of the lawyer, she ordered him, "Just follow Mr.
Wong Heng."9 Recounting the incident, Atty. Yumol declared on cross
examination:
Considering her age, ninety (90) years old at the time and her condition, she is
a wealthy woman, it is just natural when she said "This is what I want and this
will be done." In particular reference to this contract of lease, when I said "This
is not proper," she said "You just go ahead, you prepare that, I am the owner,
and if there is any illegality, I am the only one that can question the illegality."10
Atty. Yumol further testified that she signed the lease contract in the presence
of her close friend, Hermenegilda Lao, and her maid, Natividad Luna, who was
constantly by her side.11 Any of them could have testified on the undue
influence that Wong supposedly wielded over Justina Santos, but neither of
them was presented as a witness. The truth is that even after giving his client
time to think the matter over, the lawyer could not make her change her mind.
This persuaded the lower court to uphold the validity of the lease contract
against the claim that it was procured through undue influence.
Indeed, the charge of undue influence in this case rests on a mere
inference12 drawn from the fact that Justina Santos could not read (as she was
blind) and did not understand the English language in which the contract is
written, but that inference has been overcome by her own evidence.
12
Nor is there merit in the claim that her consent to the lease contract, as well as
to the rest of the contracts in question, was given out of a mistaken sense of
gratitude to Wong who, she was made to believe, had saved her and her sister
from a fire that destroyed their house during the liberation of Manila. For while
a witness claimed that the sisters were saved by other persons (the brothers
Edilberto and Mariano Sta. Ana)13 it was Justina Santos herself who, according
to her own witness, Benjamin C. Alonzo, said "very emphatically" that she and
her sister would have perished in the fire had it not been for Wong.14 Hence the
recital in the deed of conditional option (Plff Exh. 7) that "[I]tong si Wong Heng
ang siyang nagligtas sa aming dalawang magkapatid sa halos ay tiyak na
kamatayan", and the equally emphatic avowal of gratitude in the lease contract
(Plff Exh. 3).
As it was with the lease contract (Plff Exh. 3), so it was with the rest of the
contracts (Plff Exhs. 4-7) the consent of Justina Santos was given freely and
voluntarily. As Atty. Alonzo, testifying for her, said:
[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres and/or
both. When we had conferences, they used to tell me what the documents should
contain. But, as I said, I would always ask the old woman about them and
invariably the old woman used to tell me: "That's okay. It's all right."15
But the lower court set aside all the contracts, with the exception of the lease
contract of November 15, 1957, on the ground that they are contrary to the
expressed wish of Justina Santos and that their considerations are fictitious.
Wong stated in his deposition that he did not pay P360 a month for the
additional premises leased to him, because she did not want him to, but the trial
court did not believe him. Neither did it believe his statement that he paid
P1,000 as consideration for each of the contracts (namely, the option to buy the
leased premises, the extension of the lease to 99 years, and the fixing of the
term of the option at 50 years), but that the amount was returned to him by her
for safekeeping. Instead, the court relied on the testimony of Atty. Alonzo in
reaching the conclusion that the contracts are void for want of consideration.
Atty. Alonzo declared that he saw no money paid at the time of the execution
of the documents, but his negative testimony does not rule out the possibility
that the considerations were paid at some other time as the contracts in fact
recite. What is more, the consideration need not pass from one party to the other
at the time a contract is executed because the promise of one is the consideration
for the other.16
With respect to the lower court's finding that in all probability Justina Santos
could not have intended to part with her property while she was alive nor even
to lease it in its entirety as her house was built on it, suffice it to quote the
testimony of her own witness and lawyer who prepared the contracts (Plff Exhs.
4-7) in question, Atty. Alonzo:
The ambition of the old woman, before her death, according to her revelation
to me, was to see to it that these properties be enjoyed, even to own them, by
Wong Heng because Doa Justina told me that she did not have any relatives,
near or far, and she considered Wong Heng as a son and his children her
grandchildren; especially her consolation in life was when she would hear the
children reciting prayers in Tagalog.17
She was very emphatic in the care of the seventeen (17) dogs and of the maids
who helped her much, and she told me to see to it that no one could disturb
Wong Heng from those properties. That is why we thought of the ninety-nine
(99) years lease; we thought of adoption, believing that thru adoption Wong
Heng might acquire Filipino citizenship; being the adopted child of a Filipino
citizen.18
This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For the
testimony just quoted, while dispelling doubt as to the intention of Justina
Santos, at the same time gives the clue to what we view as a scheme to
circumvent the Constitutional prohibition against the transfer of lands to aliens.
"The illicit purpose then becomes the illegal causa"19 rendering the contracts
void.
Taken singly, the contracts show nothing that is necessarily illegal, but
considered collectively, they reveal an insidious pattern to subvert by
indirection what the Constitution directly prohibits. To be sure, a lease to an
alien for a reasonable period is valid. So is an option giving an alien the right to
buy real property on condition that he is granted Philippine citizenship. As this
Court said in Krivenko v. Register of Deeds:20
[A]liens are not completely excluded by the Constitution from the 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 fortunes and misfortunes, Filipino citizenship is not impossible to
acquire.
But 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,21 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 ( jus possidendi, jus
utendi, jus fruendi and jus abutendi) but also of the right to dispose of it ( jus
disponendi) rights the sum total of which make up ownership. It is just as if
today the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which ownership is made
up are consolidated in an alien. And yet this is just exactly what the parties in
this case did within the space of one year, with the result that Justina Santos'
ownership of her property was reduced to a hollow concept. If this can be done,
then the Constitutional ban against alien landholding in the Philippines, as
announced in Krivenko v. Register of Deeds,22 is indeed in grave peril.
It does not follow from what has been said, however, that because the parties
are in pari delicto they will be left where they are, without relief. For one thing,
the original parties who were guilty of a violation of the fundamental charter
have died and have since been substituted by their administrators to whom it
would be unjust to impute their guilt.23 For another thing, and this is not only
cogent but also important, article 1416 of the Civil Code provides, as an
exception to the rule on pari delicto, that "When the agreement is not illegal per
se but is merely prohibited, and the prohibition by law is designed for the
protection of the plaintiff, he may, if public policy is thereby enhanced, recover
what he has paid or delivered." The Constitutional provision 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"24 is an expression of
public policy to conserve lands for the Filipinos. As this Court said in Krivenko:
It is well to note at this juncture that in the present case we have no choice. We
are construing the Constitution as it is and not as we may desire it to be. Perhaps
the effect of our construction is to preclude aliens admitted freely into the
Philippines from owning sites where they may build their homes. But if this is
the solemn mandate of the Constitution, we will not attempt to compromise it
even in the name of amity or equity . . . .
For all the foregoing, we hold that under the Constitution aliens may not acquire
private or public agricultural lands, including residential lands, and,
accordingly, judgment is affirmed, without costs.25
That policy would be defeated and its continued violation sanctioned if, instead
of setting the contracts aside and ordering the restoration of the land to the estate
of the deceased Justina Santos, this Court should apply the general rule of pari
delicto. To the extent that our ruling in this case conflicts with that laid down
in Rellosa v. Gaw Chee Hun 26 and subsequent similar cases, the latter must be
considered as pro tanto qualified.
The claim for increased rentals and attorney's fees, made in behalf of Justina
Santos, must be denied for lack of merit.
And what of the various amounts which Wong received in trust from her? It
appears that he kept two classes of accounts, one pertaining to amount which
she entrusted to him from time to time, and another pertaining to rentals from
the Ongpin property and from the Rizal Avenue property, which he himself was
leasing.
13
With respect to the first account, the evidence shows that he received Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar,
P33,724.27 on November 8, 1957 (Plff Exh. 16); P7,354.42 on December 1, Sanchez and Angeles, JJ., concur.
1957 (Plff Exh. 13); P10,000 on December 6, 1957 (Plff Exh. 14) ; and
P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of P70,007.19. He
claims, however, that he settled his accounts and that the last amount of
P18,928.50 was in fact payment to him of what in the liquidation was found to
be due to him.

He made disbursements from this account to discharge Justina Santos'

obligations for taxes, attorneys' fees, funeral services and security guard
services, but the checks (Def Exhs. 247-278) drawn by him for this purpose
amount to only P38,442.84.27 Besides, if he had really settled his accounts with
her on August 26, 1959, we cannot understand why he still had P22,000 in the
bank and P3,000 in his possession, or a total of P25,000. In his answer, he
offered to pay this amount if the court so directed him. On these two grounds,
therefore, his claim of liquidation and settlement of accounts must be rejected.

After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts), there

is a difference of P31,564 which, added to the amount of P25,000, leaves a
balance of P56,564.3528 in favor of Justina Santos.

As to the second account, the evidence shows that the monthly income from the
Ongpin property until its sale in Rizal Avenue July, 1959 was P1,000, and that
from the Rizal Avenue property, of which Wong was the lessee, was P3,120.
Against this account the household expenses and disbursements for the care of
the 17 dogs and the salaries of the 8 maids of Justina Santos were charged. This
account is contained in a notebook (Def. Exh. 6) which shows a balance of
P9,210.49 in favor of Wong. But it is claimed that the rental from both the
Ongpin and Rizal Avenue properties was more than enough to pay for her
monthly expenses and that, as a matter of fact, there should be a balance in her
favor. The lower court did not allow either party to recover against the other.
Said the court:

[T]he documents bear the earmarks of genuineness; the trouble is that they were
made only by Francisco Wong and Antonia Matias, nick-named Toning,
which was the way she signed the loose sheets, and there is no clear proof that
Doa Justina had authorized these two to act for her in such liquidation; on the
contrary if the result of that was a deficit as alleged and sought to be there
shown, of P9,210.49, that was not what Doa Justina apparently understood for
as the Court understands her statement to the Honorable Judge of the Juvenile
Court . . . the reason why she preferred to stay in her home was because there
she did not incur in any debts . . . this being the case, . . . the Court will not
adjudicate in favor of Wong Heng on his counterclaim; on the other hand, while
it is claimed that the expenses were much less than the rentals and there in fact
should be a superavit, . . . this Court must concede that daily expenses are not
easy to compute, for this reason, the Court faced with the choice of the two
alternatives will choose the middle course which after all is permitted by the
rules of proof, Sec. 69, Rule 123 for in the ordinary course of things, a person
will live within his income so that the conclusion of the Court will be that there
is neither deficit nor superavit and will let the matter rest here.

Both parties on appeal reiterate their respective claims but we agree with the
lower court that both claims should be denied. Aside from the reasons given by
the court, we think that the claim of Justina Santos totalling P37,235, as rentals
due to her after deducting various expenses, should be rejected as the evidence
is none too clear about the amounts spent by Wong for food 29 masses30 and
salaries of her maids.31 His claim for P9,210.49 must likewise be rejected as his
averment of liquidation is belied by his own admission that even as late as 1960
he still had P22,000 in the bank and P3,000 in his possession.

ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled and
set aside; the land subject-matter of the contracts is ordered returned to the
estate of Justina Santos as represented by the Philippine Banking Corporation;
Wong Heng (as substituted by the defendant-appellant Lui She) is ordered to
pay the Philippine Banking Corporation the sum of P56,564.35, with legal
interest from the date of the filing of the amended complaint; and the amounts
consigned in court by Wong Heng shall be applied to the payment of rental
from November 15, 1959 until the premises shall have been vacated by his
heirs. Costs against the defendant-appellant.

14
G.R. No. L-30299 August 17, 1972
REPUBLIC OF THE PHILIPPINES and/or THE SOLICITOR
GENERAL petitioners,
vs.
WILLIAM H. QUASHA, respondent.
Office of the Solicitor General Estelito P. Mendoza for petitioner.
Quasha, Asperilla Blanco, Zafra & Tayag for respondent.
REYES J. B. L., J.:p
This case involves a judicial determination of the scope and duration of the
rights acquired by American citizens and corporations controlled by them,
under the Ordinance appended to the Constitution as of 18 September 1946, or
the so-called Parity Amendment.
The respondent, William H. Quasha, an American citizen, had acquired by
purchase on 26 November 1954 a parcel of land with the permanent
improvements thereon, situated at 22 Molave Place, in Forbes Park,
Municipality of Makati, Province of Rizal, with an area of 2,616 sq. m. more or
less, described in and covered by T. C. T. 36862. On 19 March 1968, he filed a
petition in the Court of First Instance of Rizal, docketed as its Civil Case No.
10732, wherein he (Quasha) averred the acquisition of the real estate aforesaid;
that the Republic of the Philippines, through its officials, claimed that upon
expiration of the Parity Amendment on 3 July 1974, rights acquired by citizens
of the United States of America shall cease and be of no further force and effect;
that such claims necessarily affect the rights and interest of the plaintiff, and
that continued uncertainty as to the status of plaintiff's property after 3 July
1974 reduces the value thereof, and precludes further improvements being
introduced thereon, for which reason plaintiff Quasha sought a declaration of
his rights under the Parity Amendment, said plaintiff contending that the
ownership of properties during the effectivity of the Parity Amendment
continues notwithstanding the termination and effectivity of the Amendment.
The then Solicitor General Antonio P. Barredo (and later on his successors in
office, Felix V. Makasiar and Felix Q. Antonio) contended that the land
acquired by plaintiff constituted private agricultural land and that the
acquisition violated section 5, Article XIII, of the Constitution of the
Philippines, which prohibits the transfer of private agricultural land to non-
Filipinos, except by hereditary succession; and assuming, without conceding,
that Quasha's acquisition was valid, any and all rights by him so acquired "will
expire ipso facto and ipso jure at the end of the day on 3 July 1974, if he
continued to hold the property until then, and will be subject to escheat or
reversion proceedings" by the Republic.
After hearing, the Court of First Instance of Rizal (Judge Pedro A. Revilla
presiding) rendered a decision, dated 6 March 1969, in favor of plaintiff, with
the following dispositive portion:
WHEREFORE, judgment is hereby rendered declaring that acquisition by the
plaintiff on 26 November 1954 of, the private agricultural land described in and
covered by Transfer Certificate of Title No. 36862 in his name was valid, and
that plaintiff has a right to continue in ownership of the said property even
beyond July 3, 1974.
Defendants appealed directly to this Court on questions of law, pleading that
the court below erred:
(1) In ruling that under the Parity Amendment American citizens and American
owned and/or controlled business enterprises "are also qualified to acquire
private agricultural lands" in the Philippines; and
(2) In ruling that when the Parity Amendment ceases to be effective on 3 July
1974, "what must be considered to end should be the right to acquire land, and
not the right to continue in ownership of land already acquired prior to that
time."
As a historical background, requisite to a proper understanding of the issues
being litigated, it should be recalled that the Constitution as originally adopted,
contained the following provisions:
Article XIII CONSERVATION AND UTILIZATION
OF NATURAL RESOURCES
Section 1. All Agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, and other natural resources of the Philippines belong to the State, and
their disposition, exploitation, development, or utilization shall be limited to
citizens of the Philippines, or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens subject to any existing
right, grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the resources shall be granted for a period exceeding
twenty-five years, renewable for another twenty-five years, except as to water
right for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases beneficial use may be the measure
and the limit of the grant.
Section 2. No private corporation or association may acquire, lease, or hold
public agricultural lands in excess of one thousand and twenty-four hectares,
nor may any individual acquire such lands by purchase in excess of one hundred
and forty-four hectares, or by lease in excess of one thousand and twenty-four
hectares, or by homestead in excess of twenty-four hectares. Lands adapted to
grazing not exceeding two thousand hectares, may be leased to an individual,
private corporation, or association.
xxx xxx xxx
Section 5. 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.
Article XIV GENERAL PROVISIONS
Section 8. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines
or to corporations or other entities organized under the laws of the Philippines,
sixty per centum of the capital of which is owned by citizens of the Philippines,
nor shall such franchise, certificate, or authorization be exclusive in character
or for a longer period than fifty years. No franchise or right shall be granted to
any individual, firm, or corporation, except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the public
interest so requires.
The nationalistic spirit that pervaded these and other provisions of the
Constitution are self-evident and require no further emphasis.
From the Japanese occupation and the reconquest of the Archipelago, the
Philippine nation emerged with its industries destroyed and its economy
dislocated. It was described in this Court's opinion in Commissioner of Internal
Revenue vs. Guerrero, et al.,
L-20942, 22 September 1967, 21 SCRA 181, 187, penned by Justice Enrique
M. Fernando, in the following terms:
It was fortunate that the Japanese Occupation ended when it did. Liberation was
hailed by all, but the problems faced by the legitimate government were
awesome in their immensity. The Philippine treasury was bankrupt and her
economy prostrate. There were no dollar-earning export crops to speak of;
commercial operations were paralyzed; and her industries were unable to
produce with mills, factories and plants either destroyed or their machineries
obsolete or dismantled. It was a desolate and tragic sight that greeted the
victorious American and Filipino troops. Manila, particularly that portion south
of the Pasig, lay in ruins, its public edifices and business buildings lying in a
heap of rubble and numberless houses razed to the ground. It was in fact, next
to Warsaw, the most devastated city in the expert opinion of the then General
15
Eisenhower. There was thus a clear need of help from the United States.
American aid was forthcoming but on terms proposed by her government and
later on accepted by the Philippines.
The foregoing description is confirmed by the 1945 Report of the Committee
on Territories and Insular Affairs to the United States Congress:
When the Philippines do become independent next July, they will start on the
road to independence with a country whose commerce, trade and political
institutions have been very, very seriously damaged. Years of rebuilding are
necessary before the former physical conditions of the islands can be restored.
Factories, homes, government and commercial buildings, roads, bridges, docks,
harbors and the like are in need of complete reconstruction or widespread
repairs. It will be quite some while before the Philippine can produce sufficient
food with which to sustain themselves.
The internal revenues of the country have been greatly diminished by war.
Much of the assessable property basis has been destroyed. Foreign trade has
vanished. Internal commerce is but a faction of what it used to be. Machinery,
farming implements, ships, bus and truck lines, inter-island transportation and
communications have been wrecked.
Shortly thereafter, in 1946, the United States 79th Congress enacted Public Law
3721, known as the Philippine Trade Act, authorizing the President of the
United States to enter into an Executive Agreement with the President of the
Philippines, which should contain a provision that
The disposition, exploitation, development, and utilization of all agricultural,
timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils,; all forces and sources of potential energy,
and other natural resources of the Philippines, and the operation of public
utilities shall, if open to any person, be open to citizens of the United States and
to all forms of business enterprise owned or controlled, directly or indirectly,
by United States citizens.
and that:
The President of the United States is not authorized ... to enter into such
executive agreement unless in the agreement the Government of the Philippines
... will promptly take such steps as are necessary to secure the amendment of
the Constitution of the Philippines so as to permit the taking effect as laws of
the Philippines of such part of the provisions of section 1331 ... as is in conflict
with such Constitution before such amendment.
The Philippine Congress, by Commonwealth Act No. 733, authorized the
President of the Philippines to enter into the Executive Agreement. Said Act
provided, inter alia, the following:
ARTICLE VII
1. The disposition, exploitation, development, and utilization of all agricultural,
timber, and mineral lands of the public domain, waters, mineral, coal,
petroleum, and other mineral oils, all forces and sources of potential energy,
and other natural resources of the Philippines, and the operation of public
utilities, shall, if open to any person, be open to citizens of the United States
and to all forms of business enterprise owned or controlled, directly or
indirectly, by United States citizens, except that (for the period prior to the
amendment of the Constitution of the Philippines referred to in Paragraph 2 of
this Article) the Philippines shall not be required to comply with such part of
the foregoing provisions of this sentence as are in conflict with such
Constitution.
2. The Government of the Philippines will promptly take such steps as are
necessary to secure the amendment of the constitution of the Philippines so as
to permit the taking effect as laws of the Philippines of such part of the
provisions of Paragraph 1 of this Article as is in conflict with such Constitution
before such amendment.
Thus authorized, the Executive Agreement was signed on 4 July 1946, and
shortly thereafter the President of the Philippines recommended to the
Philippine Congress the approval of a resolution proposing amendments to the
Philippine Constitution pursuant to the Executive Agreement. Approved by the
Congress in joint session, the proposed amendment was submitted to a
plebiscite and was ratified in November of 1946. Generally known as the Parity
Amendment, it was in the form of an Ordinance appended to the Philippine
Constitution, reading as follows:
Notwithstanding the provision of section one, Article Thirteen, and section
eight, Article Fourteen, of the foregoing Constitution, during the effectivity of
the Executive Agreement entered into by the President of the Philippines with
the President of the United States on the fourth of July, nineteen hundred and
forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven
hundred and thirty-three, but in no case to extend beyond the third of July,
nineteen hundred and seventy-four, the disposition, exploitation, development,
and utilization of all agricultural, timber, and mineral lands of the public
domain, waters, minerals, coals, petroleum, and other mineral oils, all forces
and sources of potential energy, and other natural resources of the Philippines,
and the operation of public utilities, shall, if OPEN to any person, be open to
citizens of the United States and to all forms of business enterprise owned or
controlled, directly or indirectly, by citizens of the United States in the same
manner as to and under the same conditions imposed upon, citizens of the
Philippines or corporations or associations owned or controlled by citizens of
the Philippines.
A revision of the 1946 Executive Agreement was authorized by the Philippines
by Republic Act 1355, enacted in July 1955. The revision was duly negotiated
by representatives of the Philippines and the United States, and a new
agreement was concluded on 6 September 1955 to take effect on 1 January
1956, becoming known as the Laurel-Langley Agreement.
This latter agreement, however, has no direct application to the case at bar, since
the purchase by herein respondent Quasha of the property in question was made
in 1954, more than one year prior to the effectivity of the Laurel-Langley
Agreement..
I
Bearing in mind the legal provisions previously quoted and their background,
We turn to the first main issue posed in this appeal: whether under or by virtue
of the so-called Parity Amendment to the Philippine Constitution respondent
Quasha could validly acquire ownership of the private residential land in Forbes
Park, Makati, Rizal, which is concededly classified private agricultural land.
Examination of the "Parity Amendment", as ratified, reveals that it only
establishes an express exception to two (2) provisions of our Constitution, to
wit: (a) Section 1, Article XIII, re disposition, exploitation, development and
utilization of agricultural, timber and mineral lands of the public domain and
other natural resources of the Philippines; and (b) Section 8, Article XIV,
regarding operation of public utilities. As originally drafted by the framers of
the Constitution, the privilege to acquire and exploit agricultural lands of the
public domain, and other natural resources of the Philippines, and to operate
public utilities, were reserved to Filipinos and entities owned or controlled by
them: but the "Parity Amendment" expressly extended the privilege to citizens
of the United States of America and/or to business enterprises owned or
controlled by them.
No other provision of our Constitution was referred to by the "Parity
Amendment"; nor Section 2 of Article XIII limiting the maximum area of public
agricultural lands that could be held by individuals or corporations or
associations; nor Section 5 restricting the transfer or assignment of private
agricultural lands to those qualified to acquire or hold lands of the public
domain (which under the original Section 1 of Article XIII meant Filipinos
exclusively), save in cases of hereditary succession. These sections 2 and 5 were
therefore left untouched and allowed to continue in operation as originally
intended by the Constitution's framers.
Respondent Quasha argues that since the amendment permitted United States
citizens or entities controlled by them to acquire agricultural lands of the public
domain, then such citizens or entities became entitled to acquire private
agricultural land in the Philippines, even without hereditary succession, since
said section 5 of Article XIII only negates the transfer or assignment of private
16
agricultural land to individuals or entities not qualified to acquire or hold lands
of the public domain. Clearly, this argument of respondent Quasha rests not
upon the text of the Constitutional Amendment but upon a mere inference
therefrom. If it was ever intended to create also an exception to section 5 of
Article XIII, why was mention therein made only of Section 1 of Article XIII
and Section 8 of Article XIV and of no other? When the text of the Amendment
was submitted for popular ratification, did the voters understand that three
sections of the Constitution were to be modified, when only two sections were
therein mentioned?
A reading of Sections 1 and 4 of Article XIII, as originally drafted by its
farmers, leaves no doubt that the policy of the Constitution was to reserve to
Filipinos the disposition, exploitation development or utilization of agricultural
lands, public (section 1) or private (section 5), as well as all other natural
resources of the Philippines. The "Parity Amendment" created exceptions to
that Constitutional Policy and in consequence to the sovereignty of the
Philippines. By all canons of construction, such exceptions must be given strict
interpretation; and this Court has already so ruled in Commissioner of Internal
Revenue vs. Guerrero, et al., L-20942, 22 September 1967, 21 SCRA 181, per
Justice Enrique M. Fernando:
While good faith, no less than adherence to the categorical wording of the
Ordinance, requires that all the rights and privileges thus granted to Americans
and business enterprises owned and controlled by them be respected, anything
further would not be warranted. Nothing less would suffice but anything more
is not justified.
The basis for the strict interpretation was given by former President of the
University of the Philippines, Hon. Vicente G. Sinco (Congressional Record,
House of Representatives, Volume 1, No. 26, page 561):
It should be emphatically stated that the provisions of our Constitution which
limit to Filipinos the rights to develop the natural resources and to operate the
public utilities of the Philippines is one of the bulwarks of our national integrity.
The Filipino people decided to include it in our Constitution in order that it may
have the stability and permanency that its importance requires. It is written in
our Constitution so that it may neither be the subject of barter nor be impaired
in the give and take of politics. With our natural resources, our sources of power
and energy, our public lands, and our public utilities, the material basis of the
nation's existence, in the hands of aliens over whom the Philippine Government
does not have complete control, the Filipinos may soon find themselves
deprived of their patrimony and living as it were, in a house that no longer
belongs to them.
The true extent of the Parity Amendment, as understood by its proponents in
the Philippine Congress, was clearly expressed by one of its advocates, Senator
Lorenzo Sumulong:
It is a misconception to believe that under this amendment Americans will be
able to acquire all kinds of natural resources of this country, and even after the
expiration of 28 years their acquired rights cannot be divested from them. If we
read carefully the language of this amendment which is taken verbatim from
the Provision of the Bell Act, and, which in turn, is taken also verbatim from
certain sections of the Constitution, you will find out that the equality of rights
granted under this amendment refers only to two subjects. Firstly, it refers to
exploitation of natural resources, and secondly, it refers to the operation of
public utilities. Now, when it comes to exploitation of natural resources, it must
be pointed out here that, under our Constitution and under this amendment, only
public agricultural land may be acquired, may be bought, so that on the
supposition that we give way to this amendment and on the further supposition
that it is approved by our people, let not the mistaken belief be entertained that
all kinds of natural resources may be acquired by Americans because under our
Constitution forest lands cannot be bought, mineral lands cannot be bought,
because by explicit provision of the Constitution they belong to the State, they
belong to our Government, they belong to our people. That is why we call them
rightly the patrimony of our race. Even if the Americans should so desire, they
can have no further privilege than to ask for a lease of concession of forest lands
and mineral lands because it is so commanded in the Constitution. And under
the Constitution, such a concession is given only for a limited period. It can be
extended only for 25 years, renewable for another 25. So that with respect to
mineral or forest lands, all they can do is to lease it for 25 years, and after the
expiration of the original 25 years they will have to extend it, and I believe it
can be extended provided that it does not exceed 28 years because this
agreement is to be effected only as an ordinance and for the express period of
28 years. So that it is my humble belief that there is nothing to worry about
insofar as our forest and mineral lands are concerned.
Now, coming to the operation of public utilities, as every member of the
Congress knows, it is also for a limited period, under our Constitution, for a
period not exceeding 50 years. And since this amendment is intended to endure
only for 28 years, it is my humble opinion that when Americans try to operate
public utilities they cannot take advantage of the maximum provided in the
Constitution but only the 28 years which is expressly provided to be the life of
this amendment.
There remains for us to consider the case of our public agricultural lands. To be
sure, they may be bought, and if we pass this amendment, Americans may buy
our public agricultural lands, but the very same Constitution applying even to
Filipinos, provides that the sale of public agricultural lands to a corporation can
never exceed one thousand and twenty-four hectares. That is to say, if an
American corporation, and American enterprise, should decide to invest its
money in public agricultural lands, it will be limited to the amount of 1,024
hectares, no more than 1,024 hectares' (Emphasis supplied).
No views contrary to these were ever expressed in the Philippine Legislature
during the discussion of the Proposed Amendment to our Constitution, nor was
any reference made to acquisition of private agricultural lands by non-Filipinos
except by hereditary succession. On the American side, it is significant to
observe that the draft of the Philippine Trade Act submitted to the House of
Representatives by Congressman Bell, provided in the first Portion of Section
19 the following:
SEC. 19. Notwithstanding any existing provision of the constitution and statutes
of the Philippine Government, citizens and corporations of the United States
shall enjoy in the Philippine Islands during the period of the validity of this Act,
or any extension thereof by statute or treaty, the same rights as to property,
residence, and occupation as citizens of the Philippine Islands ...
But as finally approved by the United States Congress, the equality as to
" property residence and occupation" provided in the bill was eliminated and
Section 341 of the Trade Act limited such parity to the disposition, exploitation,
development, and utilization of lands of the public domain, and other natural
resources of the Philippines (V. ante, page 5 of this opinion).
Thus, whether from the Philippine or the American side, the intention was to
secure parity for United States citizens, only in two matters: (1) exploitation,
development and utilization of public lands, and other natural resources of the
Philippines; and (2) the operation of public utilities. That and nothing else.
Respondent Quasha avers that as of 1935 when the Constitution was adopted,
citizens of the United States were already qualified to acquire public
agricultural lands, so that the literal text of section 5 must be understood as
permitting transfer or assignment of private agricultural lands to Americans
even without hereditary succession. Such capacity of United States citizens
could exist only during the American sovereignty over the Islands. For the
Constitution of the Philippines was designed to operate even beyond the
extinction of the United States sovereignty, when the Philippines would become
fully independent. That is apparent from the provision of the original Ordinance
appended to the Constitution as originally approved and ratified. Section 17 of
said Ordinance provided that:
(17) Citizens and corporations of the United States shall enjoy in the
Commonwealth of the Philippines all the civil rights of the citizens and
corporations, respectively, thereof. (Emphasis supplied)
The import of paragraph (17) of the Ordinance was confirmed and reenforced
by Section 127 of Commonwealth Act 141 (the Public Land Act of 1936) that
prescribes:
17
Sec. 127. During the existence and continuance of the Commonwealth, and
before the Republic of the Philippines is established, citizens and corporations
of the United States shall enjoy the same rights granted to citizens and
corporations of the Philippines under this Act.
thus clearly evidencing once more that equal rights of citizens and corporations
of the United States to acquire agricultural lands of the Philippines vanished
with the advent of the Philippine Republic. Which explains the need of
introducing the "Parity Amendment" of 1946.
It is then indubitable that the right of United States citizens and corporations to
acquire and exploit private or public lands and other natural resources of the
Philippines was intended to expire when the Commonwealth ended on 4 July
1946. Thereafter, public and private agricultural lands and natural resources of
the Philippines were or became exclusively reserved by our Constitution for
Filipino citizens. This situation lasted until the "Parity Amendment", ratified in
November, 1946, once more reopened to United States citizens and business
enterprises owned or controlled by them the lands of the public domain, the
natural resources of the Philippines, and the operation of the public utilities,
exclusively, but not the acquisition or exploitation of private agricultural lands,
about which not a word is found in the Parity Amendment..Respondent
Quasha's pretenses can find no support in Article VI of the Trade Agreement of
1955, known popularly as the Laurel-Langley Agreement, establishing a sort of
reciprocity rights between citizens of the Philippines and those of the United
States, couched in the following terms:
ARTICLE VI
2. The rights provided for in Paragraph I may be exercised, in the case of
citizens of the Philippines with respect to natural resources in the United States
which are subject to Federal control or regulations, only through the medium of
a corporation organized under the laws of the United States or one of the States
hereof and likewise, in the case of citizens of the United States with respect to
natural resources in the public domain in the Philippines only through the
medium of a corporation organized under the laws of the Philippines and at
least 60% of the capital stock of which is owned or controlled by citizens of the
United States. This provision, however, does not affect the right of citizens of
the United States to acquire or own private agricultural lands in the Philippines
or citizens of the Philippines to acquire or own land in the United States which
is subject to the jurisdiction of the United States and not within the jurisdiction
of any state and which is not within the public domain. The Philippines reserves
the right to dispose of the public lands in small quantities on especially
favorable terms exclusively to actual settlers or other users who are its own
citizens. The United States reserves the right to dispose of its public lands in
small quantities on especially favorable terms exclusively to actual settlers or
other users who are its own citizens or aliens who have declared their intention
to become citizens. Each party reserves the right to limit the extent to which
aliens may engage in fishing, or engage in enterprises which furnish
communications services and air or water transport. The United States also
reserves the right to limit the extent to which aliens may own land in its outlying
territories and possessions, but the Philippines will extend to American
nationals who are residents of any of those outlying territories and possessions
only the same rights, with respect to, ownership of lands, which are granted
therein to citizens of the Philippines. The rights provided for in this paragraph
shall not, however, be exercised by either party so as to derogate from the rights
previously acquired by citizens or corporations or associations owned or
controlled by citizens of the other party.
The words used in Article VI to the effect that
... This provision does not affect the right of citizen of the United States to
acquire or own private agricultural lands in the Philippines, or citizens of the
Philippines to acquire or own land in the United States which is subject to the
jurisdiction of the United States ...
must be understood as referring to rights of United States citizens to acquire or
own private agricultural lands before the independence of the Philippines since
the obvious purpose of the article was to establish rights of United States and
Filipino citizens on a basis of reciprocity. For as already shown, no such right
to acquire or own private agricultural lands in the Philippines has existed since
the independent Republic was established in 1946. The quoted expressions of
the Laurel-Langley Agreement could not expand the rights of United States
citizens as to public agricultural lands of the Philippines to private lands, when
the Parity Amendment and the Constitution authorize such United States
citizens and business entities only to acquire and exploit agricultural lands of
the public domain. If the reopening of only public lands to Americans required
a Constitutional Amendment, how could a mere Trade Agreement, like the
Laurel-Langley, by itself enable United States citizens to acquire and exploit
private agricultural lands, a right that ceased to exist since the independence of
the Philippines by express prescription of our Constitution?
We turn to the second issue involved in this appeal: On the assumption that
respondent Quasha's purchase of the private agricultural land involved is valid
and constitutional, will or will not his rights expire on 3 July 1974?
For the solution of this problem, We again turn to the "Parity Amendment".
Under it,
Notwithstanding the provision of section one, Article Thirteen, and section
eight, Article Fourteen, of the foregoing Constitution, during the effectivity of
the Executive Agreement entered into by the President of the Philippines with
the President of the United States on the fourth of July, nineteen hundred and
forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven
hundred and thirty-three,but in no case to extend beyond the third of July,
nineteen hundred and seventy-four, the disposition, exploitation, development,
and utilization of all agricultural, timber, and mineral lands of the public
domain, waters, minerals, coals, petroleum, and other mineral oils, all forces
and sources of potential energy, and other natural resources of the Philippines,
and the operation of public utilities, shall, if open to any person, be open to
citizens of the United states and to all forms of business enterprise owned or
controlled, directly or indirectly, by citizens of the United States in the same
manner as to, and under the same conditions imposed upon, citizens of the
Philippines or corporations or associations owned or controlled by citizens of
the Philippines. (Emphasis supplied)
It is easy to see that all exceptional rights conferred upon United States citizens
and business entities owned or controlled by them, under the Amendment, are
subject to one and the same resolutory term or period: they are to last "during
the effectivity of the Executive Agreement entered into on 4 July 1946", "but
in no case to extend beyond the, third of July, 1974". None of the privileges
conferred by the "Parity Amendment" are excepted from this resolutory period.
This limitation of time is in conformity with Article X, Section 2, of the
Philippine Trade Act of 1946, as embodied in Commonwealth Act No. 733. It
says:
ARTICLE X
2. This Agreement shall have no effect after 3 July 1974. It may be terminated
by either the United States or the Philippines at any time, upon not less than
five years' written notice. It the President of the United States or the President
of the Philippines determines and proclaims that the other Country has adopted
or applied measures or practices which would operate to nullify or impair any
right or obligation provided for in this Agreement, then the Agreement may be
terminated upon not less than six months' written notice.
Respondent Quasha argues that the limitative period set in the "Parity
Amendment" should be understood not to be applicable to the disposition, or
correlative acquisition, of alienable agricultural lands of the public domain,
since such lands can be acquired in full ownership, in which event, under Article
428 of the Civil Code of Philippines
ART, 428. The owner has the right to enjoy and dispose of a thing, without
other limitations than those established by law.
The owner has also a right of action against the holder and possessor of the
thing in order to recover it.
18
and that since any period or condition which produces the effect of loss or
deprivation of valuable rights is in derogation of due process of law, there must
be "a law which expressly and indubitably limits and extinguishes the
ownership of non-citizens over private agricultural lands situated in the
Philippines validly acquired under the law existing at the time of acquisition."
rendered declaring that, under the "Parity Amendment" to our Constitution,
citizens of the United States and corporations and business enterprises owned
or controlled by them can not acquire and own, save in cases of hereditary
succession, private agricultural lands in the Philippines and that all other rights
acquired by them under said amendment will expire on 3 July 1974.

