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G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust,
RAUL MANGLAPUS, as Secretary of Foreign Affairs, and
CATALINO MACARAIG, as Executive
Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS
PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA,
AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES
ON THE UTILIZATION/DISPOSITION PETITION OF
PHILIPPINE GOVERNMENT PROPERTIES IN
JAPAN, respondents.
Arturo M. Tolentino for petitioner in 92013.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin
respondents, their representatives and agents from
proceeding with the bidding for the sale of the 3,179 square
meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo,
Japan scheduled on February 21, 1990. We granted the
prayer for a temporary restraining order effective February
20, 1990. One of the petitioners (in G.R. No. 92047)
likewise prayes for a writ of mandamus to compel the
respondents to fully disclose to the public the basis of their government under the Second Year Schedule and listed
decision to push through with the sale of the Roppongi
property inspire of strong public opposition and to explain
the proceedings which effectively prevent the participation
of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et the site of the Philippine Embassy until the latter was
al. were heard by the Court on March 13, 1990. After G.R.
No. 92047, Ojeda v. Secretary Macaraig, et al. was filed,
the respondents were required to file a comment by the
Court's resolution dated February 22, 1990. The two
petitions were consolidated on March 27, 1990 when the
memoranda of the parties in the Laurel case were
deliberated upon.
The Court could not act on these cases immediately
because the respondents filed a motion for an extension of
thirty (30) days to file comment in G.R. No. 92047, followed
by a second motion for an extension of another thirty (30)
days which we granted on May 8, 1990, a third motion for
extension of time granted on May 24, 1990 and a fourth
motion for extension of time which we granted on June 5,
1990 but calling the attention of the respondents to the
length of time the petitions have been pending. After the
comment was filed, the petitioner in G.R. No. 92047 asked
for thirty (30) days to file a reply. We noted his motion and leased buildings shall be occupied and used by the
resolved to decide the two (2) cases.
I and thereafter. However, the government has not acted
The subject property in this case is one of the four (4)
properties in Japan acquired by the Philippine government
under the Reparations Agreement entered into with Japan
on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi,
Shibuya-ku, Tokyo which has an area of approximately
2,489.96 square meters, and is at present the site of the
Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho,
Kobe, with an area of around 764.72 square meters and
categorized as a commercial lot now being used as a
warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-
cho, Shinohara, Nada-ku, Kobe, a residential lot which is
now vacant.
The properties and the capital goods and services procured
from the Japanese government for national development
projects are part of the indemnification to the Filipino people
for their losses in life and property and their suffering during
World War II.
The Reparations Agreement provides that reparations
valued at $550 million would be payable in twenty (20)
years in accordance with annual schedules of procurements
to be fixed by the Philippine and Japanese governments
(Article 2, Reparations Agreement). Rep. Act No. 1789, the
Reparations Law, prescribes the national policy on
procurement and utilization of reparations and development
loans. The procurements are divided into those for use by
the government sector and those for private parties in
projects as the then National Economic Council shall
determine. Those intended for the private sector shall be
made available by sale to Filipino citizens or to one hundred
(100%) percent Filipino-owned entities in national
development projects.
The Roppongi property was acquired from the Japanese
under the heading "Government Sector", through
Reparations Contract No. 300 dated June 27, 1958. The
Roppongi property consists of the land and building "for the
Chancery of the Philippine Embassy" (Annex M-D to
Memorandum for Petitioner, p. 503). As intended, it became
transferred to Nampeidai on July 22, 1976 when the
Roppongi building needed major repairs. Due to the failure
of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that
time.
A proposal was presented to President Corazon C. Aquino
by former Philippine Ambassador to Japan, Carlos J.
Valdez, to make the property the subject of a lease
agreement with a Japanese firm - Kajima Corporation —
which shall construct two (2) buildings in Roppongi and one
(1) building in Nampeidai and renovate the present
Philippine Chancery in Nampeidai. The consideration of the
construction would be the lease to the foreign corporation of
one (1) of the buildings to be constructed in Roppongi and
the two (2) buildings in Nampeidai. The other building in
Roppongi shall then be used as the Philippine Embassy
Chancery. At the end of the lease period, all the three
Philippine government. No change of ownership or title shall
occur. (See Annex "B" to Reply to Comment) The Philippine
government retains the title all throughout the lease period
favorably on this proposal which is pending approval and
ratification between the parties. Instead, on August 11,
1986, President Aquino created a committee to study the
disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan through Administrative Order No. 3,
followed by Administrative Orders Numbered 3-A, B, C and
D.

