FIRST DIVISION

[G.R. No. L-36731. January 27, 1983.]

VICENTE GODINEZ, ET AL., Plaintiffs-Appellants, v. FONG PAK LUEN, ET

AL., Defendants, TRINIDAD S. NAVATA, Defendant-Appellee.

Dominador Sobrevinas, for Plaintiffs-Appellants.

Muss S. Inquerto, for Defendant-Appellee.

SYLLABUS

1. CONSTITUTIONAL LAW; PATRIMONY OF THE NATIONS; PROHIBITION AGAINST

ACQUISITION BY ALIENS OF PRIVATE, AGRICULTURAL OR RESIDENTIAL LANDS; CASE
AT BAR. — There can be no dispute that the sale in 1941 by Jose Godinez of his
residential lot acquired from the Bureau of Lands as part of the Jolo townsite to Fong
Pak Luen, a Chinese citizen, was violative of Section 5, Article XIII of the 1935
Constitution which was fully discussed in Krivenko v. Register of Deeds of Manila (79
Phil. 461). Said case also detailed the evolution of the provision in the public land laws,
Act No. 2874 and Commonwealth Act No. 141.

2. ID.; ID.; ID.; A DECLARATION OF AN IMPERATIVE CONSTITUTIONAL POLICY. — The

Krivenko ruling that "under the Constitution aliens may not acquire private or
agricultural lands, including residential lands," is a declaration of an imperative
constitutional policy.

3. ID.; ID.; ID.; PRESCRIPTION; EFFECT ON THE PROHIBITED CONTRACT; CASE AT

BAR. — Prescription may never be invoked to defend that which the Constitution
prohibits. Insofar as the vendee is concerned, prescription is unavailing but neither can
the vendor or his heirs rely on an argument base on imprescriptibility because the land
sold in 1941 is now in the hands of a Filipino citizen against whom the constitutional
prescription was never intended to apply. From the fact that prescription may not be
used to defend a contract which the Constitution prohibits, it does not necessarily follow
that the appellants may be allowed to recover the property sold to an alien, in line with
the ruling of this Court in Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil.
447) and reiterated in Herrera v. Luy Kim Guan (1 SCRA 406) and Sarsosa vda. de
Barsobia v. Cuenco (113 SCRA 547). Neither can appellants find solace from Philippine
Banking Corporation v. Lui She (21 SCRA 52) which relaxed the pari delicto doctrine to
allow the heirs or successors-in-interest, in appropriate cases to recover that which
their predecessors sold to aliens.

DECISION

GUTIERREZ, JR., J.:
The plaintiffs filed this case to recover a parcel of land sold by their father, now
deceased, to Fong Pak Luen, an alien, on the ground that the sale was null and void ab
initio since it violates applicable provisions of the Constitution and the Civil Code. chanrobles virtual lawlibrary

The order of the Court of First Instance of Sulu dismissing the complaint was appealed
to the Court of Appeals but the latter court certified the appeal to us since only pure
questions of law were raised by the appellants.

The facts of the case were summarized by the Court of Appeals as follows: jgc:chanrobles.com.ph

"On September 30, 1966, the plaintiffs filed a complaint in the Court of First Instance of
Sulu alleging among others that they are the heirs of Jose Godinez who was married to
Martina Alvarez Godinez sometime in 1910; that during the marriage of their parents
the said parents acquired a parcel of land lot No. 94 of Jolo townsite with an area of
3,665 square meters as evidenced by Original Certificate of Title No. 179 (D - 155) in
the name of Jose Godinez; that their mother died sometime in 1938 leaving the
plaintiffs as their sole surviving heirs; that on November 27, 1941, without the
knowledge of the plaintiffs, the said Jose Godinez, for valuable consideration sold the
aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese citizen,
which transaction is contrary to law and in violation of the Civil Code because
the latter being an alien who is inhibited by law to purchase real property; that
Transfer Certificate Title No. 884 was then issued by the Register of Deeds to the said
defendant, which is null and void ab initio since the transaction constituted a non-
existent contract; that on January 11, 1963, said defendant Fong Pak Luen executed a
power of attorney in favor of his co-defendant Kwan Pun Ming, also an alien, who
conveyed and sold the above described parcel of land to co-defendant Trinidad S.
Navata, who is aware of and with full knowledge that Fong Pak Luen is a Chinese citizen
as well as Kwan Pun Ming, who under the law are prohibited and disqualified to acquire
real property in this jurisdiction; that defendant Fong Pak Luen has not acquired any
title or interest in said parcel of land as the purported contract of sale executed by Jose
Godinez alone was contrary to law and considered non-existent, so much so that the
alleged attorney-in-fact, defendant Kwan Pun Ming had not conveyed any title or
interest over said property and defendant Navata had not acquired anything from said
grantor and as a consequence Transfer Certificate of Title No. 1322, which was issued
by the Register of Deeds in favor of the latter is null and void ab initio; that
since one-half of the said property is conjugal property inherited by the
plaintiffs from their mother, Jose Godinez could not have legally conveyed the
entire property; that notwithstanding repeated demands on said defendant to
surrender to plaintiffs the said property she refused and still refuses to do so to the
great damage and prejudice of the plaintiffs; and that they were constrained to engage
the services of counsel in the sum of P2,000.00. The plaintiffs thus pray that they be
adjudged as the owners of the parcel of land in question and that Transfer Certificate of
Title RT-90 (T-884) issued in the name of defendant Fong Pak Luen be declared null
and void ab initio; and that the power of attorney issued in the name of Kwan Pun
Ming, as well as Transfer Certificate of Title No. 1322 issued in the name of defendant
Navata be likewise declared null and void, with costs against defendants.

"On August 18, 1966, the defendant Register of Deeds filed an answer claiming that he
was not yet the register of deeds then; that it was only the ministerial duty of his office
to issue the title in favor of the defendant Navata once he was determined the
registerability of the documents presented to his office.

"On October 20, 1966, the defendant Navata filed her answer with the affirmative
defenses and counterclaim alleging among others that the complaint does not state a
cause of action since it appears from the allegation that the property is registered in the
name of Jose Godinez so that as has sole property he may dispose of the same; that
the cause of action has been barred by the statute of limitations as the alleged
document of sale executed by Jose Godinez on November 27, 1941, conveyed the
property to defendant Fong Pak Luen as a result of which a title was issued to said
defendant; that under Article 1144 (1) of the Civil Code, an action based upon a written
contract must be brought within 10 years from the time the right of action accrues; that
the right of action accrued on November 27, 1941 but the complaint was filed only on
September 30, 1966, beyond the 10-year period provided for by law; that the torrens
title in the name of defendant Navata is indefeasible who acquired the property
from defendant Fong Pak Luen who had been in possession of the property since 1941
and thereafter defendant Navata had possessed the same for the last 25 years
including the possession of Fong Pak Luen; that the complaint is intended to harass the
defendant as a civic leader and respectable member of the community as a result of
which she suffered moral damages of P100,000.00, P2,500.00 for attorney’s fees and
P500.00 expenses of litigation, hence, said defendant prays that the complaint be
dismissed and that her counterclaim be granted, with costs against the plaintiffs. On
November 24, 1967, the plaintiffs filed an answer to the affirmative defenses and
counter-claim. As the defendants Fong Pak Luen and Kwan Pun Ming are residing
outside the Philippines, the trial court upon motion issued an order of April 17, 1967,
for the service of summons on said defendants by publication. No answer has been filed
by said defendants.

"On December 2, 1967, the court issued an order as follows: jgc:chanrobles.com.ph

"‘Both parties having agreed to the suggestion of the Court that they submit their
supplemental pleadings to support both motion and opposition and after submittal of
the same the said motion to dismiss which is an affirmative defense alleged in the
complaint is deemed submitted. Failure of both parties or either party to submit their
supplemental pleadings on or about December 9, the Court will resolve the case.’