Strangely enough, this argument ignores the provisions of the "Parity Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando and Esguerra, JJ.,
Amendment" prescribing that the disposition and exploitation, etc. of concur.
agricultural lands of the public domain are in no case to extend beyond the third
of July 1974. This limitation already existed when Quasha in 1954 purchased Teehankee, Barredo, Makasiar and Antonio, JJ., took no part.
the Forbes Park property, and the acquisition was subject to it. If the Philippine
government can not dispose of its alienable public agricultural lands beyond
that date under the "Parity Amendment", then, logically, the Constitution, as
modified by the Amendment, only authorizes either of two things: (a) alienation
or transfer of rights less than ownership or (b) a resoluble ownership that will Footnotes
be extinguished not later than the specified period. For the Philippine
government to dispose of the public agricultural land for an indefinite time a Or even much less than a majority of the stock, where the other shares are
would necessarily be in violation of the Constitution. There is nothing in the widely dispersed among many stockholders (Berle & Means, "Modern
Civil Law of this country that is repugnant to the existence of ownership for a Corporations and Private Property", Ch. IV, et. seq.)
limited duration; thus the title of a "reservista" (ascendant inheriting from a
descendant) in reserva troncal, under Article 891 of the Civil Code of the
Philippines, is one such owner, holding title and dominion, although under
condition subsequent; he can do anything that a genuine owner can do, until his
death supervenes with "reservataries surviving", i.e., relatives within the third
degree (Edroso vs. Sablan, 25 Phil. 295; Lunsod vs. Ortega, 46 Phil. 661, 695).
In truth, respondent himself invokes Article 428 of the Civil Code to the effect
that "the owner has the right to enjoy and dispose of a thing, without
other limitations than those established by law". One such limitation is the
period fixed on the "Parity Amendment", which forms part of the Constitution,
the highest law of the land. How then can he complain of deprivation of due
process?

That the legislature has not yet determined what is to be done with the property
when the respondent's rights thereto terminate on 3 July 1974 is irrelevant to
the issues in this case. The law, making power has until that date full power to
adopt the apposite measures, and it is expected to do so.

One last point: under the "Parity Amendment" the disposition, exploitation,
development and utilization of lands of the public domain, and other natural
resources of the Philippines, and the operation of public utilities are open

to citizens of the United States and to all forms of business enterprises owned
or controlled, directly or indirectly, by citizens of the United States

while under the Philippine Constitution (section 1, Article XIII, and section 8,
Article XIV) utilization of such lands, natural resources and public utilities are
open to citizens of the Philippines or to

corporations or associations at least sixty per centum of the capital of which is

owned by such citizens...

It is thus apparent that American business enterprises are more favored than
Philippine organization during the period of parity in that, first, they need not
be owned by American citizens up to 60% of their capital; all that is required is
that they be controlled by United States citizens, a control that is attained by
ownership of only 51% a of the capital stock; and second, that the control by
United States citizens may be direct or indirect (voting trusts, pyramiding, etc.)
which indirect control is not allowed in the case of Philippine nationals.

That Filipinos should be placed under the so-called Parity in a more

disadvantageous position than United States citizens in the disposition,
exploitation, development and utilization of the public lands, forests, mines, oils
and other natural resources of their own country is certainly rank injustice and
inequity that warrants a most strict interpretation of the "Parity Amendment",
in order that the dishonorable inferiority in which Filipinos find themselves at
present in the land of their ancestors should not be prolonged more than is
absolutely necessary.

FOR THE FOREGOING REASONS, the appealed decision of the Court of

First Instance of Rizal is hereby reversed and set aside; and judgment is

19
G.R. No. 156364 September 3, 2007
JACOBUS BERNHARD HULST, petitioner,
vs.
PR BUILDERS, INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court assailing the Decision1 dated October 30, 2002 of the
Court of Appeals (CA) in CA-G.R. SP No. 60981.
The facts:
Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van
Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders,
Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's
townhouse project in Barangay Niyugan, Laurel, Batangas.
When respondent failed to comply with its verbal promise to complete the
project by June 1995, the spouses Hulst filed before the Housing and Land Use
Regulatory Board (HLURB) a complaint for rescission of contract with interest,
damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618.
On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter)
rendered a Decision2 in favor of spouses Hulst, the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the complainant, rescinding the Contract to Sell and ordering respondent to:
1) Reimburse complainant the sum of P3,187,500.00, representing the purchase
price paid by the complainants to P.R. Builders, plus interest thereon at the rate
of twelve percent (12%) per annum from the time complaint was filed;
2) Pay complainant the sum of P297,000.00 as actual damages;
3) Pay complainant the sum of P100,000.00 by way of moral damages;
4) Pay complainant the sum of P150,000.00 as exemplary damages;
5) P50,000.00 as attorney's fees and for other litigation expenses; and
6) Cost of suit.
SO ORDERED.3
Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased
property to petitioner.4 From then on, petitioner alone pursued the case.
On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed
to the Ex-Officio Sheriff of the Regional Trial Court of Tanauan, Batangas
directing the latter to execute its judgment.5
On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of
Execution. However, upon complaint of respondent with the CA on a Petition
for Certiorari and Prohibition, the levy made by the Sheriff was set aside,
requiring the Sheriff to levy first on respondent's personal properties. 6 Sheriff
Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ
was returned unsatisfied.7
On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an
Alias Writ of Execution.8
On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land
covered by 13 Transfer Certificates of Title (TCT)9 in Barangay Niyugan,
Laurel, Batangas.10
In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of
the levied properties on April 28, 2000 at 10:00 a.m..11
Two days before the scheduled public auction or on April 26, 2000, respondent
filed an Urgent Motion to Quash Writ of Levy with the HLURB on the ground
that the Sheriff made an overlevy since the aggregate appraised value of the
levied properties at P6,500.00 per sq m is P83,616,000.00, based on the
Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996,
which is over and above the judgment award.13
At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's
counsel objected to the conduct of the public auction on the ground that
respondent's Urgent Motion to Quash Writ of Levy was pending resolution.
Absent any restraining order from the HLURB, the Sheriff proceeded to sell the
15 parcels of land. Holly Properties Realty Corporation was the winning bidder
for all 15 parcels of land for the total amount of P5,450,653.33. The sum
of P5,313,040.00 was turned over to the petitioner in satisfaction of the
judgment award after deducting the legal fees.14
At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to
remit the legal fees relative to the auction sale and to submit the Certificates of
Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB
Director), he received the Order dated April 28, 2000 issued by the HLURB
Arbiter to suspend the proceedings on the matter.16
Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB
Director issued an Order setting aside the sheriff's levy on respondent's real
properties,17 reasoning as follows:
While we are not making a ruling that the fair market value of the levied
properties is PhP6,500.00 per square meter (or an aggregate value of
PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we
definitely cannot agree with the position of the Complainants and the Sheriff
that the aggregate value of the 12,864.00-square meter levied properties is only
around PhP6,000,000.00. The disparity between the two valuations are [sic] so
egregious that the Sheriff should have looked into the matter first before
proceeding with the execution sale of the said properties, especially when the
auction sale proceedings was seasonably objected by Respondent's counsel,
Atty. Noel Mingoa. However, instead of resolving first the objection timely
posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised
and, posthaste, issued the corresponding Certificate of Sale even prior to the
payment of the legal fees (pars. 7 & 8, Sheriff's Return).
While we agree with the Complainants that what is material in an execution sale
proceeding is the amount for which the properties were bidded and sold during
the public auction and that, mere inadequacy of the price is not a sufficient
ground to annul the sale, the court is justified to intervene where the inadequacy
of the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil. 378). The
difference between PhP83,616,000.00 and Php6,000,000.00 is
PhP77,616,000.00 and it definitely invites our attention to look into the
proceedings had especially so when there was only one bidder, the HOLLY
PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho
(par. 7, Sheriff's Return) and the auction sale proceedings was timely objected
by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the
Urgent Motion to Quash the Writ of Levy which was filed prior to the execution
sale.
Besides, what is at issue is not the value of the subject properties as
determined during the auction sale, but the determination of the value of
the properties levied upon by the Sheriff taking into consideration Section
9(b) of the 1997 Rules of Civil Procedure x x x.
xxxx
It is very clear from the foregoing that, even during levy, the Sheriff has to
consider the fair market value of the properties levied upon to determine
whether they are sufficient to satisfy the judgment, and any levy in excess of
the judgment award is void (Buan v. Court of Appeals, 235 SCRA 424).
x x x x18 (Emphasis supplied).
The dispositive portion of the Order reads:
20
WHEREFORE, the levy on the subject properties made by the Ex-Officio
Sheriff of the RTC of Tanauan, Batangas, is hereby SET ASIDE and the said
Sheriff is hereby directed to levy instead Respondent's real properties that are
reasonably sufficient to enforce its final and executory judgment, this time,
taking into consideration not only the value of the properties as indicated in
their respective tax declarations, but also all the other determinants at arriving
at a fair market value, namely: the cost of acquisition, the current value of like
properties, its actual or potential uses, and in the particular case of lands, their
size, shape or location, and the tax declarations thereon.
SO ORDERED.19
A motion for reconsideration being a prohibited pleading under Section 1(h),
Rule IV of the 1996 HLURB Rules and Procedure, petitioner filed a Petition
for Certiorari and Prohibition with the CA on September 27, 2000.
On October 30, 2002, the CA rendered herein assailed Decision 20 dismissing
the petition. The CA held that petitioner's insistence that Barrozo v.
Macaraeg21 does not apply since said case stated that "when there is a right to
redeem inadequacy of price should not be material" holds no water as what is
obtaining in this case is not "mere inadequacy," but an inadequacy that shocks
the senses; that Buan v. Court of Appeals22 properly applies since the
questioned levy covered 15 parcels of land posited to have an aggregate value
of P83,616,000.00 which shockingly exceeded the judgment debt of only
around P6,000,000.00.
Without filing a motion for reconsideration,23 petitioner took the present
recourse on the sole ground that:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE ARBITER'S ORDER SETTING ASIDE THE LEVY
MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24
Before resolving the question whether the CA erred in affirming the Order of
the HLURB setting aside the levy made by the sheriff, it behooves this Court to
address a matter of public and national importance which completely escaped
the attention of the HLURB Arbiter and the CA: petitioner and his wife are
foreign nationals who are disqualified under the Constitution from owning real
property in their names.
Section 7 of Article XII of the 1987 Constitution provides:
Sec. 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain.
(Emphasis supplied).
The capacity to acquire private land is made dependent upon the capacity to
acquire or hold lands of the public domain. Private land may be transferred or
conveyed only to individuals or entities "qualified to acquire lands of the public
domain." The 1987 Constitution reserved the right to participate in the
disposition, exploitation, development and utilization of lands of the public
domain for Filipino citizens25 or corporations at least 60 percent of the capital
of which is owned by Filipinos.26 Aliens, whether individuals or corporations,
have been disqualified from acquiring public lands; hence, they have also been
disqualified from acquiring private lands.27
Since petitioner and his wife, being Dutch nationals, are proscribed under the
Constitution from acquiring and owning real property, it is unequivocal that the
Contract to Sell entered into by petitioner together with his wife and respondent
is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose
cause, object or purpose is contrary to law or public policy and those expressly
prohibited or declared void by law are inexistent and void from the beginning.
Article 1410 of the same Code provides that the action or defense for the
declaration of the inexistence of a contract does not prescribe. A void contract
is equivalent to nothing; it produces no civil effect.28 It does not create, modify
or extinguish a juridical relation.29
Generally, parties to a void agreement cannot expect the aid of the law; the
courts leave them as they are, because they are deemed in pari delicto or "in
equal fault."30 In pari delicto is "a universal doctrine which holds that no action
arises, in equity or at law, from an illegal contract; no suit can be maintained
for its specific performance, or to recover the property agreed to be sold or
delivered, or the money agreed to be paid, or damages for its violation; and
where the parties are in pari delicto, no affirmative relief of any kind will be
given to one against the other."31
This rule, however, is subject to exceptions32 that permit the return of that which
may have been given under a void contract to: (a) the innocent party (Arts.
1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art. 1413,
Civil Code);34 (c) the party repudiating the void contract before the illegal
purpose is accomplished or before damage is caused to a third person and
if public interest is subserved by allowing recovery (Art. 1414, Civil
Code);35 (d) the incapacitated party if the interest of justice so demands (Art.
1415, Civil Code);36 (e) the party for whose protection the prohibition by law is
intended if the agreement is not illegal per se but merely prohibited and if
public policy would be enhanced by permitting recovery (Art. 1416, Civil
Code);37 and (f) the party for whose benefit the law has been intended such as
in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts. 1418-1419,
Civil Code).39
It is significant to note that the agreement executed by the parties in this case is
a Contract to Sell and not a contract of sale. A distinction between the two is
material in the determination of when ownership is deemed to have been
transferred to the buyer or vendee and, ultimately, the resolution of the question
on whether the constitutional proscription has been breached.
In a contract of sale, the title passes to the buyer upon the delivery of the thing
sold. The vendor has lost and cannot recover the ownership of the property until
and unless the contract of sale is itself resolved and set aside. 40 On the other
hand, a contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendor's obligation to transfer title is subordinated to the
happening of a future and uncertain event, so that if the suspensive condition
does not take place, the parties would stand as if the conditional obligation had
never existed.41 In other words, in a contract to sell, the prospective seller agrees
to transfer ownership of the property to the buyer upon the happening of an
event, which normally is the full payment of the purchase price. But even upon
the fulfillment of the suspensive condition, ownership does not automatically
transfer to the buyer. The prospective seller still has to convey title to the
prospective buyer by executing a contract of absolute sale.42
Since the contract involved here is a Contract to Sell, ownership has not yet
transferred to the petitioner when he filed the suit for rescission. While the
intent to circumvent the constitutional proscription on aliens owning real
property was evident by virtue of the execution of the Contract to Sell, such
violation of the law did not materialize because petitioner caused the rescission
of the contract before the execution of the final deed transferring ownership.
Thus, exception (c) finds application in this case. Under Article 1414, one who
repudiates the agreement and demands his money before the illegal act has
taken place is entitled to recover. Petitioner is therefore entitled to recover what
he has paid, although the basis of his claim for rescission, which was granted
by the HLURB, was not the fact that he is not allowed to acquire private land
under the Philippine Constitution. But petitioner is entitled to the recovery only
of the amount of P3,187,500.00, representing the purchase price paid to
respondent. No damages may be recovered on the basis of a void contract; being
nonexistent, the agreement produces no juridical tie between the parties
involved.43 Further, petitioner is not entitled to actual as well as interests
thereon,44 moral and exemplary damages and attorney's fees.
The Court takes into consideration the fact that the HLURB Decision dated
April 22, 1997 has long been final and executory. Nothing is more settled in the
law than that a decision that has acquired finality becomes immutable and
unalterable and may no longer be modified in any respect even if the
modification is meant to correct erroneous conclusions of fact or law and
whether it was made by the court that rendered it or by the highest court of the
land.45The only recognized exceptions to the general rule are the correction of
clerical errors, the so-called nunc pro tunc entries which cause no prejudice to
any party, void judgments, and whenever circumstances transpire after the
21
finality of the decision rendering its execution unjust and inequitable. 46 None
of the exceptions is present in this case. The HLURB decision cannot be
considered a void judgment, as it was rendered by a tribunal with jurisdiction
over the subject matter of the complaint.47
Ineluctably, the HLURB Decision resulted in the unjust enrichment of
petitioner at the expense of respondent. Petitioner received more than what he
is entitled to recover under the circumstances.
Article 22 of the Civil Code which embodies the maxim, nemo ex alterius
incommode debet lecupletari (no man ought to be made rich out of another's
injury), states:
Art. 22. Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human
Relations, the provisions of which were formulated as basic principles to be
observed for the rightful relationship between human beings and for the stability
of the social order; designed to indicate certain norms that spring from the
fountain of good conscience; guides for human conduct that should run as
golden threads through society to the end that law may approach its supreme
ideal which is the sway and dominance of justice. 48 There is unjust enrichment
when a person unjustly retains a benefit at the loss of another, or when a person
retains money or property of another against the fundamental principles of
justice, equity and good conscience.49
A sense of justice and fairness demands that petitioner should not be allowed to
benefit from his act of entering into a contract to sell that violates the
constitutional proscription.
This is not a case of equity overruling or supplanting a positive provision of law
or judicial rule. Rather, equity is exercised in this case "as the complement of
legal jurisdiction [that] seeks to reach and to complete justice where courts of
law, through the inflexibility of their rules and want of power to adapt their
judgments to the special circumstances of cases, are incompetent to do so."50
The purpose of the exercise of equity jurisdiction in this case is to prevent unjust
enrichment and to ensure restitution. Equity jurisdiction aims to do complete
justice in cases where a court of law is unable to adapt its judgments to the
special circumstances of a case because of the inflexibility of its statutory or
legal jurisdiction.51
The sheriff delivered to petitioner the amount of P5,313,040.00 representing the
net proceeds (bidded amount is P5,450,653.33) of the auction sale after
deducting the legal fees in the amount of P137,613.33.52 Petitioner is only
entitled to P3,187,500.00, the amount of the purchase price of the real property
paid by petitioner to respondent under the Contract to Sell. Thus, the Court in
the exercise of its equity jurisdiction may validly order petitioner to return the
excess amount of P2,125,540.00.
The Court shall now proceed to resolve the single issue raised in the present
petition: whether the CA seriously erred in affirming the HLURB Order setting
aside the levy made by the Sheriff on the subject properties.
Petitioner avers that the HLURB Arbiter and Director had no factual basis for
pegging the fair market value of the levied properties at P6,500.00 per sq m
or P83,616,000.00; that reliance on the appraisal report was misplaced since the
appraisal was based on the value of land in neighboring developed subdivisions
and on the assumption that the residential unit appraised had already been built;
that the Sheriff need not determine the fair market value of the subject
properties before levying on the same since what is material is the amount for
which the properties were bidded and sold during the public auction; that the
pendency of any motion is not a valid ground for the Sheriff to suspend the
execution proceedings and, by itself, does not have the effect of restraining the
Sheriff from proceeding with the execution.
Respondent, on the other hand, contends that while it is true that the HLURB
Arbiter and Director did not categorically state the exact value of the levied
properties, said properties cannot just amount to P6,000,000.00; that the
HLURB Arbiter and Director correctly held that the value indicated in the tax
declaration is not the sole determinant of the value of the property.
The petition is impressed with merit.
If the judgment is for money, the sheriff or other authorized officer must
execute the same pursuant to the provisions of Section 9, Rule 39 of the Revised
Rules of Court, viz:
Sec. 9. Execution of judgments for money, how enforced.
(a) Immediate payment on demand. - The officer shall enforce an execution of
a judgment for money by demanding from the judgment obligor the immediate
payment of the full amount stated in the writ of execution and all lawful fees. x
xx
(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the
obligation in cash, certified bank check or other mode of payment acceptable to
the judgment obligee, the officer shall levy upon the properties of the
judgment obligor of every kind and nature whatsoever which may be
disposed of for value and not otherwise exempt from execution, giving the
latter the option to immediately choose which property or part thereof may be
levied upon, sufficient to satisfy the judgment. If the judgment obligor does not
exercise the option, the officer shall first levy on the personal properties, if any,
and then on the real properties if the personal properties are insufficient to
answer for the judgment.
The sheriff shall sell only a sufficient portion of the personal or real
property of the judgment obligor which has been levied upon.
When there is more property of the judgment obligor than is sufficient to
satisfy the judgment and lawful fees, he must sell only so much of the
personal or real property as is sufficient to satisfy the judgment and lawful
fees.
Real property, stocks, shares, debts, credits, and other personal property, or
any interest in either real or personal property, may be levied upon in like
manner and with like effect as under a writ of attachment(Emphasis
supplied).53
Thus, under Rule 39, in executing a money judgment against the property of
the judgment debtor, the sheriff shall levy on all property belonging to the
judgment debtor as is amply sufficient to satisfy the judgment and costs, and
sell the same paying to the judgment creditor so much of the proceeds as will
satisfy the amount of the judgment debt and costs. Any excess in the proceeds
shall be delivered to the judgment debtor unless otherwise directed by the
judgment or order of the court.54
Clearly, there are two stages in the execution of money judgments. First, the
levy and then the execution sale.
Levy has been defined as the act or acts by which an officer sets apart or
appropriates a part or the whole of a judgment debtor's property for the purpose
of satisfying the command of the writ of execution.55 The object of a levy is to
take property into the custody of the law, and thereby render it liable to the lien
of the execution, and put it out of the power of the judgment debtor to divert it
to any other use or purpose.56
On the other hand, an execution sale is a sale by a sheriff or other ministerial
officer under the authority of a writ of execution of the levied property of the
debtor.57
In the present case, the HLURB Arbiter and Director gravely abused their
discretion in setting aside the levy conducted by the Sheriff for the reason that
the auction sale conducted by the sheriff rendered moot and academic the
motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the
motion to quash the levy by virtue of the consummation of the auction sale.
Absent any order from the HLURB suspending the auction sale, the sheriff
rightfully proceeded with the auction sale. The winning bidder had already paid
the winning bid. The legal fees had already been remitted to the HLURB. The
22
judgment award had already been turned over to the judgment creditor. What
was left to be done was only the issuance of the corresponding certificates of
sale to the winning bidder. In fact, only the signature of the HLURB Director
for that purpose was needed58 a purely ministerial act.
A purely ministerial act or duty is one which an officer or tribunal performs in
a given state of facts, in a prescribed manner, in obedience to the mandate of a
legal authority, without regard for or the exercise of his own judgment upon the
propriety or impropriety of the act done. If the law imposes a duty upon a public
officer and gives him the right to decide how or when the duty shall be
performed, such duty is discretionary and not ministerial. The duty is ministerial
only when the discharge of the same requires neither the exercise of official
discretion nor judgment.59 In the present case, all the requirements of auction
sale under the Rules have been fully complied with to warrant the issuance of
the corresponding certificates of sale.
And even if the Court should go into the merits of the assailed Order, the
petition is meritorious on the following grounds:
Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA,
on Barrozo v. Macaraeg60 and Buan v. Court of Appeals61 is misplaced.
The HLURB and the CA misconstrued the Court's pronouncements
in Barrozo. Barrozo involved a judgment debtor who wanted to repurchase
properties sold at execution beyond the one-year redemption period. The
statement of the Court in Barrozo, that "only where such inadequacy shocks the
conscience the courts will intervene," is at best a mere obiter dictum. This
declaration should be taken in the context of the other declarations of the Court
in Barrozo,to wit:
Another point raised by appellant is that the price paid at the auction sale was
so inadequate as to shock the conscience of the court. Supposing that this issue
is open even after the one-year period has expired and after the properties have
passed into the hands of third persons who may have paid a price higher than
the auction sale money, the first thing to consider is that the stipulation contains
no statement of the reasonable value of the properties; and although defendant'
answer avers that the assessed value was P3,960 it also avers that their real
market value was P2,000 only. Anyway, mere inadequacy of price which
was the complaint' allegation is not sufficient ground to annul the sale. It
is only where such inadequacy shocks the conscience that the courts will
intervene. x x x Another consideration is that the assessed value being P3,960
and the purchase price being in effect P1,864 (P464 sale price plus P1,400
mortgage lien which had to be discharged) the conscience is not shocked upon
examining the prices paid in the sales in National Bank v. Gonzales, 45 Phil.,
693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left undisturbed
by this Court.
Furthermore, where there is the right to redeem as in this case
inadequacy of price should not be material because the judgment debtor
may re-acquire the property or else sell his right to redeem and thus
recover any loss he claims to have suffered by reason of the price obtained
at the execution sale.
x x x x (Emphasis supplied).62
In other words, gross inadequacy of price does not nullify an execution sale. In
an ordinary sale, for reason of equity, a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one's
conscience as to justify the courts to interfere; such does not follow when the
law gives the owner the right to redeem as when a sale is made at public
auction,63 upon the theory that the lesser the price, the easier it is for the owner
to effect redemption.64 When there is a right to redeem, inadequacy of price
should not be material because the judgment debtor may re-acquire the property
or else sell his right to redeem and thus recover any loss he claims to have
suffered by reason of the price obtained at the execution sale. 65 Thus,
respondent stood to gain rather than be harmed by the low sale value of the
auctioned properties because it possesses the right of redemption. More
importantly, the subject matter in Barrozo is the auction sale, not the levy made
by the Sheriff.
The Court does not sanction the piecemeal interpretation of a decision. To get
the true intent and meaning of a decision, no specific portion thereof should be
isolated and resorted to, but the decision must be considered in its entirety.66
As regards Buan, it is cast under an entirely different factual milieu. It involved
the levy on two parcels of land owned by the judgment debtor; and the sale at
public auction of one was sufficient to fully satisfy the judgment, such that the
levy and attempted execution of the second parcel of land was declared void for
being in excess of and beyond the original judgment award granted in favor of
the judgment creditor.
In the present case, the Sheriff complied with the mandate of Section 9, Rule
39 of the Revised Rules of Court, to "sell only a sufficient portion" of the levied
properties "as is sufficient to satisfy the judgment and the lawful fees." Each of
the 15 levied properties was successively bidded upon and sold, one after the
other until the judgment debt and the lawful fees were fully satisfied. Holly
Properties Realty Corporation successively bidded upon and bought each of the
levied properties for the total amount of P5,450,653.33 in full satisfaction of the
judgment award and legal fees.67
Secondly, the Rules of Court do not require that the value of the property levied
be exactly the same as the judgment debt; it can be less or more than the amount
of debt. This is the contingency addressed by Section 9, Rule 39 of the Rules of
Court. In the levy of property, the Sheriff does not determine the exact valuation
of the levied property. Under Section 9, Rule 39, in conjunction with Section 7,
Rule 57 of the Rules of Court, the sheriff is required to do only two specific
things to effect a levy upon a realty: (a) file with the register of deeds a copy of
the order of execution, together with the description of the levied property and
notice of execution; and (b) leave with the occupant of the property copy of the
same order, description and notice.68 Records do not show that respondent
alleged non-compliance by the Sheriff of said requisites.
Thirdly, in determining what amount of property is sufficient out of which to
secure satisfaction of the execution, the Sheriff is left to his own judgment. He
may exercise a reasonable discretion, and must exercise the care which a
reasonably prudent person would exercise under like conditions and
circumstances, endeavoring on the one hand to obtain sufficient property to
satisfy the purposes of the writ, and on the other hand not to make an
unreasonable and unnecessary levy.69 Because it is impossible to know the
precise quantity of land or other property necessary to satisfy an execution, the
Sheriff should be allowed a reasonable margin between the value of the
property levied upon and the amount of the execution; the fact that the Sheriff
levies upon a little more than is necessary to satisfy the execution does not
render his actions improper.70 Section 9, Rule 39, provides adequate safeguards
against excessive levying. The Sheriff is mandated to sell so much only of such
real property as is sufficient to satisfy the judgment and lawful fees.
In the absence of a restraining order, no error, much less abuse of discretion,
can be imputed to the Sheriff in proceeding with the auction sale despite the
pending motion to quash the levy filed by the respondents with the HLURB. It
is elementary that sheriffs, as officers charged with the delicate task of the
enforcement and/or implementation of judgments, must, in the absence of a
restraining order, act with considerable dispatch so as not to unduly delay the
administration of justice; otherwise, the decisions, orders, or other processes of
the courts of justice and the like would be futile.71 It is not within the jurisdiction
of the Sheriff to consider, much less resolve, respondent's objection to the
continuation of the conduct of the auction sale. The Sheriff has no authority, on
his own, to suspend the auction sale. His duty being ministerial, he has no
discretion to postpone the conduct of the auction sale.
Finally, one who attacks a levy on the ground of excessiveness carries the
burden of sustaining that contention.72 In the determination of whether a levy
of execution is excessive, it is proper to take into consideration encumbrances
upon the property, as well as the fact that a forced sale usually results in a
sacrifice; that is, the price demanded for the property upon a private sale is not
the standard for determining the excessiveness of the levy.73
Here, the HLURB Arbiter and Director had no sufficient factual basis to
determine the value of the levied property. Respondent only submitted an
23
Appraisal Report, based merely on surmises. The Report was based on the
projected value of the townhouse project after it shall have been fully
developed, that is, on the assumption that the residential units appraised had
already been built. The Appraiser in fact made this qualification in its Appraisal
Report: "[t]he property subject of this appraisal has not been constructed. The
basis of the appraiser is on the existing model units."74 Since it is undisputed
that the townhouse project did not push through, the projected value did not
become a reality. Thus, the appraisal value cannot be equated with the fair
market value. The Appraisal Report is not the best proof to accurately show the
value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and
Director Ceniza in HLRB Case No. IV6-071196-0618 which set aside the
sheriff's levy on respondent's real properties, was clearly issued with grave
abuse of discretion. The CA erred in affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated

October 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981
is REVERSED and SET ASIDE. The Order dated August 28, 2000 of
HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in
HLRB Case No. IV6-071196-0618 is declared NULL and VOID.HLURB
Arbiter Aquino and Director Ceniza are directed to issue the corresponding
certificates of sale in favor of the winning bidder, Holly Properties Realty
Corporation. Petitioner is ordered to return to respondent the amount
of P2,125,540.00, without interest, in excess of the proceeds of the auction sale
delivered to petitioner. After the finality of herein judgment, the amount
of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.

24
G.R. No. L-31956 April 30, 1984 Court said in the cited Sarsosa case applies with equal force to the
petitioner.t.hqw
FILOMENA GERONA DE CASTRO, petitioner,
vs. ... it is likewise inescapable that petitioner Epifania had slept on her rights for
JOAQUIN TENG QUEEN TAN, TAN TENG BIO, DOLORES TAN, 26 years from 1936 to 1962. By her long inaction of inexcusable neglect, she
ROSARIO TAN HUA ING, and TO O. HIAP, respondents. should be held barred from asserting her claim to the litigated property (Sotto
vs. Teves, 86 SCRA 157 [1978]).t.hqw
Pascual G. Mier for petitioner.
Laches has been defined as the failure or neglect, for an unreasonable and
Eddie Tamondong for respondent Joaquin Teng Queen Tan. unexplained length of time, to do that which by exercising due diligence could
or should have been done earlier; it is negligence or omission to assert a right
Carlos Buenviaje for respondent Tan Teng Bio.
within a reasonable time, warranting a presumption that the party entitled to
Arnulfo L. Perete for respondent Ong Shi (To O. Hiap). assert it either has abandoned it or declined to assert it. (Tijam, et al. vs.
Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35). (cited in
Sotto vs. Teves, 86 SCRA 154 [1978]).

PLANA, J.:+.wph!1 Respondent, therefore, must be declared to be the rightful owner of the property.
(p. 553.)
Review on certiorari of the order of the former Court of First Instance of
Sorsogon dismissing petitioner's action for annulment of contract with WHEREFORE, the appealed order is affirmed. Costs against petitioner.
damages.
SO ORDERED.1wph1.t
In 1938, petitioner Filomena Gerona de Castro sold a 1,258 sq. m. residential
lot in Bulan, Sorsogon to Tan Tai, a Chinese. In 1956, Tan Tai died leaving
herein respondents his widow, To O. Hiap, and children Joaquin Teng Queen
Tan, Tan Teng Bio, Dolores Tan and Rosario Tan Hua Ing.

Before the death of Tan Tai or on August 11, 1956, one of his sons, Joaquin,
became a naturalized Filipino. Six years after Tan Tai's death, or on November
18, 1962, his heirs executed an extra-judicial settlement of estate with sale,
whereby the disputed lot in its entirety was alloted to Joaquin.

On July 15, 1968, petitioner commenced suit against the heirs of Tan Tai for
annulment of the sale for alleged violation of the 1935 Constitution prohibiting
the sale of land to aliens.

Except for respondent Tan Teng Bio who filed an answer to the complaint,
respondents moved to dismiss the complaint on the grounds of (a) lack of cause
of action, the plaintiff being in pari delicto with the vendee, and the land being
already owned by a Philippine citizen; (b) laches; and (c) acquisitive
prescription.

Over the opposition of petitioner, the court a quo dismissed the complaint,
sustaining the first two grounds invoked by the movants. It is this order of
dismissal that is now the subject of this review.

The assailed order must be sustained.

Independently of the doctrine of pari delicto, the petitioner cannot have the sale
annulled and recover the lot she herself has sold. While the vendee was an alien
at the time of the sale, the land has since become the property, of respondent
Joaquin Teng, a naturalized Philippine citizen, who is constitutionally qualified
to own land.t.hqw

... The litigated property is now in the hands of a naturalized Filipino. It is no

longer owned by a disqualified vendee. Respondent, as a naturalized citizen,
was constitutionally qualified to own the subject property. There would be no
more public policy to be served in allowing petitioner Epifania to recover the
land as it is already in the hands of a qualified person. Applying by analogy the
ruling of this Court in Vasquez vs. Giap and Li Seng Giap & Sons:t.hqw

... if the ban on aliens from acquiring not only agricultural but also urban lands,
as construed by this Court in the Krivenko case, is to preserve the nation's lands
for future generations of Filipinos, that aim or purpose would not be thwarted
but achieved by making lawful the acquisition of real estate by aliens who
became Filipino citizens by naturalization. (Sarsosa Vda. de Barsobia vs.
Cuenco, 113 SCRA 547, at 553.)