On July 25, 1987, the President issued Executive Order No.
296 entitling non-Filipino citizens or entities to avail of
separations' capital goods and services in the event of sale,
lease or disposition. The four properties in Japan including
the Roppongi were specifically mentioned in the first
"Whereas" clause.
Amidst opposition by various sectors, the Executive branch
of the government has been pushing, with great vigor, its
decision to sell the reparations properties starting with the
Roppongi lot. The property has twice been set for bidding at
a minimum floor price of $225 million. The first bidding was
a failure since only one bidder qualified. The second one,
after postponements, has not yet materialized. The last
scheduled bidding on February 21, 1990 was restrained by
his Court. Later, the rules on bidding were changed such
that the $225 million floor price became merely a suggested
floor price.
The Court finds that each of the herein petitions raises
distinct issues. The petitioner in G.R. No. 92013 objects to
the alienation of the Roppongi property to anyone while the used for public service or for diplomatic purposes for over
petitioner in G.R. No. 92047 adds as a principal objection
the alleged unjustified bias of the Philippine government in
favor of selling the property to non-Filipino citizens and
entities. These petitions have been consolidated and are
resolved at the same time for the objective is the same - to Philippine Embassy to Nampeidai (2) the issuance of
stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues: Executive Order No. 296; (4) the enactment by the
(1) Can the Roppongi property and others of its kind be
alienated by the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have (6) the deferment by the Senate in Resolution No. 55 of the
the authority and jurisdiction, to sell the Roppongi property? bidding to a future date; thus an acknowledgment by the
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from
questioning the authority of the government to alienate the
Roppongi property assails the constitutionality of Executive v. Bidding Committee, et al., G.R. No. 87478 which sought
Order No. 296 in making the property available for sale to
non-Filipino citizens and entities. He also questions the
bidding procedures of the Committee on the Utilization or
Disposition of Philippine Government Properties in Japan
for being discriminatory against Filipino citizens and Filipino-
owned entities by denying them the right to be informed
about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the
Roppongi property and the related lots were acquired as
part of the reparations from the Japanese government for
diplomatic and consular use by the Philippine government.
Vice-President Laurel states that the Roppongi property is
classified as one of public dominion, and not of private
ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes
under "property intended for public service" in paragraph 2
of the above provision. He states that being one of public
dominion, no ownership by any one can attach to it, not
even by the State. The Roppongi and related properties
were acquired for "sites for chancery, diplomatic, and
consular quarters, buildings and other improvements"
(Second Year Reparations Schedule). The petitioner states
that they continue to be intended for a necessary service.
They are held by the State in anticipation of an opportune
use. (Citing 3 Manresa 65-66). Hence, it cannot be
appropriated, is outside the commerce of man, or to put it in
more simple terms, it cannot be alienated nor be the subject
matter of contracts (Citing Municipality of Cavite v. Rojas,
30 Phil. 20 [1915]). Noting the non-use of the Roppongi
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property at the moment, the petitioner avers that the same
remains property of public dominion so long as the
government has not used it for other purposes nor adopted
any measure constituting a removal of its original purpose
or use.
The respondents, for their part, refute the petitioner's
contention by saying that the subject property is not
governed by our Civil Code but by the laws of Japan where
the property is located. They rely upon the rule of lex
situs which is used in determining the applicable law
regarding the acquisition, transfer and devolution of the title
to a property. They also invoke Opinion No. 21, Series of
1988, dated January 27, 1988 of the Secretary of Justice
which used the lex situs in explaining the inapplicability of
Philippine law regarding a property situated in Japan.
The respondents add that even assuming for the sake of
argument that the Civil Code is applicable, the Roppongi
property has ceased to become property of public dominion.
It has become patrimonial property because it has not been
thirteen (13) years now (Citing Article 422, Civil Code) and
because the intention by the Executive Department and the
Congress to convert it to private use has been manifested
by overt acts, such as, among others: (1) the transfer of the
administrative orders for the possibility of alienating the four
government properties in Japan; (3) the issuance of
Congress of Rep. Act No. 6657 [the Comprehensive
Agrarian Reform Law] on June 10, 1988 which contains a
provision stating that funds may be taken from the sale of
Philippine properties in foreign countries; (5) the holding of
the public bidding of the Roppongi property but which failed;
Senate of the government's intention to remove the
Roppongi property from the public service purpose; and (7)
the resolution of this Court dismissing the petition in Ojeda
to enjoin the second bidding of the Roppongi property
scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this
Court to rule on the constitutionality of Executive Order No.
296. He had earlier filed a petition in G.R. No. 87478 which
the Court dismissed on August 1, 1989. He now avers that
the executive order contravenes the constitutional mandate
to conserve and develop the national patrimony stated in
the Preamble of the 1987 Constitution. It also allegedly
violates:
(1) The reservation of the ownership and acquisition of
alienable lands of the public domain to Filipino citizens.
(Sections 2 and 3, Article XII, Constitution; Sections 22 and
23 of Commonwealth Act 141).i•t•c-aüsl
(2) The preference for Filipino citizens in the grant of rights,
privileges and concessions covering the national economy
and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair
competition and trade practices;
(4) The guarantee of the right of the people to information
on all matters of public concern (Section 7, Article III,
Constitution);
(5) The prohibition against the sale to non-Filipino citizens
or entities not wholly owned by Filipino citizens of capital
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goods received by the Philippines under the Reparations
Act (Sections 2 and 12 of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public
disclosure of all transactions involving public interest
(Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the
execution of an unconstitutional executive order is a
misapplication of public funds He states that since the
details of the bidding for the Roppongi property were never
publicly disclosed until February 15, 1990 (or a few days
before the scheduled bidding), the bidding guidelines are
available only in Tokyo, and the accomplishment of
requirements and the selection of qualified bidders should
be done in Tokyo, interested Filipino citizens or entities
owned by them did not have the chance to comply with
Purchase Offer Requirements on the Roppongi. Worse, the
Roppongi shall be sold for a minimum price of $225 million
from which price capital gains tax under Japanese law of
about 50 to 70% of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not
dispute the fact that the Roppongi site and the three related
properties were through reparations agreements, that these
were assigned to the government sector and that the
Roppongi property itself was specifically designated under
the Reparations Agreement to house the Philippine
Embassy.
The nature of the Roppongi lot as property for public service and improve the property (See Heirs of Felino Santiago v.
is expressly spelled out. It is dictated by the terms of the
Reparations Agreement and the corresponding contract of
procurement which bind both the Philippine government and
the Japanese government.
There can be no doubt that it is of public dominion unless it original purpose. Even the failure by the government to
is convincingly shown that the property has become
patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside
the commerce of man. It cannot be alienated. Its ownership Japan were merely directives for investigation but did not in
is a special collective ownership for general use and
enjoyment, an application to the satisfaction of collective
needs, and resides in the social group. The purpose is not
to serve the State as a juridical person, but the citizens; it is Executive Order No. 296, though its title declares an
intended for the common and public welfare and cannot be "authority to sell", does not have a provision in its text
the object of appropration. (Taken from 3 Manresa, 66-69;
cited in Tolentino, Commentaries on the Civil Code of the
Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public
dominion or of private ownership.
ART. 420. The following things are property
of public dominion
(1) Those intended for public use, such as
roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks
shores roadsteads, and others of similar
character;
(2) Those which belong to the State,
without being for public use, and are
intended for some public service or for the
development of the national wealth.
ART. 421. All other property of the State,
which is not of the character stated in the
preceding article, is patrimonial property.
The Roppongi property is correctly classified under
paragraph 2 of Article 420 of the Civil Code as property
belonging to the State and intended for some public service.
Has the intention of the government regarding the use of
the property been changed because the lot has been Idle
for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long
time for actual Embassy service does not automatically
convert it to patrimonial property. Any such conversion
happens only if the property is withdrawn from public use
(Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA
481 [1975]). A property continues to be part of the public
domain, not available for private appropriation or ownership
until there is a formal declaration on the part of the
government to withdraw it from being such (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by
concerned public officials insinuating a change of intention.
We emphasize, however, that an abandonment of the
intention to use the Roppongi property for public service
and to make it patrimonial property under Article 422 of the
Civil Code must be definite Abandonment cannot be
inferred from the non-use alone specially if the non-use was
attributable not to the government's own deliberate and
indubitable will but to a lack of financial support to repair
Lazaro, 166 SCRA 368 [1988]). Abandonment must be a
certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in
1976 is not relinquishment of the Roppongi property's
repair the building in Roppongi is not abandonment since as
earlier stated, there simply was a shortage of government
funds. The recent Administrative Orders authorizing a study
of the status and conditions of government properties in
any way signify a clear intention to dispose of the
properties.
expressly authorizing the sale of the four properties
procured from Japan for the government sector. The
executive order does not declare that the properties lost
their public character. It merely intends to make the
properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It merely
eliminates the restriction under Rep. Act No. 1789 that
reparations goods may be sold only to Filipino citizens and
one hundred (100%) percent Filipino-owned entities. The
text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act
No. 1789, as amended, and of other laws to
the contrary notwithstanding, the above-
mentioned properties can be made
available for sale, lease or any other
manner of disposition to non-Filipino
citizens or to entities owned by non-Filipino
citizens.
Executive Order No. 296 is based on the wrong premise or
assumption that the Roppongi and the three other
properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789
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differentiates the procurements for the government sector
and the private sector (Sections 2 and 12, Rep. Act No.
1789). Only the private sector properties can be sold to end-
users who must be Filipinos or entities owned by Filipinos. It
is this nationality provision which was amended by
Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which
provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the
properties of the Government in foreign countries, did not
withdraw the Roppongi property from being classified as
one of public dominion when it mentions Philippine
properties abroad. Section 63 (c) refers to properties which
are alienable and not to those reserved for public use or
service. Rep Act No. 6657, therefore, does not authorize the
Executive Department to sell the Roppongi property. It
merely enumerates possible sources of future funding to
augment (as and when needed) the Agrarian Reform Fund
created under Executive Order No. 299. Obviously any
property outside of the commerce of man cannot be tapped
as a source of funds.
The respondents try to get around the public dominion
character of the Roppongi property by insisting that
Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials,
of all people, should be the ones to insist that in the sale of
extremely valuable government property, Japanese law and
not Philippine law should prevail. The Japanese law - its
coverage and effects, when enacted, and exceptions to its
provision — is not presented to the Court It is simply
asserted that the lex loci rei sitae or Japanese law should
apply without stating what that law provides. It is a ed on
faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply
when no conflict of law situation exists. A conflict of law
situation arises only when: (1) There is a dispute over
the title or ownership of an immovable, such that the
capacity to take and transfer immovables, the formalities of
conveyance, the essential validity and effect of the transfer,
or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981
ed., pp. 377-383); and (2) A foreign law on land ownership
and its conveyance is asserted to conflict with a domestic
law on the same matters. Hence, the need to determine
which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or
title. There is no question that the property belongs to the
Philippines. The issue is the authority of the respondent
officials to validly dispose of property belonging to the State.
And the validity of the procedures adopted to effect its sale.
This is governed by Philippine Law. The rule of lex
situs does not apply.
The assertion that the opinion of the Secretary of Justice
sheds light on the relevance of the lex situs rule is
misplaced. The opinion does not tackle the alienability of
the real properties procured through reparations nor the
existence in what body of the authority to sell them. In
discussing who are capable of acquiring the lots, the
Secretary merely explains that it is the foreign law which
should determine who can acquire the properties so that the
constitutional limitation on acquisition of lands of the public
domain to Filipino citizens and entities wholly owned by
Filipinos is inapplicable. We see no point in belaboring
whether or not this opinion is correct. Why should we
discuss who can acquire the Roppongi lot when there is no
showing that it can be sold?
The subsequent approval on October 4, 1988 by President
Aquino of the recommendation by the investigating
committee to sell the Roppongi property was premature or,
at the very least, conditioned on a valid change in the public
character of the Roppongi property. Moreover, the approval
does not have the force and effect of law since the
President already lost her legislative powers. The Congress
had already convened for more than a year.
Assuming for the sake of argument, however, that the
Roppongi property is no longer of public dominion, there is
another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917
provides
Section 79 (f ) Conveyances and contracts
to which the Government is a party. — In
cases in which the Government of the
Republic of the Philippines is a party to any
deed or other instrument conveying the title
to real estate or to any other property the
value of which is in excess of one hundred
thousand pesos, the respective Department
Secretary shall prepare the necessary
papers which, together with the proper
recommendations, shall be submitted to the
Congress of the Philippines for approval by
the same. Such deed, instrument, or
contract shall be executed and signed by
the President of the Philippines on behalf of
the Government of the Philippines unless
the Government of the Philippines unless
the authority therefor be expressly vested
by law in another officer. (Emphasis
supplied)
The requirement has been retained in Section 48, Book I of
the Administrative Code of 1987 (Executive Order No. 292).
SEC. 48. Official Authorized to Convey
Real Property. — Whenever real property
of the Government is authorized by law to
be conveyed, the deed of conveyance shall
be executed in behalf of the government by
the following:
(1) For property belonging to and titled in
the name of the Republic of the Philippines,
by the President, unless the authority
therefor is expressly vested by law in
another officer.
(2) For property belonging to the Republic
of the Philippines but titled in the name of
any political subdivision or of any corporate
agency or instrumentality, by the executive
head of the agency or instrumentality.
(Emphasis supplied)
It is not for the President to convey valuable real property of
the government on his or her own sole will. Any such
conveyance must be authorized and approved by a law
enacted by the Congress. It requires executive and
legislative concurrence.
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Resolution No. 55 of the Senate dated June 8, 1989, asking
for the deferment of the sale of the Roppongi property does
not withdraw the property from public domain much less
authorize its sale. It is a mere resolution; it is not a formal
declaration abandoning the public character of the
Roppongi property. In fact, the Senate Committee on
Foreign Relations is conducting hearings on Senate
Resolution No. 734 which raises serious policy
considerations and calls for a fact-finding investigation of
the circumstances behind the decision to sell the Philippine
government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee,
et al., supra, did not pass upon the constitutionality of
Executive Order No. 296. Contrary to respondents'
assertion, we did not uphold the authority of the President to
sell the Roppongi property. The Court stated that the
constitutionality of the executive order was not the real
issue and that resolving the constitutional question was
"neither necessary nor finally determinative of the case."
The Court noted that "[W]hat petitioner ultimately questions
is the use of the proceeds of the disposition of the Roppongi
property." In emphasizing that "the decision of the Executive
to dispose of the Roppongi property to finance the CARP ...
cannot be questioned" in view of Section 63 (c) of Rep. Act
No. 6657, the Court did not acknowledge the fact that the
property became alienable nor did it indicate that the
President was authorized to dispose of the Roppongi
property. The resolution should be read to mean that in
case the Roppongi property is re-classified to be patrimonial
and alienable by authority of law, the proceeds of a sale
may be used for national economic development projects
including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions
before us question the proposed 1990 sale of the Roppongi
property. We are resolving the issues raised in these
petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to
withdraw the Roppongi property from public domain to
make it alienable and a need for legislative authority to
allow the sale of the property, we see no compelling reason
to tackle the constitutional issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional
questions unless these questions are properly raised in
appropriate cases and their resolution is necessary for the
determination of the case (People v. Vera, 65 Phil. 56
[1937]). The Court will not pass upon a constitutional
question although properly presented by the record if the
case can be disposed of on some other ground such as the
application of a statute or general law (Siler v. Louisville and
Nashville R. Co., 213 U.S. 175, [1909], Railroad
Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi
property should not be sold:
The Roppongi property is not just like any
piece of property. It was given to the
Filipino people in reparation for the lives
and blood of Filipinos who died and
suffered during the Japanese military
occupation, for the suffering of widows and
orphans who lost their loved ones and
kindred, for the homes and other properties
lost by countless Filipinos during the war.
The Tokyo properties are a monument to
the bravery and sacrifice of the Filipino
people in the face of an invader; like the
monuments of Rizal, Quezon, and other
Filipino heroes, we do not expect economic
or financial benefits from them. But who
would think of selling these monuments?
Filipino honor and national dignity dictate
that we keep our properties in Japan as
memorials to the countless Filipinos who
died and suffered. Even if we should
become paupers we should not think of
selling them. For it would be as if we sold
the lives and blood and tears of our
countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one
ceded by the Japanese government in
atonement for its past belligerence for the
valiant sacrifice of life and limb and for
deaths, physical dislocation and economic
devastation the whole Filipino people
endured in World War II.
It is for what it stands for, and for what it
could never bring back to life, that its
significance today remains undimmed,
inspire of the lapse of 45 years since the
war ended, inspire of the passage of 32
years since the property passed on to the
Philippine government.
Roppongi is a reminder that cannot —
should not — be dissipated ... (Rollo-
92047, p. 9)
It is indeed true that the Roppongi property is valuable not
so much because of the inflated prices fetched by real
property in Tokyo but more so because of its symbolic value
to all Filipinos — veterans and civilians alike. Whether or
not the Roppongi and related properties will eventually be
sold is a policy determination where both the President and
Congress must concur. Considering the properties'
importance and value, the laws on conversion and
disposition of property of public dominion must be faithfully
followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the
petitions are GRANTED. A writ of prohibition is issued
enjoining the respondents from proceeding with the sale of
the Roppongi property in Tokyo, Japan. The February 20,
1990 Temporary Restraining Order is made PERMANENT.
SO ORDERED
G.R. No. L-12476 January 29, 1960
COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
ANGLO CALIFORNIA NATIONAL BANK (CROCKER-
ANGLO NATIONAL BANK), as Treasurer for CALAMBA
SUGAR ESTATE, INC., respondent.
Assistant Solicitor General Jose P. Alejandro and Special
Attorney Librada del Rosario-Natividad for petitioner.
Ozaeta, Gibbs and Ozaeta for respondent.
REYES, J.B.L., J.:
Respondent Calamba Sugar Estate, Inc., herein
represented by its trustee, the Anglo California National
Bank, is a foreign corporation organized and existing under
the laws of the State of California, U.S.A., duly licensed (on
May 8, 1946) to do business in the Philippines. It has
consistently filed its income tax returns here through its
 6
resident attorney-in-fact. On May 14, 1956, the petitioners
Collector of Internal Revenue the corporation of an
assessment for alleged deficiency income taxes for the
years 1953, 1954 and 1955 in the respective amounts of
P138,855.00, P131,759.00 and P393,459.00, supposedly
based upon capital again derived from the respondent's
sale to the Pasumil Planters, Inc., of P250,000 shares of the
capital stock of the Pampanga Sugar Mills (a domestic
corporation) and of a promissory note, dated January 1,
1950, executed by the Pampanga Sugar Mills in the sum of
$500,000.00. In an appeal by the respondent from the ruling
of the Collector, the Court of Tax Appeals reversed said
ruling and absolved the respondent form liability.
This is an appeal by the Collector from that decision.
The parties stipulated that (a) the negotiations leading to the
execution and conclusion of the agreement of sale, dated
January 16, 1953, between the respondent corporation and
the Pasumil Planters, Inc., took place in San Francico,
California; (b) the payment on account of the sale were
made by the Pasumil Planters, Inc., at the same foreign city;
and (c) the sale was made under and in accordance with
the laws of that State. From the evidence presented, it also
appears that on December 16, 1955, the Securities and
Exchange Commission cancelled respondent's license to
transact business in the Philippines, and on December 30,
1955, the corporation was dissolved in accordance with the
California law.
The sole issue is whether the capital gains obtained from
the sale constituted income from sources within or without
the Philippines. It was the opinion of the Tax Court that they
were income derived from abroad, and not subject to
income tax.
It is hardly disputable that although shares of stock of a
corporation represent equities may consist of real as well
as personal properties therein, they are considered under
applicable law and jurisprudence as intangible personal
properties (see Art. 417 [2], Civil Code of the Philippines;
Sec. 35, Act No. 1459). Section 24 of the National Internal
Revenue Codes levies income taxes on foreign
corporations only on income derived from sources within the
Philippines; and with respect to capital gains on the sale
of personal properties, section 37 (e) of the same Tax Code
deems the place of sale as also that place or source of the
capital gain:
... Gains, profit, and income derived from the
purchase of personal within and its sale without the lower court, then presided by the Honorable Arsenio
Philippines or from the purchase or personal
property without and its sale within the
Philippines, shall be treated as derived entirely from administrator, dated February 11, 1964, as well as the
sources within the country in which sold. (Emphasis opposition filed by the Benguet Consolidated, Inc., the Court
supplied)
Construing the same provision of law (which is section 119
(e) of the 1934 Act, U.S.I.R.C.), Unites States courts are in
accord in disallowing the imposition of income taxes by its
government on capital gains where the sale takes place
outside its territorial jurisdiction. It is likewise the prevailing
view that in ascertaining the place of sale, the determination
of when and where title to the goods passes from the seller
to the buyer is decisive (East Coast Oil Co. vs. Comm., 31
B.T.A. 588, aff'd 85 F. [2d] 322, cer. den-299 U.S. 608, 81
L. Ed. 449, 57 S. Ct. 234; also Disconto-Gaesellcraft vs.
U.S. Steel Corporation, 267 U.S. 22; Compania General de by the domiciliary administrator, the County Trust Company
Tabacos de Filipinas vs. Collector, 279 U.S. 306, 73 L. Ed. of New York, but by the Philippine corporation, the Benguet
704, 49 S. Ct. 304).
In this case, it is admitted that the negotiation, perfection
and consummation of the contract of sale were all done in
California, U.S.A. It follows that title to the shares of stock
passed from the vendor to the vendee at said place, from
which time the incidents of ownership vested on the buyer.
The Collector argues that the sit us of shares of stock of a
corporation is considered to be at the domicide of the latter,
as held in some cases cited by him; but in the instant
problem, we are not concerned with the imposition of taxes
upon the shares themselves, but on a sale effected
abroad that resulted in capital gains, for which there is a
specific provision of law (Sec. 37 [e] N.I.R.C.). As stated by
the Tax Court, there is a distinction between the situs of
personal properties and the situs of the income derived from
the sale or exchange of such properties.
As to the contention that section 35 of the Corporation Law
(Act No. 1459) requires the transfer to be noted and entered
not invalidate the transfer between the parties nor is it
essential to vest title upon the vendee. The capital gains,
now sought to be taxed, arose from the severance of gain,
from the investment occasioned by the transfer of
title abroad and not on account of any registration that might
be effected later.
Wherefore, the judgment under view is hereby affirmed. No
costs
G.R. No. L-23145 November 29, 1968
TESTATE ESTATE OF IDONAH SLADE PERKINS,
deceased. RENATO D. TAYAG, ancillary administrator-
appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.
Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-
appellant.
FERNANDO, J.:
Confronted by an obstinate and adamant refusal of the
domiciliary administrator, the County Trust Company of
New York, United States of America, of the estate of the
deceased Idonah Slade Perkins, who died in New York City
on March 27, 1960, to surrender to the ancillary
administrator in the Philippines the stock certificates owned
by her in a Philippine corporation, Benguet Consolidated,
Inc., to satisfy the legitimate claims of local creditors, the
Santos, now retired, issued on May 18, 1964, an order of
this tenor: "After considering the motion of the ancillary
hereby (1) considers as lost for all purposes in connection
with the administration and liquidation of the Philippine
estate of Idonah Slade Perkins the stock certificates
covering the 33,002 shares of stock standing in her name in
the books of the Benguet Consolidated, Inc., (2) orders said
certificates cancelled, and (3) directs said corporation to
issue new certificates in lieu thereof, the same to be
delivered by said corporation to either the incumbent
ancillary administrator or to the Probate Division of this
Court."1
From such an order, an appeal was taken to this Court not
Consolidated, Inc. The appeal cannot possibly prosper. The
challenged order represents a response and expresses a
policy, to paraphrase Frankfurter, arising out of a specific
problem, addressed to the attainment of specific ends by
 7

