Contract of lease in violation of PH Constitution is void

Dear PAO,

Eddard is a foreigner and my live-in partner for 10 years. During our cohabitation, he constructed a
house using his funds on a lot that he also bought but the deed of sale and the transfer certificate of title
are all in my name. After the house was built, he drafted a contract that we both signed that I will be
leasing to him the property for 25 years and renewable for another 25 years. The contract also provides
that I cannot sell the property without his consent and, if in case the property will be sold, the proceeds
shall be delivered to him. Further, in case a law will be passed authorizing foreigners to own land in the
Philippines, I will execute a contract ceding the property to him. After our separation, he is now
demanding that I vacate the property, or he will file a case against me. Do I have any right to the house
and lot?

Aila

Dear Aila,

The general rule is foreigners are prohibited from owning private lands in the Philippines. This finds
support under Section 7, Article XII of the 1987 Philippine Constitution, which 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.

Relative thereto, Article 5 of the New Civil Code of the Philippines also provides that acts executed
against the provisions of mandatory or prohibitory laws shall be void, except when the law itself
authorizes their validity. In Article 1306 of this law, the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy. These provisions of law clearly
provide the limitations to the freedom of the contracting parties to stipulate.

The contract of lease is a void contract because it is in circumvention of the prohibition under the
Philippine Constitution. Please be guided by the decision of the Supreme Court in the case entitled
Fullido vs. Grilli (G. R. No. 215014, February 29, 2016), where Associate Justice Jose Mendoza said:

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

Applying this decision to your case, the terms of the contract limiting your right to exercise the acts of
ownership over the property are void, because it is in contravention of the prohibition in the
Constitution. Eddard, therefore, cannot enforce the same against you, because a void contract can never
be a source of any right.