Laches also militates against petitioner's cause. She sold the disputed lot in
1938. She instituted the action to annul the sale only on July 15, 1968. What the

25
[G.R. No. 128195. October 3, 2001]
ELIZABETH LEE and PACITA YU LEE, HON. JUDGE JOSE D.
ALOVERA,* Presiding Judge, Regional Trial Court, Branch 17, Roxas
City, THE REGISTER OF DEEDS OF ROXAS
CITY, petitioners, vs. REPUBLIC OF THE PHILIPPINES, represented
by THE DIRECTOR OF LANDS AND THE ADMINISTRATOR, LAND
REGISTRATION AUTHORITY and THE HON. COURT OF
APPEALS,* respondents.
DECISION
PARDO, J.:
The case under consideration is a petition for review on certiorari of the
decision[1] of the Court of Appeals nullifying that of the Regional Trial Court,
Roxas City, in Reconstitution Case No. R-1928,[2] pertaining to Lot 398, Capiz
Cadastre, covered by Original Certificate of Title No. 3389.
Sometime in March 1936, Rafael, Carmen, Francisco, Jr., Ramon, Lourdes,
Mercedes, Concepcion, Mariano, Jose, Loreto, Manuel, Rizal and Jimmy, all
surnamed Dinglasan sold to Lee Liong, a Chinese citizen, a parcel of land with
an approximate area of 1,631 square meters, designated as Lot 398 and covered
by Original Certificate of Title No. 3389, situated at the corner of Roxas Avenue
and Pavia Street, Roxas City.[3]
However, in 1948, the former owners filed with the Court of First Instance,
Capiz an action against the heirs of Lee Liong for annulment of sale and
recovery of land.[4] The plaintiffs assailed the validity of the sale because of the
constitutional prohibition against aliens acquiring ownership of private
agricultural land, including residential, commercial or industrial land. Rebuffed
in the trial court and the Court of Appeals, plaintiffs appealed to the Supreme
Court. On June 27, 1956, the Supreme Court ruled thus:
granting the sale to be null and void and can not give title to the vendee, it does
not necessarily follow therefrom that the title remained in the vendor, who had
also violated the constitutional prohibition, or that he (vendor) has the right to
recover the title of which he has divested himself by his act in ignoring the
prohibition. In such contingency another principle of law sets in to bar the
equally guilty vendor from recovering the title which he had voluntarily
conveyed for a consideration, that of pari delicto.[5]
On July 1, 1968, the same former owners Rafael A. Dinglasan, together with
Francisco, Carmen, Ramon, Lourdes, Mercedes, Concepcion, Mariano, Jose,
Loreto, Rizal, Jimmy, and Jesse Dinglasan filed with the Court of First Instance,
Capiz an action for recovery of the same parcel of land.[6] Citing the case
of Philippine Banking Corporation v. Lui She,[7] they submitted that the sale to
Lee Liong was null and void for being violative of the Constitution. On
September 23, 1968, the heirs of Lee Liong filed with the trial court a motion
to dismiss the case on the ground of res judicata.[8] On October 10, 1968, and
November 9, 1968, the trial court denied the motion.[9] The heirs of Lee Liong
elevated the case to the Supreme Court by petition for certiorari. On April 22,
1977, the Supreme Court annulled the orders of the trial court and directed it to
dismiss the case, holding that the suit was barred by res judicata.[10]
On September 7, 1993, Elizabeth Manuel-Lee and Pacita Yu Lee filed with the
Regional Trial Court, Roxas City a petition for reconstitution of title of Lot No.
398 of the Capiz Cadastre, formerly covered by Original Certificate of Title No.
3389 of the Register of Deeds of Roxas City.[11] Petitioners alleged that they
were the widows of the deceased Lee Bing Hoo and Lee Bun Ting, who were
the heirs of Lee Liong, the owner of the lot. Lee Liong died intestate in February
1944. On June 30, 1947, Lee Liongs widow, Ang Chia, and his two sons, Lee
Bun Ting and Lee Bing Ho, executed an extra-judicial settlement of the estate
of Lee Liong, adjudicating to themselves the subject parcel of land.[12] Petitioner
Elizabeth Lee acquired her share in Lot No. 398 through an extra-judicial
settlement and donation executed in her favor by her deceased husband Lee
Bing Hoo. Petitioner Pacita Yu Lee acquired her share in the same lot by
succession from her deceased husband Lee Bun Ting, as evidenced by a deed
of extra-judicial settlement.[13]
Previously, on December 9, 1948, the Register of Deeds, Capiz, Salvador
Villaluz, issued a certification that a transfer certificate of title over the property
was issued in the name of Lee Liong. [14] However, the records of the Register
of Deeds, Roxas City were burned during the war. Thus, as heretofore stated,
on September 7, 1968, petitioners filed a petition for reconstitution of title.
On June 10, 1994, the Regional Trial Court, Roxas City, Branch 17, ordered the
reconstitution of the lost or destroyed certificate of title in the name of Lee
Liong on the basis of an approved plan and technical description.[15] The
dispositive portion of the trial courts decision reads thus:
WHEREFORE, in reiteration, the Register of Deeds for the City of Roxas is
ordered to reconstitute the lost or destroyed certificate of title in the name of
Lee Liong, deceased, of Roxas City, with all the conditions stated in paragraph
2 of this decision. This decision shall become final after the lapse of thirty (30)
days from receipt by the Register of Deeds and by the Commissioner of LRA
of a notice of such judgment without any appeal having been filed by any of
such officials.
SO ORDERED.
Given at Roxas City, Philippines,
June 10, 1994.
JOSE O. ALOVERA
Judge[16]
On August 18, 1994, the Clerk of Court, Regional Trial Court, Roxas City,
Branch 17 issued an Entry of Judgment.[17]
On January 25, 1995, the Solicitor General filed with the Court of Appeals a
petition for annulment of judgment in Reconstitution Case No. 1928, alleging
that the Regional Trial Court, Roxas City had no jurisdiction over the
case.[18] The Solicitor General contended that the petitioners were not the proper
parties in the reconstitution of title, since their predecessor-in-interest Lee
Liong did not acquire title to the lot because he was a Chinese citizen and was
constitutionally not qualified to own the subject land.
On April 30, 1996, the Court of Appeals promulgated its decision declaring the
judgment of reconstitution void.[19]
On May 24, 1996, Elizabeth Manuel-Lee and Pacita Yu Lee filed with the Court
of Appeals a motion for reconsideration of the decision. [20] On February 18,
1997, the Court of Appeals denied the motion.[21]
Hence, this petition.[22]
Petitioners submitted that the Solicitor General was estopped from seeking
annulment of the judgment of reconstitution after failing to object during the
reconstitution proceedings before the trial court, despite due notice. Petitioners
alleged that the Solicitor General merely acted on the request of private and
politically powerful individuals who wished to capitalize on the prime location
of the subject land.
Petitioners emphasized that the ownership of the land had been settled in two
previous cases of the Supreme Court, where the Court ruled in favor of their
predecessor-in-interest, Lee Liong. Petitioners also pointed out that they
acquired ownership of the land through actual possession of the lot and their
consistent payment of taxes over the land for more than sixty years.
On the other hand, the Solicitor General submitted that the decision in the
reconstitution case was void; otherwise, it would amount to circumventing the
constitutional proscription against aliens acquiring ownership of private or
public agricultural lands.
We grant the petition.
The reconstitution of a certificate of title denotes restoration in the original form
and condition of a lost or destroyed instrument attesting the title of a person to
a piece of land.[23] The purpose of the reconstitution of title is to have, after
26
observing the procedures prescribed by law, the title reproduced in exactly the
same way it has been when the loss or destruction occurred. [24]
In this case, petitioners sought a reconstitution of title in the name of Lee Liong,
alleging that the transfer certificate of title issued to him was lost or destroyed
during World War II. All the documents recorded and issued by the Register of
Deeds, Capiz, which include the transfer certificate of title issued in the name
of Lee Liong, were all destroyed during the war. The fact that the original of
the transfer certificate of title was not in the files of the Office of the Register
of Deeds did not imply that a transfer certificate of title had not been
issued.[25] In the trial court proceedings, petitioners presented evidence proving
the sale of the land from the Dinglasans to Lee Liong and the latters subsequent
possession of the property in the concept of owner. Thus, the trial court, after
examining all the evidence before it, ordered the reconstitution of title in the
name of Lee Liong.
As earlier mentioned, a reconstitution of title is the re-issuance of a new
certificate of title lost or destroyed in its original form and condition.[39] It does
not pass upon the ownership of the land covered by the lost or destroyed
title.[40] Any change in the ownership of the property must be the subject of a
separate suit.[41] Thus, although petitioners are in possession of the land, a
separate proceeding is necessary to thresh out the issue of ownership of the land.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the
Court of Appeals in CA-G. R. SP No. 36274. In lieu thereof, the Court sets
aside the order of reconstitution of title in Reconstitution Case No. R-1928,
Regional Trial Court, Roxas City, and dismisses the petition, without prejudice.
No costs.
SO ORDERED.

However, there is a question as to whether Lee Liong has the qualification to

own land in the Philippines.

The sale of the land in question was consummated sometime in March 1936,
during the effectivity of the 1935 Constitution. Under the 1935
Constitution,[26] aliens could not acquire private agricultural lands, save in cases
of hereditary succession.[27] Thus, Lee Liong, a Chinese citizen, was
disqualified to acquire the land in question.[28]

The fact that the Court did not annul the sale of the land to an alien did not
validate the transaction, for it was still contrary to the constitutional proscription
against aliens acquiring lands of the public or private domain. However, the
proper party to assail the illegality of the transaction was not the parties to the
transaction.[29] In sales of real estate to aliens incapable of holding title thereto
by virtue of the provisions of the Constitution both the vendor and the vendee
are deemed to have committed the constitutional violation and being thus in
pari delicto the courts will not afford protection to either party.[30] The proper
party to assail the sale is the Solicitor General. This was what was done in this
case when the Solicitor General initiated an action for annulment of judgment
of reconstitution of title. While it took the Republic more than sixty years to
assert itself, it is not barred from initiating such action. Prescription never lies
against the State.[31]

Although ownership of the land cannot revert to the original sellers, because of
the doctrine of pari delicto, the Solicitor General may initiate an action for
reversion or escheat of the land to the State, subject to other defenses, as
hereafter set forth.[32]

In this case, subsequent circumstances militate against escheat proceedings

because the land is now in the hands of Filipinos. The original vendee, Lee
Liong, has since died and the land has been inherited by his heirs and
subsequently their heirs, petitioners herein. Petitioners are Filipino citizens, a
fact the Solicitor General does not dispute.

The constitutional proscription on alien ownership of lands of the public or

private domain was intended to protect lands from falling in the hands of non-
Filipinos. In this case, however, there would be no more public policy violated
since the land is in the hands of Filipinos qualified to acquire and own such
land. If land is invalidly transferred to an alien who subsequently becomes a
citizen or transfers it to a citizen, the flaw in the original transaction is
considered cured and the title of the transferee is rendered valid.[33] Thus, the
subsequent transfer of the property to qualified Filipinos may no longer be
impugned on the basis of the invalidity of the initial transfer.[34] The objective
of the constitutional provision to keep our lands in Filipino hands has been
achieved.

Incidentally, it must be mentioned that reconstitution of the original certificate

of title must be based on an owners duplicate, secondary evidence thereof, or
other valid sources of the title to be reconstituted.[35] In this case, reconstitution
was based on the plan and technical description approved by the Land
Registration Authority.[36] This renders the order of reconstitution void for lack
of factual support.[37] A judgment with absolutely nothing to support it is
void.[38]

27
G.R. No. 164584 June 22, 2009
PHILIP MATTHEWS, Petitioner,
vs.
BENJAMIN A. TAYLOR and JOSELYN C. TAYLOR, Respondents.
DECISION
NACHURA, J.:
Assailed in this petition for review on certiorari are the Court of Appeals (CA)
December 19, 2003 Decision1 and July 14, 2004 Resolution2 in CA-G.R. CV
No. 59573. The assailed decision affirmed and upheld the June 30, 1997
Decision3 of the Regional Trial Court (RTC), Branch 8, Kalibo, Aklan in Civil
Case No. 4632 for Declaration of Nullity of Agreement of Lease with Damages.
On June 30, 1988, respondent Benjamin A. Taylor (Benjamin), a British
subject, married Joselyn C. Taylor (Joselyn), a 17-year old Filipina.4 On June
9, 1989, while their marriage was subsisting, Joselyn bought from Diosa M.
Martin a 1,294 square-meter lot (Boracay property) situated at Manoc-Manoc,
Boracay Island, Malay, Aklan, for and in consideration of 129,000.00. 5 The
sale was allegedly financed by Benjamin.6 Joselyn and Benjamin, also using the
latters funds, constructed improvements thereon and eventually converted the
property to a vacation and tourist resort known as the Admiral Ben Bow
Inn.7 All required permits and licenses for the operation of the resort were
obtained in the name of Ginna Celestino, Joselyns sister.8
However, Benjamin and Joselyn had a falling out, and Joselyn ran away with
Kim Philippsen. On June 8, 1992, Joselyn executed a Special Power of Attorney
(SPA) in favor of Benjamin, authorizing the latter to maintain, sell, lease, and
sub-lease and otherwise enter into contract with third parties with respect to
their Boracay property.9
On July 20, 1992, Joselyn as lessor and petitioner Philip Matthews as lessee,
entered into an Agreement of Lease10(Agreement) involving the Boracay
property for a period of 25 years, with an annual rental of 12,000.00. The
agreement was signed by the parties and executed before a Notary Public.
Petitioner thereafter took possession of the property and renamed the resort as
Music Garden Resort.1avvphi1
Claiming that the Agreement was null and void since it was entered into by
Joselyn without his (Benjamins) consent, Benjamin instituted an action for
Declaration of Nullity of Agreement of Lease with Damages11 against Joselyn
and the petitioner. Benjamin claimed that his funds were used in the acquisition
and improvement of the Boracay property, and coupled with the fact that he
was Joselyns husband, any transaction involving said property required his
consent.
No Answer was filed, hence, the RTC declared Joselyn and the petitioner in
defeault. On March 14, 1994, the RTC rendered judgment by default declaring
the Agreement null and void.12 The decision was, however, set aside by the CA
in CA-G.R. SP No. 34054.13 The CA also ordered the RTC to allow the
petitioner to file his Answer, and to conduct further proceedings.
In his Answer,14 petitioner claimed good faith in transacting with Joselyn. Since
Joselyn appeared to be the owner of the Boracay property, he found it
unnecessary to obtain the consent of Benjamin. Moreover, as appearing in the
Agreement, Benjamin signed as a witness to the contract, indicating his
knowledge of the transaction and, impliedly, his conformity to the agreement
entered into by his wife. Benjamin was, therefore, estopped from questioning
the validity of the Agreement.
There being no amicable settlement during the pre-trial, trial on the merits
ensued.
On June 30, 1997, the RTC disposed of the case in this manner:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff and against the defendants as follows:
1. The Agreement of Lease dated July 20, 1992 consisting of eight (8) pages
(Exhibits "T", "T-1", "T-2", "T-3", "T-4", "T-5", "T-6" and "T-7") entered into
by and between Joselyn C. Taylor and Philip Matthews before Notary Public
Lenito T. Serrano under Doc. No. 390, Page 79, Book I, Series of 1992 is hereby
declared NULL and VOID;
2. Defendants are hereby ordered, jointly and severally, to pay plaintiff the sum
of SIXTEEN THOUSAND (16,000.00) PESOS as damages representing
unrealized income for the residential building and cottages computed monthly
from July 1992 up to the time the property in question is restored to plaintiff;
and
3. Defendants are hereby ordered, jointly and severally, to pay plaintiff the sum
of TWENTY THOUSAND (20,000.00) PESOS, Philippine Currency, for
attorneys fees and other incidental expenses.
SO ORDERED.15
The RTC considered the Boracay property as community property of Benjamin
and Joselyn; thus, the consent of the spouses was necessary to validate any
contract involving the property. Benjamins right over the Boracay property
was bolstered by the courts findings that the property was purchased and
improved through funds provided by Benjamin. Although the Agreement was
evidenced by a public document, the trial court refused to consider the alleged
participation of Benjamin in the questioned transaction primarily because his
signature appeared only on the last page of the document and not on every page
thereof.
On appeal to the CA, petitioner still failed to obtain a favorable decision. In its
December 19, 2003 Decision,16 the CA affirmed the conclusions made by the
RTC. The appellate court was of the view that if, indeed, Benjamin was a
willing participant in the questioned transaction, the parties to the Agreement
should have used the phrase "with my consent" instead of "signed in the
presence of." The CA noted that Joselyn already prepared an SPA in favor of
Benjamin involving the Boracay property; it was therefore unnecessary for
Joselyn to participate in the execution of the Agreement. Taken together, these
circumstances yielded the inevitable conclusion that the contract was null and
void having been entered into by Joselyn without the consent of Benjamin.
Aggrieved, petitioner now comes before this Court in this petition for review
on certiorari based on the following grounds:
4.1. THE MARITAL CONSENT OF RESPONDENT BENJAMIN TAYLOR
IS NOT REQUIRED IN THE AGREEMENT OF LEASE DATED 20 JULY
1992. GRANTING ARGUENDO THAT HIS CONSENT IS REQUIRED,
BENJAMIN TAYLOR IS DEEMED TO HAVE GIVEN HIS CONSENT
WHEN HE AFFIXED HIS SIGNATURE IN THE AGREEMENT OF LEASE
AS WITNESS IN THE LIGHT OF THE RULING OF THE SUPREME
COURT IN THE CASE OF SPOUSES PELAYO VS. MELKI PEREZ, G.R.
NO. 141323, JUNE 8, 2005.
4.2. THE PARCEL OF LAND SUBJECT OF THE AGREEMENT OF LEASE
IS THE EXCLUSIVE PROPERTY OF JOCELYN C. TAYLOR, A FILIPINO
CITIZEN, IN THE LIGHT OF CHEESMAN VS. IAC, G.R. NO. 74833,
JANUARY 21, 1991.
4.3. THE COURTS A QUO ERRONEOUSLY APPLIED ARTICLE 96 OF
THE FAMILY CODE OF THE PHILIPPINES WHICH IS A PROVISION
REFERRING TO THE ABSOLUTE COMMUNITY OF PROPERTY. THE
PROPERTY REGIME GOVERNING THE PROPERTY RELATIONS OF
BENJAMIN TAYLOR AND JOSELYN TAYLOR IS THE CONJUGAL
PARTNERSHIP OF GAINS BECAUSE THEY WERE MARRIED ON 30
JUNE 1988 WHICH IS PRIOR TO THE EFFECTIVITY OF THE FAMILY
CODE. ARTICLE 96 OF THE FAMILY CODE OF THE PHILIPPINES
FINDS NO APPLICATION IN THIS CASE.
4.4. THE HONORABLE COURT OF APPEALS IGNORED THE
PRESUMPTION OF REGULARITY IN THE EXECUTION OF NOTARIAL
DOCUMENTS.
28
4.5. THE HONORABLE COURT OF APPEALS FAILED TO PASS UPON
THE COUNTERCLAIM OF PETITIONER DESPITE THE FACT THAT IT
WAS NOT CONTESTED AND DESPITE THE PRESENTATION OF
EVIDENCE ESTABLISHING SAID CLAIM.17
The petition is impressed with merit.
In fine, we are called upon to determine the validity of an Agreement of Lease
of a parcel of land entered into by a Filipino wife without the consent of her
British husband. In addressing the matter before us, we are confronted not only
with civil law or conflicts of law issues, but more importantly, with a
constitutional question.
It is undisputed that Joselyn acquired the Boracay property in 1989. Said
acquisition was evidenced by a Deed of Sale with Joselyn as the vendee. The
property was also declared for taxation purposes under her name. When Joselyn
leased the property to petitioner, Benjamin sought the nullification of the
contract on two grounds: first, that he was the actual owner of the property since
he provided the funds used in purchasing the same; and second, that Joselyn
could not enter into a valid contract involving the subject property without his
consent.
The trial and appellate courts both focused on the property relations of
petitioner and respondent in light of the Civil Code and Family Code provisions.
They, however, failed to observe the applicable constitutional principles,
which, in fact, are the more decisive.
Section 7, Article XII of the 1987 Constitution states:18
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.1avvphi1
Aliens, whether individuals or corporations, have been disqualified from
acquiring lands of the public domain. Hence, by virtue of the aforecited
constitutional provision, they are also disqualified from acquiring private
lands.19The primary purpose of this constitutional provision is the conservation
of the national patrimony.20 Our fundamental law cannot be any clearer. The
right to acquire lands of the public domain is reserved only to Filipino citizens
or corporations at least sixty percent of the capital of which is owned by
Filipinos.21
In Krivenko v. Register of Deeds,22 cited in Muller v. Muller,23 we had the
occasion to explain the constitutional prohibition:
Under Section 1 of Article XIII of the Constitution, "natural resources, with the
exception of public agricultural land, shall not be alienated," and with respect
to public agricultural lands, their alienation is limited to Filipino citizens. But
this constitutional purpose conserving agricultural resources in the hands of
Filipino citizens may easily be defeated by the Filipino citizens themselves who
may alienate their agricultural lands in favor of aliens. It is partly to prevent this
result that Section 5 is included in Article XIII, and it reads as follows:
"Section 5. Save in cases of hereditary succession, no private agricultural land
will be transferred or assigned except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain in the
Philippines."
This constitutional provision closes the only remaining avenue through which
agricultural resources may leak into aliens hands. It would certainly be futile
to prohibit the alienation of public agricultural lands to aliens if, after all, they
may be freely so alienated upon their becoming private agricultural lands in the
hands of Filipino citizens. x x x
xxxx
If the term "private agricultural lands" is to be construed as not including
residential lots or lands not strictly agricultural, the result would be that "aliens
may freely acquire and possess not only residential lots and houses for
themselves but entire subdivisions, and whole towns and cities," and that "they
may validly buy and hold in their names lands of any area for building homes,
factories, industrial plants, fisheries, hatcheries, schools, health and vacation
resorts, markets, golf courses, playgrounds, airfields, and a host of other uses
and purposes that are not, in appellants words, strictly agricultural." (Solicitor
Generals Brief, p. 6) That this is obnoxious to the conservative spirit of the
Constitution is beyond question.24
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.25 There is no rule more settled than this constitutional
prohibition, as more and more aliens attempt to circumvent the provision by
trying to own lands through another. In a long line of cases, we have settled
issues that directly or indirectly involve the above constitutional provision. We
had cases where aliens wanted that a particular property be declared as part of
their fathers estate;26 that they be reimbursed the funds used in purchasing a
property titled in the name of another;27 that an implied trust be declared in their
(aliens) favor;28 and that a contract of sale be nullified for their lack of
consent.29
In Ting Ho, Jr. v. Teng Gui,30 Felix Ting Ho, a Chinese citizen, acquired a
parcel of land, together with the improvements thereon. Upon his death, his
heirs (the petitioners therein) claimed the properties as part of the estate of their
deceased father, and sought the partition of said properties among themselves.
We, however, excluded the land and improvements thereon from the estate of
Felix Ting Ho, precisely because he never became the owner thereof in light of
the above-mentioned constitutional prohibition.
In Muller v. Muller,31 petitioner Elena Buenaventura Muller and respondent
Helmut Muller were married in Germany. During the subsistence of their
marriage, respondent purchased a parcel of land in Antipolo City and
constructed a house thereon. The Antipolo property was registered in the name
of the petitioner. They eventually separated, prompting the respondent to file a
petition for separation of property. Specifically, respondent prayed for
reimbursement of the funds he paid for the acquisition of said property. In
deciding the case in favor of the petitioner, the Court held that respondent was
aware that as an alien, he was prohibited from owning a parcel of land situated
in the Philippines. He had, in fact, declared that when the spouses acquired the
Antipolo property, he had it titled in the name of the petitioner because of said
prohibition. Hence, we denied his attempt at subsequently asserting a right to
the said property in the form of a claim for reimbursement. Neither did the Court
declare that an implied trust was created by operation of law in view of
petitioners marriage to respondent. We said that to rule otherwise would permit
circumvention of the constitutional prohibition.
In Frenzel v. Catito,32 petitioner, an Australian citizen, was married to Teresita
Santos; while respondent, a Filipina, was married to Klaus Muller. Petitioner
and respondent met and later cohabited in a common-law relationship, during
which petitioner acquired real properties; and since he was disqualified from
owning lands in the Philippines, respondents name appeared as the vendee in
the deeds of sale. When their relationship turned sour, petitioner filed an action
for the recovery of the real properties registered in the name of respondent,
claiming that he was the real owner. Again, as in the other cases, the Court
refused to declare petitioner as the owner mainly because of the constitutional
prohibition. The Court added that being a party to an illegal contract, he could
not come to court and ask to have his illegal objective carried out. One who
loses his money or property by knowingly engaging in an illegal contract may
not maintain an action for his losses.
Finally, in Cheesman v. Intermediate Appellate Court,33 petitioner (an
American citizen) and Criselda Cheesman acquired a parcel of land that was
later registered in the latters name. Criselda subsequently sold the land to a
third person without the knowledge of the petitioner. The petitioner then sought
the nullification of the sale as he did not give his consent thereto. The Court
held that assuming that it was his (petitioners) intention that the lot in question
be purchased by him and his wife, he acquired no right whatever over the
property by virtue of that purchase; and in attempting to acquire a right or
interest in land, vicariously and clandestinely, he knowingly violated the
Constitution; thus, the sale as to him was null and void.
29
In light of the foregoing jurisprudence, we find and so hold that Benjamin has
no right to nullify the Agreement of Lease between Joselyn and petitioner.
Benjamin, being an alien, is absolutely prohibited from acquiring private and
public lands in the Philippines. Considering that Joselyn appeared to be the
designated "vendee" in the Deed of Sale of said property, she acquired sole
ownership thereto. This is true even if we sustain Benjamins claim that he
provided the funds for such acquisition. By entering into such contract knowing
that it was illegal, no implied trust was created in his favor; no reimbursement
for his expenses can be allowed; and no declaration can be made that the subject
property was part of the conjugal/community property of the spouses. In any
event, he had and has no capacity or personality to question the subsequent lease
of the Boracay property by his wife on the theory that in so doing, he was merely
exercising the prerogative of a husband in respect of conjugal property. To
sustain such a theory would countenance indirect controversion of the
constitutional prohibition. If the property were to be declared conjugal, this
would accord the alien husband a substantial interest and right over the land, as
he would then have a decisive vote as to its transfer or disposition. This is a
right that the Constitution does not permit him to have.34

In fine, the Agreement of Lease entered into between Joselyn and petitioner
cannot be nullified on the grounds advanced by Benjamin. Thus, we uphold its
validity.

With the foregoing disquisition, we find it unnecessary to address the other

issues raised by the petitioner.

WHEREFORE, premises considered, the December 19, 2003 Decision and July
14, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 59573, are
REVERSED and SET ASIDE and a new one is entered DISMISSING the
complaint against petitioner Philip Matthews.

SO ORDERED.

30
CASE DIGEST: Krivenko vs. The Register of Deeds, City of Manila

G.R. No. L-360 November 15, 1947 Ratio: Sec. 1, Art 13 of the Constitution talks about the conservation and
utilization of natural resources. The said provision embraces all lands of any
kind of the public domain. Its purpose is to establish a permanent and
fundamental policy for the conservation and utilization of all natural resources
ALEXANDER A. KRIVENKO, petitioner-appelant, vs. THE of the nation. Although it mentions agricultural, timber, and mineral lands, the
REGISTER OF DEEDS, CITY OF MANILA, respondent and appellee. court held that in determining whether a parcel of land is agricultural, the test
is not only whether it is actually agricultural, but also its susceptibility to
cultivation for agricultural purposes. Hence, public agricultural land was
FACTS: construed as referring to those lands that were not timber or mineral.
Therefore, it includes residential lands.

Alexander Krivenko, an alien, bought a residential lot in December of 1941.

The registration was interrupted by war. In 1945, he sought to accomplish the
StatCon maxim: If the only issue is a constitutional question which is
registration but was denied by the register of deed on ground that, being an
unavoidable, the court should confront the question and decide the case on the
alien, he cannot acquire land within the jurisdiction. Krivenko appealed to the
merits.
Court.

ISSUES: Krivenko vs Register of Deeds, GR No. L-630, November 15, 1947; 79

Phil 461

1. Whether or not an alien under our Constitution may acquire residential
land?
2. Whether or not the prohibitions of the rights to acquire residential lot that
was already of private ownership prior to the approval of this Constitutions is
applicable at the case at bar?
RULING:
(Land Titles and Deeds Aliens disqualified from acquiring public and
private lands)
Facts: An alien bought a residential lot and its registration was denied by the
Register of Deeds on the ground that being an alien, he cannot acquire land in
this jurisdiction. When the former brought the case to the CFI, the court
rendered judgement sustaining the refusal of the Register of Deeds.
Issue: WON an alien may own private lands in the Philippines.

Held. No. Public agricultural lands mentioned in Sec. 1, Art. XIII of the
1. NO. Under the Article XIII, Section 1, of the Constitution states that: All
1935 Constitution, include residential, commercial and industrial lands, the
agricultural, timber, and mineral lands of the public domain, water, minerals,
Court stated:
coal, petroleum, and other mineral oils, all forces of potential energy, and
other natural resources of the Philippines belong to the State, and their Natural resources, with the exception of public agricultural land, shall not be
disposition, exploitation, development, or utilization shall be limited to alienated, and with respect to public agricultural lands, their alienation is
citizens of the Philippines, or to corporations or associations at least sixty per limited to Filipino citizens. But this constitutional purpose conserving
centum of the capital of which is owned by such citizens, subject to any agricultural resources in the hands of Filipino citizens may easily be defeated
existing right, grant, lease, or concession at the time of the inauguration of the by the Filipino citizens themselves who may alienate their agricultural lands
Government established under this Constitution. This means to say that, under in favor of aliens.
the provisions of the Constitutions, aliens are not allowed to acquire the
ownership of urban or residential lands in the Philippines and, as Thus Section 5, Article XIII provides:
consequence, all acquisitions made in contravention of the prohibitions since
the fundamental law became effective are null and void per se and ab initio. Save in cases of hereditary succession, no private agricultural lands will be
transferred or assigned except to individuals, corporations or associations
2. Prior to the Constitution, there were in the Public Land Act No. 2874 qualified to acquire or hold lands of the public domain in the Philippines.
sections 120 and 121 which granted aliens the right to acquire private only by
way of reciprocity. It is to be observed that the pharase "no land" used in this
section refers to all private lands, whether strictly agricultural, residential or
otherwise, there being practically no private land which had not been acquired
by any of the means provided in said two sections. Therefore, the prohibition
contained in these two provisions was, in effect, that no private land could be
transferred to aliens except "upon express authorization by the Philippine
Legislature, to citizens of Philippine Islands the same right to acquire, hold,
lease, encumber, dispose of, or alienate land." In other words, aliens were
granted the right to acquire private land merely by way of reciprocity.

Facts: Alexander Krivenko, an alien, bought a residential lot from Magdalena

Estate Inc. in December 1941. The registration was interrupted by the war. In
May 1945, he sought to accomplish the said registration but was denied by the
Register of Deeds of Manila on the grounds that he is a foreigner and he
cannot acquire a land in this jurisdiction. Krivenko brought the case to the CFI
of Manila. The CFI ruled that he cannot own a land, being an alien. Hence,
this petition.

Issue: Whether or not an alien may own private lands in the Philippines.

Held: No.