the use of specific remedies, with full and ample support Thus did the lower court, in the order now on appeal, impart
from legal doctrines of weight and significance. vitality and effectiveness to what was decreed. For without
it, what it had been decided would be set at naught and
The facts will explain why. As set forth in the brief of nullified. Unless such a blatant disregard by the domiciliary
appellant Benguet Consolidated, Inc., Idonah Slade administrator, with residence abroad, of what was
Perkins, who died on March 27, 1960 in New York City, left previously ordained by a court order could be thus
among others, two stock certificates covering 33,002 shares remedied, it would have entailed, insofar as this matter was
of appellant, the certificates being in the possession of the concerned, not a partial but a well-nigh complete paralysis
County Trust Company of New York, which as noted, is the of judicial authority.
domiciliary administrator of the estate of the
deceased.2 Then came this portion of the appellant's brief: 1. Appellant Benguet Consolidated, Inc. did not dispute the
"On August 12, 1960, Prospero Sanidad instituted ancillary power of the appellee ancillary administrator to gain control
administration proceedings in the Court of First Instance of and possession of all assets of the decedent within the
Manila; Lazaro A. Marquez was appointed ancillary jurisdiction of the Philippines. Nor could it. Such a power is
administrator, and on January 22, 1963, he was substituted inherent in his duty to settle her estate and satisfy the
by the appellee Renato D. Tayag. A dispute arose between claims of local creditors.5 As Justice Tuason speaking for
the domiciary administrator in New York and the ancillary this Court made clear, it is a "general rule universally
administrator in the Philippines as to which of them was recognized" that administration, whether principal or
entitled to the possession of the stock certificates in ancillary, certainly "extends to the assets of a decedent
question. On January 27, 1964, the Court of First Instance found within the state or country where it was granted," the
of Manila ordered the domiciliary administrator, County corollary being "that an administrator appointed in one state
Trust Company, to "produce and deposit" them with the or country has no power over property in another state or
ancillary administrator or with the Clerk of Court. The country."6
domiciliary administrator did not comply with the order, and
on February 11, 1964, the ancillary administrator petitioned It is to be noted that the scope of the power of the ancillary
the court to "issue an order declaring the certificate or administrator was, in an earlier case, set forth by Justice
certificates of stocks covering the 33,002 shares issued in Malcolm. Thus: "It is often necessary to have more than one
the name of Idonah Slade Perkins by Benguet administration of an estate. When a person dies intestate
Consolidated, Inc., be declared [or] considered as lost."3 owning property in the country of his domicile as well as in a
foreign country, administration is had in both countries. That
It is to be noted further that appellant Benguet which is granted in the jurisdiction of decedent's last
Consolidated, Inc. admits that "it is immaterial" as far as it is domicile is termed the principal administration, while any
concerned as to "who is entitled to the possession of the other administration is termed the ancillary administration.
stock certificates in question; appellant opposed the petition The reason for the latter is because a grant of
of the ancillary administrator because the said stock administration does not ex proprio vigore have any effect
certificates are in existence, they are today in the beyond the limits of the country in which it is granted.
possession of the domiciliary administrator, the County Hence, an administrator appointed in a foreign state has no
Trust Company, in New York, U.S.A...."4 authority in the [Philippines]. The ancillary administration is
proper, whenever a person dies, leaving in a country other
It is its view, therefore, that under the circumstances, the than that of his last domicile, property to be administered in
stock certificates cannot be declared or considered as lost. the nature of assets of the deceased liable for his individual
7
Moreover, it would allege that there was a failure to observe debts or to be distributed among his heirs."
certain requirements of its by-laws before new stock
certificates could be issued. Hence, its appeal. It would follow then that the authority of the probate court to
require that ancillary administrator's right to "the stock
As was made clear at the outset of this opinion, the appeal certificates covering the 33,002 shares ... standing in her
lacks merit. The challenged order constitutes an emphatic name in the books of [appellant] Benguet Consolidated,
affirmation of judicial authority sought to be emasculated by Inc...." be respected is equally beyond question. For
the wilful conduct of the domiciliary administrator in refusing appellant is a Philippine corporation owing full allegiance
to accord obedience to a court decree. How, then, can this and subject to the unrestricted jurisdiction of local courts. Its
order be stigmatized as illegal? shares of stock cannot therefore be considered in any wise
as immune from lawful court orders.
As is true of many problems confronting the judiciary, such
a response was called for by the realities of the situation. Our holding in Wells Fargo Bank and Union v. Collector of
What cannot be ignored is that conduct bordering on wilful Internal Revenue8 finds application. "In the instant case, the
defiance, if it had not actually reached it, cannot without actual situs of the shares of stock is in the Philippines, the
undue loss of judicial prestige, be condoned or tolerated. corporation being domiciled [here]." To the force of the
For the law is not so lacking in flexibility and above undeniable proposition, not even appellant is
resourcefulness as to preclude such a solution, the more so insensible. It does not dispute it. Nor could it successfully do
as deeper reflection would make clear its being buttressed so even if it were so minded.
by indisputable principles and supported by the strongest
policy considerations. 2. In the face of such incontrovertible doctrines that argue in
a rather conclusive fashion for the legality of the challenged
It can truly be said then that the result arrived at upheld and order, how does appellant, Benguet Consolidated, Inc.
vindicated the honor of the judiciary no less than that of the propose to carry the extremely heavy burden of persuasion
country. Through this challenged order, there is thus of precisely demonstrating the contrary? It would assign as
dispelled the atmosphere of contingent frustration brought the basic error allegedly committed by the lower court its
about by the persistence of the domiciliary administrator to "considering as lost the stock certificates covering 33,002
hold on to the stock certificates after it had, as admitted, shares of Benguet belonging to the deceased Idonah Slade
voluntarily submitted itself to the jurisdiction of the lower Perkins, ..."9 More specifically, appellant would stress that
court by entering its appearance through counsel on June the "lower court could not "consider as lost" the stock
27, 1963, and filing a petition for relief from a previous order certificates in question when, as a matter of fact, his Honor
of March 15, 1963. the trial Judge knew, and does know, and it is admitted by
the appellee, that the said stock certificates are in existence
 8