"On November 29, 1968, the trial court issued an order dismissing the complaint
without pronouncement as to costs. (Record on Appeal, pp. 31-37). A motion for
reconsideration of this order was filed by the plaintiffs on December 12, 1968, which
was denied by the trial court in an order of July 11, 1969, (Rec. on Appeal, pp. 38, 43,
45, 47). The plaintiffs now interpose this appeal with the following assignments of
errors:chanrob1es virtual 1aw library

I. The trial court erred in dismissing plaintiffs-appellants’ complaint on the ground of

prescription of action, applying Art. 1144 (1) New Civil Code on the basis of defendant
Trinidad S. Navata’s affirmative defense of prescription in her answer treated as a
motion to dismiss.

II. The trial court erred in denying plaintiffs-appellants’ motion for reconsideration of
the order of dismissal.

III. The trial court erred in not ordering this case to be tried on the merits." cralaw virtua1aw library

The appellants contend that the lower court erred in dismissing the complaint on the
ground that their cause of action has prescribed. While the issue raised appears to be
only the applicability of the law governing prescription, the real question before us is
whether or not the heirs of a person who sold a parcel of land to an alien in
violation of a constitutional prohibition may recover the property if it had, in
the meantime, been conveyed to a Filipino citizen qualified to own and possess
it.

The question is not a novel one. Judicial precedents indicate fairly clearly how the
question should be resolved.

There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot
acquired from the Bureau of Lands as part of the Jolo townsite to Fong Pak Luen, a
Chinese citizen residing in Hongkong, was violative of Section 5, Article XIII of the 1935
Constitution which provided: chanrob1es virtual 1aw library

Sec. 5. Save in cases of hereditary succession, no private agricultural land will be

transferred or assigned except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the Philippines.

The meaning of the above provision was fully discussed in Krivenko v. Register of
Deeds of Manila (79 Phil. 461) which also detailed the evolution of the provision in the
public land laws, Act No. 2874 and Commonwealth Act No. 141. The Krivenko ruling
that "under the Constitution aliens may not acquire private or agricultural lands,
including residential lands" is a declaration of an imperative constitutional policy.
Consequently, prescription may never be invoked to defend that which the
Constitution prohibits. However, we see no necessity from the facts of this case to
pass upon the nature of the contract of sale executed by Jose Godinez and Fong Pak
Luen - whether void ab initio, illegal per se, or merely prohibited. * It is enough to
stress that insofar as the vendee is concerned, prescription is unavailing. But neither
can the vendor or his heirs rely on an argument based on imprescriptibility
because the land sold in 1941 is now in the hands of a Filipino citizen against
whom the constitutional prescription was never intended to apply. The lower
court erred in treating the case as one involving simply the application of the statute of
limitations.
chanrobles law library : red

From the fact that prescription may not be used to defend a contract which the
Constitution prohibits, it does not necessarily follow that the appellants may be allowed
to recover the property sold to an alien. As earlier mentioned, Fong Pak Luen, the
disqualified alien vendee later sold the same property to Trinidad S. Navata, a Filipino
citizen qualified to acquire real property.

In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the alien
vendee later sold the property to a Filipino corporation, this Court, in affirming a
judgment dismissing the complaint to rescind the sale of real property to the defendant
Li Seng Giap on January 22, 1940, on the ground that the vendee was an alien and
under the Constitution incapable to own and hold title to lands, held: jgc:chanrobles.com.ph

"In Caoile v. Yu Chiao, 49 Off. Gaz., 4321; Talento v. Makiki, 49 Off. Gaz., 4331;
Bautista v. Uy 49 Off. Gaz., 4336; Rellosa v. Gaw Chee, 49 Off. Gaz., 4345 and
Mercado v. Go Bio, 49 Off. Gaz., 5360, the majority of this Court has ruled that in sales
of real estate to aliens incapable of holding title thereto by virtue of the provisions of
the Constitution (Section 5, Article XIII; Krivenko v. Register of Deeds, 44 Off. Gaz.,
471) both the vendor and the vendee are deemed to have committed the
constitutional violation and being thus in pari delicto the courts will not afford
protection to either party. (Article 1305, old Civil Code; Article 1411, new Civil Code)
From this ruling three Justices dissented. (Mr. Justice Pablo, Mr. Justice Alex. Reyes and
the writer. See Caoile v. Yu Chiao, Talento v. Makiki, Bautista v. Uy, Rellosa v. Gaw
Chee and Mercado v. Go Bio, supra.

"The action is not of rescission because it is not postulated upon any of the grounds
provided for in Article 1291 of the old Civil Code and because the action of rescission
involves lesion or damage and seeks to repair it. It is an action for annulment under
Chapter VI, Title II, Book II, on nullity of contracts, based on a defect in the contract
which invalidates it independently of such lesion or damages. (Manresa, Commentarios
al Codigo Civil Español, Vol. VIII, p. 698, 4th ed.) It is very likely that the majority of
this Court proceeded upon that theory when it applied the in pari delicto rule referred to
above.

"In the United States the rule is that in a sale of real estate to an alien disqualified to
hold title thereto the vendor divests himself of the title to such real estate and has no
recourse against the vendee despite the latter’s disability on account of alienage to hold
title to such real estate and the vendee may hold it against the whole world except as
against the State. It is only the State that is entitled by proceedings in the nature of
office found to have a forfeiture or escheat declared against the vendee who is
incapable of holding title to the real estate sold and conveyed to him, (Abrams v. State,
88 Pac. 327; Craig v. Leslie Et. Al., 4 Law, Ed. 460; 3 Wheat, 563, 589-590; Cross v.
Del Valle, 1 Wall, [U.S.] 513; 17 Law. Ed., 515; Governeur v. Robertson, 11 Wheat,
332, 6 Law. Ed., 488.)

"However, if the State does not commence such proceedings and in the
meantime the alien becomes naturalized citizen, the State is deemed to have
waived its right to escheat the real property and the title of the alien thereto
becomes lawful and valid as of the date of its conveyance or transfer to him.
(Osterman v. Baldwin, 6 Wall, 116, 18 Law. ed. 730; Manuel v. Wulff, 152 U.S. 505, 38
Law. ed. 532; Pembroke v. Houston, 79, SW 470; Fioerella v. Jones, 259 SW 782. The
rule in the United States that in a sale of real estate to an alien disqualified to hold title
thereto, the vendor divests himself of the title to such real estate and is not permitted
to sue for the annulment of his contract, is also the rule under the Civil Code. . . .
Article 1302 of the old Civil Code provides: . . . Persons sui juris cannot, however, avail
themselves of the incapacity of those with whom they contracted; . . .’

x          x           x

". . . (I)f the ban on aliens from acquiring not only agricultural but also urban lands, as
construed by this Court in the Krivenko case, is to preserve the nation’s land for future
generations of Filipinos, that aim or purpose would not be thwarted but achieved by
making lawful the acquisition of real estate by aliens who became Filipino citizens by
naturalization. The title to the parcel of land of the vendee, a naturalized Filipino citizen,
being valid that of the domestic corporation to which the parcel of land has been
transferred, must also be valid, 96.67 per cent of its capital stock being owned by
Filipinos." cralaw virtua1aw library

Herrera v. Luy Kim Guan (1 SCRA 406) reiterated the above ruling by declaring that
where land is sold to a Chinese citizen, who later sold it to a Filipino, the sale to the
latter cannot be impugned.

The appellants cannot find solace from Philippine Banking Corporation v. Lui She (21
SCRA 52) which relaxed the pari delicto doctrine to allow the heirs or successors-in-
interest, in appropriate cases, to recover that which their predecessors sold to aliens. cralawnad

Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion
to pass upon a factual situation substantially similar to the one in the instant case. We
ruled:jgc:chanrobles.com.ph

"But the factual set-up has changed. The litigated property is now in the hands of a
naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a
naturalized citizen, was constitutionally qualified to own the subject property. There
would be no more public policy to be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified person. Applying by analogy the
ruling of this Court in Vasquez v. Giap & Sons: (96 Phil. 447 [1955]).

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

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

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

"Respondent, therefore, must be declared to be the rightful owner of the property." cralaw virtua1aw library

In the light of the above considerations, we find the second and third assignments of
errors without merit. Respondent Navata, the titled owner of the property is declared
the rightful owner.

WHEREFORE, the instant appeal is hereby denied. The orders dismissing the complaint
and denying the motion for reconsideration are affirmed.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.