31
G.R. No. L-630 November 15, 1947
ALEXANDER A. KRIVENKO, petitioner-appellant,
vs.
THE REGISTER OF DEEDS, CITY OF MANILA, respondent and
appellee.
Gibbs, Gibbs, Chuidian and Quasha of petitioner-appellant.
First Assistant Solicitor General Reyes and Solicitor Carreon for respondent-
appellee.
Marcelino Lontok appeared as amicus curies.
MORAN, C.J.:
Alenxander A. Kriventor alien, bought a residential lot from the Magdalena
Estate, Inc., in December of 1941, the registration of which was interrupted by
the war. In May, 1945, he sought to accomplish said registration but was denied
by the register of deeds of Manila on the ground that, being an alien, he cannot
acquire land in this jurisdiction. Krivenko then brought the case to the fourth
branch of the Court of First Instance of Manila by means of a consulta, and that
court rendered judgment sustaining the refusal of the register of deeds, from
which Krivenko appealed to this Court.
There is no dispute as to these facts. The real point in issue is whether or not an
alien under our Constitution may acquire residential land.
It is said that the decision of the case on the merits is unnecessary, there being
a motion to withdraw the appeal which should have been granted outright, and
reference is made to the ruling laid down by this Court in another case to the
effect that a court should not pass upon a constitutional question if its judgment
may be made to rest upon other grounds. There is, we believe, a confusion of
ideas in this reasoning. It cannot be denied that the constitutional question is
unavoidable if we choose to decide this case upon the merits. Our judgment
cannot to be made to rest upon other grounds if we have to render any judgment
at all. And we cannot avoid our judgment simply because we have to avoid a
constitutional question. We cannot, for instance, grant the motion withdrawing
the appeal only because we wish to evade the constitutional; issue. Whether the
motion should be, or should not be, granted, is a question involving different
considerations now to be stated.
According to Rule 52, section 4, of the Rules of Court, it is discretionary upon
this Court to grant a withdrawal of appeal after the briefs have been presented.
At the time the motion for withdrawal was filed in this case, not only had the
briefs been prensented, but the case had already been voted and the majority
decision was being prepared. The motion for withdrawal stated no reason
whatsoever, and the Solicitor General was agreeable to it. While the motion was
pending in this Court, came the new circular of the Department of Justice,
instructing all register of deeds to accept for registration all transfers of
residential lots to aliens. The herein respondent-appellee was naturally one of
the registers of deeds to obey the new circular, as against his own stand in this
case which had been maintained by the trial court and firmly defended in this
Court by the Solicitor General. If we grant the withdrawal, the the result would
be that petitioner-appellant Alexander A. Krivenko wins his case, not by a
decision of this Court, but by the decision or circular of the Department of
Justice, issued while this case was pending before this Court. Whether or not
this is the reason why appellant seeks the withdrawal of his appeal and why the
Solicitor General readily agrees to that withdrawal, is now immaterial. What is
material and indeed very important, is whether or not we should allow
interference with the regular and complete exercise by this Court of its
constitutional functions, and whether or not after having held long deliberations
and after having reached a clear and positive conviction as to what the
constitutional mandate is, we may still allow our conviction to be silenced, and
the constitutional mandate to be ignored or misconceived, with all the harmful
consequences that might be brought upon the national patromony. For it is but
natural that the new circular be taken full advantage of by many, with the
circumstance that perhaps the constitutional question may never come up again
before this court, because both vendors and vendees will have no interest but to
uphold the validity of their transactions, and very unlikely will the register of
deeds venture to disobey the orders of their superior. Thus, the possibility for
this court to voice its conviction in a future case may be remote, with the result
that our indifference of today might signify a permanent offense to the
Constitution.
All thse circumstances were thoroughly considered and weighted by this Court
for a number of days and the legal result of the last vote was a denial of the
motion withdrawing the appeal. We are thus confronted, at this stage of the
proceedings, with our duty, the constitutional question becomes unavoidable.
We shall then proceed to decide that question.
Article XIII, section 1, of the Constitutional is as follows:
Article XIII. Conservation and utilization of natural resources.
SECTION 1. All agricultural, timber, and mineral lands of the public domain,
water, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, and other natural resources of the Philippines belong to the State, and
their disposition, exploitation, development, or utilization shall be limited to
citizens of the Philippines, or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, subject to any existing
right, grant, lease, or concession at the time of the inaguration of the
Government established uunder this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no licence,
concession, or lease for the exploitation, development, or utilization of any of
the natural resources shall be granted for a period exceeding twenty-five years,
renewable for another twenty-five years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of water
"power" in which cases beneficial use may be the measure and the limit of the
grant.
The scope of this constitutional provision, according to its heading and its
language, embraces all lands of any kind of the public domain, its purpose being
to establish a permanent and fundamental policy for the conservation and
utilization of all natural resources of the Nation. When, therefore, this
provision, with reference to lands of the public domain, makes mention of only
agricultural, timber and mineral lands, it means that all lands of the public
domain are classified into said three groups, namely, agricultural, timber and
mineral. And this classification finds corroboration in the circumstance that at
the time of the adoption of the Constitution, that was the basic classification
existing in the public laws and judicial decisions in the Philippines, and the term
"public agricultural lands" under said classification had then acquired a
technical meaning that was well-known to the members of the Constitutional
Convention who were mostly members of the legal profession.
As early as 1908, in the case of Mapa vs. Insular Government (10 Phil., 175,
182), this Court said that the phrase "agricultural public lands" as defined in the
Act of Congress of July 1, 1902, which phrase is also to be found in several
sections of the Public Land Act (No. 926), means "those public lands acquired
from Spain which are neither mineral for timber lands." This definition has been
followed in long line of decisions of this Court. (See Montano vs.Insular
Government, 12 Phil., 593; Ibaez de Aldecoa vs. Insular Government, 13 Phil.,
159; Ramos vs. Director of Lands, 39 Phil., 175; Jocson vs. Director of
Forestry, 39 Phil., 560; Ankron vs. Government of the Philippines, 40 Phil., 10.)
And with respect to residential lands, it has been held that since they are neither
mineral nor timber lands, of necessity they must be classified as agricultural. In
Ibaez de Aldecoa vs. Insular Government (13 Phil., 159, 163), this Court said:
Hence, any parcel of land or building lot is susceptible of cultivation, and may
be converted into a field, and planted with all kinds of vegetation; for this
reason, where land is not mining or forestal in its nature, it must necessarily be
included within the classification of agricultural land, not because it is actually
used for the purposes of agriculture, but because it was originally agricultural
and may again become so under other circumstances; besides, the Act of
Congress contains only three classification, and makes no special provision
with respect to building lots or urban lands that have ceased to be agricultural
land.
In other words, the Court ruled that in determining whether a parcel of land is
agricultural, the test is not only whether it is actually agricultural, but also its
susceptibility to cultivation for agricultural purposes. But whatever the test
32
might be, the fact remains that at the time the Constitution was adopted, lands
of the public domain were classified in our laws and jurisprudence into
agricultural, mineral, and timber, and that the term "public agricultural lands"
was construed as referring to those lands that were not timber or mineral, and
as including residential lands. It may safely be presumed, therefore, that what
the members of the Constitutional Convention had in mind when they drafted
the Constitution was this well-known classification and its technical meaning
then prevailing.
Certain expressions which appear in Constitutions, . . . are obviously technical;
and where such words have been in use prior to the adoption of a Constitution,
it is presumed that its framers and the people who ratified it have used such
expressions in accordance with their technical meaning. (11 Am. Jur., sec. 66,
p. 683.) AlsoCalder vs. Bull, 3 Dall. [U.S.], 386; 1 Law. ed., 648;
Bronson vs. Syverson, 88 Wash., 264; 152 P., 1039.)
It is a fundamental rule that, in construing constitutions, terms employed therein
shall be given the meaning which had been put upon them, and which they
possessed, at the time of the framing and adoption of the instrument. If a word
has acquired a fixed, technical meaning in legal and constitutional history, it
will be presumed to have been employed in that sense in a written Constitution.
(McKinney vs. Barker, 180 Ky., 526; 203 S.W., 303; L.R.A., 1918 E, 581.)
Where words have been long used in a technical sense and have been judicially
construed to have a certain meaning, and have been adopted by the legislature
as having a certain meaning prior to a particular statute in which they are used,
the rule of construction requires that the words used in such statute should be
construed according to the sense in which they have been so previously used,
although the sense may vary from strict literal meaning of the words. (II
Sutherland, Statutory Construction, p. 758.)
Therefore, the phrase "public agricultural lands" appearing in section 1 of
Article XIII of the Constitution must be construed as including residential lands,
and this is in conformity with a legislative interpretation given after the
adoption of the Constitution. Well known is the rule that "where the Legislature
has revised a statute after a Constitution has been adopted, such a revision is to
be regarded as a legislative construction that the statute so revised conforms to
the Constitution." (59 C.J., 1102.) Soon after the Constitution was adopted, the
National Assembly revised the Public Land Law and passed Commonwealth
Act No. 141, and sections 58, 59 and 60 thereof permit the sale of residential
lots to Filipino citizens or to associations or corporations controlled by such
citizens, which is equivalent to a solemn declaration that residential lots are
considered as agricultural lands, for, under the Constitution, only agricultural
lands may be alienated.
It is true that in section 9 of said Commonwealth Act No. 141, "alienable or
disposable public lands" which are the same "public agriculture lands" under
the Constitution, are classified into agricultural, residential, commercial,
industrial and for other puposes. This simply means that the term "public
agricultural lands" has both a broad and a particular meaning. Under its broad
or general meaning, as used in the Constitution, it embraces all lands that are
neither timber nor mineral. This broad meaning is particularized in section 9 of
Commonwealth Act No. 141 which classifies "public agricultural lands" for
purposes of alienation or disposition, into lands that are stricly agricultural or
actually devoted to cultivation for agricultural puposes; lands that are
residential; commercial; industrial; or lands for other purposes. The fact that
these lands are made alienable or disposable under Commonwealth Act No.
141, in favor of Filipino citizens, is a conclusive indication of their character as
public agricultural lands under said statute and under the Constitution.
It must be observed, in this connection that prior to the Constitution, under
section 24 of Public Land Act No. 2874, aliens could acquire public agricultural
lands used for industrial or residential puposes, but after the Constitution and
under section 23 of Commonwealth Act No. 141, the right of aliens to acquire
such kind of lands is completely stricken out, undoubtedly in pursuance of the
constitutional limitation. And, again, prior to the Constitution, under section 57
of Public Land Act No. 2874, land of the public domain suitable for residence
or industrial purposes could be sold or leased to aliens, but after the
Constitution and under section 60 of Commonwealth Act No. 141, such land
may only be leased, but not sold, to aliens, and the lease granted shall only be
valid while the land is used for the purposes referred to. The exclusion of sale
in the new Act is undoubtedly in pursuance of the constitutional limitation, and
this again is another legislative construction that the term "public agricultural
land" includes land for residence purposes.
Such legislative interpretation is also in harmony with the interpretation given
by the Executive Department of the Government. Way back in 1939, Secretary
of Justice Jose Abad Santos, in answer to a query as to "whether or not the
phrase 'public agricultural lands' in section 1 of Article XII (now XIII) of the
Constitution may be interpreted to include residential, commercial, and
industrial lands for purposes of their disposition," rendered the following short,
sharp and crystal-clear opinion:
Section 1, Article XII (now XIII) of the Constitution classifies lands of the
public domain in the Philippines into agricultural, timber and mineral. This is
the basic classification adopted since the enactment of the Act of Congress of
July 1, 1902, known as the Philippine Bill. At the time of the adoption of the
Constitution of the Philippines, the term 'agricultural public lands' and,
therefore, acquired a technical meaning in our public laws. The Supreme Court
of the Philippines in the leading case of Mapa vs. Insular Government, 10 Phil.,
175, held that the phrase 'agricultural public lands' means those public lands
acquired from Spain which are neither timber nor mineral lands. This
definition has been followed by our Supreme Court in many subsequent case. .
..
Residential commercial, or industrial lots forming part of the public domain
must have to be included in one or more of these classes. Clearly, they are
neither timber nor mineral, of necessity, therefore, they must be classified as
agricultural.
Viewed from another angle, it has been held that in determining whether lands
are agricultural or not, the character of the land is the test (Odell vs. Durant, 62
N.W., 524; Lorch vs. Missoula Brick and Tile Co., 123 p.25). In other words, it
is the susceptibility of the land to cultivation for agricultural purposes by
ordinary farming methods which determines whether it is agricultural or not
(State vs. Stewart, 190 p. 129).
Furthermore, as said by the Director of Lands, no reason is seen why a piece of
land, which may be sold to a person if he is to devote it to agricultural, cannot
be sold to him if he intends to use it as a site for his home.
This opinion is important not alone because it comes from a Secratary of Justice
who later became the Chief Justice of this Court, but also because it was
rendered by a member of the cabinet of the late President Quezon who actively
participated in the drafting of the constitutional provision under consideration.
(2 Aruego, Framing of the Philippine Constitution, p. 598.) And the opinion of
the Quezon administration was reiterated by the Secretary of Justice under the
Osmea administration, and it was firmly maintained in this Court by the
Solicitor General of both administrations.
It is thus clear that the three great departments of the Government judicial,
legislative and executive have always maintained that lands of the public
domain are classified into agricultural, mineral and timber, and that agricultural
lands include residential lots.
Under section 1 of Article XIII of the Constitution, "natural resources, with the
exception of public agricultural land, shall not be aliented," and with respect to
public agricultural lands, their alienation is limited to Filipino citizens. But this
constitutional purpose conserving agricultural resources in the hands of Filipino
citizens may easily be defeated by the Filipino citizens themselves who may
alienate their agricultural lands in favor of aliens. It is partly to prevent this
result that section 5 is included in Article XIII, and it reads as follows:
Sec. 5. Save in cases of hereditary succession, no private agricultural land will
be transferred or assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the Philippines.
This constitutional provision closes the only remaining avenue through which
agricultural resources may leak into aliens' hands. It would certainly be futile
33
to prohibit the alienation of public agricultural lands to aliens if, after all, they
may be freely so alienated upon their becoming private agricultural lands in the
hands of Filipino citizens. Undoubtedly, as above indicated, section 5 is
intended to insure the policy of nationalization contained in section 1. Both
sections must, therefore, be read together for they have the same purpose and
the same subject matter. It must be noticed that the persons against whom the
prohibition is directed in section 5 are the very same persons who under section
1 are disqualified "to acquire or hold lands of the public domain in the
Philippines." And the subject matter of both sections is the same, namely, the
non-transferability of "agricultural land" to aliens. Since "agricultural land"
under section 1 includes residential lots, the same technical meaning should be
attached to "agricultural land under section 5. It is a rule of statutory
construction that "a word or phrase repeated in a statute will bear the same
meaning throughout the statute, unless a different intention appears." (II
Sutherland, Statutory Construction, p. 758.) The only difference between
"agricultural land" under section 5, is that the former is public and the latter
private. But such difference refers to ownership and not to the class of land. The
lands are the same in both sections, and, for the conservation of the national
patrimony, what is important is the nature or class of the property regardless of
whether it is owned by the State or by its citizens.
Reference is made to an opinion rendered on September 19, 1941, by the Hon.
Teofilo Sison, then Secretary of Justice, to the effect that residential lands of
the public domain may be considered as agricultural lands, whereas residential
lands of private ownership cannot be so considered. No reason whatsoever is
given in the opinion for such a distinction, and no valid reason can be adduced
for such a discriminatory view, particularly having in mind that the purpose of
the constitutional provision is the conservation of the national patrimony, and
private residential lands are as much an integral part of the national patrimony
as the residential lands of the public domain. Specially is this so where, as
indicated above, the prohibition as to the alienable of public residential lots
would become superflous if the same prohibition is not equally applied to
private residential lots. Indeed, the prohibition as to private residential lands
will eventually become more important, for time will come when, in view of
the constant disposition of public lands in favor of private individuals, almost
all, if not all, the residential lands of the public domain shall have become
private residential lands.
It is maintained that in the first draft of section 5, the words "no land of private
ownership" were used and later changed into "no agricultural land of private
ownership," and lastly into "no private agricultural land" and from these
changes it is argued that the word "agricultural" introduced in the second and
final drafts was intended to limit the meaning of the word "land" to land actually
used for agricultural purposes. The implication is not accurate. The wording of
the first draft was amended for no other purpose than to clarify concepts and
avoid uncertainties. The words "no land" of the first draft, unqualified by the
word "agricultural," may be mistaken to include timber and mineral lands, and
since under section 1, this kind of lands can never be private, the prohibition to
transfer the same would be superfluous. Upon the other hand, section 5 had to
be drafted in harmony with section 1 to which it is supplementary, as above
indicated. Inasmuch as under section 1, timber and mineral lands can never be
private, and the only lands that may become private are agricultural lands, the
words "no land of private ownership" of the first draft can have no other
meaning than "private agricultural land." And thus the change in the final draft
is merely one of words in order to make its subject matter more specific with a
view to avoiding the possible confusion of ideas that could have arisen from the
first draft.
If the term "private agricultural lands" is to be construed as not including
residential lots or lands not strictly agricultural, the result would be that "aliens
may freely acquire and possess not only residential lots and houses for
themselves but entire subdivisions, and whole towns and cities," and that "they
may validly buy and hold in their names lands of any area for building homes,
factories, industrial plants, fisheries, hatcheries, schools, health and vacation
resorts, markets, golf courses, playgrounds, airfields, and a host of other uses
and purposes that are not, in appellant's words, strictly agricultural." (Solicitor
General's Brief, p. 6.) That this is obnoxious to the conservative spirit of the
Constitution is beyond question.
One of the fundamental principles underlying the provision of Article XIII of
the Constitution and which was embodied in the report of the Committee on
Nationalization and Preservation of Lands and other Natural Resources of the
Constitutional Convention, is "that lands, minerals, forests, and other natural
resources constitute the exclusive heritage of the Filipino nation. They should,
therefore, be preserved for those under the sovereign authority of that nation
and for their posterity." (2 Aruego, Framing of the Filipino Constitution, p.
595.) Delegate Ledesma, Chairman of the Committee on Agricultural
Development of the Constitutional Convention, in a speech delivered in
connection with the national policy on agricultural lands, said: "The exclusion
of aliens from the privilege of acquiring public agricultural lands and of
owning real estate is a necessary part of the Public Land Laws of the
Philippines to keep pace with the idea of preserving the Philippines for the
Filipinos." (Emphasis ours.) And, of the same tenor was the speech of Delegate
Montilla who said: "With the complete nationalization of our lands and natural
resources it is to be understood that our God-given birthright should be one
hundred per cent in Filipino hands . . .. Lands and natural resources are
immovables and as such can be compared to the vital organs of a person's body,
the lack of possession of which may cause instant death or the shortening of
life. If we do not completely antionalize these two of our most important
belongings, I am afraid that the time will come when we shall be sorry for the
time we were born. Our independence will be just a mockery, for what kind of
independence are we going to have if a part of our country is not in our hands
but in those of foreigners?" (Emphasis ours.) Professor Aruego says that since
the opening days of the Constitutional Convention one of its fixed and
dominating objectives was the conservation and nationalization of the natural
resources of the country. (2 Aruego, Framing of the Philippine Constitution, p
592.) This is ratified by the members of the Constitutional Convention who are
now members of this Court, namely, Mr. Justice Perfecto, Mr. Justice Briones,
and Mr. Justice Hontiveros. And, indeed, if under Article XIV, section 8, of the
Constitution, an alien may not even operate a small jitney for hire, it is certainly
not hard to understand that neither is he allowed to own a pieace of land.
This constitutional intent is made more patent and is strongly implemented by
an act of the National Assembly passed soon after the Constitution was
approved. We are referring again to Commonwealth Act No. 141. Prior to the
Constitution, there were in the Public Land Act No. 2874 sections 120 and 121
which granted aliens the right to acquire private only by way of reciprocity.
Said section reads as follows:
SEC. 120. No land originally acquired in any manner under the provisions of
this Act, nor any permanent improvement on such land, shall be encumbered,
alienated, or transferred, except to persons, corporations, associations, or
partnerships who may acquire lands of the public domain under this Act; to
corporations organized in the Philippine Islands authorized therefor by their
charters, and, upon express authorization by the Philippine Legislature, to
citizens of countries the laws of which grant to citizens of the Philippine Islands
the same right to acquire, hold, lease, encumber, dispose of, or alienate land, or
permanent improvements thereon, or any interest therein, as to their own
citizens, only in the manner and to the extent specified in such laws, and while
the same are in force but not thereafter.
SEC. 121. No land originally acquired in any manner under the provisions of
the former Public Land Act or of any other Act, ordinance, royal order, royal
decree, or any other provision of law formerly in force in the Philippine Islands
with regard to public lands, terrenos baldios y realengos, or lands of any other
denomination that were actually or presumptively of the public domain or by
royal grant or in any other form, nor any permanent improvement on such land,
shall be encumbered, alienated, or conveyed, except to persons, corporations,
or associations who may acquire land of the public domain under this Act; to
corporate bodies organized in the Philippine Islands whose charters may
authorize them to do so, and, upon express authorization by the Philippine
Legislature, to citizens of the countries the laws of which grant to citizens of
the Philippine Islands the same right to acquire, hold, lease, encumber, dispose
of, or alienate land or pemanent improvements thereon or any interest therein,
as to their own citizens, and only in the manner and to the extent specified in
such laws, and while the same are in force, but not thereafter: Provided,
however, That this prohibition shall not be applicable to the conveyance or
34
acquisition by reason of hereditary succession duly acknowledged and legalized
by competent courts, nor to lands and improvements acquired or held for
industrial or residence purposes, while used for such purposes: Provided,
further, That in the event of the ownership of the lands and improvements
mentioned in this section and in the last preceding section being transferred by
judicial decree to persons,corporations or associations not legally capacitated
to acquire the same under the provisions of this Act, such persons, corporations,
or associations shall be obliged to alienate said lands or improvements to others
so capacitated within the precise period of five years, under the penalty of such
property reverting to the Government in the contrary case." (Public Land Act,
No. 2874.)
It is to be observed that the pharase "no land" used in these section refers to all
private lands, whether strictly agricultural, residential or otherwise, there being
practically no private land which had not been acquired by any of the means
provided in said two sections. Therefore, the prohibition contained in these two
provisions was, in effect, that no private land could be transferred to aliens
except "upon express authorization by the Philippine Legislature, to citizens of
Philippine Islands the same right to acquire, hold, lease, encumber, dispose of,
or alienate land." In other words, aliens were granted the right to acquire private
land merely by way of reciprocity. Then came the Constitution and
Commonwealth Act No. 141 was passed, sections 122 and 123 of which read
as follows:
SEC. 122. No land originally acquired in any manner under the provisions of
this Act, nor any permanent improvement on such land, shall be encumbered,
alienated, or transferred, except to persons, corporations, associations, or
partnerships who may acquire lands of the public domain under this Act or to
corporations organized in the Philippines authorized thereof by their charters.
SEC. 123. No land originally acquired in any manner under the provisions of
any previous Act, ordinance, royal order, royal decree, or any other provision
of law formerly in force in the Philippines with regard to public lands terrenos
baldios y realengos, or lands of any other denomination that were actually or
presumptively of the public domain, or by royal grant or in any other form, nor
any permanent improvement on such land, shall be encumbered, alienated, or
conveyed, except to persons, corporations or associations who may acquire land
of the public domain under this Act or to corporate bodies organized in the
Philippines whose charters authorize them to do so: Provided, however, That
this prohibition shall not be applicable to the conveyance or acquisition by
reason of hereditary succession duly acknowledged and legalized by competent
courts: Provided, further, That in the event of the ownership of the lands and
improvements mentioned in this section and in the last preceding section being
transferred by judicial decree to persons, corporations or associations not
legally capacitated to acquire the same under the provisions of this Act, such
persons, corporations, or associations shall be obliged to alienate said lands or
improvements to others so capacitated within the precise period of five years;
otherwise, such property shall revert to the Government.
And, finally, on June 14, 1947, the Congress approved Republic Act No. 133
which allows mortgage of "private real property" of any kind in favor of aliens
but with a qualification consisting of expressly prohibiting aliens to bid or take
part in any sale of such real property as a consequence of the mortgage. This
prohibition makes no distinction between private lands that are strictly
agricultural and private lands that are residental or commercial. The prohibition
embraces the sale of private lands of any kind in favor of aliens, which is again
a clear implementation and a legislative interpretation of the constitutional
prohibition. Had the Congress been of opinion that private residential lands may
be sold to aliens under the Constitution, no legislative measure would have been
found necessary to authorize mortgage which would have been deemed also
permissible under the Constitution. But clearly it was the opinion of the
Congress that such sale is forbidden by the Constitution and it was such opinion
that prompted the legislative measure intended to clarify that mortgage is not
within the constitutional prohibition.
It is well to note at this juncture that in the present case we have no choice. We
are construing the Constitution as it is and not as we may desire it to be. Perhaps
the effect of our construction is to preclude aliens, admitted freely into the
Philippines from owning sites where they may build their homes. But if this is
the solemn mandate of the Constitution, we will not attempt to compromise it
even in the name of amity or equity. We are satisfied, however, that aliens are
not completely excluded by the Constitution from the 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
fortunes and misfortunes, Filipino citizenship is not impossible to acquire.
For all the foregoing, we hold that under the Constitution aliens may not acquire
private or public agricultural lands, including residential lands, and,
accordingly, judgment is affirmed, without costs.
Feria, Pablo, Perfecto, Hilado, and Briones, JJ., concur.

These two sections are almost literally the same as sections 120 and 121 of Act
No. 2874, the only difference being that in the new provisions, the right to
reciprocity granted to aliens is completely stricken out. This, undoubtedly, is to
conform to the absolute policy contained in section 5 of Article XIII of the
Constitution which, in prohibiting the alienation of private agricultural lands to
aliens, grants them no right of reciprocity. This legislative construction carries
exceptional weight, for prominent members of the National Assembly who
approved the new Act had been members of the Constitutional Convention.

It is said that the lot question does not come within the purview of sections 122
and 123 of Commonwealth Act No. 141, there being no proof that the same had
been acquired by one of the means provided in said provisions. We are not,
however, diciding the instant case under the provisions of the Public Land Act,
which have to refer to land that had been formerly of the public domain,
otherwise their constitutionality may be doubtful. We are deciding the instant
case under section 5 of Article XIII of the Constitution which is more
comprehensive and more absolute in the sense that it prohibits the transfer to
alien of any private agricultural land including residential land whatever its
origin might have been.

35
G.R. No. L-33048 April 16, 1982
EPIFANIA SARSOSA VDA. DE BARSOBIA and PACITA W. VALLAR,
petitioners,
vs.
VICTORIANO T. CUENCO, respondent.
MELENCIO-HERRERA, J.:
Sought to be reviewed herein is the judgment dated August 18, 1970, of the
Court of Appeals, 1 rendered in CA-G.R. No. 41318-R, entitled "Victoriano T.
Cuenco, Plaintiff-appellant, vs. Epifania Sarsosa Vda. de Barsobia and Pacita
W. Vallar, Defendants- appellees, " declaring Victoriano T. Cuenco (now the
respondent) as the absolute owner of the coconut land in question.
The lot in controversy is a one-half portion (on the northern side) of two
adjoining parcels of coconut land located at Barrio Mancapagao, Sagay,
Camiguin, Misamis Oriental (now Camiguin province), with an area of 29,150
square meters, more or less. 2
The entire land was owned previously by a certain Leocadia Balisado, who had
sold it to the spouses Patricio Barsobia (now deceased) and Epifania Sarsosa,
one of the petitioners herein. They are Filipino citizens.
On September 5, 1936, Epifania Sarsosa then a widow, sold the land in
controversy to a Chinese, Ong King Po, for the sum of P1,050.00 (Exhibit "B").
Ong King Po took actual possession and enjoyed the fruits thereof.
On August 5, 1961, Ong King Po sold the litigated property to Victoriano T.
Cuenco (respondent herein), a naturalized Filipino, for the sum of P5,000.00
(Exhibit "A"). Respondent immediately took actual possession and harvested
the fruits therefrom.
On March 6, 1962, Epifania "usurped" the controverted property, and on July
26, 1962, Epifania (through her only daughter and child, Emeteria Barsobia),
sold a one-half (1/2) portion of the land in question to Pacita W. Vallar, the
other petitioner herein (Exhibit "2"). Epifania claimed that it was not her
intention to sell the land to Ong King Po and that she signed the document of
sale merely to evidence her indebtedness to the latter in the amount of
P1,050.00. Epifania has been in possession ever since except for the portion
sold to the other petitioner Pacita.
On September 19, 1962, respondent filed a Forcible Entry case against Epifania
before the Municipal Court of Sagay, Camiguin. The case was dismissed for
lack of jurisdiction since, as the laws then stood, the question of possession
could not be properly determined without first settling that of ownership.
On December 27, 1966, respondent instituted before the Court of First Instance
of Misamis Oriental a Complaint for recovery of possession and ownership of
the litigated land, against Epifania and Pacita Vallar (hereinafter referred to
simply as petitioners).
In their Answer below, petitioners insisted that they were the owners and
possessors of the litigated land; that its sale to Ong King Po, a Chinese, was
inexistent and/or void ab initio; and that the deed of sale between them was only
an evidence of Epifania's indebtedness to Ong King Po.
The trial Court rendered judgment:
1. Dismissing the complaint with costs against plaintiff (respondent herein).
2. Declaring the two Deeds of Sale, Exhibits A and B, respectively, inexistent
and void from the beginning; and
3. Declaring defendant Pacita W. Vallar as the lawful owner and possessor of
the portion of land she bought from Emeteria Barsobia (pp. 57, 67, Record.) 3
On appeal, the Court of Appeals reversed the aforementioned Decision and
decreed instead that respondent was the owner of the litigated property, thus:
xxx xxx xxx
In view of all the foregoing considerations, the judgment appealed from is
hereby reversed. In lieu thereof, we render judgment:
(a) Declaring the plaintiff-appellant Victoriano T. Cuenco the absolute owner
of the land in question, with the right of possession thereof;
(b) Ordering the defendants-appellees to restore the possession of said land to
the plaintiff;
(c) Dismissing the defendants' counterclaim;
(d) Condemning the defendants to pay to the plaintiff the sum of
P10,000.00 representing the latter's share from the sale of copra which he failed
to receive since March, 1962 when he was deprived of his possession over the
land, and which defendants illegally appropriated it to their own use and benefit,
plus legal interest from the filing of the complaint until fully paid; plus
P2,000.00 representing expenses and attorney's fees;
(e) Sentencing the defendants to pay the costs.
SO ORDERED. 4
Following the denial of their Motion for Reconsideration, petitioners filed the
instant Petition for Review on certiorari with this Court on January 21, 1971.
Petitioners claim that the Court of Appeals erred:
I. ... when it reversed the judgment of the trial court declaring petitioner Pacita
W. Vallar as the lawful possessor and owner of the portion of land she
purchased from Emeteria Barsobia, not a party to this case, there being no
evidence against her.
II ... when it included petitioner Pacita W. Vallar to pay P10,000.00, with legal
interest from the filing of the complaint, representing respondent's share in the
harvest and to pay the costs, there being no evidence against her.
III. ... when it condemned petitioners to pay P2,000.00 representing expenses
and attorney's fees, there being no factual, legal and equitable justification.
IV. ... in not applying the rule on pari delicto to the facts of the case or the
doctrine enunciated ... in the case of Philippine Banking Corporation vs. Lui
She, L-17587, September 12, 1967, to ... Petitioner Epifania Sarsosa Vda. de
Barsobia.
V. ... in denying, for lack of sufficient merits, petitioners' motion for rehearing
or reconsideration of its decision. 5
As the facts stand, a parcel of coconut land was sold by its Filipino owner,
petitioner Epifania, to a Chinese, Ong King Po, and by the latter to a naturalized
Filipino, respondent herein. In the meantime, the Filipino owner had
unilaterally repudiated the sale she had made to the Chinese and had resold the
property to another Filipino. The basic issue is: Who is the rightful owner of
the property?
There should be no question that the sale of the land in question in 1936 by
Epifania to Ong King Po was inexistent and void from the beginning (Art. 1409
[7], Civil Code) 6 because it was a contract executed against the mandatory
provision of the 1935 Constitution, which is an expression of public policy to
conserve lands for the Filipinos. Said provision reads:
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. 7
Had this been a suit between Epifania and Ong King Po, she could have been
declared entitled to the litigated land on the basis, as claimed, of the ruling
in Philippine Banking Corporation vs. Lui She, 8 reading:
... For another thing, and this is not only cogent but also important. Article 1416
of the Civil Code provides as an exception to the rule on pari delicto that when
the agreement is not illegal per se but is merely prohibited, and the prohibition
36
by the law is designed for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has sold or delivered. ...

But the factual set-up has changed. The litigated property is now in the hands
of a naturalized Filipino. It is no longer owned by a disqualified vendee.
Respondent, as a naturalized citizen, was constitutionally qualified to own the
subject property. There would be no more public policy to be served in allowing
petitioner Epifania to recover the land as it is already in the hands of a qualified
person. Applying by analogy the ruling of this Court in Vasquez vs. Giap and
Li Seng Giap & Sons: 9

... if the ban on aliens from acquiring not only agricultural but also urban lands,
as construed by this Court in the Krivenko case, is to preserve the nation's lands
for future generations of Filipinos, that aim or purpose would not be thwarted
but achieved by making lawful the acquisition of real estate by aliens who
became Filipino citizens by naturalization.

While, strictly speaking, Ong King Po, private respondent's vendor, had no
rights of ownership to transmit, it is likewise inescapable that petitioner
Epifania had slept on her rights for 26 years from 1936 to 1962. By her long
inaction or inexcusable neglect, she should be held barred from asserting her
claim to the litigated property (Sotto vs. Teves, 86 SCRA 157 [1978]).

Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due diligence could
or should have been done earlier; it is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. (Tijam, et al. vs.
Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35). (cited in
Sotto vs. Teves, 86 SCRA 154 [1978]).

Respondent, therefore, must be declared to be the rightful owner of the property.

The award of actual damages in respondent's favor of P10,000.00, as well as of

attorney's fees and expenses of litigation of P2,000.00, is justified. Respondent
was deprived of the possession of his land and the enjoyment of its fruits from
March, 1962. The Court of Appeals fixed respondent's share of the sale of copra
at P10,000.00 for eight years at four (4) harvests a year. The accuracy of this
finding has not been disputed.

However, we find merit in the assigned error that petitioner, Pacita Vallar,
should not be held also liable for actual damages to respondent. In the absence
of contrary proof, she, too, must be considered as a vendee in good faith of
petitioner Epifania.

The award of attorney's fees and litigation expenses in the sum of P2,000.00 in
respondent's favor is in order considering that both petitioners compelled
respondent to litigate for the protection of his interests. Moreover, the amount
is reasonable. 10

WHEREFORE, except for that portion holding petitioner, Pacita W. Vallar,

also liable for damages of P10,000.00, the appealed judgment is hereby
affirmed.

Costs against petitioners.

SO ORDERED.

37
G.R. No. L-69344 April 26, 1991
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and SPOUSES ANTONIO and
CLARA PASTOR, respondents.
Roberto L. Bautista for private respondents.
GRIO-AQUINO, J.:
The legal issue presented in this petition for review is whether or not the tax
amnesty payments made by the private respondents on October 23, 1973 bar an
action for recovery of deficiency income taxes under P.D.'s Nos. 23, 213 and
370.
On April 15, 1980, the Republic of the Philippines, through the Bureau of
Internal Revenue, commenced an action in the Court of First Instance (now
Regional Trial Court) of Manila, Branch XVI, to collect from the spouses
Antonio Pastor and Clara Reyes-Pastor deficiency income taxes for the years
1955 to 1959 in the amount of P17,117.08 with a 5% surcharge and 1% monthly
interest, and costs.
The Pastors filed a motion to dismiss the complaint, but the motion was
denied.1wphi1 On August 2, 1975, they filed an answer admitting there was
an assessment against them of P17,117.08 for income tax deficiency but
denying liability therefor. They contended that they had availed of the tax
amnesty under P.D.'s Nos. 23, 213 and 370 and had paid the corresponding
amnesty taxes amounting to P10,400 or 10% of their reported untaxed income
under P.D. 23, P2,951.20 or 20% of the reported untaxed income under P.D.
213, and a final payment on October 26, 1973 under P.D. 370 evidenced by the
Government's Official Receipt No. 1052388. Consequently, the Government is
in estoppel to demand and compel further payment of income taxes by them.
The parties agreed that there were no issues of fact to be litigated, hence, the
case was submitted for decision upon the pleadings and memoranda on the lone
legal question of: whether or not the payment of deficiency income tax under
the tax amnesty, P.D. 23, and its acceptance by the Government operated to
divest the Government of the right to further recover from the taxpayer, even if
there was an existing assessment against the latter at the time he paid the
amnesty tax.
It is not disputed that as a result of an investigation made by the Bureau of
Internal Revenue in 1963, it was found that the private respondents owed the
Government P1,283,621.63 as income taxes for the years 1955 to 1959,
inclusive of the 50% surcharge and 1% monthly interest. The defendants
protested against the assessment. A reinvestigation was conducted resulting in
the drastic reduction of the assessment to only P17,117.08.
It appears that on April 27, 1978, the private respondents offered to pay the
Bureau of Internal Revenue the sum of P5,000 by way of compromise
settlement of their income tax deficiency for the questioned years, but Assistant
Commissioner Bernardo Carpio, in a letter addressed to the Pastor spouses,
rejected the offer stating that there was no legal or factual justification for
accepting it. The Government filed the action against the spouses in 1980, ten
(10) years after the assessment of the income tax deficiency was made.
On a motion for judgment on the pleadings filed by the Government, which the
spouses did not oppose, the trial court rendered a decision on February 28, 1980,
holding that the defendants spouses had settled their income tax deficiency for
the years 1955 to 1959, not under P.D. 23 or P.D. 370, but under P.D. 213, as
shown in the Amnesty Income Tax Returns' Summary Statement and the tax
Payment Acceptance Order for P2,951.20 with its corresponding official
receipt, which returns also contain the very assessment for the questioned years.
By accepting the payment of the amnesty income taxes, the Government,
therefore, waived its right to further recover deficiency incomes taxes "from the
defendants under the existing assessment against them because:
1. the defendants' amnesty income tax returns' Summary Statement included
therein the deficiency assessment for the years 1955 to 1959;
2. tax amnesty payment was made by the defendants under Presidential Decree
No. 213, hence, it had the effect of remission of the income tax deficiency for
the years 1955 to 1959;
3. P.D. No. 23 as well as P.D. No. 213 do not make any exceptions nor impose
any conditions for their application, hence, Revenue Regulation No. 7-73 which
excludes certain taxpayers from the coverage of P.D. No. 213 is null and void,
and
4. the acceptance of tax amnesty payment by the plaintiff-appellant bars the
recovery of deficiency taxes. (pp. 3-4, IAC Decision, pp. 031-032, Rollo.)
The Government appealed to the Intermediate Appellant Court (AC G.R. CV
No. 68371 entitled, "Republic of the Philippines vs. Antonio Pastor, et al."),
alleging that the private respondents were not qualified to avail of the tax
amnesty under P.D. 213 for the benefits of that decree are available only to
persons who had no pending assessment for unpaid taxes, as provided in
Revenue Regulations Nos. 8-72 and 7-73. Since the Pastors did in fact have a
pending assessment against them, they were precluded from availing of the
amnesty granted in P.D.'s Nos. 23 and 213. The Government further argued that
"tax exemptions should be interpreted strictissimi juris against the taxpayer."
The respondent spouses, on the other hand, alleged that P.D. 213 contains no
exemptions from its coverage and that, under Letter of Instruction LOI 129
dated September 18, 1973, the immunities granted by P.D. 213 include:
II-Immunities Granted.
Upon payment of the amounts specified in the Decree, the following shall be
observed:
1. . . . .
2. The taxpayer shall not be subject to any investigation, whether civil, criminal
or administrative, insofar as his declarations in the income tax returns are
concerned nor shall the same be used as evidence against, or to the prejudice of
the declarant in any proceeding before any court of law or body, whether
judicial, quasi-judicial or administrative, in which he is a defendant or
respondent, and he shall be exempt from any liability arising from or incident
to his failure to file his income tax return and to pay the tax due thereon, as well
as to any liability for any other tax that may be due as a result of business
transactions from which such income, now voluntarily declared may have been
derived. (Emphasis supplied; p. 040, Rollo.)
There is nothing in the LOI which can be construed as authority for the Bureau
of Internal Revenue to introduce exceptions and/or conditions to the coverage
of the law.
On November 23, 1984, the Intermediate Appellate Court (now Court of
Appeals) rendered a decision dismissing the Government's appeal and holding
that the payment of deficiency income taxes by the Pastors under PD. No. 213,
and the acceptance thereof by the Government, operated to divest the latter of
its right to further recover deficiency income taxes from the private respondents
pursuant to the existing deficiency tax assessment against them. The appellate
court held that if Revenue Regulation No. 7-73 did provide an exception to the
coverage of P.D. 213, such provision was null and void for being contrary to,
or restrictive of, the clear mandate of P.D. No. 213 which the regulation should
implement. Said revenue regulation may not prevail over the provisions of the
decree, for it would then be an act of administrative legislation, not mere
implementation, by the Bureau of Internal Revenue.
On February 4, 1986, the Republic of the Philippines, through the Solicitor
General, filed this petition for review of the decision dated November 23, 1984
of the Intermediate Appellate Court affirming the dismissal, by the Court of
First Instance of Manila, of the Government's complaint against the respondent
spouses.
The petition is devoid of merit.
38
Even assuming that the deficiency tax assessment of P17,117.08 against the
Pastor spouses were correct, since the latter have already paid almost the
equivalent amount to the Government by way of amnesty taxes under P.D. No.
213, and were granted not merely an exemption, but an amnesty, for their past
tax failings, the Government is estopped from collecting the difference between
the deficiency tax assessment and the amount already paid by them as amnesty
tax.

A tax amnesty, being a general pardon or intentional overlooking by the State

of its authority to impose penalties on persons otherwise guilty of evasion or
violation of a revenue or tax law, partakes of an absolute forgiveness or waiver
by the Government of its right to collect what otherwise would be due it, and in
this sense, prejudicial thereto, particularly to give tax evaders, who wish to
relent and are willing to reform a chance to do so and thereby become a part of
the new society with a clean slate (Commission of Internal Revenue vs. Botelho
Corp. and Shipping Co., Inc., 20 SCRA 487).

The finding of the appellate court that the deficiency income taxes were paid
by the Pastors, and accepted by the Government, under P.D. 213, granting
amnesty to persons who are required by law to file income tax returns but who
failed to do so, is entitled to the highest respect and may not be disturbed except
under exceptional circumstances which have already become familiar (Rule 45,
Sec. 4, Rules of Court; e.g., where: (1) the conclusion is a finding grounded
entirely on speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is
based on misapprehension of facts; (5) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the admissions of both the
appellant and the appellee; (6) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (7) said findings of fact are conclusions
without citation of specific evidence in which they are based; (8) the facts set
forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondents; and (9) when the finding of fact of the Court of
Appeals is premised on the absense of evidence and is contradicted by the
evidence on record (Thelma Fernan vs. CA, et al., 181 SCRA
546, citing Tolentino vs. de Jesus, 56 SCRA 67; People vs. Traya, 147 SCRA
381), none of which is present in this case.

The rule is that in case of doubt, tax statutes are to be construed strictly against
the Government and liberally in favor of the taxpayer, for taxes, being burdens,
are not to be presumed beyond what the applicable statute (in this case P.D.
213) expressly and clearly declares (Commission of Internal Revenue vs. La
Tondena, Inc. and CTA, 5 SCRA 665, citing Manila Railroad Company vs.
Collector of Customs, 52 Phil, 950).

WHEREFORE, the petition for review is denied. No costs.

SO ORDERED.