and are today in the possession of the domiciliary not the case, it would be a legal absurdity to impart to such
administrator in New York."10 a provision conclusiveness and finality. Assuming that a
contrariety exists between the above by-law and the
There may be an element of fiction in the above view of the command of a court decree, the latter is to be followed.
lower court. That certainly does not suffice to call for the
reversal of the appealed order. Since there is a refusal, It is understandable, as Cardozo pointed out, that the
persistently adhered to by the domiciliary administrator in Constitution overrides a statute, to which, however, the
New York, to deliver the shares of stocks of appellant judiciary must yield deference, when appropriately invoked
corporation owned by the decedent to the ancillary and deemed applicable. It would be most highly unorthodox,
administrator in the Philippines, there was nothing however, if a corporate by-law would be accorded such a
unreasonable or arbitrary in considering them as lost and high estate in the jural order that a court must not only take
requiring the appellant to issue new certificates in lieu note of it but yield to its alleged controlling force.
thereof. Thereby, the task incumbent under the law on the
ancillary administrator could be discharged and his The fear of appellant of a contingent liability with which it
responsibility fulfilled. could be saddled unless the appealed order be set aside for
its inconsistency with one of its by-laws does not impress
Any other view would result in the compliance to a valid us. Its obedience to a lawful court order certainly constitutes
judicial order being made to depend on the uncontrolled a valid defense, assuming that such apprehension of a
discretion of the party or entity, in this case domiciled possible court action against it could possibly materialize.
abroad, which thus far has shown the utmost persistence in Thus far, nothing in the circumstances as they have
refusing to yield obedience. Certainly, appellant would not developed gives substance to such a fear. Gossamer
be heard to contend in all seriousness that a judicial decree possibilities of a future prejudice to appellant do not suffice
could be treated as a mere scrap of paper, the court issuing to nullify the lawful exercise of judicial authority.
it being powerless to remedy its flagrant disregard.
4. What is more the view adopted by appellant Benguet
It may be admitted of course that such alleged loss as found Consolidated, Inc. is fraught with implications at war with
by the lower court did not correspond exactly with the facts. the basic postulates of corporate theory.
To be more blunt, the quality of truth may be lacking in such
a conclusion arrived at. It is to be remembered however, We start with the undeniable premise that, "a corporation is
again to borrow from Frankfurter, "that fictions which the law an artificial being created by operation of law...." 16 It owes
may rely upon in the pursuit of legitimate ends have played its life to the state, its birth being purely dependent on its
an important part in its development."11 will. As Berle so aptly stated: "Classically, a corporation was
conceived as an artificial person, owing its existence
Speaking of the common law in its earlier period, Cardozo through creation by a sovereign power."17 As a matter of
could state fictions "were devices to advance the ends of fact, the statutory language employed owes much to Chief
justice, [even if] clumsy and at times offensive."12 Some of Justice Marshall, who in the Dartmouth College decision
them have persisted even to the present, that eminent jurist, defined a corporation precisely as "an artificial being,
noting "the quasi contract, the adopted child, the invisible, intangible, and existing only in contemplation of
constructive trust, all of flourishing vitality, to attest the law."18
empire of "as if" today."13 He likewise noted "a class of
fictions of another order, the fiction which is a working tool The well-known authority Fletcher could summarize the
of thought, but which at times hides itself from view till matter thus: "A corporation is not in fact and in reality a
reflection and analysis have brought it to the light." 14 person, but the law treats it as though it were a person by
process of fiction, or by regarding it as an artificial person
What cannot be disputed, therefore, is the at times distinct and separate from its individual stockholders.... It
indispensable role that fictions as such played in the law. owes its existence to law. It is an artificial person created by
There should be then on the part of the appellant a further law for certain specific purposes, the extent of whose
refinement in the catholicity of its condemnation of such existence, powers and liberties is fixed by its
judicial technique. If ever an occasion did call for the charter."19 Dean Pound's terse summary, a juristic person,
employment of a legal fiction to put an end to the resulting from an association of human beings granted legal
anomalous situation of a valid judicial order being personality by the state, puts the matter neatly.20
disregarded with apparent impunity, this is it. What is thus
most obvious is that this particular alleged error does not There is thus a rejection of Gierke's genossenchaft theory,
carry persuasion. the basic theme of which to quote from Friedmann, "is the
reality of the group as a social and legal entity, independent
3. Appellant Benguet Consolidated, Inc. would seek to of state recognition and concession."21 A corporation as
bolster the above contention by its invoking one of the known to Philippine jurisprudence is a creature without any
provisions of its by-laws which would set forth the procedure existence until it has received the imprimatur of the state
to be followed in case of a lost, stolen or destroyed stock according to law. It is logically inconceivable therefore that it
certificate; it would stress that in the event of a contest or will have rights and privileges of a higher priority than that of
the pendency of an action regarding ownership of such its creator. More than that, it cannot legitimately refuse to
certificate or certificates of stock allegedly lost, stolen or yield obedience to acts of its state organs, certainly not
destroyed, the issuance of a new certificate or certificates excluding the judiciary, whenever called upon to do so.
would await the "final decision by [a] court regarding the
ownership [thereof]."15 As a matter of fact, a corporation once it comes into being,
following American law still of persuasive authority in our
Such reliance is misplaced. In the first place, there is no jurisdiction, comes more often within the ken of the judiciary
such occasion to apply such by-law. It is admitted that the than the other two coordinate branches. It institutes the
foreign domiciliary administrator did not appeal from the appropriate court action to enforce its right. Correlatively, it
order now in question. Moreover, there is likewise the is not immune from judicial control in those instances,
express admission of appellant that as far as it is where a duty under the law as ascertained in an appropriate
concerned, "it is immaterial ... who is entitled to the legal proceeding is cast upon it.
possession of the stock certificates ..." Even if such were
 9
To assert that it can choose which court order to follow and
which to disregard is to confer upon it not autonomy which
may be conceded but license which cannot be tolerated. It
is to argue that it may, when so minded, overrule the state,
the source of its very existence; it is to contend that what
any of its governmental organs may lawfully require could
be ignored at will. So extravagant a claim cannot possibly
merit approval.
5. One last point. In Viloria v. Administrator of Veterans
Affairs,22 it was shown that in a guardianship proceedings
then pending in a lower court, the United States Veterans
Administration filed a motion for the refund of a certain sum
of money paid to the minor under guardianship, alleging that
the lower court had previously granted its petition to
consider the deceased father as not entitled to guerilla
benefits according to a determination arrived at by its main
office in the United States. The motion was denied. In
seeking a reconsideration of such order, the Administrator
relied on an American federal statute making his decisions
"final and conclusive on all questions of law or fact"
precluding any other American official to examine the matter
anew, "except a judge or judges of the United States
court."23 Reconsideration was denied, and the Administrator
appealed.
In an opinion by Justice J.B.L. Reyes, we sustained the
lower court. Thus: "We are of the opinion that the appeal
should be rejected. The provisions of the U.S. Code,
invoked by the appellant, make the decisions of the U.S.
Veterans' Administrator final and conclusive when made on
claims property submitted to him for resolution; but they are
not applicable to the present case, where the Administrator
is not acting as a judge but as a litigant. There is a great
difference between actions against the Administrator (which
must be filed strictly in accordance with the conditions that
are imposed by the Veterans' Act, including the exclusive
review by United States courts), and those actions where
the Veterans' Administrator seeks a remedy from our courts
and submits to their jurisdiction by filing actions therein. Our
attention has not been called to any law or treaty that would
make the findings of the Veterans' Administrator, in actions
where he is a party, conclusive on our courts. That, in
effect, would deprive our tribunals of judicial discretion and
render them mere subordinate instrumentalities of the
Veterans' Administrator."
It is bad enough as the Viloria decision made patent for our
judiciary to accept as final and conclusive, determinations
made by foreign governmental agencies. It is infinitely
worse if through the absence of any coercive power by our
courts over juridical persons within our jurisdiction, the force
and effectivity of their orders could be made to depend on
the whim or caprice of alien entities. It is difficult to imagine
of a situation more offensive to the dignity of the bench or
the honor of the country.
Yet that would be the effect, even if unintended, of the
proposition to which appellant Benguet Consolidated seems
to be firmly committed as shown by its failure to accept the
validity of the order complained of; it seeks its reversal.
Certainly we must at all pains see to it that it does not
succeed. The deplorable consequences attendant on
appellant prevailing attest to the necessity of negative
response from us. That is what appellant will get.
That is all then that this case presents. It is obvious why the
appeal cannot succeed. It is always easy to conjure
extreme and even oppressive possibilities. That is not
decisive. It does not settle the issue. What carries weight
and conviction is the result arrived at, the just solution
obtained, grounded in the soundest of legal doctrines and
distinguished by its correspondence with what a sense of
realism requires. For through the appealed order, the
imperative requirement of justice according to law is
satisfied and national dignity and honor maintained.
WHEREFORE, the appealed order of the Honorable
Arsenio Santos, the Judge of the Court of First Instance,
dated May 18, 1964, is affirmed. With costs against
oppositor-appelant Benguet Consolidated, Inc.
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................................................................. On June 23, 1966, the administratrix submitted a project of
............................. 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............................. related to the second heirs or substitutes within the first
.............. 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 enumerates four classes, there are really only two principal
precedentemente ordinadas, las
10
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.
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
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
substitutions, namely: simple or common, brief or
compendious, reciprocal, and fideicommissary (Art. 858,
Civil Code.) According to Tolentino, "Although the Code
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 The 1935 Constitution which is controlling provides as
Wrobleski" in connection with the one-third usufruct over the follows:
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.
The appellants also question the sustitucion vulgar y
fideicomisaria in connection with Wanda's usufruct over two
thirds of the estate in favor of Juan Pablo Jankowski and
Horace v. Ramirez.
They allege that the substitution in its vulgar aspect as void Wanda on the ground that the Constitution covers not only
because Wanda 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 for it also includes refusal or incapacity to
accept the inheritance as provided in Art. 859 of the Civil
Code, supra. Hence, the vulgar substitution is valid.
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."
11
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.)
(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.
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
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:

One-half (1/2) thereof to his widow as her legitime;
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 substitution in favor of
Juan Pablo Jankowski and Horace V. Ramirez.
The distribution herein ordered supersedes that of the
court a quo. No special pronouncement as to costs.
SO ORDERED
G.R. No. L-29663 August 20, 1990
GREGORIO LLANTINO and BELINDA LLANTINO assisted
by husband Napoleon Barba, plaintiffs-appellants,
vs.
CO LIONG CHONG alias JUAN MOLINA, defendant-
appellee.
Delfin de Vera for plaintiffs-appellants.
Antonio G. Sosito for defendant-appellee.
PARAS, J.:
This is an appeal perfected before the effectivity of Republic
Act 5440, from the decision * of the Court of First Instance
of Catanduanes in Civil Case No. 611, to quiet title with
damages, entitled Gregorio Llantino, et al. vs. Cong Liong
Chong alias Juan Molina, dismissing the complaint and
declaring that the contract of lease entered into between the
plaintiffs and the defendant valid and in accordance with
law.
The facts of the case as summarized by the trial court are
as follows:
Plaintiffs (petitioners herein) aver that they are the owners
of a commercial-residential land situated in the municipality
of Virac, Catanduanes, described in paragraph 2 of the
complaint, which sometime in 1954 they leased to the
defendant (private respondent) who was then a Chinese
national and went by the name of Co Liong Chong for a
period of thirteen (13) years for the sum of P6,150.00 for the
whole period. The defendant was placed in possession of
the property but knowing that the period of the least would
end with the year 1967, petitioners requested private
respondent for a conference but the latter did not honor the
request and instead he informed the petitioners that he had
already constructed a commercial building on the land worth
P50,000.00; that the lease contract was for a period of sixty
(60) years, counted from 1954; and that he is already a
Filipino citizen. The claim of Chong came as a surprise to
the Llantinos because they did not remember having agreed
to a sixty-year lease agreement as that would virtually make
Chong the owner of the realty which, as a Chinese national,
he had no right to own and neither could he have acquired
such ownership after naturalization subsequent to 1954. On
December 16, 1967, in order to avoid a court litigation the
Llantinos once more invited Chong to a conference about
the matter but again Chong ignored the invitation. (Rollo, p.
48; Appellant's Brief, p. 12)
Hence, on January 10, 1968, the Llantinos filed their
complaint to quiet title with damages before the Court of
First Instance of Catanduanes (Rollo, p. 12; Record on
Appeal, pp. 1-4).
After Chong has filed an answer to the complaint and the
Llantinos their reply, (Rollo, p. 12; Record on Appeal, pp. 9-
12
10) the trial court set the case for pre-trial and trial for April
2, 1968 (Rollo, p. 12; Record on Appeal, pp. 10-11).
At the pre-trial, both parties agreed upon the identity of the
land as described in the complaint. It was mutually admitted
that the defendants original name was Co Liong Chong who
was then a Chinese national in 1954, when he approached
the plaintiffs and offered to lease the land in question. It was
also admitted by the counsel for the defendant that prior to
the filing of the case, the plaintiffs have in fact invited the
defendant to a conference about the matter (Rollo, p. 12;
Record on Appeal; p. 14).
Chong's counsel produced the carbon original of the
contract of lease entered into between Chong and the
Llantinos and the existence of the contract of lease as a
public instrument was admitted (Rollo, p. 12; Record on
Appeal, pp. 14-15).
It was also admitted that Chong had in fact constructed a
building of strong materials on the land worth P40,000.00
(Rollo, p. 12; Record on Appeal, p. 15); that Chong has
become a naturalized Filipino citizen in 1961 and that his
name is no longer Co Liong Chong but Juan Molina (Rollo,
p. 12; Record on Appeal, p. 15).
On May 17, 1968, the trial court rendered a Decision the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing
considerations, the Court finds the contract
of lease entered into between the plaintiffs
and the defendant on October 5, 1954,
valid and in accordance with law and the
complaint is dismissed with costs against
the plaintiffs.
The Court, however, feels that there is no
sufficient ground to award moral damages
or attorney's fees as claimed by the
defendant because the Court is fairly
convinced that the institution of the suit
sprung from an honest conviction on the
part of the plaintiffs that on account of the
period fixed in the contract of lease and the
fact that the defendant was a Chinese
national at the time of its celebration
constituted valid grounds for annulment.
SO ORDERED. (Rollo, p. 12; Record on
Appeal, p. 24).
From this judgment, plaintiffs appealed directly to this Court
on a pure question of law (Rollo, p. 12; Record on Appeal,
pp. 24-25).
The plaintiffs-appellants filed their brief on May 26, 1969
(Rollo, p. 48). The defendant-appellee filed his
corresponding brief on July 22, 1969 (Rollo, p. 59).
The appellants raised the following assignment of errors:
I
THE LOWER COURT ERRED IN DECLARING THE
CONTRACT ENTERED INTO BY AND BETWEEN THE
APPELLANTS AND THE DEFENDANTS ON OCTOBER 5,
1954 VALID.
II