Endnotes:

* Under the facts in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547), this Court
stated that" (t)here should be no question that the sale of the land in question in 1936
by Epifania Sarsosa to Ong King Po was non-existent and void from the beginning (Art.
1409 [7], Civil Code) because it was a contract executed against the mandatory
provision of the 1935 Constitution, which is an expression of public policy to conserve
lands for the Filipinos." In Philippine Banking Corporation v. Lui She (21 SCRA 52) the
Court, however, applied Article 1416 of the Civil Code, which refers to agreements not
illegal per se but merely prohibited, to justify the exception to the rule on pari delicto.

FIRST DIVISION

G.R. No. 159310               February 24, 2009

CAMILO F. BORROMEO, Petitioner,
vs.
ANTONIETTA O. DESCALLAR, Respondent.

DECISION

PUNO, C.J.:

What are the rights of an alien (and his successor-in-interest) who acquired real properties in the
country as against his former Filipina girlfriend in whose sole name the properties were registered
under the Torrens system?

The facts are as follows:

Wilhelm Jambrich, an Austrian, arrived in the Philippines in 1983 after he was assigned by his
employer, Simmering-Graz Panker A.G., an Austrian company, to work at a project in Mindoro. In
1984, he transferred to Cebu and worked at the Naga II Project of the National Power Corporation.
There, he met respondent Antonietta Opalla-Descallar, a separated mother of two boys who was
working as a waitress at St. Moritz Hotel. Jambrich befriended respondent and asked her to tutor
him in English. In dire need of additional income to support her children, respondent agreed. The
tutorials were held in Antonietta’s residence at a squatters’ area in Gorordo Avenue.
Jambrich and respondent fell in love and decided to live together in a rented house in Hernan
Cortes, Mandaue City. Later, they transferred to their own house and lots at Agro-Macro
Subdivision, Cabancalan, Mandaue City. In the Contracts to Sell dated November 18, 1985 1 and
March 10, 19862 covering the properties, Jambrich and respondent were referred to as the buyers. A
Deed of Absolute Sale dated November 16, 1987 3 was likewise issued in their favor. However, when
the Deed of Absolute Sale was presented for registration before the Register of Deeds, registration
was refused on the ground that Jambrich was an alien and could not acquire alienable lands of the
public domain. Consequently, Jambrich’s name was erased from the document. But it could be
noted that his signature remained on the left hand margin of page 1, beside respondent’s signature
as buyer on page 3, and at the bottom of page 4 which is the last page. Transfer Certificate of Title
(TCT) Nos. 24790, 24791 and 24792 over the properties were issued in respondent’s name alone.

Jambrich also formally adopted respondent’s two sons in Sp. Proc. No. 39-MAN, 4 and per Decision
of the Regional Trial Court of Mandaue City dated May 5, 1988. 5

However, the idyll lasted only until April 1991. By then, respondent found a new boyfriend while
Jambrich began to live with another woman in Danao City. Jambrich supported respondent’s sons
for only two months after the break up.

Jambrich met petitioner Camilo F. Borromeo sometime in 1986. Petitioner was engaged in the real
estate business. He also built and repaired speedboats as a hobby. In 1989, Jambrich purchased an
engine and some accessories for his boat from petitioner, for which he became indebted to the latter
for about ₱150,000.00. To pay for his debt, he sold his rights and interests in the Agro-Macro
properties to petitioner for ₱250,000, as evidenced by a "Deed of Absolute Sale/Assignment." 6 On
July 26, 1991, when petitioner sought to register the deed of assignment, he discovered that titles to
the three lots have been transferred in the name of respondent, and that the subject property has
already been mortgaged.

On August 2, 1991, petitioner filed a complaint against respondent for recovery of real property
before the Regional Trial Court of Mandaue City. Petitioner alleged that the Contracts to Sell dated
November 18, 1985 and March 10, 1986 and the Deed of Absolute Sale dated November 16, 1987
over the properties which identified both Jambrich and respondent as buyers do not reflect the true
agreement of the parties since respondent did not pay a single centavo of the purchase price and
was not in fact a buyer; that it was Jambrich alone who paid for the properties using his exclusive
funds; that Jambrich was the real and absolute owner of the properties; and, that petitioner acquired
absolute ownership by virtue of the Deed of Absolute Sale/Assignment dated July 11, 1991 which
Jambrich executed in his favor.

In her Answer, respondent belied the allegation that she did not pay a single centavo of the
purchase price. On the contrary, she claimed that she "solely and exclusively used her own personal
funds to defray and pay for the purchase price of the subject lots in question," and that Jambrich,
being an alien, was prohibited to acquire or own real property in the Philippines.

At the trial, respondent presented evidence showing her alleged financial capacity to buy the
disputed property with money from a supposed copra business. Petitioner, in turn, presented
Jambrich as his witness and documentary evidence showing the substantial salaries which Jambrich
received while still employed by the Austrian company, Simmering-Graz Panker A.G.

In its decision, the court a quo found—

Evidence on hand clearly show that at the time of the purchase and acquisition of [the] properties
under litigation that Wilhelm Jambrich was still working and earning much. This fact of Jambrich
earning much is not only supported by documentary evidence but also by the admission made by
the defendant Antoniet[t]a Opalla. So that, Jambrich’s financial capacity to acquire and purchase the
properties . . . is not disputed. 7

xxx

On the other hand, evidence . . . clearly show that before defendant met Jambrich sometime in the
latter part of 1984, she was only working as a waitress at the St. Moritz Hotel with an income of
₱1,000.00 a month and was . . . renting and living only in . . . [a] room at . . . [a] squatter area at
Gorordo Ave., Cebu City; that Jambrich took pity of her and the situation of her children that he
offered her a better life which she readily accepted. In fact, this miserable financial situation of hers
and her two children . . . are all stated and reflected in the Child Study Report dated April 20, 1983
(Exhs. "G" and "G-1") which facts she supplied to the Social Worker who prepared the same when
she was personally interviewed by her in connection with the adoption of her two children by Wilhelm
Jambrich. So that, if such facts were not true because these are now denied by her . . . and if it was
also true that during this time she was already earning as much as ₱8,000.00 to ₱9,000.00 as profit
per month from her copra business, it would be highly unbelievable and impossible for her to be
living only in such a miserable condition since it is the observation of this Court that she is not only
an extravagant but also an expensive person and not thrifty as she wanted to impress this Court in
order to have a big saving as clearly shown by her actuation when she was already cohabiting and
living with Jambrich that according to her . . . the allowance given . . . by him in the amount of
$500.00 a month is not enough to maintain the education and maintenance of her children. 8

This being the case, it is highly improbable and impossible that she could acquire the properties
under litigation or could contribute any amount for their acquisition which according to her is worth
more than ₱700,000.00 when while she was working as [a] waitress at St. Moritz Hotel earning
₱1,000.00 a month as salary and tips of more or less ₱2,000.00 she could not even provide [for] the
daily needs of her family so much so that it is safe to conclude that she was really in financial
distress when she met and accepted the offer of Jambrich to come and live with him because that
was a big financial opportunity for her and her children who were already abandoned by her
husband.9

xxx

The only probable and possible reason why her name appeared and was included in [the contracts
to sell dated November 18, 1985 and March 10, 1986 and finally, the deed of absolute sale dated
November 16, 1987] as buyer is because as observed by the Court, she being a scheming and
exploitive woman, she has taken advantage of the goodness of Jambrich who at that time was still
bewitched by her beauty, sweetness, and good attitude shown by her to him since he could still very
well provide for everything she needs, he being earning (sic) much yet at that time. In fact, as
observed by this Court, the acquisition of these properties under litigation was at the time when their
relationship was still going smoothly and harmoniously. 10 [Emphasis supplied.]