39
G.R. No. L-3676 January 31, 1955
SOCORRO VASQUEZ, plaintiff-appellant,
vs.
LI SENG GIAPand LI SENG GIAP & SONS, defendants-appellees.
Jose S. Sarte for appellant.
Lee, Orendain and Guzman for appellees.
PADILLA, J.:
This is an action to rescind the sale of a parcel of land together with the
improvements erected thereon, described in the complaint, which was sold by
the plaintiff to the defendant Li Seng Giap on 22 January 1940, on the ground
that the vendee was an alien and under the Constitution incapable to own and
hold title to lands. The case was decided upon the following stipulation of facts:
Plaintiff and defendants in the above-entitled case, by their respective attorneys,
hereby stipulate and agree that the facts involved in this litigation are as
follows:.
That plaintiff and defendant Li Seng Giap are, and were at all times mentioned
herein, of legal age and residents of the City of Manila, Philippines; that
defendant Li Seng Giap & Sons, Inc., is a corporation duly organized and
existing under and by virtue of the laws of the Philippines, with principal office
in the City of Manila, Philippines.
II.
That on January 22, 1940, plaintiff sold and transferred to defendant Li Seng
Giap, then Chinese citizen, for the sum of P14,500, a parcel of land together
with a house of strong materials existing thereon, more particularly bounded
and described as follows:.
A PARCEL OF LAND (Lot No. 22-A of the subdivision plan Psd-15360, being
a portion of Lot No. 22, Block No. 2809 of the Cadastral survey of Manila,
G.L.R.O. Cadastral Record No. 192), situated in the District of Tondo, City of
Manila. Bounded on the NE. by lot No. 23, Block No. 2809, on the SE. by Lot
No. 22-B, Block No. 2809; on the SW. by Lot No. 21, Block No. 2809; and on
the NW. by Calle Magdalena; * * * containing an area of four hundred twenty-
three square meters and forty-five square decimeters (423.45) more or less.
(Assessed Value P15,579.00).
III.
That on August 21, 1940, defendant Li Seng Giap sold and transferred unto
defendant Li Seng Giap & Sons, Inc., whose shareholdings then were owned
by Chinese citizens, for the same sum of P14,500, the above-mentioned parcel,
together with the improvements thereon, and duly registered under Transfer
Certificate of Title No. 59684 of the Office of the Register of Deeds for the city
of Manila on August 23, 1940.
IV.
That defendant Li Seng Giap was duly naturalized as a Filipino citizen on May
10, 1941, under Certificate of Naturalization No. 515, the records of which were
duly reconstituted under an order of this Honorable Court in Case No. R-603
dated May 24, 1946.
V.
That defendant Li Seng Giap & Sons, Inc., is now a Filipino corporation, 96.67
per cent of its stock being owned by Filipinos, and duly authorized by its articles
of incorporation to own, acquire or dispose of real properties.
VI.
That the following are the names and respective citizenship and shareholdings
of the present stockholders of Li Seng Giap & Sons, Inc:
Names Citizenship No. of Shares Per cent Total Amount.
Li Seng Giap Filipino 3,400 56.67 P340,000.00 Tang Ho de Li Seng Giap
Filipino 1,200 20.00 120,000.00 William Lee Filipino 200 3.33 20,000.00
Henry Lee Filipino 200 3.33 20,000.00 Thomas J. Lee Filipino 200 3.33
20,000.00 Sofia Lee Teehankee Filipino 200 3.33 20,000.00 Julian M. Lee
Filipino 200 3.33 20,000.00 Anthony P. Lee Chinese 200 3.33 20,000.00 6,000
100.00% P600,000.00.
VII.
That Henry Lee was duly naturalized as a Filipino citizen on October 21, 1936,
under Certificate of Naturalization No. 352, the records of which were duly
reconstituted under an order of this Honorable Court in Case No. R-407 dated
May 24, 1946.
VIII.
That Thomas J. Lee was duly naturalized as a Filipino citizen on May 10, 1941,
under Certificate of Naturalization No. 516, the records of which were duly
reconstituted under an order of this Honorable Court in Case No. R-604 dated
May 24, 1946.
IX.
That William Lee was duly naturalized as a Filipino citizen on November 1,
1948, under Certificate of Naturalization No. 2 of the Court of First Instance of
Daet, Camarines Norte.
X.
That Sofia Lee Teehankee is a Filipino citizen being married to Dr. Rafael
Teehankee, a Filipino citizen.
XI.
That Julia M. Lee and Charles Lee are both Filipinos by operation of law as
they were both minors when their father, Li Seng Giap, became a Filipino
citizen on May 10, 1941.
Manila, Philippines, September 7, 1949.
Respectfully Submitted:
(Sgd.) JOSE S. SARTE Counsel for the Plaintiff Room 213 Central Hotel,
Manila.
LEE, ORENDAIN, & GUZMAN Counsel for the Defendants 60 Novaliches
St., Manila.
By: (Sgd.) LEONARDO M. GUZMAN
The Court rendered judgment dismissing the complaint with cost against the
plaintiff. She has appealed.
In Caoile vs. Yu Chiao, 49 Off. Gaz., 4321; Talento vs. Makiki, 49 Off. Gaz.,
4331; Bautista vs. Uy 49 Off. Gaz., 4331; Rellosa vs. Gaw Chee, 49 Off. Gaz.,
4345 and Mercado vs. Go Bio, 49 Off. Gaz., 5360, the majority of this Court
has ruled that in Sales of real estate to aliens incapable of holding title thereto
by virtue of the provisions of the Constitution 1 both the vendor and the vendee
are deemed to have committed the constitutional violation and being thus in
pari delicto the courts will not afford protection to either party. 2 From this
ruling three Justices dissented.3
The action is not of rescission because it is not postulated upon any of the
grounds provided for in Article 1291 of the old Civil Code and because the
action of rescission involves lesion or damage and seeks to repair it. It is an
action for annulment under Chapter VI, Title II, Book II, on nullity of contracts,
based on a defect in the contract which invalidates it independently of such
lesion or damages. 4 It is very likely that the majority of this Court proceeded
upon that theory when it applied the in pari delicto rule referred to above.
In the United States the rule is that in a sale of real estate to an alien disqualified
to hold title thereto the vendor divests himself of the title to such real estate and
40
has no recourse against the vendee despite the latter's disability on account of
alienage to hold title to such real estate and the vendee may hold it against the
whole except as against the State. It is only the State that is entitled by
proceedings in the nature of office found to have a forfeiture or escheat declared
against the vendee who is incapable of holding title to the real estate sold and
conveyed to him.5

However, if the State does not commence such proceedings and in the meantime
the alien becomes naturalized citizen the State is deemed to have waived its
right to escheat the real property and the title of the alien thereto becomes lawful
and valid as of the date of its conveyance or transfer to him. 6 The Rule in the
United States that in a sale of real estate to an alien disqualified to hold title
thereto, the vendor divests himself of the title to such real estate and is not
permitted to sue for the annulment of his contract, is also the rule under the
Civil Code. * * *Article 1302 of the old Civil Code provides: * * *Persons sui
juris cannot, however, avail themselves of the incapacity of those with whom
they contracted; * * *.".

Manresa's comment on this clause of article 1302 of the Civil Code is as

follows:.

Irresponsabilidad del defecto alegada. Es la segunda de las condiciones

necesarias para el ejercicio de la accion. Algunos la expresan diciendo que solo
puede intrenar aquella el perjudicado, pero esta expresion puede conducir a
ideas equivocadas, ya quela nulidad es independiente de la lesion, como declara
el art. 1.300, y es licito al favorecido economicamente por el contrato pedir la
nulidad basandose en causas a el no imputables, y en cambio no autoriza la ley
el caso inverso.

Sencilla la regla contenida en el parrafo segundo de este articulo,puede

complicarse cuando coexisten dos defectos del contrato, comopuede suceder,
derivandose a veces de un mismo hecho, verbigracia,el contrato celebrado con
un incapaz por quien ignora que lo es: eneste ejemplo es indudable que la
persona capaz no podra pedir lanulidad fundado en la incapacidad de la otra,
pero si alegar elerror o el dolo que padeciera si las circunstancias del sujetoeran
de decisiva influencia en el contrato. (Supra, pp.709-709.).

Appellant argues that if at the time of the conveyance of the real property the
appellee was incapable of holding title to such real estate, the contract of sale
was null or void and may be annulled, and his subsequent naturalization as a
Filipino citizen cannot retroact to the date of the conveyance to make it lawful
and valid. However, if the ban on aliens from acquiring not only agricultural
but also urban lands, as construed by this Court in the Krivenko case, is to
preserve the nation's lands for future generations of Filipinos, that aim or
purpose would not be thwarted but achieved by making lawful the acquisition
of real estate by aliens who became Filipino citizens by naturalization. The title
to the parcel of land of the vendee, a naturalized Filipino citizen, being valid
that of the domestic corporation to which the parcel of land has been transferred,
must also be valid, 96.67 per cent of its capital stock being owned by Filipinos.

The judgment appealed from is affirmed, without costs.

Paras, C.J., Pablo, Bengzon, Montemayor, Reyes, A., Jugo, Bautista Angelo,
and Labrador, JJ., concur.

Separate Opinions

REYES, J.B.L., J., concurring:.

I fully concur with the opinion of Justice Padilla, but wish to stress, as an
additional reason for the decision in the present case, that when this action was
instituted in 1948, the disability of the original vendee had been already
removed, since he was naturalized in 1941; and that the stockholders of the
second transferee, Li Seng Giap & Sons, Inc., who hold more than 60 per cent
of its capital stock, had likewise become Filipino citizens before, and not after,
the action to annul was filed.

41
G.R. Nos. 113472-73 December 20, 1994
ONG CHING PO, YU SIOK LIAN DAVID ONG and JIMMY
ONG, petitioners,
vs.
COURT OF APPEALS and SOLEDAD PARIAN, respondents.
Bautista, Salva, Arrieta, Salva for petitioner.
Arthem Maceda Potian for private respondent.
QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court of the Decision of the Court of Appeals dated July 15, 1993, which
dismissed the petition for certiorari in CA-G.R. CV Nos. 28391-92.
I
On July 23, 1947, Ong Joi Jong sold a parcel of land located at Fundidor Street,
San Nicolas to private respondent Soledad Parian, the wife of Ong Yee. The
latter, the brother of petitioner Ong Ching Po, died in January 1983; while
petitioner Ong Ching Po died in October 1986. The said sale was evidenced by
a notarized Deed of Sale written in English. Subsequently, the document was
registered with the Register of Deeds of Manila, which issued Transfer
Certificate of Title No. 9260 dated September 2, 1947 in the name of private
respondent.
According to private respondent, she entrusted the administration of the lot and
building to petitioner Ong Ching Po when she and her husband settled in Iloilo.
When her husband died, she demanded that the lot be vacated because she was
going to sell it. Unfortunately, petitioners refused to vacate the said premises.
On March 19, 1984, private respondent filed a case for unlawful detainer
against petitioner Ong Ching Po before the Metropolitan Trial Court of Manila,
Branch 26. The inferior court dismissed her case. The dismissal was affirmed
by the Regional Trial Court, Branch 10, Manila. The decision of the Regional
Trial Court was, in turn, affirmed by the Court of Appeals, which dismissed the
petition. The decision of the Court of Appeals became final and executory.
Petitioners, on the other hand, claimed that on July 23, 1946, petitioner Ong
Ching Po bought the said parcel of land from Ong Joi Jong. The sale was
evidenced by a photo copy of a Deed of Sale written in Chinese with the letter
head "Sincere Trading Co." (Exh. "B"). An English translation of said document
(Exh. "C") read as follows:
Deed of Sale
I, Ong Joi Jong, a party to this Deed of Sale hereby sell in absolutely (sic)
manner a lot located on No. 4 Fundidor Street, San Nicolas an (sic) area
consisting 213 square meters including a one-story house erected thereon unto
Mr. Ong Ching Po for the sum of P6,000.00 the receipt of which is hereby
acknowledged by me and consequently I have executed and signed the
government registered title (sic) the said lot inclusive of the house erected
thereon, now belong (sic) to Mr. Ong Ching Po unequivocally. And the purpose
of this document is to precisely serve as proof of the sale.
Addendum: I have acceded to the request of Mr. Ong Ching Po into signing
another document in favor of Soledad Parian (She is the Filipino wife of Ong
Yee, brother of Ong Ching Po) for the purpose of facilitating the issuance of
the new title by the City Register of Deeds and for the reason that he is not yet
a Filipino. I certify to the truthfulness of this fact.
Lot Seller: Ong Joi Jong
(Exhibits for the plaintiff, p. 4)
On December 6, 1983, petitioner Ong Ching Po executed a Deed of Absolute
Sale conveying to his children, petitioners Jimmy and David Ong, the same
property sold by Ong Joi Jong to private respondent in 1947. On December 12
1985, petitioners Ong Ching Po, Jimmy Ong and David Ong filed an action for
reconveyance and damages against private respondent in the Regional Trial
Court, Branch 53, Manila, docketed as Case No. 85-33962.
On July 26, 1986, private respondent filed an action for quieting of title against
petitioners Ong Ching Po and his wife, petitioner Yu Siok Lian, in the Regional
Trial Court, Branch 58, Manila, docketed as Civil Case No.
86-36818. Upon her motion, the case was consolidated with Civil Case No.
85-33962. On May 30 1990, the trial court rendered a decision in favor of
private respondent. On appeal by petitioners to the Court of Appeals, the said
court affirmed the decision of the Regional Trial Court.
Hence, this petition.
II
According to petitioners, the Court of Appeals erred:
(1) When it gave full faith and credit to the Deed of Sale (Exh. "A") in favor of
private respondent, instead of the Deed of Sale (Exh. "B" and its translation,
Exh. "C") in favor of petitioner Ong Ching Po.
(2) When it concluded that the acts of petitioners were not acts of ownership;
and
(3) When it ruled that no express nor implied trust existed between petitioners
and private respondent (Rollo, pp. 17-18).
As stated by petitioners themselves, what is in dispute ". . . is not so much as to
which between Exhibit "A" and "Exhibit "B" is more weighty, but whether this
document is what it purports to be (i.e., a deed of conveyance in favor of
Soledad Parian [private respondent] or it was only resorted to or executed as a
subterfuge because the real buyer (Ong Ching Po) was an alien and it was
agreed upon between Ong Ching Po and his brother (Ong Yee, Soledad Parian's
husband) that the land be registered in the name of Soledad Parian in order to
avoid legal complications and to facilitate registration and transfer and that the
said title would be transferred by Soledad to Ong Ching Po or his successors-
in-interest and that she would be holding the title in trust for him" (Rollo, pp.
19-20).
We cannot go along with the claim that petitioner Ong Ching Po merely used
private respondent as a dummy to have the title over the parcel of land
registered in her name because being an alien he was disqualified to own real
property in the Philippines. To sustain such an outrageous contention would be
giving a high premium to a violation of our nationalization laws.
Assuming that Exhibit "B" is in existence and that it was duly executed, still
petitioners cannot claim ownership of the disputed lot by virtue thereof.
Section 5, Article XIII of the 1935 Constitution provides, as follows:
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.
Section 14, Article XIV of the 1973 Constitution provides, as follows:
Save in cases of hereditary succession, no private land shall be transferred or
conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands in the public domain.
Section 7, Article XII of the 1987 Constitution provides:
Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands in the public domain.
The capacity to acquire private land is made dependent upon the capacity to
acquire or hold lands of the public domain. Private land may be transferred or
conveyed only to individuals or entities "qualified to acquire lands of the public
domain" (II Bernas, The Constitution of the Philippines 439-440 [1988 ed.]).
42
The 1935 Constitution reserved the right to participate in the "disposition,
exploitation, development and utilization" of all "lands of the public domain
and other natural resources of the Philippines" for Filipino citizens or
corporations at least sixty percent of the capital of which was owned by
Filipinos. Aliens, whether individuals or corporations, have been disqualified
from acquiring public lands; hence, they have also been disqualified from
acquiring private lands.
proponent must establish the former existence of the document. The correct
order of proof is as follows: existence; execution; loss; contents. This order may
be changed if necessary in the discretion of the court (De Vera v. Aguilar, 218
SCRA 602 [1993]).
Petitioners failed to adduce evidence as to the genuineness and due execution
of the deed of sale, Exhibit "B".

Petitioner Ong Ching Po was a Chinese citizen; therefore, he was disqualified The due execution of the document may be established by the person or persons
from acquiring and owning real property. Assuming that the genuineness and who executed it; by the person before whom its execution was acknowledged;
due execution of Exhibit "B" has been established, the same is null and void, it or by any person who was present and saw it executed or who after its execution,
being contrary to law. saw it and recognized the signatures; or by a person to whom the parties to the
instrument had previously confessed the execution thereof (De Vera v.
On the other end of the legal spectrum, the deed of sale executed by Ong Joi Aguilar, supra).
Jong in favor of private respondent (Exh. "A") is a notarized document.
Petitioner Yu Siok Lian testified that she was present when said document was
To remove the mantle of validity bestowed by law on said document, petitioners executed, but the trial court rejected her claim and held:
claim that private respondent admitted that she did not pay anything as
consideration for the purported sale in her favor. In the same breath, petitioners If it is true that she was present, why did she not sign said document, even
said that private respondent implied in her deposition that it was her husband merely as a witness? Her oral testimony is easy to concoct or fabricate.
who paid for the property. It appears, therefore, that the sale was financed out Furthermore, she was married only on September 6, 1946 to the plaintiff, Ong
of conjugal funds and that it was her husband who handled the transaction for Ching Po, in Baguio City where she apparently resided, or after the deed of sale
the purchase of the property. Such transaction is a common practice in Filipino- was executed. The Court does not believe that she was present during the
family affairs. execution and signing of the deed of sale involved therein, notwithstanding her
pretensions to the contrary (Decision p. 6, Records p. 414).
It is not correct to say that private respondent never took possession of the
property. Under the law, possession is transferred to the vendee by virtue of the As to the contention of petitioners that all the tax receipts, tax declaration, rental
notarized deed of conveyance. Under Article 1498 of the Civil Code of the receipts, deed of sale (Exh. "B") and transfer certificate of title were in their
Philippines, "when the sale is made through a public instrument, the execution possession, private respondent explained that she and her husband entrusted
thereof shall be equivalent to the delivery of the object of the contract, if from said lot and building to petitioners when they moved to Iloilo.
the deed the contrary does not appear or cannot clearly be inferred." If what
As observed by the Court of Appeals:
petitioners meant was that private respondent never lived in the building
constructed on said land, it was because her family had settled in Iloilo. We find, however, that these acts, even if true, are not necessarily reflective of
dominion, as even a mere administrator or manager may lawfully perform them
There is no document showing the establishment of an express trust by
pursuant to his appointment or employment (Rollo,
petitioner Ong Ching Po as trustor and private respondent as trustee. Not even
p. 10).
Exhibit "B" can be considered as such a document because private respondent,
the registered owner of the property subject of said "deed of sale," was not a It is markworthy that all the tax receipts were in the name of private respondent
party thereto. The oral testimony to prove the existence of the express trust will and her husband. The rental receipts were also in the name of her husband.
not suffice. Under Article 1443 of the Civil Code of the Philippines, "No
express trust concerning an immovable or any interest therein may be proved WHEREFORE, the petition is DISMISSED.
by parole evidence."
SO ORDERED.
Undaunted, petitioners argue that if they cannot prove an express trust in
writing, they can prove an implied trust orally. While an implied trust may be
proved orally (Civil Code of the Philippines, Art. 1457), the evidence must be
trustworthy and received by the courts with extreme caution, because such kind
of evidence may be easily fabricated (Salao v. Salao, 70 SCRA 65 [1976]). It
cannot be made to rest on vague and uncertain evidence or on loose, equivocal
or indefinite declarations (Cf. De Leon v. Molo-Peckson, et al., 116 Phil. 1267
[1962]). Petitioners do not claim that Ong Yee was not in a financial position
to acquire the land and to introduce the improvements thereon. On the other
hand, Yu Siok Lian, the wife of petitioner Ong Ching Po, admitted in her
testimony in court that Ong Yee was a stockholder of Lam Sing Corporation
and was engaged in business.

The Court of Appeals did not give any credence to Exhibit "B" and its
translation, Exhibit "C", because these documents had not been properly
authenticated.

Under Section 4, Rule 130 of the Revised Rules of Court:

Secondary Evidence when Original is lost or destroyed. When the original

writing has been lost or destroyed, or cannot be produced in court, upon proof
of its execution and lost or destruction, or unavailability, its contents may be
proved by a copy, or by a recital of its contents in some authentic document, or
by the recollection of the witnesses.

Secondary evidence is admissible when the original documents were actually

lost or destroyed. But prior to the introduction of such secondary evidence, the

43
[G.R. No. 143958. July 11, 2003]
ALFRED FRITZ FRENZEL, petitioner, vs. EDERLINA P.
CATITO, respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review of the Decision[1] of the Court of Appeals in
CA-G.R. CV No. 53485 which affirmed the Decision[2] of the Regional Trial
Court of Davao City, Branch 14, in Civil Case No. 17,817 dismissing the
petitioners complaint, and the resolution of the Court of Appeals denying his
motion for reconsideration of the said decision.
The Antecedents[3]
As gleaned from the evidence of the petitioner, the case at bar stemmed from
the following factual backdrop:
Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He
is an electrical engineer by profession, but worked as a pilot with the New
Guinea Airlines. He arrived in the Philippines in 1974, started engaging in
business in the country two years thereafter, and married Teresita Santos, a
Filipino citizen. In 1981, Alfred and Teresita separated from bed and board
without obtaining a divorce.
Sometime in February 1983, Alfred arrived in Sydney, Australia for a vacation.
He went to Kings Cross, a night spot in Sydney, for a massage where he met
Ederlina Catito, a Filipina and a native of Bajada, Davao City. Unknown to
Alfred, she resided for a time in Germany and was married to Klaus Muller, a
German national. She left Germany and tried her luck in Sydney, Australia,
where she found employment as a masseuse in the Kings Cross nightclub. She
was fluent in German, and Alfred enjoyed talking with her. The two saw each
other again; this time Ederlina ended up staying in Alfreds hotel for three days.
Alfred gave Ederlina sums of money for her services.[4]
Alfred was so enamored with Ederlina that he persuaded her to stop working at
Kings Cross, return to the Philippines, and engage in a wholesome business of
her own. He also proposed that they meet in Manila, to which she assented.
Alfred gave her money for her plane fare to the Philippines. Within two weeks
of Ederlinas arrival in Manila, Alfred joined her. Alfred reiterated his proposal
for Ederlina to stay in the Philippines and engage in business, even offering to
finance her business venture. Ederlina was delighted at the idea and proposed
to put up a beauty parlor. Alfred happily agreed.
Alfred told Ederlina that he was married but that he was eager to divorce his
wife in Australia. Alfred proposed marriage to Ederlina, but she replied that
they should wait a little bit longer.
Ederlina found a building at No. 444 M.H. del Pilar corner Arquiza Street,
Ermita, Manila, owned by one Atty. Jose Hidalgo who offered to convey his
rights over the property for P18,000.00. Alfred and Ederlina accepted the
offer. Ederlina put up a beauty parlor on the property under the business name
Edorial Beauty Salon, and had it registered with the Department of Trade and
Industry under her name. Alfred paid Atty. Hidalgo P20,000.00 for his right
over the property and gave P300,000.00 to Ederlina for the purchase of
equipment and furnitures for the parlor. As Ederlina was going to Germany, she
executed a special power of attorney on December 13, 1983 [5] appointing her
brother, Aser Catito, as her attorney-in-fact in managing the beauty parlor
business. She stated in the said deed that she was married to Klaus
Muller. Alfred went back to Papua New Guinea to resume his work as a pilot.
When Alfred returned to the Philippines, he visited Ederlina in her Manila
residence and found it unsuitable for her. He decided to purchase a house and
lot owned by Victoria Binuya Steckel in San Francisco del Monte, Quezon City,
covered by Transfer Certificate of Title No. 218429 for US$20,000.00. Since
Alfred knew that as an alien he was disqualified from owning lands in the
Philippines, he agreed that only Ederlinas name would appear in the deed of
sale as the buyer of the property, as well as in the title covering the same. After
all, he was planning to marry Ederlina and he believed that after their marriage,
the two of them would jointly own the property. On January 23, 1984, a
Contract to Sell was entered into between Victoria Binuya Steckel as the vendor
and Ederlina as the sole vendee. Alfred signed therein as a witness.[6] Victoria
received from Alfred, for and in behalf of Ederlina, the amount of
US$10,000.00 as partial payment, for which Victoria issued a receipt. [7] When
Victoria executed the deed of absolute sale over the property on March 6,
1984,[8] she received from Alfred, for and in behalf of Ederlina, the amount of
US$10,000.00 as final and full payment. Victoria likewise issued a receipt for
the said amount.[9] After Victoria had vacated the property, Ederlina moved into
her new house. When she left for Germany to visit Klaus, she had her father
Narciso Catito and her two sisters occupy the property.
Alfred decided to stay in the Philippines for good and live with Ederlina. He
returned to Australia and sold his fiber glass pleasure boat to John Reid for
$7,500.00 on May 4, 1984.[10] He also sold his television and video business in
Papua New Guinea for K135,000.00 to Tekeraoi Pty. Ltd. [11] He had his
personal properties shipped to the Philippines and stored at No. 14 Fernandez
Street, San Francisco del Monte, Quezon City. The proceeds of the sale were
deposited in Alfreds account with the Hong Kong Shanghai Banking
Corporation (HSBC), Kowloon Branch under Bank Account No. 018-2-
807016.[12] When Alfred was in Papua New Guinea selling his other properties,
the bank sent telegraphic letters updating him of his account.[13] Several checks
were credited to his HSBC bank account from Papua New Guinea Banking
Corporation, Westpac Bank of Australia and New Zealand Banking Group
Limited and Westpac BankPNG-Limited. Alfred also had a peso savings
account with HSBC, Manila, under Savings Account No. 01-725-183-01.[14]
Once, when Alfred and Ederlina were in Hong Kong, they opened another
account with HSBC, Kowloon, this time in the name of Ederlina, under Savings
Account No. 018-0-807950.[15] Alfred transferred his deposits in Savings
Account No. 018-2-807016 with the said bank to this new account. Ederlina
also opened a savings account with the Bank of America Kowloon Main Office
under Account No. 30069016.[16]
On July 28, 1984, while Alfred was in Papua New Guinea, he received a Letter
dated December 7, 1983 from Klaus Muller who was then residing in Berlin,
Germany. Klaus informed Alfred that he and Ederlina had been married on
October 16, 1978 and had a blissful married life until Alfred intruded therein.
Klaus stated that he knew of Alfred and Ederlinas amorous relationship, and
discovered the same sometime in November 1983 when he arrived in Manila.
He also begged Alfred to leave Ederlina alone and to return her to him, saying
that Alfred could not possibly build his future on his (Klaus) misfortune. [17]
Alfred had occasion to talk to Sally MacCarron, a close friend of Ederlina. He
inquired if there was any truth to Klaus statements and Sally confirmed that
Klaus was married to Ederlina. When Alfred confronted Ederlina, she admitted
that she and Klaus were, indeed, married. But she assured Alfred that she would
divorce Klaus. Alfred was appeased. He agreed to continue the amorous
relationship and wait for the outcome of Ederlinas petition for divorce. After
all, he intended to marry her. He retained the services of Rechtsanwltin Banzhaf
with offices in Berlin, as her counsel who informed her of the progress of the
proceedings.[18] Alfred paid for the services of the lawyer.
In the meantime, Alfred decided to purchase another house and lot, owned by
Rodolfo Morelos covered by TCT No. 92456 located in Pea Street, Bajada,
Davao City.[19] Alfred again agreed to have the deed of sale made out in the
name of Ederlina. On September 7, 1984, Rodolfo Morelos executed a deed of
absolute sale over the said property in favor of Ederlina as the sole vendee for
the amount of P80,000.00.[20] Alfred paid US$12,500.00 for the property.
Alfred purchased another parcel of land from one Atty. Mardoecheo
Camporedondo, located in Moncado, Babak, Davao, covered by TCT No.
35251. Alfred once more agreed for the name of Ederlina to appear as the sole
vendee in the deed of sale. On December 31, 1984, Atty. Camporedondo
executed a deed of sale over the property for P65,000.00 in favor of Ederlina as
the sole vendee.[21] Alfred, through Ederlina, paid the lot at the cost of
P33,682.00 and US$7,000.00, respectively, for which the vendor signed
receipts.[22] On August 14, 1985, TCT No. 47246 was issued to Ederlina as the
sole owner of the said property.[23]
44
Meanwhile, Ederlina deposited on December 27, 1985, the total amount of
US$250,000 with the HSBC Kowloon under Joint Deposit Account No. 018-
462341-145.[24]
The couple decided to put up a beach resort on a four-hectare land in
Camudmud, Babak, Davao, owned by spouses Enrique and Rosela Serrano.
Alfred purchased the property from the spouses for P90,000.00, and the latter
issued a receipt therefor.[25] A draftsman commissioned by the couple submitted
a sketch of the beach resort.[26] Beach houses were forthwith constructed on a
portion of the property and were eventually rented out by Ederlinas father,
Narciso Catito. The rentals were collected by Narciso, while Ederlina kept the
proceeds of the sale of copra from the coconut trees in the property. By this
time, Alfred had already spent P200,000.00 for the purchase, construction and
upkeep of the property.
Ederlina often wrote letters to her family informing them of her life with Alfred.
In a Letter dated January 21, 1985, she wrote about how Alfred had financed
the purchases of some real properties, the establishment of her beauty parlor
business, and her petition to divorce Klaus.[27]
Because Ederlina was preoccupied with her business in Manila, she executed
on July 8, 1985, two special powers of attorney[28] appointing Alfred as
attorney-in-fact to receive in her behalf the title and the deed of sale over the
property sold by the spouses Enrique Serrano.
In the meantime, Ederlinas petition for divorce was denied because Klaus
opposed the same. A second petition filed by her met the same fate. Klaus
wanted half of all the properties owned by Ederlina in the Philippines before he
would agree to a divorce. Worse, Klaus threatened to file a bigamy case against
Ederlina.[29]
Alfred proposed the creation of a partnership to Ederlina, or as an alternative,
the establishment of a corporation, with Ederlina owning 30% of the equity
thereof. She initially agreed to put up a corporation and contacted Atty.
Armando Dominguez to prepare the necessary documents. Ederlina changed
her mind at the last minute when she was advised to insist on claiming
ownership over the properties acquired by them during their coverture.
Alfred and Ederlinas relationship started deteriorating. Ederlina had not been
able to secure a divorce from Klaus. The latter could charge her for bigamy and
could even involve Alfred, who himself was still married. To avoid
complications, Alfred decided to live separately from Ederlina and cut off all
contacts with her. In one of her letters to Alfred, Ederlina complained that he
had ruined her life. She admitted that the money used for the purchase of the
properties in Davao were his. She offered to convey the properties deeded to
her by Atty. Mardoecheo Camporedondo and Rodolfo Morelos, asking Alfred
to prepare her affidavit for the said purpose and send it to her for her
signature.[30] The last straw for Alfred came on September 2, 1985, when
someone smashed the front and rear windshields of Alfreds car and damaged
the windows. Alfred thereafter executed an affidavit-complaint charging
Ederlina and Sally MacCarron with malicious mischief.[31]
On October 15, 1985, Alfred wrote to Ederlinas father, complaining that
Ederlina had taken all his life savings and because of this, he was virtually
penniless. He further accused the Catito family of acquiring for themselves the
properties he had purchased with his own money. He demanded the return of
all the amounts that Ederlina and her family had stolen and turn over all the
properties acquired by him and Ederlina during their coverture.[32]
Shortly thereafter, Alfred filed a Complaint[33] dated October 28, 1985, against
Ederlina, with the Regional Trial Court of Quezon City, for recovery of real and
personal properties located in Quezon City and Manila. In his complaint, Alfred
alleged, inter alia, that Ederlina, without his knowledge and consent, managed
to transfer funds from their joint account in HSBC Hong Kong, to her own
account with the same bank. Using the said funds, Ederlina was able to purchase
the properties subject of the complaints. He also alleged that the beauty parlor
in Ermita was established with his own funds, and that the Quezon City property
was likewise acquired by him with his personal funds.[34]
Ederlina failed to file her answer and was declared in default. Alfred adduced
his evidence ex-parte.
In the meantime, on November 7, 1985, Alfred also filed a complaint[35] against
Ederlina with the Regional Trial Court, Davao City, for specific performance,
declaration of ownership of real and personal properties, sum of money, and
damages. He alleged, inter alia, in his complaint:
4. That during the period of their common-law relationship, plaintiff
solely through his own efforts and resources acquired in the Philippines real and
personal properties valued more or less at P724,000.00; The defendants
common-law wife or live-in partner did not contribute anything financially to
the acquisition of the said real and personal properties. These properties are as
follows:
I. Real Properties
a. TCT No. T-92456 located at Bajada, Davao City, consisting of 286 square
meters, (with residential house) registered in the name of the original title owner
Rodolfo M. Morelos but already fully paid by plaintiff. Valued at P342,000.00;
b. TCT No. T-47246 (with residential house) located at Babak, Samal, Davao,
consisting of 600 square meters, registered in the name of Ederlina Catito, with
the Register of Deeds of Tagum, Davao del Norte valued at P144,000.00;
c. A parcel of agricultural land located at Camudmud, Babak, Samal, Davao del
Norte, consisting of 4.2936 hectares purchased from Enrique Serrano and
Rosela B. Serrano. Already paid in full by plaintiff. Valued at P228,608.32;
II. Personal Properties:
a. Furniture valued at P10,000.00.
...
5. That defendant made no contribution at all to the acquisition of the above-
mentioned properties as all the monies (sic) used in acquiring said properties
belonged solely to plaintiff;[36]
Alfred prayed that after hearing, judgment be rendered in his favor:
WHEREFORE, in view of the foregoing premises, it is respectfully prayed that
judgment be rendered in favor of plaintiff and against defendant:
a) Ordering the defendant to execute the corresponding deeds of transfer and/or
conveyances in favor of plaintiff over those real and personal properties
enumerated in Paragraph 4 of this complaint;
b) Ordering the defendant to deliver to the plaintiff all the above real and
personal properties or their money value, which are in defendants name and
custody because these were acquired solely with plaintiffs money and resources
during the duration of the common-law relationship between plaintiff and
defendant, the description of which are as follows:
(1) TCT No. T-92456 (with residential house) located at Bajada, Davao City,
consisting of 286 square meters, registered in the name of the original title
owner Rodolfo Morelos but already fully paid by plaintiff. Valued at
P342,000.00;
(2) TCT No. T-47246 (with residential house) located at Babak, Samal, Davao,
consisting of 600 square meters, registered in the name of Ederlina Catito, with
the Register of Deeds of Tagum, Davao del Norte, valued at P144,000.00;
(3) A parcel of agricultural land located at Camudmud, Babak, Samal, Davao
del Norte, consisting of 4.2936 hectares purchased from Enrique Serrano and
Rosela B. Serrano. Already fully paid by plaintiff. Valued at P228,608.32;
c) Declaring the plaintiff to be the sole and absolute owner of the above-
mentioned real and personal properties;
d) Awarding moral damages to plaintiff in an amount deemed reasonable by the
trial court;
45
e) To reimburse plaintiff the sum of P12,000.00 as attorneys fees for having
compelled the plaintiff to litigate;
f) To reimburse plaintiff the sum of P5,000.00 incurred as litigation expenses
also for having compelled the plaintiff to litigate; and
g) To pay the costs of this suit;
Plaintiff prays for other reliefs just and equitable in the premises. [37]
In her answer, Ederlina denied all the material allegations in the complaint,
insisting that she acquired the said properties with her personal funds, and as
such, Alfred had no right to the same. She alleged that the deeds of sale, the
receipts, and certificates of titles of the subject properties were all made out in
her name.[38] By way of special and affirmative defense, she alleged that Alfred
had no cause of action against her. She interposed counterclaims against the
petitioner.[39]
In the meantime, the petitioner filed a Complaint dated August 25, 1987, against
the HSBC in the Regional Trial Court of Davao City[40] for recovery of bank
deposits and damages.[41] He prayed that after due proceedings, judgment be
rendered in his favor, thus:
WHEREFORE, plaintiff respectfully prays that the Honorable Court adjudge
defendant bank, upon hearing the evidence that the parties might present, to pay
plaintiff:
1. ONE HUNDRED TWENTY SIX THOUSAND TWO HUNDRED AND
THIRTY U.S. DOLLARS AND NINETY EIGHT CENTS (US$126,230.98)
plus legal interests, either of Hong Kong or of the Philippines, from 20
December 1984 up to the date of execution or satisfaction of judgment, as actual
damages or in restoration of plaintiffs lost dollar savings;
2.The same amount in (1) above as moral damages;
3. Attorneys fees in the amount equivalent to TWENTY FIVE PER CENT
(25%) of (1) and (2) above;
4. Litigation expenses in the amount equivalent to TEN PER CENT (10%) of
the amount in (1) above; and
5. For such other reliefs as are just and equitable under the circumstances. [42]
On April 28, 1986, the RTC of Quezon City rendered its decision in Civil Case
No. Q-46350, in favor of Alfred, the decretal portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering the
defendant to perform the following:
(1) To execute a document waiving her claim to the house and lot in No. 14
Fernandez St., San Francisco Del Monte, Quezon City in favor of plaintiff or to
return to the plaintiff the acquisition cost of the same in the amount of
$20,000.00, or to sell the said property and turn over the proceeds thereof to the
plaintiff;
(2) To deliver to the plaintiff the rights of ownership and management of the
beauty parlor located at 444 Arquiza St., Ermita, Manila, including the
equipment and fixtures therein;
(3) To account for the earnings of rental of the house and lot in No. 14
Fernandez St., San Francisco Del Monte, Quezon City, as well as the earnings
in the beauty parlor at 444 Arquiza St., Ermita, Manila and turn over one-half
of the net earnings of both properties to the plaintiff;
(4) To surrender or return to the plaintiff the personal properties of the latter left
in the house at San Francisco Del Monte, to wit:
(1) Mamya automatic camera
(1) 12 inch Sonny T.V. set, colored with remote control.
(1) Micro oven
(1) Electric fan (tall, adjustable stand)
(1) Office safe with (2) drawers and safe
(1) Electric Washing Machine
(1) Office desk and chair
(1) Double bed suits
(1) Mirror/dresser
(1) Heavy duty voice/working mechanic
(1) Sony Beta-Movie camera
(1) Suitcase with personal belongings
(1) Cardboard box with belongings
(1) Guitar Amplifier
(1) Hanger with mens suit (white).
To return to the plaintiff, (1) Hi-Fi Stereo equipment left at 444 Arquiza Street,
Ermita, Manila, as well as the Fronte Suzuki car.
(4) To account for the monies (sic) deposited with the joint account of the
plaintiff and defendant (Account No. 018-0-807950); and to restore to the
plaintiff all the monies (sic) spent by the defendant without proper authority;
(5) To pay the amount of P5,000.00 by way of attorneys fees, and the costs of
suit.
SO ORDERED.[43]
However, after due proceedings in the RTC of Davao City, in Civil Case No.
17,817, the trial court rendered judgment on September 28, 1995 in favor of
Ederlina, the dispositive portion of which reads:
WHEREFORE, the Court cannot give due course to the complaint and hereby
orders its dismissal. The counterclaims of the defendant are likewise dismissed.
SO ORDERED.[44]
The trial court ruled that based on documentary evidence, the purchaser of the
three parcels of land subject of the complaint was Ederlina. The court further
stated that even if Alfred was the buyer of the properties, he had no cause of
action against Ederlina for the recovery of the same because as an alien, he was
disqualified from acquiring and owning lands in the Philippines. The sale of the
three parcels of land to the petitioner was null and void ab initio. Applying
the pari delicto doctrine, the petitioner was precluded from recovering the
properties from the respondent.
Alfred appealed the decision to the Court of Appeals[45] in which the petitioner
posited the view that although he prayed in his complaint in the court a quo that
he be declared the owner of the three parcels of land, he had no intention of
owning the same permanently. His principal intention therein was to be
declared the transient owner for the purpose of selling the properties at public
auction, ultimately enabling him to recover the money he had spent for the
purchase thereof.
On March 8, 2000, the CA rendered a decision affirming in toto the decision of
the RTC. The appellate court ruled that the petitioner knowingly violated the
Constitution; hence, was barred from recovering the money used in the
purchase of the three parcels of land. It held that to allow the petitioner to
recover the money used for the purchase of the properties would embolden
aliens to violate the Constitution, and defeat, rather than enhance, the public
policy.[46]
Hence, the petition at bar.
The petitioner assails the decision of the court contending that:
46
THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE
RULE OF IN PARI DELICTO IN THE INSTANT CASE BECAUSE BY THE
FACTS AS NARRATED IN THE DECISION IT IS APPARENT THAT THE
PARTIES ARE NOT EQUALLY GUILTY BUT RATHER IT WAS THE
RESPONDENT WHO EMPLOYED FRAUD AS WHEN SHE DID NOT
INFORM PETITIONER THAT SHE WAS ALREADY MARRIED TO
ANOTHER GERMAN NATIONAL AND WITHOUT SUCH
FRAUDULENT DESIGN PETITIONER COULD NOT HAVE PARTED
WITH HIS MONEY FOR THE PURCHASE OF THE PROPERTIES.[47]
and
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
THAT THE INTENTION OF THE PETITIONER IS NOT TO OWN REAL
PROPERTIES IN THE PHILIPPINES BUT TO SELL THEM AT PUBLIC
AUCTION TO BE ABLE TO RECOVER HIS MONEY USED IN
PURCHASING THEM.[48]
Since the assignment of errors are intertwined with each other, the Court shall
resolve the same simultaneously.
The petitioner contends that he purchased the three parcels of land subject of
his complaint because of his desire to marry the respondent, and not to violate
the Philippine Constitution. He was, however, deceived by the respondent when
the latter failed to disclose her previous marriage to Klaus Muller. It cannot,
thus, be said that he and the respondent are equally guilty; as such, the pari
delicto doctrine is not applicable to him. He acted in good faith, on the advice
of the respondents uncle, Atty. Mardoecheo Camporedondo. There is no
evidence on record that he was aware of the constitutional prohibition against
aliens acquiring real property in the Philippines when he purchased the real
properties subject of his complaint with his own funds. The transactions were
not illegal per se but merely prohibited, and under Article 1416 of the New
Civil Code, he is entitled to recover the money used for the purchase of the
properties. At any rate, the petitioner avers, he filed his complaint in the court a
quo merely for the purpose of having him declared as the owner of the
properties, to enable him to sell the same at public auction. Applying by analogy
Republic Act No. 133[49] as amended by Rep. Act No. 4381 and Rep. Act No.
4882, the proceeds of the sale would be remitted to him, by way of refund for
the money he used to purchase the said properties. To bar the petitioner from
recovering the subject properties, or at the very least, the money used for the
purchase thereof, is to allow the respondent to enrich herself at the expense of
the petitioner in violation of Article 22 of the New Civil Code.
The petition is bereft of merit.
Section 14, Article XIV of the 1973 Constitution provides, as follows:
Save in cases of hereditary succession, no private land shall be transferred or
conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands in the public domain.[50]
Lands of the public domain, which include private lands, may be transferred or
conveyed only to individuals or entities qualified to acquire or hold private
lands or lands of the public domain. Aliens, whether individuals or
corporations, have been disqualified from acquiring lands of the public
domain. Hence, they have also been disqualified from acquiring private
lands.[51]
Even if, as claimed by the petitioner, the sales in question were entered into by
him as the real vendee, the said transactions are in violation of the Constitution;
hence, are null and void ab initio.[52] A contract that violates the Constitution
and the law, is null and void and vests no rights and creates no obligations. It
produces no legal effect at all.[53] The petitioner, being a party to an illegal
contract, cannot come into a court of law and ask to have his illegal objective
carried out. One who loses his money or property by knowingly engaging in a
contract or transaction which involves his own moral turpitude may not
maintain an action for his losses. To him who moves in deliberation and
premeditation, the law is unyielding.[54] The law will not aid either party to an
illegal contract or agreement; it leaves the parties where it finds them.[55] Under
Article 1412 of the New Civil Code, the petitioner cannot have the subject
properties deeded to him or allow him to recover the money he had spent for
the purchase thereof.[56] Equity as a rule will follow the law and will not permit
that to be done indirectly which, because of public policy, cannot be done
directly.[57] Where the wrong of one party equals that of the other, the defendant
is in the stronger position ... it signifies that in such a situation, neither a court
of equity nor a court of law will administer a remedy.[58] The rule is expressed
in the maxims: EX DOLO MALO NON ORITUR ACTIO and IN PARI
DELICTO POTIOR EST CONDITIO DEFENDENTIS.[59]
The petitioner cannot feign ignorance of the constitutional proscription, nor
claim that he acted in good faith, let alone assert that he is less guilty than the
respondent. The petitioner is charged with knowledge of the constitutional
prohibition.[60] As can be gleaned from the decision of the trial court, the
petitioner was fully aware that he was disqualified from acquiring and owning
lands under Philippine law even before he purchased the properties in question;
and, to skirt the constitutional prohibition, the petitioner had the deed of sale
placed under the respondents name as the sole vendee thereof:
Such being the case, the plaintiff is subject to the constitutional restrictions
governing the acquisition of real properties in the Philippines by aliens.
From the plaintiffs complaint before the Regional Trial Court, National Capital
Judicial Region, Branch 84, Quezon City in Civil Case No. Q-46350 he alleged:
xxx That on account that foreigners are not allowed by the Philippine laws to
acquire real properties in their name as in the case of my vendor Miss Victoria
Vinuya (sic) although married to a foreigner, we agreed and I consented in
having the title to subject property placed in defendants name alone although I
paid for the whole price out of my own exclusive funds. (paragraph IV, Exhibit
W.)
and his testimony before this Court which is hereby quoted:
ATTY. ABARQUEZ:
Q. In whose name the said house and lot placed, by the way, where is his house
and lot located?
A. In 14 Fernandez St., San Francisco, del Monte, Manila.
Q. In whose name was the house placed?
A. Ederlina Catito because I was informed being not a Filipino, I cannot own
the property. (tsn, p. 11, August 27, 1986).
xxx xxx xxx
COURT:
Q. So you understand that you are a foreigner that you cannot buy land in the
Philippines?
A. That is correct but as she would eventually be my wife that would be owned
by us later on. (tsn, p. 5, September 3, 1986)
xxx xxx xxx
Q. What happened after that?
A. She said you foreigner you are using Filipinos to buy property.
Q. And what did you answer?
A. I said thank you very much for the property I bought because I gave you a
lot of money (tsn., p. 14, ibid).
It is evident that the plaintiff was fully aware that as a non-citizen of the
Philippines, he was disqualified from validly purchasing any land within the
country.[61]
The petitioners claim that he acquired the subject properties because of his
desire to marry the respondent, believing that both of them would thereafter
jointly own the said properties, is belied by his own evidence. It is merely an
47
afterthought to salvage a lost cause. The petitioner admitted on cross-
examination that he was all along legally married to Teresita Santos Frenzel,
while he was having an amorous relationship with the respondent:
ATTY. YAP:
Q When you were asked to identify yourself on direct examination you claimed
before this Honorable Court that your status is that of being married, do you
confirm that?
A Yes, sir.
Q To whom are you married?
A To a Filipina, since 1976.
Q Would you tell us who is that particular person you are married since 1976?
A Teresita Santos Frenzel.
Q Where is she now?
A In Australia.
Q Is this not the person of Teresita Frenzel who became an Australian citizen?
A I am not sure, since 1981 we were separated.
Q You were only separated, in fact, but not legally separated?
A Thru my counsel in Australia I filed a separation case.
Q As of the present you are not legally divorce[d]?
A I am still legally married.[62]
The respondent was herself married to Klaus Muller, a German citizen. Thus,
the petitioner and the respondent could not lawfully join in wedlock. The
evidence on record shows that the petitioner in fact knew of the respondents
marriage to another man, but nonetheless purchased the subject properties
under the name of the respondent and paid the purchase prices therefor. Even if
it is assumed gratia arguendi that the respondent and the petitioner were
capacitated to marry, the petitioner is still disqualified to own the properties in
tandem with the respondent.[63]
foreclosure: Provided, That said mortgagee or successor-in-interest may take
possession of said property after default in accordance with the prescribed
judicial procedures for foreclosure and receivership and in no case exceeding
five years from actual possession.[65]
From the evidence on record, the three parcels of land subject of the complaint
were not mortgaged to the petitioner by the owners thereof but were sold to the
respondent as the vendee, albeit with the use of the petitioners personal funds.
Futile, too, is petitioners reliance on Article 22 of the New Civil Code which
reads:
Art. 22. Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him.[66]
The provision is expressed in the maxim: MEMO CUM ALTERIUS DETER
DETREMENTO PROTEST (No person should unjustly enrich himself at the
expense of another). An action for recovery of what has been paid without just
cause has been designated as an accion in rem verso.[67] This provision does not
apply if, as in this case, the action is proscribed by the Constitution or by the
application of the pari delicto doctrine.[68] It may be unfair and unjust to bar the
petitioner from filing an accion in rem verso over the subject properties, or from
recovering the money he paid for the said properties, but, as Lord Mansfield
stated in the early case of Holman vs. Johnson:[69] The objection that a contract
is immoral or illegal as between the plaintiff and the defendant, sounds at all
times very ill in the mouth of the defendant. It is not for his sake, however, that
the objection is ever allowed; but it is founded in general principles of policy,
which the defendant has the advantage of, contrary to the real justice, as
between him and the plaintiff.
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. The
decision of the Court of Appeals is AFFIRMED in toto.
Costs against the petitioner.
SO ORDERED.