THE LOWER COURT ERRED IN REFUSING TO
DECLARE THAT CONTRACT NOT A LEASE.
Stripping the case of irrelevant allegations, the pivotal issue
in this case is whether or not the contract of lease entered
into by and between the petitioners including Virgilio
Llantino now deceased and private respondent on October
5, 1954 for a period of sixty (60) years is valid.
Petitioners contend that when the contract which is sought
to be declared void was entered into by and between the
parties, private respondent was still a Chinese national
(Rollo, p. 48; Appellants' Brief, p. 2). However, petitioners
also stated that they do not dispute the right of private
respondent to hold the landholding in dispute under a
contract of lease but they cannot fathom how Congress
could have thought of a lease contract which shall be for an
indefinite period and yet say that the period to be valid
should not exceed 99 years (Rollo, p. 48; Appellant's Brief,
p. 4; Article 1643 of the New Civil Code of the Philippines).
On the other hand, private respondent argued that even
though he was still an alien when he entered into the
contract of lease (on October 5, 1954), he was not
prohibited by law to do so. In fact, prior to his becoming a
naturalized Filipino citizen in 1961, the appellants did not
question his right to enter into that contract so that the
parties are in pari delicto. He constructed a building on the
property worth P40,000.00 and prays that he be awarded
P30,000.00 for moral damages and P2,000.00 for
Attorney's fees. (Rollo, p. 48; Appellant's Brief, p. 2).
The position of private respondent is well taken.
The lower court correctly ruled that the defendant-appellee
Chong had at the time of the execution of the contract, the
right to hold by lease the property involved in the case
although at the time of the execution of the contract, he was It is too late to raise an issue on appeal in the Supreme
still a Chinese national (Rollo, p. 59; Appellee's Brief, pp. Court when it has not been raised in the lower court
10-11). (Espadera vs. Court of Appeals, 165 SCRA 364 [1988]).
In the present case, it has been established that there is
only one contract and there is no option to buy the leased
property in favor of Chong. There is nothing in the record,
either in the lease contract or in the complaint itself, to
indicate any scheme to circumvent the constitutional
prohibition. On the contrary, the Llantinos themselves admit
openly that right from the start and before entering into the
contract, Chong had merely asked them for a lease of the
premises to which they agreed. Admittedly under the terms
of the contract there is nothing to prevent the Llantinos from
disposing of their title to the land to any qualified party but
subject to the rights of the lessee Chong. Neither is there
under the terms of the said contract to indicate that the
ownership of the Llantinos of the leased premises has been
virtually transferred to the lessee (Rollo, p. 59; Appellee's
Brief, p. 14).
Under the circumstances, 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. Aliens are not completely excluded by
the Constitution from use of lands for residential purposes.
Since their residence in the Philippines is temporary, they
may be granted temporary rights such as a lease contract
which is not forbidden by the Constitution. Should they
desire to remain here forever and share our fortune and
misfortune, Filipino citizenship is not impossible to acquire
(Philippine Banking Corporation vs. Lui She, 21 SCRA 52
[1967], citing Krivenko vs. Register of Deeds, 79 Phil. 461
[1947]).
13
The only instance where a contract of lease may be
considered invalid is, if there are circumstances attendant to
its execution, which are used as a scheme to circumvent
the constitutional prohibition.
If an alien is given not only a lease of, but also an option to
buy, a piece of land, by virtue of which the Filipino owner
cannot sell or otherwise dispose of his property, this to last
for 50 years, then it becomes clear that the arrangement is
a virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land (jus
possidendi, jus utendi, jus fruendi, and jus abutendi) —
rights, the sum 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 (Philippine Banking Corporation vs. Lui She, 21 SCRA
52 [1967]).
Coming back to the case at bar, even assuming, arguendo,
that the subject contract is prohibited, the same can no
longer be questioned presently upon the acquisition by the
private respondent of Filipino citizenship. It was held that
sale of a residential land to an alien which is now in the
hands of a naturalized Filipino citizen is valid (De Castro vs.
Tan, 129 SCRA 85 [1984]).
A contract is the law between the contracting parties, and
when there is nothing in it which is contrary to law, morals,
good customs, public policy or public order, the validity of
the contract must be sustained (Marimperio Compania
Naviera, S.A. vs. Court of Appeals, 156 SCRA 358 [1987]).
The issue of the nature of the contract in the case at bar
was never raised in the basic pleadings or in the pre-trial
(Rollo, p. 59-1; Appellee's Brief, p. 22).
Moreover, contracts which are not ambiguous are to be
interpreted according to their literal meaning and should not
be interpreted beyond their obvious intendment (Plastic
Town Center Corporation vs. NLRC, 172 SCRA 580 [1989];
Herrera vs. Petrophil Corp., 146 SCRA 385 [1986]).
PREMISES CONSIDERED, the decision appealed from is
hereby AFFIRMED with costs against the plaintiffs-
appellants.
SO ORDERED
G.R. No. 205487 November 12, 2014
ORION SAVINGS BANK, Petitioner,
vs.
SHIGEKANE SUZUKI, Respondent.
DECISION
BRION, J.:
Before us is the Petition for Review on Certiorari1 filed by
petitioner Orion Savings Bank (Orion) under Rule 45 of the
Rules of Court, assailing the decision2 dated August 23,
2012 and the resolution3 dated January 25, 2013 of the
Court of Appeals (CA) in CA-G.R. CV No. 94104.
The Factual Antecedents

In the first week of August 2003, respondent Shigekane
Suzuki (Suzuki), a Japanese national, met with Ms. Helen
Soneja (Soneja) to inquire about a condominium unit and a
parking slot at Cityland Pioneer, Mandaluyong City,
allegedly owned by Yung Sam Kang (Kang), a Korean
national and a Special Resident Retiree's Visa (SRRV)
holder.
At the meeting, Soneja informed Suzuki that Unit No. 536
[covered by Condominium Certificate of Title (CCT) No.
18186]4 and Parking Slot No. 42 [covered by CCT No.
9118]5 were for sale for ₱3,000,000.00. Soneja likewise
assured Suzuki that the titles to the unit and the parking slot
were clean. After a brief negotiation, the parties agreed to
reduce the price to ₱2,800,000.00. On August 5, 2003,
Suzuki issued Kang a Bank of the Philippine Island (BPI)
Check No. 833496 for One Hundred Thousand Pesos
(₱100,000.00) as reservation fee.7 On August 21, 2003,
Suzuki issued Kang another check, BPI Check No.
83350,8 this time for ₱2,700,000.00 representing the
remaining balance of the purchase price. Suzuki and Kang
then executed a Deed of Absolute Sale dated August 26,
20039 covering Unit No. 536 and Parking Slot No. 42. Soon
after, Suzuki took possession of the condominium unit and
parking lot, and commenced the renovation of the interior of
the condominium unit.
Kang thereafter made several representations with Suzuki
to deliver the titles to the properties, which were then
allegedly in possession of Alexander Perez (Perez, Orion’s
Loans Officer) for safekeeping. Despite several verbal
demands, Kang failed to deliver the documents. Suzuki later
on learned that Kang had left the country, prompting Suzuki
to verify the status of the properties with the Mandaluyong
City Registry of Deeds.
Before long, Suzuki learned that CCT No. 9118
representing the title to the Parking Slot No. 42 contained
no annotations although it remained under the name of
Cityland Pioneer. This notwithstanding, Cityland Pioneer,
through Assistant Vice President Rosario D. Perez, certified
that Kang had fully paid the purchase price of Unit. No.
53610 and Parking Slot No. 42.11 CCT No. 18186
representing the title to the condominium unit had no
existing encumbrance, except for anannotation under Entry
No. 73321/C-10186 which provided that any conveyance or
encumbrance of CCT No. 18186 shall be subject to
approval by the Philippine Retirement Authority (PRA).
Although CCT No. 18186 contained Entry No. 66432/C-
10186 dated February 2, 1999 representing a mortgage in
favor of Orion for a ₱1,000,000.00 loan, that annotation was
subsequently cancelled on June 16, 2000 by Entry No.
73232/T. No. 10186. Despite the cancellation of the
mortgage to Orion, the titles to the properties remained in
possession of Perez.
To protect his interests, Suzuki thenexecuted an Affidavit of
Adverse Claim12 dated September 8, 2003, withthe Registry
of Deeds of Mandaluyong City, annotated as Entry No.
3292/C-No. 18186 in CCT No. 18186. Suzuki then
demanded the delivery of the titles.13 Orion, (through
Perez), however, refused to surrender the titles, and cited
the need to consult Orion’s legal counsel as its reason.
On October 14, 2003, Suzuki received a letter from Orion’s of an SRRV only serves as a warning to an SRRV holder
counsel dated October 9, 2003, stating that Kang obtained
another loan in the amount of ₱1,800,000.00. When Kang
failed to pay, he executed a Dacion en Pagodated February deleting the award for moral damages, exemplary damages,
2, 2003, in favorof Orion covering Unit No. 536. Orion,
however, did not register the Dacion en Pago, until October
15, 2003.
14
On October 28, 2003, Suzuki executed an Affidavit of
Adverse Claim over Parking Slot No. 42 (covered by CCT
No. 9118) and this was annotated as Entry No. 4712/C-No.
9118 in the parking lot’s title.
On January 27, 2004, Suzuki filed a complaint for specific
performance and damages against Kang and Orion. At the
pre-trial, the parties made the following admissions and
stipulations:
1. That as of August 26, 2003, Kang was the
registered owner of Unit No. 536 and Parking Slot
No. 42;
2. That the mortgage in favor ofOrion supposedly
executed by Kang, with Entry No. 66432/C-10186
dated February 2, 1999, was subsequently
cancelled by Entry No. 73232/T No. 10186 dated
June 16, 2000;
3. That the alleged Dacion en Pagowas never
annotated in CCT Nos. 18186 and 9118;
4. That Orion only paid the appropriate capital gains
tax and the documentary stamp tax for the alleged
Dacion en Pago on October 15, 2003;
5. That Parking Slot No. 42, covered by CCT No.
9118, was never mortgaged to Orion; and
6. That when Suzuki bought the properties, he went
to Orion to obtain possession of the titles.
The RTC Ruling
In its decision14 dated June 29, 2009, the Regional Trial
Court (RTC), Branch 213, Mandaluyong City ruled infavor of
Suzuki and ordered Orion to deliver the CCT Nos. 18186
and 9118 to Suzuki.
The court found that Suzuki was an innocent purchaser for
value whose rights over the properties prevailed over
Orion’s. The RTC further noted that Suzuki exerted efforts
to verify the status of the properties but he did not find any
existing encumbrance inthe titles. Although Orion claims to
have purchased the property by way of a Dacion en Pago,
Suzuki only learned about it two (2) months after he bought
the properties because Orion never bothered to register or
annotate the Dacion en Pagoin CCT Nos. 18186 and 9116.
The RTC further ordered Orion and Kang to jointly and
severally pay Suzuki moral damages, exemplary damages,
attorney’s fees, appearance fees, expenses for litigation
and cost ofsuit. Orion timely appealed the RTC decision
with the CA.
The CA Ruling
On August 23, 2012, the CA partially granted Orion’s appeal
and sustained the RTC insofar as it upheld Suzuki’s right
over the properties. The CA further noted that Entry No.
73321/C-10186 pertaining to the withdrawal of investment
about the implications of a conveyance of a property
investment. It deviated from the RTC ruling, however, by
attorney’s fees, expenses for litigation and cost of suit.
Orion sought a reconsideration of the CA decision but the
CA denied the motion in its January 25, 2013 resolution.
Orion then filed a petition for review on certiorariunder Rule
45 with this Court.
 15