The dispositive portion of the Decision states:

WHEREFORE, . . . Decision is hereby rendered in favor of the plaintiff and against the defendant
Antoniet[t]a Opalla by:

1) Declaring plaintiff as the owner in fee simple over the residential house of strong materials
and three parcels of land designated as Lot Nos. 1, 3 and 5 which are covered by TCT Nos.
24790, 24791 and 24792 issued by the Register of Deeds of Mandaue City;
 2) Declaring as null and void TCT Nos. 24790, 24791 and 24792 issued in the name of
defendant Antoniet[t]a Descallar by the Register of Deeds of Mandaue City;

3) Ordering the Register of Deeds of Mandaue City to cancel TCT Nos. 24790, 24791 and
24792 in the name of defendant Antoniet[t]a Descallar and to issue new ones in the name of
plaintiff Camilo F. Borromeo;

4) Declaring the contracts now marked as Exhibits "I," "K" and "L" as avoided insofar as they
appear to convey rights and interests over the properties in question to the defendant
Antoniet[t]a Descallar;

5) Ordering the defendant to pay plaintiff attorney’s fees in the amount of ₱25,000.00 and
litigation expenses in the amount of ₱10,000.00; and,

6) To pay the costs.11

Respondent appealed to the Court of Appeals. In a Decision dated April 10, 2002, 12 the appellate
court reversed the decision of the trial court. In ruling for the respondent, the Court of Appeals held:

We disagree with the lower court’s conclusion. The circumstances involved in the case cited by the
lower court and similar cases decided on by the Supreme Court which upheld the validity of the title
of the subsequent Filipino purchasers are absent in the case at bar. It should be noted that in said
cases, the title to the subject property has been issued in the name of the alien transferee (Godinez
et al., vs. Fong Pak Luen et al., 120 SCRA 223 citing Krivenko vs. Register of Deeds of Manila, 79
Phils. 461; United Church Board for World Ministries vs. Sebastian, 159 SCRA 446, citing the case
of Sarsosa Vda. De Barsobia vs. Cuenco, 113 SCRA 547; Tejido vs. Zamacoma, 138 SCRA 78). In
the case at bar, the title of the subject property is not in the name of Jambrich but in the name of
defendant-appellant. Thus, Jambrich could not have transferred a property he has no title thereto. 13

Petitioner’s motion for reconsideration was denied.

Hence, this petition for review.

Petitioner assigns the following errors:

I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING

RESPONDENT’S JUDICIAL ADMISSION AND OTHER OVERWHELMING EVIDENCE
ESTABLISHING JAMBRICH’S PARTICIPATION, INTEREST AND OWNERSHIP OF THE
PROPERTIES IN QUESTION AS FOUND BY THE HONORABLE TRIAL COURT.

II. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT JAMBRICH
HAS NO TITLE TO THE PROPERTIES IN QUESTION AND MAY NOT THEREFORE TRANSFER
AND ASSIGN ANY RIGHTS AND INTERESTS IN FAVOR OF PETITIONER.

III. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE WELL-
REASONED DECISION OF THE TRIAL COURT AND IN IMPOSING DOUBLE COSTS AGAINST
HEREIN PETITIONER (THEN, PLAINTIFF-APPELLEE).14

First, who purchased the subject properties?

The evidence clearly shows, as pointed out by the trial court, who between respondent and Jambrich
possesses the financial capacity to acquire the properties in dispute. At the time of the acquisition of
the properties in 1985 to 1986, Jambrich was gainfully employed at Simmering-Graz Panker A.G.,
an Austrian company. He was earning an estimated monthly salary of ₱50,000.00. Then, Jambrich
was assigned to Syria for almost one year where his monthly salary was approximately ₱90,000.00.

On the other hand, respondent was employed as a waitress from 1984 to 1985 with a monthly salary
of not more than ₱1,000.00. In 1986, when the parcels of land were acquired, she was unemployed,
as admitted by her during the pre-trial conference. Her allegations of income from a copra business
were unsubstantiated. The supposed copra business was actually the business of her mother and
their family, with ten siblings. She has no license to sell copra, and had not filed any income tax
return. All the motorized bancas of her mother were lost to fire, and the last one left standing was
already scrap. Further, the Child Study Report 15 submitted by the Department of Social Welfare and
Development (DSWD) in the adoption proceedings of respondent’s two sons by Jambrich disclosed
that:

Antonietta tried all types of job to support the children until she was accepted as a waitress at St.
Moritz Restaurant in 1984. At first she had no problem with money because most of the customers
of St. Moritz are (sic) foreigners and they gave good tips but towards the end of 1984 there were no
more foreigners coming because of the situation in the Philippines at that time. Her financial problem
started then. She was even renting a small room in a squatters area in Gorordo Ave., Cebu City. It
was during her time of great financial distress that she met Wilhelm Jambrich who later offered her a
decent place for herself and her children. 16

The DSWD Home Study Report17 further disclosed that:

[Jambrich] was then at the Restaurant of St. Moritz when he saw Antonietta Descallar, one of the
waitresses of the said Restaurants. He made friends with the girl and asked her to tutor him in [the]
English language. Antonietta accepted the offer because she was in need of additional income to
support [her] 2 young children who were abandoned by their father. Their session was agreed to be
scheduled every afternoon at the residence of Antonietta in the squatters area in Gorordo Avenue,
Cebu City. The Austrian was observing the situation of the family particularly the children who were
malnourished. After a few months sessions, Mr. Jambrich offered to transfer the family into a decent
place. He told Antonietta that the place is not good for the children. Antonietta who was miserable
and financially distressed at that time accepted the offer for the sake of the children. 18

Further, the following additional pieces of evidence point to Jambrich as the source of fund used to
purchase the three parcels of land, and to construct the house thereon:

(1) Respondent Descallar herself affirmed under oath, during her re-direct examination and
during the proceedings for the adoption of her minor children, that Jambrich was the owner
of the properties in question, but that his name was deleted in the Deed of Absolute Sale
because of legal constraints. Nonetheless, his signature remained in the deed of sale, where
he signed as buyer.

(2) The money used to pay the subject parcels of land in installments was in postdated
checks issued by Jambrich. Respondent has never opened any account with any bank.
Receipts of the installment payments were also in the name of Jambrich and respondent.

(3) In 1986-1987, respondent lived in Syria with Jambrich and her two children for ten
months, where she was completely under the support of Jambrich.
 (4) Jambrich executed a Last Will and Testament, where he, as owner, bequeathed the
subject properties to respondent.

Thus, Jambrich has all authority to transfer all his rights, interests and participation over the subject
properties to petitioner by virtue of the Deed of Assignment he executed on July 11, 1991.

Well-settled is the rule that this Court is not a trier of facts. The findings of fact of the trial court are
accorded great weight and respect, if not finality by this Court, subject to a number of exceptions. In
the instant case, we find no reason to disturb the factual findings of the trial court. Even the appellate
court did not controvert the factual findings of the trial court. They differed only in their conclusions of
law.

Further, the fact that the disputed properties were acquired during the couple’s cohabitation also
does not help respondent. The rule that co-ownership applies to a man and a woman living
exclusively with each other as husband and wife without the benefit of marriage, but are otherwise
capacitated to marry each other, does not apply.19 In the instant case, respondent was still legally
married to another when she and Jambrich lived together. In such an adulterous relationship, no co-
ownership exists between the parties. It is necessary for each of the partners to prove his or her
actual contribution to the acquisition of property in order to be able to lay claim to any portion of it.
Presumptions of co-ownership and equal contribution do not apply. 20

Second, we dispose of the issue of registration of the properties in the name of respondent alone.
Having found that the true buyer of the disputed house and lots was the Austrian Wilhelm Jambrich,
what now is the effect of registration of the properties in the name of respondent?

It is settled that registration is not a mode of acquiring ownership. 21 It is only a means of confirming
the fact of its existence with notice to the world at large. 22 Certificates of title are not a source of right.
The mere possession of a title does not make one the true owner of the property. Thus, the mere
fact that respondent has the titles of the disputed properties in her name does not necessarily,
conclusively and absolutely make her the owner. The rule on indefeasibility of title likewise does not
apply to respondent. A certificate of title implies that the title is quiet, 23 and that it is perfect, absolute
and indefeasible.24 However, there are well-defined exceptions to this rule, as when the transferee is
not a holder in good faith and did not acquire the subject properties for a valuable
consideration.25 This is the situation in the instant case. Respondent did not contribute a
single centavo in the acquisition of the properties. She had no income of her own at that
time, nor did she have any savings. She and her two sons were then fully supported by
Jambrich.