The petitioner cannot find solace in Article 1416 of the New Civil Code which
reads:

Art. 1416. When the agreement is not illegal per se but is merely prohibited,
and the prohibition by the law is designed for the protection of the plaintiff, he
may, if public policy is thereby enhanced, recover what he has paid or
delivered.[64]

The provision applies only to those contracts which are merely prohibited, in
order to benefit private interests. It does not apply to contracts void ab
initio. The sales of three parcels of land in favor of the petitioner who is a
foreigner is illegal per se. The transactions are void ab initio because they were
entered into in violation of the Constitution. Thus, to allow the petitioner to
recover the properties or the money used in the purchase of the parcels of land
would be subversive of public policy.

Neither may the petitioner find solace in Rep. Act No. 133, as amended by Rep.
Act No. 4882, which reads:

SEC. 1. Any provision of law to the contrary notwithstanding, private real

property may be mortgaged in favor of any individual, corporation, or
association, but the mortgagee or his successor-in- interest, if disqualified to
acquire or hold lands of the public domain in the Philippines, shall not take
possession of the mortgaged property during the existence of the mortgage and
shall not take possession of mortgaged property except after default and for the
sole purpose of foreclosure, receivership, enforcement or other proceedings and
in no case for a period of more than five years from actual possession and shall
not bid or take part in any sale of such real property in case of

48
G.R. No. 149615 August 29, 2006
IN RE: PETITION FOR SEPARATION OF PROPERTY ELENA
BUENAVENTURA MULLER, Petitioner,
vs.
HELMUT MULLER, Respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari 1 assails the February 26, 2001
Decision 2 of the Court of Appeals in CA-G.R. CV No. 59321 affirming with
modification the August 12, 1996 Decision 3 of the Regional Trial Court of
Quezon City, Branch 86 in Civil Case No. Q-94-21862, which terminated the
regime of absolute community of property between petitioner and respondent,
as well as the Resolution 4 dated August 13, 2001 denying the motion for
reconsideration.
The facts are as follows:
Petitioner Elena Buenaventura Muller and respondent Helmut Muller were
married in Hamburg, Germany on September 22, 1989. The couple resided in
Germany at a house owned by respondents parents but decided to move and
reside permanently in the Philippines in 1992. By this time, respondent had
inherited the house in Germany from his parents which he sold and used the
proceeds for the purchase of a parcel of land in Antipolo, Rizal at the cost of
P528,000.00 and the construction of a house amounting to P2,300,000.00. The
Antipolo property was registered in the name of petitioner under Transfer
Certificate of Title No. 219438 5 of the Register of Deeds of Marikina, Metro
Manila.
Due to incompatibilities and respondents alleged womanizing, drinking, and
maltreatment, the spouses eventually separated. On September 26, 1994,
respondent filed a petition 6 for separation of properties before the Regional
Trial Court of Quezon City.
On August 12, 1996, the trial court rendered a decision which terminated the
regime of absolute community of property between the petitioner and
respondent. It also decreed the separation of properties between them and
ordered the equal partition of personal properties located within the country,
excluding those acquired by gratuitous title during the marriage. With regard to
the Antipolo property, the court held that it was acquired using paraphernal
funds of the respondent. However, it ruled that respondent cannot recover his
funds because the property was purchased in violation of Section 7, Article XII
of the Constitution. Thus
However, pursuant to Article 92 of the Family Code, properties acquired by
gratuitous title by either spouse during the marriage shall be excluded from the
community property. The real property, therefore, inherited by petitioner in
Germany is excluded from the absolute community of property of the herein
spouses. Necessarily, the proceeds of the sale of said real property as well as
the personal properties purchased thereby, belong exclusively to the petitioner.
However, the part of that inheritance used by the petitioner for acquiring the
house and lot in this country cannot be recovered by the petitioner, its
acquisition being a violation of Section 7, Article XII of the Constitution which
provides that "save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations or associations
qualified to acquire or hold lands of the public domain." The law will leave the
parties in the situation where they are in without prejudice to a voluntary
partition by the parties of the said real property. x x x
xxxx
As regards the property covered by Transfer Certificate of Title No. 219438 of
the Registry of Deeds of Marikina, Metro Manila, situated in Antipolo, Rizal
and the improvements thereon, the Court shall not make any pronouncement on
constitutional grounds. 7
Respondent appealed to the Court of Appeals which rendered the assailed
decision modifying the trial courts Decision. It held that respondent merely
prayed for reimbursement for the purchase of the Antipolo property, and not
acquisition or transfer of ownership to him. It also considered petitioners
ownership over the property in trust for the respondent. As regards the house,
the Court of Appeals ruled that there is nothing in the Constitution which
prohibits respondent from acquiring the same. The dispositive portion of the
assailed decision reads:
WHEREFORE, in view of the foregoing, the Decision of the lower court dated
August 12, 1996 is hereby MODIFIED. Respondent Elena Buenaventura
Muller is hereby ordered to REIMBURSE the petitioner the amount of
P528,000.00 for the acquisition of the land and the amount of P2,300,000.00
for the construction of the house situated in Atnipolo, Rizal, deducting
therefrom the amount respondent spent for the preservation, maintenance and
development of the aforesaid real property including the depreciation cost of
the house or in the alternative to SELL the house and lot in the event respondent
does not have the means to reimburse the petitioner out of her own money and
from the proceeds thereof, reimburse the petitioner of the cost of the land and
the house deducting the expenses for its maintenance and preservation spent by
the respondent. Should there be profit, the same shall be divided in proportion
to the equity each has over the property. The case is REMANDED to the lower
court for reception of evidence as to the amount claimed by the respondents for
the preservation and maintenance of the property.
SO ORDERED. 8
Hence, the instant petition for review raising the following issues:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT THE RESPONDENT HEREIN IS ENTITLED TO
REIMBURSEMENT OF THE AMOUNT USED TO PURCHASE THE
LAND AS WELL AS THE COSTS FOR THE CONSTRUCTION OF THE
HOUSE, FOR IN SO RULING, IT INDIRECTLY ALLOWED AN ACT
DONE WHICH OTHERWISE COULD NOT BE DIRECTLY x x x DONE,
WITHOUT DOING VIOLENCE TO THE CONSTITUTIONAL
PROSCRIPTION THAT AN ALIEN IS PROHIBITED FROM ACQUIRING
OWNERSHIP OF REAL PROPERTIES LOCATED IN THE PHILIPPINES.
II
THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING
RESPONDENTS CAUSE OF ACTION WHICH IS ACTUALLY A
DESPERATE ATTEMPT TO OBTAIN OWNERSHIP OVER THE LOT IN
QUESTION, CLOTHED UNDER THE GUISE OF CLAIMING
REIMBURSEMENT.
Petitioner contends that respondent, being an alien, is disqualified to own
private lands in the Philippines; that respondent was aware of the constitutional
prohibition but circumvented the same; and that respondents purpose for filing
an action for separation of property is to obtain exclusive possession, control
and disposition of the Antipolo property.
Respondent claims that he is not praying for transfer of ownership of the
Antipolo property but merely reimbursement; that the funds paid by him for the
said property were in consideration of his marriage to petitioner; that the funds
were given to petitioner in trust; and that equity demands that respondent should
be reimbursed of his personal funds.
The issue for resolution is whether respondent is entitled to reimbursement of
the funds used for the acquisition of the Antipolo property.
The petition has merit.
Section 7, Article XII of the 1987 Constitution states:
Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain.
49
Aliens, whether individuals or corporations, are disqualified from acquiring
lands of the public domain. Hence, they are also disqualified from acquiring
private lands. 9 The primary purpose of the constitutional provision is the
conservation of the national patrimony. In the case of Krivenko v. Register of
Deeds, 10 the Court held:
Under section 1 of Article XIII of the Constitution, "natural resources, with the
exception of public agricultural land, shall not be alienated," and with respect
to public agricultural lands, their alienation is limited to Filipino citizens. But
this constitutional purpose conserving agricultural resources in the hands of
Filipino citizens may easily be defeated by the Filipino citizens themselves who
may alienate their agricultural lands in favor of aliens. It is partly to prevent this
result that section 5 is included in Article XIII, and it reads as follows:
"Sec. 5. Save in cases of hereditary succession, no private agricultural land will
be transferred or assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the Philippines."
This constitutional provision closes the only remaining avenue through which
agricultural resources may leak into aliens hands. It would certainly be futile
to prohibit the alienation of public agricultural lands to aliens if, after all, they
may be freely so alienated upon their becoming private agricultural lands in the
hands of Filipino citizens. x x x
xxxx
If the term "private agricultural lands" is to be construed as not including
residential lots or lands not strictly agricultural, the result would be that "aliens
may freely acquire and possess not only residential lots and houses for
themselves but entire subdivisions, and whole towns and cities," and that "they
may validly buy and hold in their names lands of any area for building homes,
factories, industrial plants, fisheries, hatcheries, schools, health and vacation
resorts, markets, golf courses, playgrounds, airfields, and a host of other uses
and purposes that are not, in appellants words, strictly agricultural." (Solicitor
Generals Brief, p. 6.) That this is obnoxious to the conservative spirit of the
Constitution is beyond question.
Respondent was aware of the constitutional prohibition and expressly admitted
his knowledge thereof to this Court.11 He declared that he had the Antipolo
property titled in the name of petitioner because of the said prohibition. 12His
attempt at subsequently asserting or claiming a right on the said property cannot
be sustained.
The Court of Appeals erred in holding that an implied trust was created and
resulted by operation of law in view of petitioners marriage to respondent. Save
for the exception provided in cases of hereditary succession, respondents
disqualification from owning lands in the Philippines is absolute. Not even an
ownership in trust is allowed. Besides, where the purchase is made in violation
of an existing statute and in evasion of its express provision, no trust can result
in favor of the party who is guilty of the fraud. 13 To hold otherwise would allow
circumvention of the constitutional prohibition.
Invoking the principle that a court is not only a court of law but also a court of
equity, is likewise misplaced. It has been held that equity as a rule will follow
the law and will not permit that to be done indirectly which, because of public
policy, cannot be done directly. 14 He who seeks equity must do equity, and he
who comes into equity must come with clean hands. The latter is a frequently
stated maxim which is also expressed in the principle that he who has done
inequity shall not have equity. It signifies that a litigant may be denied relief by
a court of equity on the ground that his conduct has been inequitable, unfair and
dishonest, or fraudulent, or deceitful as to the controversy in issue. 15
Thus, in the instant case, respondent cannot seek reimbursement on the ground
of equity where it is clear that he willingly and knowingly bought the property
despite the constitutional prohibition.
Further, the distinction made between transfer of ownership as opposed to
recovery of funds is a futile exercise on respondents part. To allow
reimbursement would in effect permit respondent to enjoy the fruits of a
property which he is not allowed to own. Thus, it is likewise proscribed by law.
As expressly held in Cheesman v. Intermediate Appellate Court: 16
Finally, the fundamental law prohibits the sale to aliens of residential land.
Section 14, Article XIV of the 1973 Constitution ordains that, "Save in cases of
hereditary succession, no private land shall be transferred or conveyed except
to individuals, corporations, or associations qualified to acquire or hold lands
of the public domain." Petitioner Thomas Cheesman was, of course, charged
with knowledge of this prohibition. Thus, assuming that it was his intention that
the lot in question be purchased by him and his wife, he acquired no right
whatever over the property by virtue of that purchase; and in attempting to
acquire a right or interest in land, vicariously and clandestinely, he knowingly
violated the Constitution; the sale as to him was null and void. In any event, he
had and has no capacity or personality to question the subsequent sale of the
same property by his wife on the theory that in so doing he is merely exercising
the prerogative of a husband in respect of conjugal property. To sustain such a
theory would permit indirect controversion of the constitutional prohibition. If
the property were to be declared conjugal, this would accord to the alien
husband a not insubstantial interest and right over land, as he would then have
a decisive vote as to its transfer or disposition. This is a right that the
Constitution does not permit him to have.
As already observed, the finding that his wife had used her own money to
purchase the property cannot, and will not, at this stage of the proceedings be
reviewed and overturned. But even if it were a fact that said wife had used
conjugal funds to make the acquisition, the considerations just set out to
militate, on high constitutional grounds, against his recovering and holding the
property so acquired, or any part thereof. And whether in such an event, he may
recover from his wife any share of the money used for the purchase or charge
her with unauthorized disposition or expenditure of conjugal funds is not now
inquired into; that would be, in the premises, a purely academic exercise.
(Emphasis added)
WHEREFORE, in view of the foregoing, the instant petition is GRANTED.
The Decision dated February 26, 2001 of the Court of Appeals in CA-G.R. CV
No. 59321 ordering petitioner Elena Buenaventura Muller to reimburse
respondent Helmut Muller the amount of P528,000 for the acquisition of the
land and the amount of P2,300,000 for the construction of the house in Antipolo
City, and the Resolution dated August 13, 2001 denying reconsideration
thereof, are REVERSED and SET ASIDE. The August 12, 1996 Decision of
the Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-94-
21862 terminating the regime of absolute community between the petitioner
and respondent, decreeing a separation of property between them and ordering
the partition of the personal properties located in the Philippines equally, is
REINSTATED.
SO ORDERED.
50
G.R. No. L-31606 March 28, 1983
DONATO REYES YAP and MELITONA MARAVILLAS, petitioners,
vs.
HON. EZEKIEL S. GRAGEDA, as Judge of the Court of First Instance of
Albay and JOSE A. RICO, respondents.
Jose P. Oira for petitioners.
Rodolfo A. Madrid for respondents.
GUTIERREZ, JR., J.:
We are asked in this petition to review the amended decision of the respondent
court which declared as absolutely null and void the sale of a residential lot in
Guinobatan, Albay to a Chinese national and ordered its reconveyance to the
vendors thirty years after the sale inspite of the fact that the vendee had been a
naturalized Filipino citizen for fifteen years at the time.
We grant the petition. The questioned decision and the order amending it are
reversed and set aside.
The facts are not disputed.
On April 12, 1939, Maximino Rico, for and in his own behalf and that of the
minors Maria Rico, Filomeno Rico, Prisco Rico, and Lourdes' Rico, executed a
Deed of Absolute Sale (Annex 'A' to the complaint) over Lot 339 and a portion
of Lot 327 in favor of the petitioner Donato Reyes Yap who was then a Chinese
national. Respondent Jose A. Rico is the eldest son of Maximino Rico, one of
the vendors in Annex 'A'.
Subsequently, the petitioner as vendee caused the registration of the instrument
of sale and the cancellation of Original Certificates of Title Nos. 29332 and
29410 and the consequent issuance in his favor of Transfer Certificate of Title
No. T-2433 covering the two lots subject matter of the Contract of Sale.
After the lapse of nearly fifteen years from and after the execution of the deed
of absolute sale, Donato Reyes Yap was admitted as a Filipino citizen and
allowed to take his oath of allegiance to the Republic of the Philippines. He
was, thereafter, issued Certificate of Naturalization No. 7, File No. 19 of the
Court of First Instance of Albay.
On December 1, 1967, the petitioner ceded the major portion of Lot No. 327
consisting of 1,078 square meters which he acquired by purchase under the deed
of sale in favor of his engineer son, Felix Yap, who was also a Filipino citizen
because of the Filipino citizenship of his mother and the naturalization of his
father Donato Reyes Yap.
Subsequently, Lourdes Rico, aunt and co-heir of respondent Jose A. Rico. sold
the remaining portion of Lot 327 to the petitioner who had his rights thereon
duly registered under Act 496. Petitioner, Donato Reyes Yap, has been in
possession of the lots in question since 1939, openly, publicly, continuously,
and adversely in the concept of owner until the present time. The petitioner has
one surviving son by his first marriage to a Filipino wife. He has five children
by his second marriage also to a Filipina and has a total of 23 grandchildren all
of whom are Filipino citizens.
The respondent court considered Section 5, Article XIII of the 1935
Constitution that "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" to be an absolute and unqualified
prohibition and, therefore, ruled that a conveyance contrary to it would not be
validated nor its void nature altered by the subsequent naturalization of the
vendee.
The dispositive portion of the amended decision reads:
WHEREFORE, in view of all the foregoing, the Contract of Sale embodied in
the 'Escritura de Compra Venta' which is attached to the Complaint as Annex
'A', is hereby declared null and void ab initio and without any legal force and
effect.
The action to recover Lot 339 of the Cadastral Survey of Guinobatan, Albay,
covered by Transfer Certificate of Title No. T2433. and Lot 327 covered by the
same Transfer Certificate of Title, is hereby granted to plaintiff, upon payment
of the consideration price of P150.00 and declaring plaintiff as the lawful owner
and entitled to the possession thereof.
Defendant Donato Reyes Yap is hereby ordered to produce his Transfer
Certificate of Title No. T-2433 to the Register of Deeds of Albay, so as to enable
said office to make the due and proper annotations on said title as well as in the
original of the declaration of nullity as herein adjudged. Let Transfer Certificate
of Title issued to plaintiff, concerning said Lots 339 and 327 of the Cadastral
Survey of Guinobatan, Albay.
COSTS AGAINST DEFENDANTS.
The rulings in Vasquez v.Leng Seng Giap et al. (96 Phil. 447) and Sarosa Vda.
de Bersabia v. Cuenco (113 SCRA 547) sustain the petitioner's contentions. We
stated in Sarosa Vda de Bersabia:
There should be no question that the sale of the land in question in 1936 by
Epifania to Ong King Po was inexistent and void from the beginning (Art. 1409
[7], Civil Code) because it was a contract executed against the mandatory
provision of the 1935 Constitution, which is an expression of public policy to
conserve lands for the Filipinos. Said provision reads:
Save in cases of hereditary succession, no private agricultural land shall be
transferred or assigned except to in. individuals, corporations, or associations,
qualified to acquire or hold lands of the public domain.
Had this been a suit between Epifania and Ong King Po she could have been
declared entitled to the litigated land on the basis, as claimed, of the ruling in
Philippine Banking Corporation vs. Lui She, reading:
... For another thing, and this is not only cogent but also important. Article 1416
of the Civil Code provides as an exception to the rule on pari delicto that when
the agreement is not illegal per se but is merely prohibited, and the prohibition
by the law is designed for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has sold or delivered. ...
But the factual set-up has changed. The litigated property is now in the hands
of a naturalized Filipino. It is no longer owned by a disqualified vendee.
Respondent, as a naturalized citizen, was constitutionally qualified to own the
subject property. There would be no more public policy to be served in allowing
petitioner Epifania to recover the land as it is already in the hands of a qualified
person. Applying by analogy the ruling of this Court in Vasquez vs. Giap and
Leng Seng Giap & Sons:
... if the ban on aliens from acquiring not only agricultural but also urban lands,
as construed by this Court in the Krivenko case, is to preserve the nation's lands
for future generations of Filipinos, that aim or purpose would not be thwarted
but achieved by making lawful the acquisition of real estate by aliens who
became Filipino citizens by naturalization.
Only recently, we had occasion to reiterate the above rulings in Vicente Godines
v. Fong Pak Luen, et al. (G.R. No. L-36731, January 27, 1983).
WHEREFORE, the amended judgment of the respondent court is hereby
REVERSED and SET ASIDE. The complaint is DISMISSED.
SO ORDERED.
51
G.R. No. L-36731 January 27, 1983
VICENTE GODINEZ, ET AL., plaintiffs-appellants,
vs.
FONG PAK LUEN ET AL., defendants, TRINIDAD S.
NAVATA, defendant-appellee.
GUTIERREZ, JR., J.:
The plaintiffs filed this case to recover a parcel of land sold by their father, now
deceased, to Fong Pak Luen, an alien, on the ground that the sale was null
and void ab initio since it violates applicable provisions of the Constitution and
the Civil Code.
The order of the Court of First Instance of Sulu dismissing the complaint was
appealed to the Court of Appeals but the latter court certified the appeal to us
since only pure questions of law were raised by the appellants.
The facts of the case were summarized by the Court of Appeals as follows:
On September 30, 1966, the plaintiffs filed a complaint in the Court of First
Instance of Sulu alleging among others that they are the heirs of Jose Godinez
who was married to Martina Alvarez Godinez sometime in 1910; that during
the marriage of their parents the said parents acquired a parcel of land lot No.
94 of Jolo townsite with an area of 3,665 square meters as evidenced by Original
Certificate of Title No. 179 (D -155) in the name of Jose Godinez; that their
mother died sometime in 1938 leaving the plaintiffs as their sole surviving
heirs; that on November 27, 1941, without the knowledge of the plaintiffs, the
said Jose Godinez, for valuable consideration, sold the aforesaid parcel of land
to the defendant Fong Pak Luen, a Chinese citizen, which transaction is contrary
to law and in violation of the Civil Code because the latter being an alien who
is inhibited by law to purchase real property; that Transfer Certificate Title No.
884 was then issued by the Register of Deeds to the said defendant, which is
null and void ab initio since the transaction constituted a non-existent contract;
that on January 11, 1963, said defendant Fong Pak Luen executed a power of
attorney in favor of his co-defendant Kwan Pun Ming, also an alien, who
conveyed and sold the above described parcel of land to co-defendant Trinidad
S. Navata, who is aware of and with full knowledge that Fong Pak Luen is a
Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited
and disqualified to acquire real property in this jurisdiction; that defendant Fong
Pak Luen has not acquired any title or interest in said parcel of land as the
purported contract of sale executed by Jose Godinez alone was contrary to law
and considered non- existent, so much so that the alleged attorney-in-fact,
defendant Kwan Pun Ming had not conveyed any title or interest over said
property and defendant Navata had not acquired anything from said grantor and
as a consequence Transfer Certificate of Title No. 1322, which was issued by
the Register of Deeds in favor of the latter is null and void ab initio,- that since
one-half of the said property is conjugal property inherited by the plaintiffs from
their mother, Jose Godinez could -not have legally conveyed the entire
property; that notwithstanding repeated demands on said defendant to surrender
to plaintiffs the said property she refused and still refuses to do so to the great
damage and prejudice of the plaintiffs; and that they were constrained to engage
the services of counsel in the sum of P2,000.00.1wph1.t The plaintiffs thus land to an alien in violation of a constitutional prohibition may recover the
pray that they be adjudged as the owners of the parcel of land in question and
that Transfer Certificate of Title RT-90 (T-884) issued in the name of defendant
Fong Pak Luen be declared null and void ab initio; and that the power of
attorney issued in the name of Kwan Pun Ming, as well as Transfer Certificate
of Title No. 'L322 issued in the name of defendant Navata be likewise declared
null and void, with costs against defendants.
On August 18, 1966, the defendant Register of Deeds filed an answer claiming
that he was not yet the register of deeds then; that it was only the ministerial
duty of his office to issue the title in favor of the defendant Navata once he was
determined the registerability of the documents presented to his office.
On October 20, 1966, the defendant Navata filed her answer with the
affirmative defenses and counterclaim alleging among others that the complaint
does not state a cause of action since it appears from the allegation that the
property is registered in the name of Jose Godinez so that as his sole property
he may dispose of the same; that the cause of action has been barred by the
statute of limitations as the alleged document of sale executed by Jose Godinez
on November 27, 1941, conveyed the property to defendant Fong Pak Luen as
a result of which a title was issued to said defendant; that under Article 1144
(1) of the Civil Code, an action based upon a written contract must be brought
within 10 years from the time the right of action accrues; that the right of action
accrued on November 27, 1941 but the complaint was filed only on September
30, 1966, beyond the 10 year period provided for by law; that the torrens title
in the name of defendant Navata is indefeasible who acquired the property from
defendant Fong Pak Luen who had been in possession of the property since
1941 and thereafter defendant Navata had possessed the same for the last 25
years including the possession of Fong Pak Luen; that the complaint is intended
to harass the defendant as a civic leader and respectable member of the
community as a result of which she suffered moral damages of P100,000.00,
P2,500.00 for attorney's fees and P500.00 expenses of litigation, hence, said
defendant prays that the complaint be dismissed and that her counterclaim be
granted, with costs against the plaintiffs. On November 24, 1967, the plaintiffs
filed an answer to the affirmative defenses and counter-claim. As the defendants
Fong Pak Luen and Kwan Pun Ming are residing outside the Philippines, the
trial court upon motion issued an order of April 17, 1967, for the service of
summons on said defendants by publication. No answer has been filed by said
defendants.
On December 2, 196 7, the court issued an order as follows:
Both parties having agreed to the suggestion of the Court that they submit their
supplemental pleadings to support both motion and opposition and after
submittal of the same the said motion to dismiss which is an affirmative defense
alleged in the complaint is deemed submitted. Failure of both parties or either
party to submit their supplemental pleadings on or about December 9, the Court
will resolve the case.
On November 29, 1968, the trial court issued an order missing the complaint
without pronouncement as to costs. (Record on Appeal, pp. 31- 37). A motion
for reconsideration of this order was filed by the plaintiffs on December 12,
196F, which was denied by the trial court in an order of July 11, 1969, (Rec. on
Appeal, pp. 38, 43, 45, 47). The plaintiffs now interpose this appeal with the
following assignments of errors:
I. The trial court erred in dismissing plaintiffs-appellants' complaint on the
ground of prescription of action, applying Art. 1144 (1) New Civil Code on the
basis of defendant Trinidad S. Navata's affirmative defense of prescription in
her answer treated as a motion to dismiss.
II. The trial court erred in denying plaintiffs-appellants' motion for
reconsideration of the order of dismissal.
III. The trial court erred in not ordering this case to be tried on the merits."
The appellants contend that the lower court erred in dismissing the complaint
on the ground that their cause of action has prescribed. While the issue raised
appears to be only the applicability of the law governing prescription, the real
question before us is whether or not the heirs of a person who sold a parcel of
property if it had, in the meantime, been conveyed to a Filipino citizen qualified
to own and possess it.
The question is not a novel one. Judicial precedents indicate fairly clearly how
the question should be resolved.
There can be no dispute that the sale in 1941 by Jose Godinez of his residential
lot acquired from the Bureau of Lands as part of the Jolo townsite to Fong Pak
Luen, a Chinese citizen residing in Hongkong, was violative of Section 5,
Article XIII of the 1935 Constitution which provided:
Sec. 5. Save in cases of hereditary succession, no private agricultural land will
be transferred or assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the Philippines.
The meaning of the above provision was fully discussed in Krivenko v. Register
of Deeds of Manila (79 Phil. 461) which also detailed the evolution of the
52
provision in the public land laws, Act No. 2874 and Commonwealth Act No.
141. The Krivenko ruling that "under the Constitution aliens may not acquire
private or agricultural lands, including residential lands" is a declaration of an
imperative constitutional policy. Consequently, prescription may never be
invoked to defend that which the Constitution prohibits. However, we see no
necessity from the facts of this case to pass upon the nature of the contract of
sale executed by Jose Godinez and Fong Pak Luen whether void ab
initio, illegal per se or merely pro-exhibited.** It is enough to stress that insofar
as the vendee is concerned, prescription is unavailing. But neither can the
vendor or his heirs rely on an argument based on imprescriptibility because the
land sold in 1941 is now in the hands of a Filipino citizen against whom the
constitutional prescription was never intended to apply. The lower court erred
in treating the case as one involving simply the application of the statute of
limitations.
From the fact that prescription may not be used to defend a contract which the
Constitution prohibits, it does not necessarily follow that the appellants may be
allowed to recover the property sold to an alien. As earlier mentioned, Fong Pak
Luen, the disqualified alien vendee later sold the same property to Trinidad S.
Navata, a Filipino citizen qualified to acquire real property.
In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the
alien vendee later sold the property to a Filipino corporation, this Court, in
affirming a judgment dismissing the complaint to rescind the sale of real
property to the defendant Li Seng Giap on January 22, 1940, on the ground that
the vendee was an alien and under the Constitution incapable to own and hold
title to lands, held:
In Caoile vs. Yu Chiao 49 Qff Gaz., 4321; Talento vs. Makiki 49 Off. Gaz.,
4331; Bautista vs. Uy 49 Off. Gaz., 4336; Rellosa vs. Gaw Chee 49 Off. Gaz.,
4345 and Mercado vs. Go Bio, 49 Off. Gaz., 5360, the majority of this Court
has ruled that in sales of real estate to aliens incapable of holding title thereto
by virtue of the provisions of the Constitution (Section 5, Article XIII Krivenko
vs. Register of Deeds, 44 Off. Gaz., 471) both the vendor and the vendee are
deemed to have committed the constitutional violation and being thus in pari
delicto the courts will not afford protection to either party. (Article 1305, old
Civil Code; Article 1411, new Civil Code) From this ruling three Justices
dissented. (Mr. Justice Pablo, Mr. Justice Alex. Reyes and the writer. See Caoile
vs. Yu Chiao Talento vs. Makiki Bautista us. Uy, Rellosa vs. Gaw Chee and
Mercado vs. Go Bio). supra.
The action is not of rescission because it is not postulated upon any of the
grounds provided for in Article 1291 of the old Civil Code and because the
action of rescission involves lesion or damage and seeks to repair it. It is an
action for annulment under Chapter VI, Title II, Book 11, on nullity of
contracts, based on a defect in the contract which invalidates it independently
of such lesion or damages. (Manresa, Commentarios al Codigo Civil Espanol
Vol. VIII, p. 698, 4th ed.) It is very likely that the majority of this Court
proceeded upon that theory when it applied the in pari delicto rule referred to
above.
In the United States the rule is that in a sale of real estate to an alien disqualified
to hold title thereto the vendor divests himself of the title to such real estate and
has no recourse against the vendee despite the latter's disability on account of
alienage to hold title to such real estate and the vendee may hold it against the
whole world except as against the State. It is only the State that is entitled by
proceedings in the nature of office found to have a forfeiture or escheat declared
against the vendee who is incapable of holding title to the real estate sold and
conveyed to him. Abrams vs. State, 88 Pac. 327; Craig vs. Leslie et al., 4 Law,
Ed. 460; 3 Wheat, 563, 589590; Cross vs. Del Valle, 1 Wall, [U.S.] 513; 17
Law. Ed., 515; Governeur vs. Robertson, 11 Wheat, 332, 6 Law. Ed., 488.)
However, if the State does not commence such proceedings and in the meantime
the alien becomes naturalized citizen, the State is deemed to have waived its
right to escheat the real property and the title of the alien thereto becomes lawful
and valid as of the date of its conveyance or transfer to him. (Osterman vs.
Baldwin, 6 Wall, 116, 18 Law. ed. 730; Manuel vs. Wulff, 152 U.S. 505, 38
Law. ed. 532; Pembroke vs. Houston, 79, SW 470; Fioerella vs. Jones, 259 SW
782. The rule in the United States that in a sale of real estate to an alien
disqualified to hold title thereto, the vendor divests himself of the title to such
real estate and is not permitted to sue for the annulment Of his Contract, is also
the rule under the Civil Code. ... Article 1302 of the old Civil Code provides: ...
Persons sui juris cannot, however, avail themselves of the incapacity of those
with whom they contracted; ...
xxx xxx xxx
. . . (I)f the ban on aliens from acquiring not only agricultural but, also urban
lands, as construed by this Court in the Krivenko case, is to preserve the nation's
land for future generations of Filipinos, that aim or purpose would not be
thwarted but achieved by making lawful the acquisition of real estate by aliens
who became Filipino citizens by naturalization. The title to the parcel of land
of the vendee, a naturalized Filipino citizen, being valid that of the domestic
corporation to which the parcel of land has been transferred, must also be valid,
96.67 per cent of its capital stock being owned by Filipinos.
Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring
that where land is sold to a Chinese citizen, who later sold it to a Filipino, the
sale to the latter cannot be impugned.
The appellants cannot find solace from Philippine Banking Corporation v. Lui
She (21 SCRA 52) which relaxed the pari delicto doctrine to allow the heirs or
successors-in-interest, in appropriate cases, to recover that which their
predecessors sold to aliens.
Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had
occasion to pass upon a factual situation substantially similar to the one in the
instant case. We ruled:
But the factual set-up has changed. The litigated property is now in the hands
of a naturalized Filipino. It is no longer owned by a disqualified vendee.
Respondent, as a naturalized citizen, was constitutionally qualified to own the
subject property. There would be no more public policy to be served in allowing
petitioner Epifania to recover the land as it is already in the hands of a qualified
person. Applying by analogy the ruling of this Court in Vasquez vs. Giap &
Sons: (.96 Phil. 447 [1955])
... if the ban on aliens from acquiring not only agricultural but also urban lands,
as construed by this Court in the Krivenko case, is to preserve the nation's lands
for future generations of Filipinos, that aim or purpose would not be thwarted
but achieved by making lawful the acquisition of real estate by aliens who
became Filipino citizens by naturalization.
While, strictly speaking, Ong King Po, private respondent's vendor, had no
rights of ownership to transmit, it is likewise in escapable that petitioner
Epifania had slept on her rights for 26 years from 1936 to 1962. By her long
inaction or inexcusable neglect, she should be held barred from asserting her
claim to the litigated property (Sotto vs. Teves, 86 SCRA 157 [1978])
Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due diligence could
or should have been done earlier; it is negligence or ommission to assert a right
within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. (Tijam, et al. vs.
Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35).' (Cited in
Sotto vs. Teves, 86 SCRA 154 [1978]).
Respondent, therefore, must be declared to be the rightful owner of the property.
In the light of the above considerations, we find the second and third
assignments of errors without merit. Respondent Navata, the titled owner of the
property is declared the rightful owner.
WHEREFORE, the instant appeal is hereby denied. The orders dismissing the
complaint and denying the motion for reconsideration are affirmed.
SO ORDERED.
53
JG Summit Holdings Inc. vs. CA