The Petition and Comment Thus, all matters concerning the titleand disposition ofreal
property are determined by what is known as the lex loci rei
Orion’s petition is based on the following sitae, which can alone prescribe the mode by which a title
grounds/arguments:15 canpass from one person to another, or by which an interest
therein can be gained or lost.23 This general principle
includes all rules governing the descent, alienation and
1. The Deed of Sale executed by Kang in favor of
transfer of immovable property and the validity, effect and
Suzuki is null and void. Under Korean law, any
conveyance of a conjugal property should be made construction of wills and other conveyances.24
with the consent of both spouses;
This principle even governs the capacity of the person
making a deed relating to immovable property, no matter
2. Suzuki is not a buyer in good faith for he failed to
what its nature may be. Thus, an instrument will be
check the owner’s duplicate copies of the CCTs;
ineffective to transfer title to land if the person making it is
incapacitated by the lex loci rei sitae, even though under the
3. Knowledge of the PRA restriction under Entry law of his domicile and by the law of the place where the
No. 73321/C-10186, which prohibits any instrument is actually made, his capacity is undoubted. 25
conveyance or encumbrance of the property
investment, defeats the alleged claim of good faith
by Suzuki; and On the other hand, property relations between spouses are
governed principally by the national law of the
spouses.26 However, the party invoking the application of a
4. Orion should not be faulted for exercising due foreign law has the burden of proving the foreign law. The
diligence. foreign law is a question of fact to be properly pleaded and
proved as the judge cannot take judicial notice of a foreign
In his Comment,16 Suzuki asserts that the issue on spousal law.27 He is presumed to know only domestic or the law of
consent was belatedly raised on appeal. Moreover, proof of the forum.28
acquisition during the marital coverture is a condition sine
qua nonfor the operation of the presumption of conjugal To prove a foreign law, the party invoking it must present a
ownership.17 Suzuki additionally maintains that he is a copy thereof and comply with Sections 24 and 25 of Rule
purchaser in good faith, and is thus entitled to the protection 132 of the Revised Rules of Court which reads:
of the law.
SEC. 24. Proof of official record. — The record of public
The Court’s Ruling documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official
We deny the petition for lack of merit. publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and
The Court may inquire into conclusions of fact when the accompanied, if the record is not kept in the Philippines,
inference made is manifestly mistaken with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreign country, the
In a Rule 45 petition, the latitude of judicial review generally certificate may be made by a secretary of the embassy or
excludes a factual and evidentiary re-evaluation, and the legation, consul general, consul, vice consul, or consular
Court ordinarily abides by the uniform factual conclusions of agent or by any officer in the foreign service of the
the trial court and the appellate court.18 In the present case, Philippines stationed in the foreign country inwhich the
while the courts below both arrived at the same conclusion, record is kept, and authenticated by the seal of his office.
there appears tobe an incongruence in their factual findings (Emphasis supplied)
and the legal principle they applied to the attendant factual
circumstances. Thus, we are compelled to examine certain SEC. 25. What attestation ofcopy must state. — Whenever
factual issues in the exercise of our sound discretion to a copy of a document or record is attested for the purpose
correct any mistaken inference that may have been made.19 of the evidence, the attestation must state, in substance,
that the copy is a correct copy of the original, or a specific
Philippine Law governs the transfer of real property part thereof, as the case may be. The attestation must be
under the official seal of the attesting officer, if there be any,
or if he be the clerk of a court having a seal, under the seal
Orion believes that the CA erred in not ruling on the issue of
of such court.
spousal consent. We cannot uphold this position, however,
because the issue of spousal consent was only raised on
appeal to the CA. It is a well-settled principle that points of Accordingly, matters concerning the title and disposition of
law, theories, issues, and arguments not brought to the real property shall be governed by Philippine law while
attention of the trial court cannot be raised for the first time issues pertaining to the conjugal natureof the property shall
on appeal and considered by a reviewing court.20 To be governed by South Korean law, provided it is proven as
consider these belated arguments would violate basic a fact.
principles of fairplay, justice, and due process.
In the present case, Orion, unfortunately failed to prove the
Having said these, we shall nonetheless discuss the issues South Korean law on the conjugal ownership ofproperty. It
Orion belatedly raised, if only to put an end to lingering merely attached a "Certification from the Embassy of the
doubts on the correctness of the denial of the present Republic of Korea"29 to prove the existence of Korean Law.
petition. This certification, does not qualify as sufficient proof of the
conjugal nature of the property for there is no showing that it
was properly authenticated bythe seal of his office, as
It is a universal principle thatreal or immovable property is
required under Section 24 of Rule 132.30
exclusively subject to the laws of the country or state where
it is located.21 The reason is found in the very nature of
immovable property — its immobility. Immovables are part Accordingly, the International Law doctrine of presumed-
of the country and so closely connected to it that all rights identity approachor processual presumption comes into
over them have their natural center of gravity there.22 play, i.e., where a foreign law is not pleaded or, evenif
 16

pleaded, is not proven, the presumption is that foreign law is Despite the exclusion of its most critical documentary
the same as Philippine Law.31 evidence, Orion failed to make a tender ofexcluded
evidence, as provided under Section 40, Rule 132 of the
Under Philippine Law, the phrase "Yung Sam Kang ‘married Rules of Court. For this reason alone, we are prevented
to' Hyun Sook Jung" is merely descriptive of the civil status from seriously considering Exhibit "5" and its submarkings
of Kang.32 In other words, the import from the certificates of and Exhibit "12" in the present petition.
title is that Kang is the owner of the properties as they are
registered in his name alone, and that he is married to Hyun Moreover, even if we consider Exhibit "5" and its
Sook Jung. submarkings and Exhibit "12" in the present petition, the
copious inconsistencies and contradictions in the
We are not unmindful that in numerous cases we have held testimonial and documentary evidence of Orion, militate
that registration of the property in the name of only one against the conclusion that the Dacion en Pagowas duly
spouse does not negate the possibility of it being conjugal executed. First, there appears to be no due and
or community property.33 In those cases, however, there demandable obligation when the Dacion en Pago was
was proof that the properties, though registered in the name executed, contrary to the allegations of Orion. Orion’s
of only one spouse, were indeed either conjugal or witness Perez tried to impress upon the RTC that Kang was
community properties.34 Accordingly, we see no reason to in default in his ₱1,800,000.00 loan. During his direct
declare as invalid Kang’s conveyance in favor of Suzuki for examination, he stated:
the supposed lack of spousal consent.
ATTY. CRUZAT:
The petitioner failed to adduce sufficient evidence to prove
the due execution of the Dacion en Pago Q: Okay, so this loan of ₱1.8 million, what
happened to this loan, Mr. Witness?
Article 1544 of the New Civil Codeof the Philippines
provides that: A: Well it became past due, there has been delayed
interest payment by Mr. Kangand...
ART. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the Q: So what did you do after there were defaults[?]
person who may have first taken possession thereof in good
faith, if it should be movable property. A: We have to secure the money or the investment
of the bank through loans and we have executed a
Should it be immovable property, the ownership shall dacion en pagobecause Mr. Kang said he has no
belong to the person acquiring it who in good faith first money. So we just execute[d] the dacion en pago
recorded it in the Registry of Property. rather than going through the Foreclosure
proceedings.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession; xxxx
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. Q: Can you tell the court when was this executed?