Respondent argued that aliens are prohibited from acquiring private land. This is embodied in
Section 7, Article XII of the 1987 Constitution,26 which is basically a reproduction of Section 5, Article
XIII of the 1935 Constitution,27 and Section 14, Article XIV of the 1973 Constitution. 28 The capacity to
acquire private land is dependent on the capacity "to acquire or hold lands of the public domain."
Private land may be transferred only to individuals or entities "qualified to acquire or hold lands of the
public domain." Only Filipino citizens or corporations at least 60% of the capital of which is owned by
Filipinos are qualified to acquire or hold lands of the public domain. Thus, as the rule now stands,
the fundamental law explicitly prohibits non-Filipinos from acquiring or holding title to private lands,
except only by way of legal succession or if the acquisition was made by a former natural-born
citizen.29

Therefore, in the instant case, the transfer of land from Agro-Macro Development Corporation to
Jambrich, who is an Austrian, would have been declared invalid if challenged, had not Jambrich
conveyed the properties to petitioner who is a Filipino citizen. In United Church Board for World
Ministries v. Sebastian,30 the Court reiterated the consistent ruling in a number of cases31 that
if land is invalidly transferred to an alien who subsequently becomes a Filipino citizen or transfers it
to a Filipino, the flaw in the original transaction is considered cured and the title of the
transferee is rendered valid. Applying United Church Board for World Ministries, the trial court
ruled in favor of petitioner, viz.:

[W]hile the acquisition and the purchase of (sic) Wilhelm Jambrich of the properties under litigation
[were] void ab initio since [they were] contrary to the Constitution of the Philippines, he being a
foreigner, yet, the acquisition of these properties by plaintiff who is a Filipino citizen from him,
has cured the flaw in the original transaction and the title of the transferee is valid.

The trial court upheld the sale by Jambrich in favor of petitioner and ordered the cancellation of the
TCTs in the name of respondent. It declared petitioner as owner in fee simple of the residential
house of strong materials and three parcels of land designated as Lot Nos. 1, 3 and 5, and ordered
the Register of Deeds of Mandaue City to issue new certificates of title in his name. The trial court
likewise ordered respondent to pay petitioner ₱25,000 as attorney’s fees and ₱10,000 as litigation
expenses, as well as the costs of suit.

We affirm the Regional Trial Court.

The rationale behind the Court’s ruling in United Church Board for World Ministries, as reiterated in
subsequent cases,32 is this – since the ban on aliens is intended to preserve the nation’s land
for future generations of Filipinos, that aim is achieved by making lawful the acquisition of
real estate by aliens who became Filipino citizens by naturalization or those transfers made
by aliens to Filipino citizens. As the property in dispute is already in the hands of a qualified
person, a Filipino citizen, there would be no more public policy to be protected. The objective
of the constitutional provision to keep our lands in Filipino hands has been achieved.

IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of Appeals in C.A. G.R.
CV No. 42929 dated April 10, 2002 and its Resolution dated July 8, 2003 are REVERSED and SET
ASIDE. The Decision of the Regional Trial Court of Mandaue City in Civil Case No. MAN-1148 is
REINSTATED.

SO ORDERED.

REYNATO S. PUNO
Chief Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

RENATO C. CORONA TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1
 Exhibit "I," Original Records, p. 104.

2
 Exhibit "K," id. at 105.

3
 Exhibit "L," id. at 106-109.

4
 Exhibit "C," id. at 87-89.

5
 Exhibit "H," id. at 101-103.

6
 Exhibit "O," id. at 155.

7
 Decision, id. at 294.

8
 Id. at 295-296.

9
 Id. at 296.

10
 Id. at 297.

11
 Id. at 297-298.

12
 Id. at 71-83.

13
 CA rollo, pp. 225-226.

14
 Rollo, p. 15.

15
 Exhibit "G," Original Records, pp. 97-100.

16
 Id. at 100.

17
 Exhibit "F," id. at 92-96.

18
 Id. at 93.

19
 Art. 144, Civil Code; Art. 147, Family Code.
  Art. 148, Family Code; Rivera v. Heirs of Romualdo Villanueva, G.R. No. 141501, July 21,
20

2006, 496 SCRA 135.

21
 Bollozos v. Yu Tieng Su, No. L-29442, November 11, 1987, 155 SCRA 506.

22
 Id. at 517, citing Bautista v. Dy Bun Chin, CA-L-6983-R, 49 O.G. 179.

23
 Legarda and Prieto v. Saleeby, 31 Phil. 590 (1915).

24
 Government v. Avila, 38 Phil. 38 (1918).

 Ignacio v. Chua Beng, 52 Phil. 940 (1929); Acosta v. Gomez, 52 Phil. 744 (1929); Cruz v.
25

Fabie, 35 Phil. 144 (1916).

26
 SECTION 7. Save in cases of hereditary succession, no private lands shall be transferred
or conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain.

27
 SECTION 5. Save in cases of hereditary succession, no private agricultural land shall be
transferred or assigned except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the Philippines.

28
 SECTION 14. Save in cases of hereditary succession, no private land shall be transferred
or conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain.

 1987 Constitution, Art. XII, Sec. 8. Notwithstanding the provisions of Section 7 of this
29

Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be
a transferee of private lands, subject to limitations provided by law.

30
 G.R. No. L-34672, March 30, 1988, 159 SCRA 446.

 Sarsosa Vda. de Barsobia v. Cuenco, G.R. No. L-33048, April 16, 1982, 113 SCRA 547;
31

Godinez v. Pak Luen, G.R. No. L-36731, January 27, 1983, 120 SCRA 223, Vasquez v. Li
Seng Giap & Sons, 96 Phil. 447 (1955); Herrera v. Luy King Guan, G.R. No. L-17043,
January 31, 1961, 1 SCRA 406; Yap v. Maravillas, G.R. No. L-31606, March 28, 1983, 121
SCRA 244; and De Castro v. Tan, G.R. No. L-31956, April 30, 1984, 129 SCRA 85.

 Hko Ah Pao v. Ting, G.R. No. 153476, September 27, 2006, 503 SCRA 551; Muller v.
32

Muller, G.R. No. 149615, August 29, 2006, 500 SCRA 65; Lee v. Republic, G.R. No. 128195,
October 3, 2001, 366 SCRA 524.

G.R. No. 201070, August 01, 2016 - LUZ S. NICOLAS, Petitioner, v. LEONORA C.
MARIANO, Respondent.
 SECOND DIVISION

G.R. No. 201070, August 01, 2016

LUZ S. NICOLAS, Petitioner, v. LEONORA C. MARIANO, Respondent.

DECISION

DEL CASTILLO, J.:

When both parties are in pari delicto or in equal fault, none of them may
expect positive relief from the courts in the interpretation of their agreement;
instead, they shall be left as they were at the time the case was filed.

This Petition for Review on Certiorari1 assails the Court of Appeals' (CA) June 21, 2011
Decision2 and March 1, 2012 Resolution3 denying herein petitioner's Motion for Partial
Reconsideration4 in CA-G.R. CV No. 93532.

Factual Antecedents

The CA's summation of the facts is hereby adopted, thus: ChanRoblesVirtualawlibrary

The subject of the instant controversy is the one-half portion of a 155-square meter
parcel of land known as Lot 13-A, Block 40 located at 109 Kapayapaan Street, Bagong
Barrio, Caloocan City and covered by Transfer Certificate of Title No. (TCT) No. C-
44249. The parcel of land is part of the National Housing Authority's (NHA) Bagong
Barrio Project and built thereon is plaintiff-appellee Leonora Mariano's 5 five-unit
apartment which she leases out to tenants.

hi 1972, Leonora Mariano filed with the NHA Application No. 99-02-0323 for a land
grant under the Bagong Barrio Project. In 1978, the NHA approved the Application,
thus, her institution as grantee of the foregoing parcel of land. The grant, however, is
subject to a mortgage inscribed as Entry No. 98464/C-39393 on the dorsal side of TCT
No. C-44249, viz[.]:ChanRoblesVirtualawlibrary

— NATIONAL HOUSING AUTHORITY —

TO GUARANTEE A PRINCIPAL XXX (illegible) IN THE SUM OF P36,036.10 PAYABLE

WITHIN TWENTY FIVE (25) YEARS WITH ANNUAL INTEREST OF TWELVE (12%)
PERCENT UNTIL FULLY PAID IN THREE HUNDRED (300) EQUAL MONTHLY
INSTALLMENTS.xxx
DATE OF INSTRUMENT - Feb. 12, 1981

DATE OF INSCRIPTION - May 8, 1981

and further subject to a proviso, proscribing any transfer or encumbrance of said parcel
of land, viz[.]:
ChanRoblesVirtualawlibrary

"EXCEPT BY HEREDITARY SUCCESSION, THE HEREIN LOT OR ANY PART THEREOF

CANNOT BE xxx (illegible), TRANSFERRED, OR ENCUMBERED WITHIN FIVE (5) YEARS
FROM THE DATE OF RELEASE OF THE MORTGAGE INSCRIBED AT THE BACK HEREOF
WITHOUT PRIOR WRITTEN CONSENT AND AUTHORITY FROM THE NATIONAL HOUSING
AUTHORITY."