G.R. No. 124293, November 20, 2000

FACTS:

The National Investment and Development Corporation (NIDC), a

government corporation, entered into a Joint Venture Agreement (JVA) with
Kawasaki Heavy Industries, Ltd. for the construction, operation and
management of the Subic National Shipyard, Inc., later became the Philippine
Shipyard and Engineering Corporation (PHILSECO). Under the JVA, NIDC
and Kawasaki would maintain a shareholding proportion of 60%-40% and that
the parties have the right of first refusal in case of a sale.

Through a series of transfers, NIDCs rights, title and interest in PHILSECO

eventually went to the National Government. In the interest of national
economy, it was decided that PHILSECO should be privatized by selling
87.67% of its total outstanding capital stock to private entities. After
negotiations, it was agreed that Kawasakis right of first refusal under the JVA
be exchanged for the right to top by five percent the highest bid for said
shares. Kawasaki that Philyards Holdings, Inc. (PHI), in which it was a
stockholder, would exercise this right in its stead.

During bidding, Kawasaki/PHI Consortium is the losing bidder. Even so,

because of the right to top by 5% percent the highest bid, it was able to top JG
Summits bid. JG Summit protested, contending that PHILSECO, as a
shipyard is a public utility and, hence, must observe the 60%-40% Filipino-
foreign capitalization. By buying 87.67% of PHILSECOs capital stock at
bidding, Kawasaki/PHI in effect now owns more than 40% of the stock.

ISSUE:

o Whether or not PHILSECO is a public utility

o Whether or not Kawasaki/PHI can purchase beyond 40% of

PHILSECOs stocks

HELD:

In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit

relied on sec. 13, CA No. 146. On the other hand, Kawasaki/PHI argued that
PD No. 666 explicitly stated that a shipyard was not a public utility. But
the SC stated that sec. 1 of PD No. 666 was expressly repealed by sec. 20, BP
Blg. 391 and when BP Blg. 391 was subsequently repealed by EO 226, the
latter law did not revive sec. 1 of PD No. 666. Therefore, the law that states
that a shipyard is a public utility still stands.

A shipyard such as PHILSECO being a public utility as provided by law is

therefore required to comply with the 60%-40% capitalization under the
Constitution. Likewise, the JVA between NIDC and Kawasaki manifests an
intention of the parties to abide by this constitutional mandate. Thus, under the
JVA, should the NIDC opt to sell its shares of stock to a third party, Kawasaki
could only exercise its right of first refusal to the extent that its total shares of
stock would not exceed 40% of the entire shares of stock. The NIDC, on the
other hand, may purchase even beyond 60% of the total shares. As a
government corporation and necessarily a 100% Filipino-owned corporation,
there is nothing to prevent its purchase of stocks even beyond 60% of the
capitalization as the Constitution clearly limits only foreign capitalization.

Kawasaki was bound by its contractual obligation under the JVA that limits its
right of first refusal to 40% of the total capitalization of PHILSECO. Thus,
Kawasaki cannot purchase beyond 40% of the capitalization of the joint
venture on account of both constitutional and contractual proscriptions.

54
[G.R. No. 124293. September 24, 2003]
JG SUMMIT HOLDINGS, INC., petitioner, vs. COURT OF APPEALS,
COMMITTEE ON PRIVATIZATION, its Chairman and Members;
ASSET PRIVATIZATION TRUST and PHILYARDS
HOLDINGS, INC., respondents.
RESOLUTION
PUNO, J.:
The core issue posed by the Motions for Reconsideration is whether a shipyard
is a public utility whose capitalization must be sixty percent (60%) owned by
Filipinos. Our resolution of this issue will determine the fate of the shipbuilding
and ship repair industry. It can either spell the industrys demise or breathe new
life to the struggling but potentially healthy partner in the countrys bid for
economic growth. It can either kill an initiative yet in its infancy, or harness
creativity in the productive disposition of government assets.
The facts are undisputed and can be summarized briefly as follows:
On January 27, 1977, the National Investment and Development Corporation
(NIDC), a government corporation, entered into a Joint Venture Agreement
(JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for
the construction, operation and management of the Subic National Shipyard,
Inc. (SNS) which subsequently became the Philippine Shipyard and
Engineering Corporation (PHILSECO). Under the JVA, the NIDC and
KAWASAKI will contribute P330 million for the capitalization of PHILSECO
in the proportion of 60%-40% respectively.[1] One of its salient features is the
grant to the parties of the right of first refusal should either of them decide to
sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in
SNS [PHILSECO] to any third party without giving the other under the same
terms the right of first refusal. This provision shall not apply if the transferee is
a corporation owned or controlled by the GOVERNMENT or by a
KAWASAKI affiliate.[2]
On November 25, 1986, NIDC transferred all its rights, title and interest in
PHILSECO to the Philippine National Bank (PNB). Such interests were
subsequently transferred to the National Government pursuant to
Administrative Order No. 14. On December 8, 1986, President Corazon C.
Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and
possession of, conserve, manage and dispose of non-performing assets of the
National Government. Thereafter, on February 27, 1987, a trust agreement was
entered into between the National Government and the APT wherein the latter
was named the trustee of the National Governments share in PHILSECO. In
1989, as a result of a quasi-reorganization of PHILSECO to settle its huge
obligations to PNB, the National Governments shareholdings in PHILSECO
increased to 97.41% thereby reducing KAWASAKIs shareholdings to 2.59%.[3]
In the interest of the national economy and the government, the COP and the
APT deemed it best to sell the National Governments share in PHILSECO to
private entities. After a series of negotiations between the APT and
KAWASAKI, they agreed that the latters right of first refusal under the JVA be
exchanged for the right to top by five percent (5%) the highest bid for the said
shares. They further agreed that KAWASAKI would be entitled to name a
company in which it was a stockholder, which could exercise the right to top.
On September 7, 1990, KAWASAKI informed APT that Philyards Holdings,
Inc. (PHI) would exercise its right to top.[4]
At the pre-bidding conference held on September 18, 1993, interested bidders
were given copies of the JVA between NIDC and KAWASAKI, and of the
Asset Specific Bidding Rules (ASBR) drafted for the National Governments
87.6% equity share in PHILSECO.[5] The provisions of the ASBR were
explained to the interested bidders who were notified that the bidding would be
held on December 2, 1993. A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through public
bidding is the National Governments equity in PHILSECO consisting of
896,869,942 shares of stock (representing 87.67% of PHILSECOs outstanding
capital stock), which will be sold as a whole block in accordance with the rules
herein enumerated.
...
2.0 The highest bid, as well as the buyer, shall be subject to the final approval
of both the APT Board of Trustees and the Committee on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis. The
Indicative price set for the National Governments 87.67% equity in PHILSECO
is PESOS: ONE BILLION THREE HUNDRED MILLION
(P1,300,000,000.00).
...
6.0 The highest qualified bid will be submitted to the APT Board of Trustees at
its regular meeting following the bidding, for the purpose of determining
whether or not it should be endorsed by the APT Board of Trustees to the COP,
and the latter approves the same. The APT shall advise Kawasaki Heavy
Industries, Inc. and/or its nominee, Philyards Holdings, Inc., that the highest bid
is acceptable to the National Government. Kawasaki Heavy Industries, Inc.
and/or Philyards Holdings, Inc. shall then have a period of thirty (30) calendar
days from the date of receipt of such advice from APT within which to exercise
their Option to Top the Highest Bid by offering a bid equivalent to the highest
bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc.
exercise their Option to Top the Highest Bid, they shall so notify the APT about
such exercise of their option and deposit with APT the amount equivalent to ten
percent (10%) of the highest bid plus five percent (5%) thereof within the thirty
(30)-day period mentioned in paragraph 6.0 above. APT will then serve notice
upon Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. declaring
them as the preferred bidder and they shall have a period of ninety (90) days
from the receipt of the APTs notice within which to pay the balance of their bid
price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. fail
to exercise their Option to Top the Highest Bid within the thirty (30)-day period,
APT will declare the highest bidder as the winning bidder.
...
12.0 The bidder shall be solely responsible for examining with appropriate care
these rules, the official bid forms, including any addenda or amendments thereto
issued during the bidding period. The bidder shall likewise be responsible for
informing itself with respect to any and all conditions concerning the
PHILSECO Shares which may, in any manner, affect the bidders proposal.
Failure on the part of the bidder to so examine and inform itself shall be its sole
risk and no relief for error or omission will be given by APT or COP. . .. [6]
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc.
submitted a bid of Two Billion and Thirty Million Pesos (P2,030,000,000.00)
with an acknowledgement of KAWASAKI/Philyards right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to thirty
(30) days to act on APTs recommendation based on the result of this bidding.
Should the COP approve the highest bid, APT shall advise Kawasaki Heavy
Industries, Inc. and/or its nominee, Philyards Holdings, Inc. that the highest bid
is acceptable to the National Government. Kawasaki Heavy Industries, Inc.
and/or Philyards Holdings, Inc. shall then have a period of thirty (30) calendar
days from the date of receipt of such advice from APT within which to exercise
their Option to Top the Highest Bid by offering a bid equivalent to the highest
bid plus five (5%) percent thereof.[7]
As petitioner was declared the highest bidder, the COP approved the sale on
December 3, 1993 subject to the right of Kawasaki Heavy Industries,
55
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the
bidding rules.[8]
On December 29, 1993, petitioner informed APT that it was protesting the offer
of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI consortium
composed of Kawasaki, Philyards, Mitsui, Keppel, SM Group, ICTSI and
Insular Life violated the ASBR because the last four (4) companies were the
losing bidders thereby circumventing the law and prejudicing the weak winning
bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the
same option to top to PHI constituted unwarranted benefit to a third party; (d)
no right of first refusal can be exercised in a public bidding or auction sale; and
(e) the JG Summit consortium was not estopped from questioning the
proceedings.[9]
On February 2, 1994, petitioner was notified that PHI had fully paid the balance
of the purchase price of the subject bidding. On February 7, 1994, the APT
notified petitioner that PHI had exercised its option to top the highest bid and
that the COP had approved the same on January 6, 1994. On February 24, 1994,
the APT and PHI executed a Stock Purchase Agreement. [10] Consequently,
petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057.
On May 11, 1994, said petition was referred to the Court of Appeals. On July
18, 1995, the Court of Appeals denied the same for lack of merit. It ruled that
the petition for mandamus was not the proper remedy to question the
constitutionality or legality of the right of first refusal and the right to top that
was exercised by KAWASAKI/PHI, and that the matter must be brought by the
proper party in the proper forum at the proper time and threshed out in a full
blown trial. The Court of Appeals further ruled that the right of first refusal and
the right to top are prima facie legal and that the petitioner, by participating in
the public bidding, with full knowledge of the right to top granted to
KASAWASAKI/Philyards is . . .estopped from questioning the validity of the
award given to Philyards after the latter exercised the right to top and had paid
in full the purchase price of the subject shares, pursuant to the ASBR. Petitioner
filed a Motion for Reconsideration of said Decision which was denied on March
15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging
grave abuse of discretion on the part of the appellate court. [11]
On November 20, 2000, this Court rendered the now assailed Decision ruling
among others that the Court of Appeals erred when it dismissed the petition on
the sole ground of the impropriety of the special civil action
of mandamus because the petition was also one of certiorari.[12] It further ruled
that a shipyard like PHILSECO is a public utility whose capitalization must be
sixty percent (60%) Filipino-owned.[13] Consequently, the right to top granted
to KAWASAKI under the Asset Specific Bidding Rules (ASBR) drafted for the
sale of the 87.67% equity of the National Government in PHILSECO is illegal-
--not only because it violates the rules on competitive bidding--- but more so,
because it allows foreign corporations to own more than 40% equity in the
shipyard.[14] It also held that although the petitioner had the opportunity to
examine the ASBR before it participated in the bidding, it cannot be estopped
from questioning the unconstitutional, illegal and inequitable provisions
thereof.[15] Thus, this Court voided the transfer of the national governments
87.67% share in PHILSECO to Philyard Holdings, Inc., and upheld the right of
JG Summit, as the highest bidder, to take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED.
The assailed Decision and Resolution of the Court of Appeals are REVERSED
and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two
Billion Thirty Million Pesos (P2,030,000,000.00 ), less its bid deposit plus
interests upon the finality of this Decision. In turn, APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests
from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of stocks
representing 87.6% of PHILSECOs total capitalization;
(d) return to private respondent PHGI the amount of Two Billion One Hundred
Thirty-One Million Five Hundred Thousand Pesos (P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI.
SO ORDERED.[16]
In separate Motions for Reconsideration,[17] respondents submit three basic
issues for our resolution: (1) Whether PHILSECO is a public utility; (2)
Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal
only up to 40% of the total capitalization of PHILSECO; and (3) Whether the
right to top granted to KAWASAKI violates the principles of competitive
bidding.
I.
Whether PHILSECO is a Public Utility.
After carefully reviewing the applicable laws and jurisprudence, we hold that
PHILSECO is not a public utility for the following reasons:
First. By nature, a shipyard is not a public utility.
A public utility is a business or service engaged in regularly supplying the
public with some commodity or service of public consequence such as
electricity, gas, water, transportation, telephone or telegraph service. [18] To
constitute a public utility, the facility must be necessary for the maintenance of
life and occupation of the residents. However, the fact that a business offers
services or goods that promote public good and serve the interest of the public
does not automatically make it a public utility. Public use is not synonymous
with public interest. As its name indicates, the term public utility implies public
use and service to the public. The principal determinative characteristic of
a public utility is that of service to, or readiness to serve, an indefinite public or
portion of the public as such which has a legal right to demand and receive its
services or commodities. Stated otherwise, the owner or person in control of a
public utility must have devoted it to such use that the public generally or that
part of the public which has been served and has accepted the service, has the
right to demand that use or service so long as it is continued, with reasonable
efficiency and under proper charges.[19] Unlike a private enterprise which
independently determines whom it will serve, a public utility holds out
generally and may not refuse legitimate demand for service.[20] Thus, in Iloilo
Ice and Cold Storage Co. vs. Public Utility Board,[21] this Court defined
public use, viz:
Public use means the same as use by the public. The essential feature of the
public use is that it is not confined to privileged individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its
public character. In determining whether a use is public, we must look not only
to the character of the business to be done, but also to the proposed mode of
doing it.If the use is merely optional with the owners, or the public benefit is
merely incidental, it is not a public use, authorizing the exercise of jurisdiction
of the public utility commission. There must be, in general, a right which the
law compels the owner to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use is not synonymous with
public interest. The true criterion by which to judge the character of the use
is whether the public may enjoy it by right or only by
permission.[22] (emphasis supplied)
Applying the criterion laid down in Iloilo to the case at bar, it is crystal clear
that a shipyard cannot be considered a public utility.
A shipyard is a place or enclosure where ships are built or repaired.[23] Its nature
dictates that it serves but a limited clientele whom it may choose to serve at
its discretion. While it offers its facilities to whoever may wish to avail of its
services, a shipyard is not legally obliged to render its services
indiscriminately to the public. It has no legal obligation to render the services
sought by each and every client. The fact that it publicly offers its services does
not give the public a legal right to demand that such services be rendered.
There can be no disagreement that the shipbuilding and ship repair industry is
imbued with public interest as it involves the maintenance of the seaworthiness
of vessels dedicated to the transportation of either persons or goods.
Nevertheless, the fact that a business is affected with public interest does not
56
imply that it is under a duty to serve the public. While the business may be
regulated for public good, the regulation cannot justify the classification of a
purely private enterprise as a public utility. The legislature cannot, by its mere
declaration, make something a public utility which is not in fact such; and a
private business operated under private contracts with selected customers
and not devoted to public use cannot, by legislative fiat or by order of a
public service commission, be declared a public utility, since that would be
taking private property for public use without just compensation, which cannot
be done consistently with the due process clause. [24]
It is worthy to note that automobile and aircraft manufacturers, which are of
similar nature to shipyards, are not considered public utilities despite the fact
that their operations greatly impact on land and air transportation. The reason
is simple. Unlike commodities or services traditionally regarded as public
utilities such as electricity, gas, water, transportation, telephone or telegraph
service, automobile and aircraft manufacturing---and for that matter ship
building and ship repair--- serve the public only incidentally.
Second. There is no law declaring a shipyard as a public utility.
History provides us hindsight and hindsight ought to give us a better view of
the intent of any law. The succession of laws affecting the status of shipyards
ought not to obliterate, but rather, give us full picture of the intent of the
legislature. The totality of the circumstances, including the contemporaneous
interpretation accorded by the administrative bodies tasked with the
enforcement of the law all lead to a singular conclusion: that shipyards are not
public utilities.
Since the enactment of Act No. 2307 which created the Public Utility
Commission (PUC) until its repeal by Commonwealth Act No. 146,
establishing the Public Service Commission (PSC), a shipyard, by legislative
declaration, has been considered a public utility. [25] A Certificate of Public
Convenience (CPC) from the PSC to the effect that the operation of the said
service and the authorization to do business will promote the public interests in
a proper and suitable manner is required before any person or corporation may
operate a shipyard.[26] In addition, such persons or corporations should abide by
the citizenship requirement provided in Article XIII, section 8 of the 1935
Constitution,[27] viz:
Sec. 8. No franchise, certificate, or any other form or authorization for the
operation of a public utility shall be granted except to citizens of the Philippines
or to corporations or other entities organized under the laws of the
Philippines, sixty per centum of the capital of which is owned by citizens of
the Philippines, nor shall such franchise, certificate or authorization be
exclusive in character or for a longer period than fifty years. No franchise or
right shall be granted to any individual, firm or corporation, except under the
condition that it shall be subject to amendment, alteration, or repeal by the
National Assembly when the public interest so requires. (emphasis supplied)
To accelerate the development of shipbuilding and ship repair industry, former
President Ferdinand E. Marcos issued P.D. No. 666 granting the following
incentives:
SECTION 1. Shipbuilding and ship repair yards duly registered with the
Maritime Industry Authority shall be entitled to the following incentive
benefits:
(a) Exemption from import duties and taxes.- The importation of machinery,
equipment and materials for shipbuilding, ship repair and/or alteration,
including indirect import, as well as replacement and spare parts for the repair
and overhaul of vessels such as steel plates, electrical machinery and electronic
parts, shall be exempt from the payment of customs duty and compensating tax:
Provided, however, That the Maritime Industry Authority certifies that the item
or items imported are not produced locally in sufficient quantity and acceptable
quality at reasonable prices, and that the importation is directly and actually
needed and will be used exclusively for the construction, repair, alteration, or
overhaul of merchant vessels, and other watercrafts; Provided, further, That if
the above machinery, equipment, materials and spare parts are sold to non-tax
exempt persons or entities, the corresponding duties and taxes shall be paid by
the original importer; Provided, finally, That local dealers and/or agents who
sell machinery, equipment, materials and accessories to shipyards for
shipbuilding and ship repair are entitled to tax credits, subject to approval by
the total tariff duties and compensating tax paid for said machinery, equipment,
materials and accessories.
(b) Accelerated depreciation.- Industrial plant and equipment may, at the option
of the shipbuilder and ship repairer, be depreciated for any number of years
between five years and expected economic life.
(c) Exemption from contractors percentage tax.- The gross receipts derived by
shipbuilders and ship repairers from shipbuilding and ship repairing activities
shall be exempt from the Contractors Tax provided in Section 91 of the National
Internal Revenue Code during the first ten years from registration with the
Maritime Industry Authority, provided that such registration is effected not later
than the year 1990; Provided, That any and all amounts which would otherwise
have been paid as contractors tax shall be set aside as a separate fund, to be
known as Shipyard Development Fund, by the contractor for the purpose of
expansion, modernization and/or improvement of the contractors own
shipbuilding or ship repairing facilities; Provided, That, for this purpose, the
contractor shall submit an annual statement of its receipts to the Maritime
Industry Authority; and Provided, further, That any disbursement from such
fund for any of the purposes hereinabove stated shall be subject to approval by
the Maritime Industry Authority.
In addition, P.D. No. 666 removed the shipbuilding and ship repair industry
from the list of public utilities, thereby freeing the industry from the 60%
citizenship requirement under the Constitution and from the need to obtain
Certificate of Public Convenience pursuant to section 15 of C.A No.
146. Section 1 (d) of P.D. 666 reads:
(d) Registration required but not as a Public Utility.- The business of
constructing and repairing vessels or parts thereof shall not be considered
a public utility and no Certificate of Public Convenience shall be required
therefor. However, no shipyard, graving dock, marine railway or marine repair
shop and no person or enterprise shall engage in construction and/or repair of
any vessel, or any phase or part thereof, without a valid Certificate of
Registration and license for this purpose from the Maritime Industry Authority,
except those owned or operated by the Armed Forces of the Philippines or by
foreign governments pursuant to a treaty or agreement. (emphasis supplied)
Any law, decree, executive order, or rules and regulations inconsistent with
P.D. No. 666 were repealed or modified accordingly.[28] Consequently, sections
13 (b) and 15 of C.A. No. 146 were repealed in so far as the former law included
shipyards in the list of public utilities and required the certificate of public
convenience for their operation. Simply stated, the repeal was due to
irreconcilable inconsistency, and by definition, this kind of repeal falls under
the category of an implied repeal.[29]
On April 28, 1983, Batas Pambansa Blg. 391, also known as the Investment
Incentive Policy Act of 1983, was enacted. It laid down the general policy of
the government to encourage private domestic and foreign investments in the
various sectors of the economy, to wit:
Sec. 2. Declaration of Investment Policy.- It is the policy of the State to
encourage private domestic and foreign investments in industry, agriculture,
mining and other sectors of the economy which shall: provide significant
employment opportunities relative to the amount of the capital being invested;
increase productivity of the land, minerals, forestry, aquatic and other resources
of the country, and improve utilization of the products thereof; improve
technical skills of the people employed in the enterprise; provide a foundation
for the future development of the economy; accelerate development of less
developed regions of the country; and result in increased volume and value of
exports for the economy.
It is the policy of the State to extend to projects which will significantly
contribute to the attainment of these objectives, fiscal incentives without which
said projects may not be established in the locales, number and/or pace required
for optimum national economic development. Fiscal incentive systems shall
be devised to compensate for market imperfections, reward performance
57
of making contributions to economic development, cost-efficient and be
simple to administer.
The fiscal incentives shall be extended to stimulate establishment and assist
initial operations of the enterprise, and shall terminate after a period of not more
than 10 years from registration or start-up of operation unless a special period
is otherwise stated.
The foregoing declaration shall apply to all investment incentive
schemes and in particular will supersede article 2 of Presidential Decree No.
1789. (emphases supplied)
With the new investment incentive regime, Batas Pambansa Blg. 391 repealed
the following laws, viz:
Sec. 20. The following provisions are hereby repealed:
1) Section 53, P.D. 463 (Mineral Resources Development Decree);
2.) Section 1, P.D. 666 (Shipbuilding and Ship Repair Industry);
3) Section 6, P.D. 1101 (Radioactive Minerals);
4) LOI 508 extending P.D. 791 and P.D. 924 (Sugar); and
5) The following articles of Presidential Decree 1789: 2, 18, 19, 22, 28, 30, 39,
49 (d), 62, and 77. Articles 45, 46 and 48 are hereby amended only with respect
to domestic and export producers.
All other laws, decrees, executive orders, administrative orders, rules and
regulations or parts thereof which are inconsistent with the provisions of this
Act are hereby repealed, amended or modified accordingly.
All other incentive systems which are not in any way affected by the provisions
of this Act may be restructured by the President so as to render them cost-
efficient and to make them conform with the other policy guidelines in the
declaration of policy provided in Section 2 of this Act. (emphasis supplied)
From the language of the afore-quoted provision, the whole of P.D. No. 666,
section 1 was expressly and categorically repealed. As a consequence, the
provisions of C.A. No. 146, which were impliedly repealed by P.D. No. 666,
section 1 were revived.[30] In other words, with the enactment of Batas
Pambansa Blg. 391, a shipyard reverted back to its status as a public utility and
as such, requires a CPC for its operation.
The crux of the present controversy is the effect of the express repeal of Batas
Pambansa Blg. 391 by Executive Order No. 226 issued by former President
Corazon C. Aquino under her emergency powers.
We rule that the express repeal of Batas Pambansa Blg. 391 by E.O. No. 226
did not revive Section 1 of P.D. No. 666. But more importantly, it also put a
period to the existence of sections 13 (b) and 15 of C.A. No. 146. It bears
emphasis that sections 13 (b) and 15 of C.A. No. 146, as originally written,
owed their continued existence to Batas Pambansa Blg. 391. Had the latter not
repealed P.D. No. 666, the former should have been modified accordingly and
shipyards effectively removed from the list of public utilities. Ergo, with the
express repeal of Batas Pambansa Blg. 391 by E.O. No. 226, the revival of
sections 13 (b) and 15 of C.A. No. 146 had no more leg to stand on. A law that
has been expressly repealed ceases to exist and becomes inoperative from the
moment the repealing law becomes effective.[31] Hence, there is simply no basis
in the conclusion that shipyards remain to be a public utility. A repealed statute
cannot be the basis for classifying shipyards as public utilities.
In view of the foregoing, there can be no other conclusion than to hold that a
shipyard is not a pubic utility. A shipyard has been considered a public utility
merely by legislative declaration. Absent this declaration, there is no more
reason why it should continuously be regarded as such. The fact that the
legislature did not clearly and unambiguously express its intention to include
shipyards in the list of public utilities indicates that that it did not intend to do
so. Thus, a shipyard reverts back to its status as non-public utility prior to the
enactment of the Public Service Law.
This interpretation is in accord with the uniform interpretation placed upon it
by the Board of Investments (BOI), which was entrusted by the legislature with
the preparation of annual Investment Priorities Plan (IPPs). The BOI has
consistently classified shipyards as part of the manufacturing sector and not of
the public utilities sector. The enactment of Batas Pambansa Blg. 391 did not
alter the treatment of the BOI on shipyards. It has been, as at present, classified
as part of the manufacturing and not of the public utilities sector.[32]
Furthermore, of the 441 Ship Building and Ship Repair (SBSR) entities
registered with the MARINA,[33] none appears to have an existing franchise. If
we continue to hold that a shipyard is a pubic utility, it is a necessary
consequence that all these entities should have obtained a franchise as was the
rule prior to the enactment of P.D. No. 666. But MARINA remains without
authority, pursuant to P.D. No. 474[34] to issue franchises for the operation of
shipyards. Surely,
the legislature did not intend to create a vacuum by continuously treating a
shipyard as a public utility without giving MARINA the power to issue a
Certificate of Public Convenience (CPC) or a Certificate of Public Convenience
and Necessity (CPCN) as required by section 15 of C.A. No. 146.
II.
Whether under the 1977 Joint Venture Agreement,
KAWASAKI can purchase only a maximum of 40%
of PHILSECOs total capitalization.
A careful reading of the 1977 Joint Venture Agreement reveals that there is
nothing that prevents KAWASAKI from acquiring more than 40% of
PHILSECOs total capitalization. Section 1 of the 1977 JVA states:
1.3 The authorized capital stock of Philseco shall be P330 million. The parties
shall thereafter increase their subscription in Philseco as may be necessary and
as called by the Board of Directors, maintaining a proportion of 60%-40% for
NIDC and KAWASAKI respectively, up to a total subscribed and paid-up
capital stock of P312 million.
1.4 Neither party shall sell, transfer or assign all or any part of its interest in
SNS [renamed PHILSECO] to any third party without giving the other under
the same terms the right of first refusal. This provision shall not apply if the
transferee is a corporation owned and controlled by the GOVERMENT [of the
Philippines] or by a Kawasaki affiliate.
1.5 The By-Laws of SNS [PHILSECO] shall grant the parties preemptive rights
to unissued shares of SNS [PHILSECO].[35]
Under section 1.3, the parties agreed to the amount of P330 million as the total
capitalization of their joint venture. There was no mention of the amount of
their initial subscription. What is clear is that they are to infuse the needed
capital from time to time until the total subscribed and paid-up capital
reaches P312 million. The phrase maintaining a proportion of 60%-40% refers
to their respective share of the burden each time the Board of Directors decides
to increase the subscription to reach the target paid-up capital of P312 million.
It does not bind the parties to maintain the sharing scheme all throughout the
existence of their partnership.
The parties likewise agreed to arm themselves with protective mechanisms to
preserve their respective interests in the partnership in the event that (a) one
party decides to sell its shares to third parties; and (b) new Philseco shares are
issued. Anent the first situation, the non-selling party is given the right of first
refusal under section 1.4 to have a preferential right to buy or to refuse the
selling partys shares. The right of first refusal is meant to protect the original or
remaining joint venturer(s) or shareholder(s) from the entry of third persons
who are not acceptable to it as co-venturer(s) or co-shareholder(s). The joint
venture between the Philippine Government and KAWASAKI is in the nature
of a partnership[36] which, unlike an ordinary corporation, is based on delectus
personae.[37] No one can become a member of the partnership association
without the consent of all the other associates. The right of first refusal thus
ensures that the parties are given control over who may become a new partner
58
in substitution of or in addition to the original partners. Should the selling
partner decide to dispose all its shares, the non-selling partner may acquire all
these shares and terminate the partnership. No person or corporation can be
compelled to remain or to continue the partnership. Of course, this presupposes
that there are no other restrictions in the maximum allowable share that the non-
selling partner may acquire such as the constitutional restriction on foreign
ownership in public utility. The theory that KAWASAKI can acquire, as a
maximum, only 40% of PHILSECOs shares is correct only if a shipyard is a
public utility. In such instance, the non-selling partner who is an alien can
acquire only a maximum of 40% of the total capitalization of a public utility
despite the grant of first refusal. The partners cannot, by mere agreement, avoid
the constitutional proscription. But as afore-discussed, PHILSECO is not a
public utility and no other restriction is present that would limit the right of
KAWASAKI to purchase the Governments share to 40% of Philsecos total
capitalization.
Furthermore, the phrase under the same terms in section 1.4 cannot be given an
interpretation that would limit the right of KAWASAKI to purchase
PHILSECO shares only to the extent of its original proportionate contribution
of 40% to the total capitalization of the PHILSECO. Taken together with the
whole of section 1.4, the phrase under the same terms means that a partner
to the joint venture that decides to sell its shares to a third party shall make
a similar offer to the non-selling partner. The selling partner cannot make a
different or a more onerous offer to the non-selling partner.
The exercise of first refusal presupposes that the non-selling partner is aware of
the terms of the conditions attendant to the sale for it to have a guided choice.
While the right of first refusal protects the non-selling partner from the entry of
third persons, it cannot also deprive the other partner the right to sell its shares
to third persons if, under the same offer, it does not buy the shares.
Apart from the right of first refusal, the parties also have preemptive
rights under section 1.5 in the unissued shares of Philseco. Unlike the former,
this situation does not contemplate transfer of a partners shares to third parties
but the issuance of new Philseco shares. The grant of preemptive rights
preserves the proportionate shares of the original partners so as not to dilute
their respective interests with the issuance of the new shares. Unlike the right
of first refusal, a preemptive right gives a partner a preferential right over the
newly issued shares only to the extent that it retains its original proportionate
share in the joint venture.
The case at bar does not concern the issuance of new shares but the transfer of
a partners share in the joint venture. Verily, the operative protective mechanism
is the right of first refusal which does not impose any limitation in the maximum
shares that the non-selling partner may acquire.
III.
Whether the right to top granted to KAWASAKI
in exchange for its right of first refusal violates
the principles of competitive bidding.
We also hold that the right to top granted to KAWASAKI and exercised by
private respondent did not violate the rules of competitive bidding.
The word bidding in its comprehensive sense means making an offer or an
invitation to prospective contractors whereby the government manifests its
intention to make proposals for the purpose of supplies, materials and
equipment for official business or public use, or for public works or
repair.[38] The three principles of public bidding are: (1) the offer to the public;
(2) an opportunity for competition; and (3) a basis for comparison of bids.[39] As
long as these three principles are complied with, the public bidding can be
considered valid and legal. It is not necessary that the highest bid be
automatically accepted. The bidding rules may specify other conditions or the
bidding process be subjected to certain reservation or qualification such as when
the owner reserves to himself openly at the time of the sale the right to bid upon
the property, or openly announces a price below which the property will not be
sold. Hence, where the seller reserves the right to refuse to accept any bid made,
a binding sale is not consummated between the seller and the bidder until the
seller accepts the bid. Furthermore, where a right is reserved in the seller to
reject any and all bids received, the owner may exercise the right even after the
auctioneer has accepted a bid, and this applies to the auction of public as well
as private property. [40] Thus:
It is a settled rule that where the invitation to bid contains a reservation for the
Government to reject any or all bids, the lowest or the highest bidder, as the
case may be, is not entitled to an award as a matter of right for it does not
become a ministerial duty of the Government to make such an award. Thus, it
has been held that where the right to reject is so reserved, the lowest bid or any
bid for that matter may be rejected on a mere technicality, that all bids may be
rejected, even if arbitrarily and unwisely, or under a mistake, and that in the
exercise of a sound discretion, the award may be made to another than the
lowest bidder. And so, where the Government as advertiser, availing itself of
that right, makes its choice in rejecting any or all bids, the losing bidder has no
cause to complain nor right to dispute that choice, unless an unfairness or
injustice is shown. Accordingly, he has no ground of action to compel the
Government to award the contract in his favor, nor compel it to accept his bid.[41]
In the instant case, the sale of the Government shares in PHILSECO was
publicly known. All interested bidders were welcomed. The basis for
comparing the bids were laid down. All bids were accepted sealed and were
opened and read in the presence of the COAs official representative and before
all interested bidders. The only question that remains is whether or not the
existence of KAWASAKIs right to top destroys the essence of competitive
bidding so as to say that the bidders did not have an opportunity for
competition. We hold that it does not.
The essence of competition in public bidding is that the bidders are placed on
equal footing. This means that all qualified bidders have an equal chance of
winning the auction through their bids. In the case at bar, all of the bidders were
exposed to the same risk and were subjected to the same condition, i.e., the
existence of KAWASAKIs right to top. Under the ASBR, the Government
expressly reserved the right to reject any or all bids, and manifested its intention
not to accept the highest bid should KAWASAKI decide to exercise its right to
top under the ABSR. This reservation or qualification was made known to the
bidders in a pre-bidding conference held on September 28, 1993. They all
expressly accepted this condition in writing without any qualification.
Furthermore, when the Committee on Privatization notified petitioner of the
approval of the sale of the National Government shares of stock in PHILSECO,
it specifically stated that such approval was subject to the right of KAWASAKI
Heavy Industries, Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as
specified in the bidding rules. Clearly, the approval of the sale was a conditional
one. Since Philyards eventually exercised its right to top petitioners bid by 5%,
the sale was not consummated. Parenthetically, it cannot be argued that the
existence of the right to top set for naught the entire public bidding. Had
Philyards Holdings, Inc. failed or refused to exercise its right to top, the sale
between the petitioner and the National Government would have been
consummated. In like manner, the existence of the right to top cannot be likened
to a second bidding, which is countenanced, except when there is failure to bid
as when there is only one bidder or none at all. A prohibited second bidding
presupposes that based on the terms and conditions of the sale, there is already
a highest bidder with the right to demand that the seller accept its bid. In the
instant case, the highest bidder was well aware that the acceptance of its bid
was conditioned upon the non-exercise of the right to top.
To be sure, respondents did not circumvent the requirements for bidding by
granting KAWASAKI, a non-bidder, the right to top the highest bidder. The
fact that KAWASAKIs nominee to exercise the right to top has among its
stockholders some losing bidders cannot also be deemed unfair.
It must be emphasized that none of the parties questions the existence of
KAWASAKIs right of first refusal, which is concededly the basis for the grant
of the right to top. Under KAWASAKIs right of first refusal, the National
Government is under the obligation to give preferential right to KAWASAKI
in the event it decides to sell its shares in PHILSECO. It has to offer to
KAWASAKI the shares and give it the option to buy or refuse under the same
terms for which it is willing to sell the said shares to third parties. KAWASAKI
59
is not a mere non-bidder. It is a partner in the joint venture; the incidents of
which are governed by the law on contracts and on partnership.