The application of Article 1544 of the New Civil Code A: February 6, 2003, your Honor.41
presupposes the existence of two or more duly executed
contracts of sale. In the present case, the Deed of Sale
A reading of the supposed promissory note, however,
dated August 26, 200335 between Suzuki and Kang was
shows that there was nodefault to speak of when the
admitted by Orion36 and was properly identified by Suzuki’s
supposed Dacion en Pagowas executed.
witness Ms. Mary Jane Samin (Samin).37
Based on the promissory note, Kang’s loan obligation
It is not disputed, too, that the Deed of Sale dated August
wouldmature only on August 27, 2003. Neither can Orion
26, 2003 was consummated. In a contract of sale, the seller
claim that Kang had been in default in his installment
obligates himself to transfer the ownership of the
payments because the wordings of the promissory note
determinate thing sold, and to deliver the same to the buyer,
provide that "[t]he principal of this loanand its interest and
who obligates himself to pay a price certain to the other charges shall be paid by me/us in accordance
seller.38 The execution of the notarized deed of saleand the
hereunder: SINGLE PAYMENT LOANS.42 "There was thus
actual transfer of possession amounted to delivery that
no due and demandable loan obligation when the alleged
produced the legal effect of transferring ownership to
Dacion en Pago was executed.
Suzuki.39
Second, Perez, the supposed person who prepared the
On the other hand, although Orion claims priority in right
Dacion en Pago,appears to only have a vague idea of the
under the principle of prius tempore, potior jure (i.e.,first in
transaction he supposedly prepared. During his cross-
time, stronger in right), it failedto prove the existence and
examination, he testified:
due execution of the Dacion en Pagoin its favor.
ATTY. DE CASTRO:
At the outset, Orion offered the Dacion en Pagoas Exhibit
"5"with submarkings "5-a" to "5-c" to prove the existence of
the February 6, 2003 transaction in its Formal Offer dated Q: And were you the one who prepared this [dacion
July 20, 2008. Orion likewise offered in evidence the en pago] Mr. witness?
supposed promissory note dated September 4, 2002 as
Exhibit "12"to prove the existence of the additional A: Yes, sir. I personally prepared this.
₱800,000.00 loan. The RTC, however, denied the
admission of Exhibits "5" and "12,"among others, in its order xxxx
dated August 19, 2008 "since the same [were] not identified
in court by any witness."40
 17

Q: So this 1.8 million pesos is already inclusive of COURT:

all the penalties, interest and surcharge due from
Mr. Yung Sam Kang? xxxx

A: It’s just the principal, sir. Q: Would you remember what was the subject
matter of that real estate mortgage for that first
Q: So you did not state the interest [and] penalties? ₱1,000,000.00 loan?

A: In the [dacion en pago], we do not include A: It’s a condominium Unit in Cityland, sir.
interest, sir. We may actually includethat but....
xxxx
Q: Can you read the Second Whereas Clause, Mr.
Witness? Q: Would you recall if there was any payment by
Mr. Yung Sam Kang of this ₱1,000,000.00 loan?
A: Whereas the first party failed to pay the said loan
to the second party and as of February 10, 2003, A: None sir.
the outstanding obligation which is due and
demandable principal and interest and other
Q: No payments?
charges included amounts to ₱1,800,000.00 pesos,
sir.
A: None sir.
xxxx
Q: And from 1999 to 2002, there was no payment,
either by way of payment to the principal, by way
Q: You are now changing your answer[.] [I]t now
ofpayment of interest, there was no payment by Mr.
includes interest and other charges, based on this Yung Sam Kang of this loan?
document?
A: Literally, there was no actual cash movement,
A: Yes, based on that document, sir.43
sir.

Third, the Dacion en Pago,mentioned that the Q: There was no actual cash?
₱1,800,000.00 loan was secured by a real estate
mortgage. However, no document was ever
presented to prove this real estate mortgage aside A: Yes, sir.
from it being mentioned in the Dacion en Pago
itself. Q: And yet despite no payment, the bank Orion
Savings Bank still extended an ₱800,000.00
ATTY. DE CASTRO: additional right?

Q: Would you know if there is any other document A: Yes, sir.47

like a supplement to that Credit Line Agreement
referring to this 1.8 million peso loan by Mr. Yung Fifth, it is undisputed that notwithstanding the supposed
Sam Kang which says that there was a subsequent execution of theDacion en Pago on February 2, 2003, Kang
collateralization or security given by Mr. Yung [Sam] remained in possession of the condominium unit. In fact,
nothing in the records shows that Orion even bothered to
Kang for the loan? take possession of the property even six (6) months after
the supposed date of execution of the Dacion en Pago.
Kang was even able to transfer possession of the
xxxx
condominium unit to Suzuki, who then made immediate
improvements thereon. If Orion really purchased the
A: The [dacion en pago], sir.44 condominium unit on February 2, 2003 and claimed to be its
true owner, why did it not assert its ownership immediately
Fourth,the Dacion en Pago was first mentioned only two (2) after the alleged sale took place? Why did it have to assert
months after Suzuki and Samin demanded the delivery of its ownership only after Suzuki demanded the delivery of
the titles sometime in August 2003,and after Suzuki caused the titles? These gaps have remained unanswered and
the annotation of his affidavit of adverse claim. Records unfilled.
show that it was only on October 9, 2003, when Orion,
through its counsel, Cristobal Balbin Mapile & Associates In Suntay v. CA,48 we held that the most prominent index of
first spoke of the Dacion en Pago.45 Not even Perez simulation is the complete absence of anattempt on the part
mentioned any Dacion en Pago on October 1, 2003, when of the vendee to assert his rights of ownership over the
he personally received a letter demanding the delivery of property in question. After the sale, the vendee should have
the titles.Instead, Perez refused to accept the letter and entered the land and occupied the premises. The absence
opted to first consult with his lawyer.46 of any attempt on the part of Orion to assert its right of
dominion over the property allegedly soldto it is a clear
Notably, even the October 9, 2003 letter contained material badge of fraud. That notwithstanding the execution of the
inconsistencies in its recital of facts surrounding the Dacion en Pago, Kang remained in possession of the
execution of the Dacion en Pago. In particular, it mentioned disputed condominium unit – from the time of the execution
that "on [September 4, 2002], after paying the original loan, of the Dacion en Pagountil the property’s subsequent
[Kang] applied and was granted a new Credit Line Facility transfer to Suzuki – unmistakably strengthens the fictitious
by [Orion] x x x for ONE MILLION EIGHT HUNDRED nature of the Dacion en Pago.
THOUSAND PESOS (₱1,800,000.00)." Perez, however,
testified that there was "no cash movement" in the original These circumstances, aside from the glaring
₱1,000,000.00 loan. In his testimony, he said: inconsistencies in the documents and testimony of Orion’s
 18

witness, indubitably prove the spurious nature of the Dacion With the conclusion that Orion failed to prove the
en Pago. authenticity of the Dacion en Pago, we see no reason for
the application of the rules on double sale under Article
The fact that the Dacion en Pago 1544 of the New Civil Code. Suzuki, moreover, successfully
is a notarized document does not adduced sufficient evidence to establish the validity of
support the conclusion that the conveyance in his favor.
sale it embodies is a true
conveyance WHEREFORE, premises considered, we DENY the petition
for lack of merit. Costs against petitioner Orion Savings
Public instruments are evidence of the facts that gave rise Bank.
to their execution and are to be considered as containing all
the terms of the agreement.49 While a notarized document SO ORDERED.
enjoys this presumption, "the fact that a deed is notarized is
not a guarantee of the validity of its contents."50 The
presumption of regularity of notarized documents is not
absolute and may be rebutted by clear and convincing
evidence to the contrary.51

In the present case, the presumption cannot apply because

the regularity in the execution of the Dacion en Pago and
the loan documents was challenged in the proceedings
below where their prima facievalidity was overthrown by the
highly questionable circumstances surrounding their
execution.52

Effect of the PRA restriction on

the validity of Suzuki’s title to the
property

Orion argues that the PRA restriction in CCT No. 18186

affects the conveyance to Suzuki. In particular, Orion
assails the status of Suzuki as a purchaser in good faith in
view of the express PRA restriction contained in CCT No.
18186.53

We reject this suggested approachoutright because, to our

mind, the PRA restriction cannot affect the conveyance in
favor of Suzuki. On this particular point, we concur withthe
following findings of the CA:

x x x the annotation merely servesas a warning to the owner

who holds a Special Resident Retiree’s Visa(SRRV) that he
shall lose his visa if he disposes his property which serves
as his investment in order to qualify for such status. Section
14 of the Implementing Investment Guidelines under Rule
VIII-A of the Rules and Regulations Implementing Executive
Order No. 1037, Creating the Philippine Retirement Park
System Providing Funds Therefor and For Other Purpose (
otherwise known as the Philippine Retirement Authority)
states:

Section 14. Should the retiree-investor withdraw his

investment from the Philippines, or transfer the same to
another domestic enterprise, orsell, convey or transfer his
condominium unit or units to another person, natural or
juridical without the prior approval of the Authority, the
Special Resident Retiree’s Visa issued to him, and/or
unmarried minor child or children[,] may be cancelled or
revoked by the Philippine Government, through the
appropriate government department or agency, upon
recommendation of the Authority.54

Moreover, Orion should not be allowed to successfully

assail the good faith of Suzuki on the basis of the PRA
restriction. Orion knew of the PRA restriction when it
transacted with Kang. Incidentally, Orion admitted
accommodating Kang’s request to cancel the mortgage
annotation despite the lack of payment to circumvent the
PRA restriction. Orion, thus, is estopped from impugning the
validity of the conveyance in favor of Suzuki on the basis of
the PRA restriction that Orion itself ignored and "attempted"
to circumvent.