Accordingly, the NHA withheld conveyance of the original TCT No. C-44249 to

Leonora Mariano, furnishing her instead a photocopy thereof as the issuance
of the original TCT in her name is conditioned upon her full payment of the
mortgage loan. Leonora Mariano's last payment was in February 1999. The
NHA's Statement of Account indicates that as of September 30, 2004, Leonora
Mariano's outstanding obligation amounted to P37,679.70. Said obligation remained
unpaid.

On January 28, 1998, Leonora Mariano obtained a P100,000.00 loan from defendant-
appellant Luz Nicolas6 with a payment term often (10) months at the monthly interest
rate of 7%. To secure the loan, she executed a Mortgage Contract over the subject
property, comprising the one-half portion of the parcel of land.

On February 22, 1999, Leonora Mariano, having defaulted in the payment of her
obligation, executed in favor of Luz Nicolas a second mortgage deed denominated
as Sanglaan ng Lupa at Bahay, this time mortgaging the subject property and the
improvements thereon for a consideration of P552,000.00 inclusive of the original loan
of P100,000.00. The Sanglaan ng Lupa at Bahay provides for a payment term of one
(1) year and contains the following stipulations:
ChanRoblesVirtualawlibrary

xxx         xxx         xxx

1. Na kung sakali at mabayaran ng UNANG PAMG ang IKALAWANG PANIG o ang kahalili
nito ang nabanggit na pagkakautang na halagang Limang Daan Limamput Dalawang
Libong Piso (P552,000.00), salaping Pilipino, kasama ang interes o tubo, sa loob ng
taning na panahon, ay mawalan ng bisa at saysay ang SANGLAANG ito;

2. Na kapag hindi nabayaran ng UNANG PANIG sa IKALAWANG PANIG ang buong

halagang pagkakautang na nabanggit sa itaas, ay ituturing ng ma[g]kabilang panig na
ang lupa at bahay na nakasangla ay nabili at pagmamay-ari na ng IKALAWANG PANIG
at sumasang-ayon ang UNANG PANIG na magsagawa ng kaukulang Kasulatan ng
Bilihan na wala nang karagdagang bayad o halagang ibinibigay sa nagsangla.

xxx         xxx         xxx

On June 7, 2000, Leonora Mariano, similarly defaulting on the second obligation,
executed a deed of Absolute Sale of Real Property, conveying to Luz Nicolas the
ownership of the subject property and the improvements thereon for a purchase price
of P600,000.00. A document denominated Pagtanggap ng Kabuang Halaga, executed
before Punong Barangay Crispin C. Peña, Sr. attested to the full payment of the
P600,000.00 to Leonora Mariano. It appears that from June 1999, the tenants of
Leonora Mariano's five-unit apartment have been remitting monthly rentals to Luz
Nicolas in the amount of P2,000.00, or P10,000.00 in the aggregate. From said period
until June 2004, Luz Nicolas' rental collection amounted to P600,000.00. 7 (Emphasis in
the original)

Ruling of the Regional Trial Court

On July 8, 2004, Leonora C. Mariano (Mariano) sued Luz S. Nicolas (Nicolas) before the
Regional Trial Court of Caloocan City (RTC). In her Amended Complaint8 for
"Specific Performance with Damages and with Prayer for the Issuance of a
Temporary Restraining Order and thereafter a Permanent Mandatory
Injunction" before RTC Branch 121, Mariano sought to be released from the second
mortgage agreement and stop Nicolas from further collecting upon her credit through
the rentals from her apartments, claiming that she has fully paid her debt. In addition,
she prayed for other actual damages, moral damages, attorney's fees, and injunctive
relief.

In her Answer,9 Nicolas denied that she collected rentals from Mariano's apartments;
that Mariano's debt remained unpaid; that the subject property and the improvements
thereon were later sold to her via a deed of absolute sale executed by Mariano which,
however, did not bear the written consent of the latter's husband; and that as a result
of the sale, she obtained the right to collect the rentals from the apartment tenants.
Nicolas thus prayed that Mariano be ordered to surrender the title to the subject
property to her, and to pay her moral and exemplary damages and costs.

After trial, the trial court issued its Decision 10 in Civil Case No. C-20937 dated August
26, 2009, decreeing as follows: ChanRoblesVirtualawlibrary

The Court is inclined to believe that what had been entered into by and between the
parties was a mere contract of mortgage of real property and not a sale of real
property.

The Court could not uphold the validity of the Deed of Absolute Sale of Real Property
dated June 7, 2000 because it is tainted with flaws and defects. There is no evidence
that the parties have given their consent thereto. A careful scrutiny of the document
will readily show that at the time of the execution thereof there was no consideration
for the sale of the property. The alleged vendor, plaintiff herein, made it appear that
she received the sum of Php600,000.00 in foil and in her complete satisfaction from the
alleged vendee, herein defendant. The lack of consideration was likewise bolstered by
the defendant's production of the handwritten memorandum or note of the various
amounts allegedly received by the aforesaid defendant from the plaintiff on different
occasions. It is important to stress, however, that even admitting arguendo that several
amounts were received by the plaintiff from the defendant, there has not been any
indication that the same were intended as consideration for the sale of the property in
question. xxx It has been observed also that the alleged payments occurred long after
the execution of the Deed of Sale, or a span of four (4) months to be more exact No
less than the barangay captain had categorically declared that he did not see that the
defendant even handed over the amount of Php600,000.00 to the plaintiff. Moreover, a
scrutiny of the aforesaid fictitious Deed of Absolute Sale of Real Property will readily
show that it did not even specifically described [sic] the subject-matter of the alleged
sale.
There are two sets of mortgage contracts executed by the parties herein. One in the
amount of Php100,000.00 with an interest of 7% payable in ten (10) month period and
the other one in a jacked up price of Php552,000.00 payable within a period of one (1)
year from its execution. The plaintiffs contention that the unpaid obligation in the
amount of Php100,000.00 has already been consolidated to the jacked up amount of
Php552,000.00 is tenable. Anent the claim of the defendant that the plaintiff
never paid her, such alleged failure however could not be attributed to the
fault of the plaintiff considering that the latter had been tendering her
payments not only once but for several times and it was the defendant who refused to
accept the payments for various reasons. It is crystal clear that the defendant's refusal
to accept the payments which were tendered by the plaintiff was nothing but a
malicious scheme devised by the defendant to make the plaintiffs obligation ballooned
[sic] to Php552,000.00, which would make it more difficult for the plaintiff to pay the
increased amount of Php552,000.00 in lump sum. Hie actuations displayed by the
defendant is indeed a downright manifestation of bad faith on her part in her desire to
own the property belonging to herein plaintiff, which is in brazen violation of Article 19
of the Civil Code, which provides among others that 'Every person must in the exercise
of his right and in the performance of his duties act with justice, give everyone his due
and observe honesty and good faith.' Be that as it may, the plaintiff, despite her
vigorous protestation to the jacked up amount of Php552,000.00 had agreed to sign the
second mortgage denominated as 'Sanglaan Ng Bahay At Lupa' payable within a period
of one (1) year. Apparently, the defendant's consuming aspiration to push the plaintiff
against the wall, had even accentuated when she demanded payment of the
aforestated sum from the herein plaintiff even before its maturity.