It is true that properties of the National Government, as a rule, may be sold only
after a public bidding is held. Public bidding is the accepted method in arriving
at a fair and reasonable price and ensures that overpricing, favoritism and other
anomalous practices are eliminated or minimized.[42] But the requirement for
public bidding does not negate the exercise of the right of first refusal. In fact,
public bidding is an essential first step in the exercise of the right of first refusal
because it is only after the public bidding that the terms upon which the
Government may be said to be willing to sell its shares to third parties may be
known. It is only after the public bidding that the Government will have a basis
with which to offer KAWASAKI the option to buy or forego the shares.

Assuming that the parties did not swap KAWASAKIs right of first refusal with
the right to top, KAWASAKI would have been able to buy the National
Governments shares in PHILSECO under the same terms as offered by the
highest bidder. Stated otherwise, by exercising its right of first refusal,
KAWASAKI could have bought the shares for only P2.03 billion and not the
higher amount of P2.1315 billion. There is, thus, no basis in the submission that
the right to top unfairly favored KAWASAKI. In fact, with the right to top,
KAWASAKI stands to pay higher than it should had it settled with its right of
first refusal. The obvious beneficiary of the scheme is the National Government.

If at all, the obvious consideration for the exchange of the right of first refusal
with the right to top is that KAWASAKI can name a nominee, which it is a
shareholder, to exercise the right to top. This is a valid contractual stipulation;
the right to top is an assignable right and both parties are aware of the full legal
consequences of its exercise. As aforesaid, all bidders were aware of the
existence of the right to top, and its possible effects on the result of the public
bidding was fully disclosed to them. The petitioner, thus, cannot feign
ignorance nor can it be allowed to repudiate its acts and question the
proceedings it had fully adhered to.[43]

The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM
Group, Insular Life Assurance, Mitsui and ICTSI), has joined Philyards in the
latters effort to raise P2.131 billion necessary in exercising the right to top is
not contrary to law, public policy or public morals. There is nothing in the
ASBR that bars the losing bidders from joining either the winning bidder
(should the right to top is not exercised) or KAWASAKI/PHI (should it exercise
its right to top as it did), to raise the purchase price. The petitioner did not allege,
nor was it shown by competent evidence, that the participation of the losing
bidders in the public bidding was done with fraudulent intent. Absent any proof
of fraud, the formation by Philyards of a consortium is legitimate in a free
enterprise system. The appellate court is thus correct in holding the petitioner
estopped from questioning the validity of the transfer of the National
Governments shares in PHILSECO to respondent.

Finally, no factual basis exists to support the view that the drafting of the ASBR
was illegal because no prior approval was given by the COA for it, specifically
the provision on the right to top the highest bidder and that the public auction
on December 2, 1993 was not witnessed by a COA representative. No evidence
was proffered to prove these allegations and the Court cannot make legal
conclusions out of mere allegations. Regularity in the performance of official
duties is presumed[44] and in the absence of competent evidence to rebut this
presumption, this Court is duty bound to uphold this presumption.

IN VIEW OF THE FOREGOING, the Motion for Reconsideration is hereby

GRANTED. The impugned Decision and Resolution of the Court of Appeals
are AFFIRMED.

SO ORDERED.

60
G.R. No. L-6776 May 21, 1955
THE REGISTER OF DEEDS OF RIZAL, petitioner-appellee,
vs.
UNG SIU SI TEMPLE, respondent-appellant.
Alejo F. Candido for appellant.
Office of the Solicitor General Querube C. Makalintal and Solicitor Felix V.
Makasiar for appellee.
REYES, J.B.L., J.:
The Register of Deeds for the province of Rizal refused to accept for record a
deed of donation executed in due form on January 22, 1953, by Jesus Dy, a
Filipino citizen, conveying a parcel of residential land, in Caloocan, Rizal,
known as lot No. 2, block 48-D, PSD-4212, G.L.R.O. Record No. 11267, in
favor of the unregistered religious organization "Ung Siu Si Temple", operating
through three trustees all of Chinese nationality. The donation was duly
accepted by Yu Juan, of Chinese nationality, founder and deaconess of the
Temple, acting in representation and in behalf of the latter and its trustees.
The refusal of the Registrar was elevated en Consultato the IVth Branch of the
Court of First Instance of Manila. On March 14, 1953, the Court upheld the
action of the Rizal Register of Deeds, saying:
The question raised by the Register of Deeds in the above transcribed consulta
is whether a deed of donation of a parcel of land executed in favor of a religious
organization whose founder, trustees and administrator are Chinese citizens
should be registered or not.
acquisition of public agricultural lands and other natural resources to
"corporations or associations at least sixty per centum of the capital of which is
owned by such citizens" (of the Philippines).
The fact that the appellant religious organization has no capital stock does not
suffice to escape the Constitutional inhibition, since it is admitted that its
members are of foreign nationality. The purpose of the sixty per centum
requirement is obviously to ensure that corporations or associations allowed to
acquire agricultural land or to exploit natural resources shall be controlled by
Filipinos; and the spirit of the Constitution demands that in the absence of
capital stock, the controlling membership should be composed of Filipino
citizens.
To permit religious associations controlled by non-Filipinos to acquire
agricultural lands would be to drive the opening wedge to revive alien religious
land holdings in this country. We can not ignore the historical fact that
complaints against land holdings of that kind were among the factors that
sparked the revolution of 1896.
As to the complaint that the disqualification under article XIII is violative of
the freedom of religion guaranteed by Article III of the Constitution, we are by
no means convinced (nor has it been shown) that land tenure is indispensable
to the free exercise and enjoyment of religious profession or worship; or that
one may not worship the Deity according to the dictates of his own conscience
unless upon land held in fee simple.
The resolution appealed from is affirmed, with costs against appellant.

It appearing from the record of the Consulta that UNG SIU SI TEMPLE is a
religious organization whose deaconess, founder, trustees and administrator are
all Chinese citizens, this Court is of the opinion and so hold that in view of the
provisions of the sections 1 and 5 of Article XIII of the Constitution of the
Philippines limiting the acquisition of land in the Philippines to its citizens, or
to corporations or associations at least sixty per centum of the capital stock of
which is owned by such citizens adopted after the enactment of said Act No.
271, and the decision of the Supreme Court in the case of Krivenko vs. the
Register of Deeds of Manila, the deed of donation in question should not be
admitted for admitted for registration. (Printed Rec. App. pp 17-18).

Not satisfied with the ruling of the Court of First Instance, counsel for the donee
Uy Siu Si Temple has appealed to this Court, claiming: (1) that the acquisition
of the land in question, for religious purposes, is authorized and permitted by
Act No. 271 of the old Philippine Commission, providing as follows:

SECTION 1. It shall be lawful for all religious associations, of whatever sort or

denomination, whether incorporated in the Philippine Islands or in the name of
other country, or not incorporated at all, to hold land in the Philippine Islands
upon which to build churches, parsonages, or educational or charitable
institutions.

SEC. 2. Such religious institutions, if not incorporated, shall hold the land in
the name of three Trustees for the use of such associations; . . .. (Printed Rec.
App. p. 5.)

and (2) that the refusal of the Register of Deeds violates the freedom of religion
clause of our Constitution [Art. III, Sec. 1(7)].

We are of the opinion that the Court below has correctly held that in view of
the absolute terms of section 5, Title XIII, of the Constitution, the provisions of
Act No. 271 of the old Philippine Commission must be deemed repealed since
the Constitution was enacted, in so far as incompatible therewith. In providing
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 Constitution makes no exception in favor of religious associations. Neither

is there any such saving found in sections 1 and 2 of Article XIII, restricting the

61
Corporate Law Case Digest: Roman Catholic Apostolic Administrator Of In this sense, the king is a sole corporation; so is a bishop,
Davao V. LRC (1957) or dens, distinct from their several chapters

G.R. No. L-8451 December 20, 1957 corporation sole

Lesson Applicable: Exploitation of Natural Resources (Corporate Law) 1. composed of only one persons, usually the head or bishop of the
diocese, a unit which is not subject to expansion for the purpose of
determining any percentage whatsoever

2. only the administrator and not the owner of the temporalities

FACTS:
located in the territory comprised by said corporation sole and such
October 4, 1954: Mateo L. Rodis, a Filipino citizen and resident of temporalities are administered for and on behalf of the faithful
the City of Davao, executed a deed of sale of a parcel of land in favor residing in the diocese or territory of the corporation sole
of the Roman Catholic Apostolic Administrator of Davao
3. has no nationality and the citizenship of the incumbent and ordinary
Inc.(Roman), a corporation sole organized and existing in
has nothing to do with the operation, management or administration
accordance with Philippine Laws, with Msgr. Clovis Thibault, a
of the corporation sole, nor effects the citizenship of the faithful
Canadian citizen, as actual incumbent.
connected with their respective dioceses or corporation sole.

The Register of Deeds of Davao for registration, having in mind a

previous resolution of the CFI in Carmelite Nuns of Davao were
made to prepare an affidavit to the effect that 60% of the members
of their corp. were Filipino citizens when they sought to register in
favor of their congregation of deed of donation of a parcel of
land, required it to submit a similar affidavit declaring the same.
June 28, 1954: Roman in the letter expressed willingness to submit
an affidavit but not in the same tenor as the Carmelite Nuns because
it had five incorporators while as a corporation sole it has only one
and it was ownership through donation and this was purchased
Constitution demands that in the absence of capital stock, the
controlling membership should be composed of Filipino citizens.
(Register of Deeds of Rizal vs. Ung Sui Si Temple)
undeniable proof that the members of the Roman Catholic Apostolic
faith within the territory of Davao are predominantly Filipino
citizens
presented evidence to establish that the clergy and lay
members of this religion fully covers the percentage of
Filipino citizens required by the Constitution

As the Register of the Land Registration Commissioner (LRC) fact that the law thus expressly authorizes the corporations sole
: Deeds has some doubts as to the registerability, the matter was to receive bequests or gifts of real properties (which were the main
referred to the Land Registration Commissioner en consulta for source that the friars had to acquire their big haciendas during the
resolution (section 4 of Republic Act No. 1151) Spanish regime), is a clear indication that the requisite that bequests
or gifts of real estate be for charitable, benevolent, or educational
LRC:
purposes, was, in the opinion of the legislators, considered sufficient
and adequate protection against the revitalization of religious
In view of the provisions of Section 1 and 5 of Article
landholdings.
XIII of the Philippine Constitution, the vendee was not
qualified to acquire private lands in the Philippines in the
as in respect to the property which they hold for the corporation,
absence of proof that at least 60 per centum of the capital,
they stand in position of TRUSTEES and the courts may exercise
property, or assets of the Roman Catholic Apostolic the same supervision as in other cases of trust
Administrator of Davao, Inc., was actually owned or
controlled by Filipino citizens, there being no question
that the present incumbent of the corporation sole was a
Canadian citizen

ordered the Registered Deeds of Davao to deny

registration of the deed of sale in the absence of proof of
compliance with such condition

action for mandamus was instituted by Roman alleging the land is

held in true for the benefit of the Catholic population of a place

ISSUE: W/N Roman is qualified to acquire private agricultural lands in the

Philippines pursuant to the provisions of Article XIII of the Constitution

HELD: YES. Register of Deeds of the City of Davao is ordered to register the
deed of sale

A corporation sole consists of one person only, and his successors

(who will always be one at a time), in some particular station, who
are incorporated by law in order to give them some legal capacities
and advantages, particularly that of perpetuity, which in their natural
persons they could not have had.

62
RCADI v. LRC and RD of Davao DIGEST
DECEMBER 21, 2016 ~ VBDIAZ
TOPIC: Nationality of a corporation
Roman Catholic Apostolic Administrator of Davao, Inc. v. The Land
Registration Commission and the Register of Deeds of Davao City, G.R.
No. L-8451, December 20,1957
Facts:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City
of Davao, executed a deed of sale of a parcel of land located in the same city
covered by Transfer Certificate No. 2263, in favor of the Roman Catholic
Apostolic Administrator of Davao Inc.,(RCADI) is corporation sole organized
and existing in accordance with Philippine Laws, with Msgr. Clovis Thibault,
a Canadian citizen, as actual incumbent. Registry of Deeds Davao (RD)
required RCADI to submit affidavit declaring that 60% of its members were
Filipino Citizens. As the RD entertained some doubts as to the registerability of
the deed of sale, the matter was referred to the Land Registration
Commissioner (LRC) en consulta for resolution. LRC hold that pursuant to
provisions of sections 1 and 5 of Article XII of the Philippine Constitution,
RCADI is not qualified to acquire land in the Philippines in the absence of proof
that at leat 60% of the capital, properties or assets of the RCADI is actually
owned or controlled by Filipino citizens. LRC also denied the registration of
the Deed of Sale in the absence of proof of compliance with such requisite.
RCADIs Motion for Reconsideration was denied. Aggrieved, the latter filed a
petition for mandamus.
Issue:
Whether or not the Universal Roman Catholic Apostolic Church in the
Philippines, or better still, the corporation sole named the Roman Catholic
Apostolic Administrator of Davao, Inc., is qualified to acquire private
agricultural lands in the Philippines pursuant to the provisions of Article XIII
of the Constitution.
by the change of citizenship of the incumbent bishops or head of said
corporation sole.
We must therefore, declare that although a branch of the Universal Roman
Catholic Apostolic Church, every Roman Catholic Church in different
countries, if it exercises its mission and is lawfully incorporated in accordance
with the laws of the country where it is located, is considered an entity or person
with all the rights and privileges granted to such artificial being under the laws
of that country, separate and distinct from the personality of the Roman Pontiff
or the Holy See, without prejudice to its religious relations with the latter which
are governed by the Canon Law or their rules and regulations.
It has been shown before that: (1) the corporation sole, unlike the ordinary
corporations which are formed by no less than 5 incorporators, is composed of
only one persons, usually the head or bishop of the diocese, a unit which is not
subject to expansion for the purpose of determining any percentage whatsoever;
(2) the corporation sole is only the administrator and not the owner of the
temporalities located in the territory comprised by said corporation sole; (3)
such temporalities are administered for and on behalf of the faithful residing in
the diocese or territory of the corporation sole; and (4) the latter, as such, has
no nationality and the citizenship of the incumbent Ordinary has nothing to do
with the operation, management or administration of the corporation sole, nor
effects the citizenship of the faithful connected with their respective dioceses
or corporation sole.
In view of these peculiarities of the corporation sole, it would seem obvious that
when the specific provision of the Constitution invoked by respondent
Commissioner (section 1, Art. XIII), was under consideration, the framers of
the same did not have in mind or overlooked this particular form of corporation.
If this were so, as the facts and circumstances already indicated tend to prove it
to be so, then the inescapable conclusion would be that this requirement of at
least 60 per cent of Filipino capital was never intended to apply to corporations
sole, and the existence or not a vested right becomes unquestionably immaterial.

Ruling:

RCADI is qualified.

While it is true and We have to concede that in the profession of their faith, the
Roman Pontiff is the supreme head; that in the religious matters, in the exercise
of their belief, the Catholic congregation of the faithful throughout the world
seeks the guidance and direction of their Spiritual Father in the Vatican, yet it
cannot be said that there is a merger of personalities resultant therein. Neither
can it be said that the political and civil rights of the faithful, inherent or
acquired under the laws of their country, are affected by that relationship with
the Pope. The fact that the Roman Catholic Church in almost every country
springs from that society that saw its beginning in Europe and the fact that the
clergy of this faith derive their authorities and receive orders from the Holy See
do not give or bestow the citizenship of the Pope upon these branches.
Citizenship is a political right which cannot be acquired by a sort of radiation.
We have to realize that although there is a fraternity among all the catholic
countries and the dioceses therein all over the globe, the universality that the
word catholic implies, merely characterize their faith, a uniformity in the
practice and the interpretation of their dogma and in the exercise of their belief,
but certainly they are separate and independent from one another in jurisdiction,
governed by different laws under which they are incorporated, and entirely
independent on the others in the management and ownership of their
temporalities. To allow theory that the Roman Catholic Churches all over the
world follow the citizenship of their Supreme Head, the Pontifical Father,
would lead to the absurdity of finding the citizens of a country who embrace
the Catholic faith and become members of that religious society, likewise
citizens of the Vatican or of Italy. And this is more so if We consider that the
Pope himself may be an Italian or national of any other country of the world.
The same thing be said with regard to the nationality or citizenship of the
corporation sole created under the laws of the Philippines, which is not altered

63
G.R. No. L-34672 March 30,1988
UNITED CHURCH BOARD FOR WORLD MINISTRIES, as owner of
BROKENSHIRE MEMORIAL HOSPITAL, petitioner,
vs.
HON. JUDGE ALEJANDRO E. SEBASTIAN, as Presiding Judge of the
CFI of Davao del Norte, and MELENCIO B. DELENA and MAURO
GEMENTIZA as Co-Executors of the Testate Estate of DAVID,
Jacobson, respondents.
CRUZ, J.:
This case is unusual because it arose not out of greed but of generosity. The
only question to be resolved is the Identity and eligibility of the beneficiary in
the light of the pertinent constitutional provisions and the evidence of record.
David Jacobson was an American citizen who had been a resident of the
Philippines for more than thirty years and up to the time of his death in
1970. 1 He left a will in which he "devised and bequeathed" to the Brokenshire
Memorial Hospital 60% of his shares of stocks in the Tagdangua Plantation Co.,
inc. which was incorporated under Philippine law in 1948. 2 This corporation
was the registered owner of a tract of land in Pantuhan Davao del Norte, with a
total area of about 445 hectares acquired by virtue of a sales patent issued to it
in 11953 . 3
In Special Proceeding No. 1695 of the Court of First Instance of Davao del
Norte, Judge Alejandro E. Sebastian disallowed the above-described legacy on
the ground that it was in effect an alienation of private agricultural land in favor
of a transferee which was not qualified under the Constitution of 1935. 4 The
finding was that the Brokenshire Memorial Hospital was owned by the United
Church Board for World Ministries (UCBWM) ,the herein petitioner, which
was a non-stock corporation organized in the United States by virtue of a charter
granted by the state legislature of Massachussets . 5
The basis of this ruling was Article XII, Sections I and 5 of the 1935
Constitution, which barred foreigners, including Americans, from acquiring
agricultural lands in this country except only by hereditary succession. The
court directed that a copy of its order be sent to the Solicitor General so he could
take the proper action, in view of the invalidity of the transfer, for the escheat
of the subject property to the State. 6
Its motion for reconsideration having been denied, the petitioner came to this
Court, contending that the above-cited constitutional provisions were not
applicable because the object of the legacy was not land but shares of stocks.
Moreover, even assuming that what was really involved was a transfer of land,
the petitioner was nonetheless qualified to acquire it under the provisions of the
Parity Amendment and the Laurel-Langley Agreement.
The Solicitor General disagreed at first, insisting that the legacy was prohibited
by the 1935 Constitution and did not come under any of the allowed exceptions.
During the protracted exchange of pleadings among the parties, however,
certain events transpired to considerably change the original situation and,
consequently, also the position of government.
It now appears from the voluminous documents submitted in this case that at
the time the will was executed in 1966, the land on which the Brokenshire
Memorial Hospital was situated was already registered in the name of the
Mindanao District Conference, an affiliate of the United Church of Christ in the
Philippines (PUCC).7 It was this non-stock corporation, organized in 1949
under Philippine law with a 100% Filipino membership, that owned and was
operating the Hospital at the time of Jacobson's death. 8 Later, the Brokenshire
Memorial Hospital was itself incorporated as a charitable institution, with
Filipinos constituting the majority of its membership, 9 and on December
16,1970, became the successor-in-interest of the UCCP to the devised parcel of
land.10
In proof of these circumstances, the new counsel for Brokenshire presented,
among many other documents, the articles of incorporation of the UCCP and
the Hospital and their corresponding certificates of registration issued by the
Securities and Exchange Commission, the licenses issued by the Board of
Medical Sciences for the operation of the Hospital to the UCCP from 1968 to
1972 and to the Brokenshire Memorial Hospital, Inc. from 1973 to 1974, and
the certificate of title over the subject land in the name of the "Mindanao District
Conference, commonly known as the Brokenshire Memorial Hospital."11
These facts were not brought earlier to the attention of the probate court by the
former counsel of the Hospital, Atty. Juan V. Faune for reasons that do not
appear in the record. It was for such omission (the new counsel would call it
"misrepresentation") that Atty. Faune was replaced by Atty. Rodolfo D. de la
Cruz, who disavowed his predecessor's representations. At any rate, the above-
stated documents have now made it clear that the United Church for Christ in
the Philippines and not the United Church Board for World Ministries was the
owner of the Hospital at the time of the execution of the win in 1966 and of the
testator's death in 1970. It is also not disputed that such ownership passed to the
Brokenshire Memorial Hospital itself upon its incorporation in 1970 when it
thus became the proper party-in-interest to claim the property directly devised
by Jacobson to it.
That the United Church Board for World Ministries no longer claims the subject
property (if indeed it really did claim it before), is manifest in its sur rejoinder
to the rejoinder of the movant Brokenshire Memorial Hospital, Inc., which had
asked to be substituted for the former as petitioner in this case. The body of this
pleading is reproduced in full as follows:
PETITIONER, by the Undersigned Counsel, to this Honorable Court most
respectfully states:
l. That upon its organization in 1948 the United Church of Christ in the
Philippines succeeded to the religious work, service and mission of the United
Church Board for World Ministries and other religion boards in the United
States of America;
2. It was the intention, following the independence of the Philippines from the
U.S.A. the constitution of an independent and autonomous United Church of
Christ in the Philippines, to eventually transfer all properties, schools, and
hospitals established by said mission boards, to the United Church of Christ in
the Philippines;
3. That the United Church Board for World Ministries had, in fact, transferred
the ownership of most of its properties in the Philippines to the United Church
of Christ in the Philippines, its religious organizations and/or instrumentalities;
4. That when the Brokenshire Memorial Hospital was destroyed by fire in 1964,
reconstruction efforts and responsibilities was assumed by the United Church
of Christ in the Philippines, it was the intention of the United Church Board for
World Ministries to relinquish the rights, interests and ownership to the
Brokenshire Memorial Hospital, now Brokenshire Memorial Hospital, Inc. and
considered it so relinquished, with continuing funding assistance from the
United Church Board for World Ministries and other mission boards overseas;
5. The United Church Board for World Ministries continues to this date, with
its fraternal and cooperative relationship with the United Church of Christ in
the Philippines;
6. That as has already been stated, the United Church Board for World
Ministries does not intend to take, possess, or enjoy the legacy of David
Jacobson and has manifested and mandated that all properties that may be
derived therefrom shall be used entirely and exclusively for the work of the
Brokenshire Memorial Hospital and its School of Nursing in accordance with
the wishes of David Jacobson;
7. Considering the clear intention of David Jacobson to support the life and
work of Brokenshire Memorial Hospital and its School of Nursing, and further
considering that what was bequeathed are shares of stocks in a corporation,,
there exists no legal and moral impediment for the legacy to be delivered to the
Brokenshire Memorial Hospital, Inc., an instrumentality of the United Church
of Christ in the Philippines, that has succeeded to the ownership of and the
humanitarian, and charitable service of said Hospital.
64
Respectfully submitted. Thus, in Sarsosa vda. de Barsobia v. Cuenco, 13 where a Filipino citizen sold
her land to an alien who later sold it to a Filipino, we held that the invalidity of
September 3, 1983, Davao City, Philippines. the initial transfer to the alien was corrected by the subsequent transfer of the
property to a citizen. A similar ruling was made in Godinez v. Fong Pak
(Sgd.) JUAN V. FAUNE
Luen,14 involving a similar set of facts, where we also cited Vasquez v. Li Seng
Counsel for Petitioner Giap,15 and Herrera v. Luy King Guan.16 In Yap v. Maravillas,17we validated
the sale of agricultural land to an alien who, after the purchase, was naturalized
United Church Board for as a Filipino and so became qualified to acquire it. The facts were slightly
different in De Castro v. Teng, 18 where, upon the death of an alien who had
World Ministries purchased a residential lot, his heirs entered into an extrajudicial partition of his
estate and transferred the land to one of his sons who was a naturalized Filipino.
185-B Anda Street, Davao City
We also sustained the sale.
WITH OUR CONCURRENCE:
This action has been pending for quite some time now because of the confusion
UNITED CHURCH BOARD FOR regarding the status of the Brokenshire Memorial Hospital as the ultimate
beneficiary of the challenged legacy. The curious thing is that this case was
WORLD MINISTRIES mired in factual and legal complications caused by needless misunderstanding
among the parties which, it now appears, were never in any substantial
by: disagreement over the ownership of the Hospital. Their common concern for its
welfare, in line with the charitable spirit and purposes of the testator, should
(Sgd.) BYRON W. CLARK
have avoided all this tedious and acrimonious dispute.
Treasurer
WHEREFORE, the Brokenshire Memorial Hospital, Inc. is hereby substituted
NO OBJECTION TO THE DELIVERY for the United Church Board for World Ministries as petitioner in this case and
DECLARED to be qualified to accept the legacy of the late David Jacobson.
OF THE LEGACY TO BROKENSHIRE The petition as thus modified is GRANTED. The order of the respondent judge
dated December 9, 1971, and his Resolution dated December 9, 1971, are SET
MEMORIAL HOSPITAL, INC. ASIDE. This decision is immediately executory. No costs.

(Sgd.) MELENCIO B. DELENA (Sgd.) DARIO C. RAMA SO ORDERED.

Executor-Respondent Counsel for the Estate

and Respondents

Melencio Delena and

the late Mauro

Gementiza

(deceased-Executor)

Security Bank Bldg.

Magsaysay Ave., Davao City

(Sgd.) DEAN CLAIR (Sgd.) ROSALINO D. ISIDRO

Executor Counsel for the Estate

and Executor Dean Clair

205 Aldavinco Bldg.,

C.M. Recto Ave., Davao City 12

Parenthetically, it should be observed, in fairness to Judge Sebastian, that he

was unaware of these circumstances when he declared the legacy invalid to
enforce the nationalistic provisions of Article XIII of the 1935 Constitution. For
his vigilance in the protection of the national patrimony, he should be, as he is
hereby, commenced.

Even on the assumption that the UCBWN was really the owner of the Hospital
at the time of the effectivity of the will and that the devise was for that reason
unenforceable, the defect in the will should be deemed rectified by the
subsequent transfer of the property to the Brokenshire Memorial Hospital, Inc.
Our consistent ruling on this matter is that if land is invalidly transferred to an
alien who subsequently becomes a citizen or transfers it to a ctitizen, the flaw
in the original transaction is considered cured and the title of the transferee is
rendered valid.

65