It is important to stress however, that in plaintiffs sincere desire to settle her

obligation, upon request of the defendant, had even executed a Special Power of
Attorney in favor of the latter, authorizing the aforesaid defendant to collect the rentals
from the five-door apartment belonging to the plaintiff, which commenced from June
1999 up to June 2004. Although the defendant assured the plaintiff that the payments
by way of rentals would be applied to the indebtedness of the plaintiff, such verbal
agreement was never reduced in writing in view of the trust and confidence reposed by
the plaintiff upon the defendant.

In sum, the defendant was able to collect the total amount of Php612,000.00 from the
tenants of the plaintiff, which evidently tremendously exceeded the amount of the
alleged indebtedness of the plaintiff to the defendant in the increased amount of
Php552,000.00.

xxx         xxx         xxx

There is no doubt that the plaintiff has suffered mental anguish and injury due to the
wrongful act done by the defendant against the plaintiff. Hence, the latter is entitled to
an award of moral damages inasmuch as the sufferings and injuries suffered by the
plaintiff are the proximate result of the defendant's wrongful act or omission (Art.
2217, Civil Code of the Philippines). However, the amount of moral damages suffered
by the plaintiff in the amount of Php400,000.00 is unconscionable which must have to
be reduced by the court.
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff
and against the defendant by:

1. Ordering the cancellation of the two (2) mortgages denominated as

Mortgage Contract and the Sanglaan Ng Lupa At Bahay, thus releasing the
plaintiff from her obligation relative thereto;

2. Ordering the defendant, to stop collecting further monthly rentals on the

five-door apartment belonging to the plaintiff from the tenants of the
latter; and,

3. To pay moral damages in the amount of Php100,000.00, and,

4. To pay the costs of suit.

SO ORDERED.11 chanroblesvirtuallawlibrary

Ruling of the Court of Appeals

Nicolas filed an appeal before the CA, docketed as CA-G.R. CV No. 93532. In its
assailed June 21, 2011 Decision, however, the CA ruled against Nicolas, stating thus: ChanRoblesVirtualawlibrary

Aggrieved, Luz Nicolas interposed this appeal, raising the following assignment of
errors:ChanRoblesVirtualawlibrary

THE TRIAL COURT ERRED IN DECLARING THE DEED OF SALE AS NULL AND VOID FOR
LACK OF CONSIDERATION;

II

THE TRIAL COURT ERRED IN RELEASING THE APPELLEE FROM HER OBLIGATION TO
THE APPELLANT AND CANCELING THE TWO MORTGAGES; [and]

III

THE TRIAL COURT ERRED IN AWARDING THE APPELLEE MORAL DAMAGES AND COST
OF SUIT.
The pivotal issue in this appeal is whether xxx the RTC committed reversible error in
(1) declaring the Absolute Sale of Real Property invalid, (2) cancelling the Mortgage
Contract and Sanglaan ng Lupa at Bahay, and (3) awarding moral damages to Leonora
Mariano.

xxxx

Luz Nicolas maintains that the Absolute Sale of Real Property is valid on the grounds:
(1) that the same is Leonora Mariano's free and voluntary act in settlement of her
mortgage liability of P552,000.00; (2) it pertains to the subject property for the valid
consideration of P600,000.00, P552,000.00 of which Leonora Mariano had already
received by way of the mortgage debt; and (3) that the Pagtanggap ng Kabuuang
Halaga is conclusive evidence of Leonora Mariano's fall receipt of the P600,000.00. She
further avers that the RTC erred in declaring Leonora Mariano's release from liability on
the basis of the purported special power of attorney, contending that the special power
was never formally offered in evidence and that assuming arguendo it exists,
the Absolute Sale of Real Property superseded the same, making her rental collection
one in the concept of an owner. She finally theorizes that the Absolute Sale of Real
Property novated the mortgage contracts because it converted Leonora Mariano's
mortgage obligation of P552,000.00 into partial consideration for the subject property
and that it is Leonora Mariano who is instead liable for moral damages, having
maliciously filed the fraudulent complaint against her who entered into the foregoing
contracts in good faith.

For her part, Leonora Mariano, reiterates the grounds raised in her Motion to Dismiss
Notice to Appeal by Expunging and further avers the appeal is procedurally infirm for
non-compliance with Sections 5 and 6, Rule 41 of the Rules of Court. She maintains the
propriety of the RTC's Decision, stressing that being the trial court's factual conclusion,
the same must be accorded great respect xxx.

The appeal is partly meritorious.

xxxx

As regards the merits of this appeal, we are one with the RTC in declaring the Absolute
Sale of Real Property invalid, but we cannot uphold that the invalidity thereof due to
lack of the essential requisites of consent, object, and consideration. Indeed,
the Absolute Sale of Real Property contains all the foregoing requisites and nothing in
the records proves, or at least suggests, that the same was executed through fraud or
under duress. Hence, by no stretch of the imagination can we sustain the RTC's
declaration of invalidity on said ground.

We declare the Absolute Sale of Real Property is invalid on the ground that Leonora
Mariano, the supposed vendor of the subject property, is not the owner thereof. For a
sale to be valid, it is imperative that the vendor is the owner of the property sold. The
records show that Leonora Mariano, to debunk Luz Nicolas' claim of ownership of the
subject property, openly admitted that she has not fully paid the grant thereof to the
NHA. Leonora Mariano, as mere grantee of the subject property who failed to fulfil the
conditions of the grant, never acquired ownership thereof, hence, was without any right
to dispose or alienate the same. "Nemo dat quod non habet." One cannot give what he
does not own. Hence, not being the owner of the subject property, Leonora Mariano
could have not transferred the ownership thereof to Luz Nicolas. 12 chanrobleslaw

Furthermore, the Absolute Sale of Real Property is a clear violation of the

express proviso, prohibiting "any transfer or encumbrance of subject property within
five (5)-years from the release of the mortgage." Said violation rendered the Absolute
Sale void ab initio, thus, the Republic's retention of ownership over the subject
property.13 A buyer acquires no better title to the property sold than the seller had.
Necessarily, Luz Nicolas cannot invoke the Absolute Sale as basis of her right to collect
rentals.

Leonora Mariano, being not the owner of the subject property, we declare that both
the Mortgage Contract and the Sanglaan ng Lupa at Bahay she executed are void ab
initio. For a person to validly constitute a mortgage on real estate, he must be the
absolute owner of the property mortgaged as required by Article 2085 of the New Civil
Code. Otherwise stated, the mortgagor must be the owner of the property subject of
the mortgage; otherwise, the mortgage is void.

Thus, having declared the Absolute Sale of Real Property and the two mortgages, i.e.
the Mortgage Contract and the Sanglaan ng Lupa at Bahay, void, all rights and
obligations created thereunder are effectively obliterated and rendered ineffective. Luz
Nicolas' supposed ownership of the subject property and her right to collect rentals on
Leonora Mariano's five-unit apartment, on the one hand, and the latter's mortgage debt
of P552,000.00, on the other hand, are necessarily void, hence, without force and
effect. A void contract is equivalent to nothing; it produces no civil effect. It does not
create, modify, or extinguish a juridical relation. Parties to a void agreement cannot
expect the aid of the law. The courts leave them as they are, because they are deemed
in pari delicto or in equal fault. It follows, therefore, that the award of moral damages
must also be vacated. The rule is no damages may be recovered on the basis of a void
contract since being inexistent, it produces no juridical tie between the parties involved.

WHEREFORE, the appeal is PARTLY GRANTED. The assailed Decision dated August 26,

2009 of the RTC, Branch 121, Caloocan City, in Civil Case No. C-20937 is AFFIRMED
with MODIFICATION, deleting the award of moral damages of P100,000.00 to Leonora
Mariano.

SO ORDERED.14 chanroblesvirtuallawlibrary

Nicolas moved to reconsider, but in its assailed March 1, 2012 Resolution, the CA held
its ground. Hence, the present Petition.

On May 8, 2012, Mariano filed a Motion for Execution Pending Appeal. 15 chanrobleslaw

In a November 13, 2013 Resolution,16 this Court resolved to give due course to the
instant Petition.

On November 5, 2014, Mariano filed a Motion for Urgent Execution Pendente

Lite,17 which the Court noted in a February 2, 2015 Resolution. 18chanrobleslaw

Issues

Nicolas submits that -

I.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN APPLYING THE RULINGS

IN HEIRS OF SALVADOR HERMOSILLA VS. REMOQUILLO (513 SCRA 409-
410) AND MAGOYAG VS. MARUHOM (626 SCRA 247, 257 [2010]) WHICH ARE
INAPPLICABLE TO THE CASE AT BAR SINCE RESPONDENT LEONORA C. MARIANO
ALIENATED THE SAID PROPERTY WHEN SHE WAS THE ABSOLUTE OWNER OF THE
PROPERTY.
a) THE TRANSFER CERTIFICATE OF TITLE ISSUED IN FAVOR OF RESPONDENT
MARIANO IS AN EVIDENCE OF HER OWNERSHIP OVER THE SUBJECT
PROPERTY.
b) ARTICLE 1477 OF THE NEW CIVIL CODE BOLSTERS RESPONDENT'S
OWNERSHIP OVER THE SUBJECT PROPERTY WHICH NECESSARILY
CAPACITATES HER TO ALIENATE THE SAID PROPERTY IN FAVOR OF
PETITIONER.
II.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT

RESPONDENT WAS NOT THE ABSOLUTE OWNER AT THE TIME THE DEED OF ABSOLUTE
SALE WAS EXECUTED.

III.

THE PROVISO IN THE TRANSFER CERTIFICATE OF TITLE THAT PROHIBITS APPELLEE

LEONORA C. MARIANO TO TRANSFER OR ENCUMBER THE SUBJECT PROPERTY IS A
STIPULATION CONTRARY TO LAW SINCE THE SAID PROVISO YIELDS TO R.A. 6552 (AN
ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT
PAYMENTS [MACEDA LAW]).

IV.

THE DEED OF SALE OVER THE SUBJECT PROPERTY BETWEEN THE PARTIES IS VALID
AND BINDING.19 chanroblesvirtuallawlibrary

Arguments of Nicolas

Praying that the assailed CA dispositions be reversed and set aside, Nicolas argues in
her Petition that the CA seriously erred in affirming the cancellation of the mortgage
contracts and invalidating the parties' deed of sale, since, as the registered owner of
the subject property under Transfer Certificate of Title (TCT) No. C-44249, Mariano had
every right to mortgage and sell the same to her; that while the National Housing
Authority (NHA) withheld the original copy of TCT No. C-44249 and merely gave a
photocopy thereof to Mariano pending full payment of the installments, this does not
detract from the fact that Mariano is the owner of the subject property; that while there
is proviso in TCT No. C-44249 to the effect that Mariano may not transfer or encumber
the subject property within five years from the date of release of the mortgage without
the NHA's prior written consent and authority, this condition is null and void as it unduly
restricts Mariano's rights as owner of the subject property; that Republic Act No. 6552
should instead apply in Mariano's case, which involves an installment sale of real
property; and that consequently, the mortgages and deed of sale executed by and
between the parties should be upheld for being in accordance with law, supported by
adequate consideration, and in furtherance of the intentions of the parties thereto.

Arguments of Mariano

In her Comments and Opposition to the Petition for Review, 20 Mariano fully agrees with
the pronouncements of the CA, except that she believes that she must be awarded
moral damages as prayed for and proved during trial. She admits that even if TCT No.
C-44249 was issued in her name, she is not the owner of the subject property since she
has not fully paid the installments to the NHA; this being so, she concedes that she had
no right to mortgage and sell the same to Nicolas. She adds that TCT No. C-44249
constitutes mere evidence of title, and does not vest title itself, to the subject property.
Thus, she prays for affirmance with modification, in that she be awarded the amounts
of P960,000.00 as reimbursement for Nicolas's excess rental collections; P500,000.00
additional actual damages; P1,000,000.00 moral damages; P400,000.00 attorney's
fees; and costs of suit.

Our Ruling

The Petition must be denied.

While title to TCT No. C-44249 is in the name of Mariano, she has not completed her
installment payments to NHA; this fact is not disputed, and as a matter of fact, Mariano
admits it. Indeed, Mariano even goes so far as to concede, in her Comments and
Opposition to the Petition, that she is not the owner of the subject
property.21 Thus, if she never became the owner of the subject property, then
she could not validly mortgage and sell the same to Nicolas. The principle nemo
dat quod non habet certainly applies.
xxx By title, the law refers to ownership which is represented by that document.
Petitioner apparently confuses certificate with title. Placing a parcel of land under the
mantle of the Torrens system does not mean that ownership thereof can no longer be
disputed. Ownership is different from a certificate of title. The TCT is only the best
proof of ownership of a piece of land. Besides, the certificate cannot always be
considered as conclusive evidence of ownership. xxx22 (Emphasissupplied)
Indeed, the Torrens system of land registration "merely confirms ownership and does
not create it. It cannot be used to divest lawful owners of their title for the purpose of
transferring it to another one who has not acquired it by any of the modes allowed or
recognized by law."23 chanrobleslaw

Nicolas is charged with knowledge of the circumstances surrounding the subject

property. The original owner's copy of TCT No. C-44249 is not in Mariano's possession,
and the latter could only present a photocopy thereof to her. Before one could part with
his money as mortgagee or buyer of real property, it is only natural to demand to be
presented with the original owner's copy of the certificate of title covering the same.
Secondly, Entry No. 98464/C-39393 on the dorsal side of TCT No. C-44249 constitutes
sufficient warning as to the subject property's condition at the time. In other words.
TCT No. C-44249 was not a clean title, and if Nicolas exercised diligence, she would
have discovered that Mariano was delinquent in her installment payments to the NHA,
which in turn would have generated the necessary conclusion that the property
belonged to the said government agency.

For her part, Mariano cannot recover damages on account of her claimed losses arising
from her entering into contract with Nicolas. Realizing that she is not the owner of
the subject property and knowing that she has not fully paid the price
therefor, she is as guilty as Nicolas for knowingly mortgaging and thereafter
selling what is not hers. As correctly held by the CA, both parties herein are not in
good faith; they are deemed in pari delicto or in equal fault, and for this, "[n]either one
may expect positive relief from courts of justice in the interpretation of their contract.
The courts will leave them as they were at the time the case was filed." 24 Besides, if
Mariano's prayer for damages were to be considered at all, she should have directly
assailed the CA's pronouncement by filing her own petition before this Court, which she
failed to do.

With the foregoing pronouncement, the Court finds no need to tackle the other issues
raised by the parties. They have become irrelevant in light of the view taken of the
case. Consequently, Mariano's Motion for Execution Pending Appeal and Motion for
Urgent Execution Pendente Lite require no further resolution.

WHEREFORE, the Petition is DENIED. The June 21, 2011 Decision and March 1, 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 93532 are AFFIRMED.

SO ORDERED. chan robles virtuallawlibrary

Carpio, (Chairperson), Mendoza, and Leonen, JJ., concur.

Brion, J., on leave.

Endnotes:

1
Rollo, pp. 3-35.

2
 Id. at 37-49; penned by Associate Justice Hakim S. Abdulwahid and concurred in by
Associate Justices Ricardo R. Rosario and Danton Q. Bueser.

3
 Id. at 52-53.

4
 Id. at 143-154.

5
 Herein respondent.

6
 Herein petitioner.

7
Rollo, pp. 37-40.

8
 Id. at 56-64.

9
 Id. at 69-75.

10
 Id. at 79-93.

11
 Id. at 91-93.

12
 Citing Heirs of Salvador Hermosilla v. Spouses Remoquillo, 542 Phil. 390 (2007).

13
 Citing Magoyag v. Maruhom, 640 Phil. 289 (2010) and Heirs of Salvador Hermosilla
v. Spouses Remoquillo, id.

14
Rollo, pp. 44-49.

15
 Id. at 170-174.
16
 Id. at 233-234.

17
 Id. at 266-267.

18
 Id. at 278.

19
 Id. at 14-15.

20
 Id. at 175-202.

21
 Id. at 189-190.

22
Lee Tek Sheng v. Court of Appeals, 354 Phil. 556, 561 (1998).

23
Peralta v. Heirs of Bernardino Abalon, G.R. Nos. 183448 & 183464, June 30, 2014,
727 SCRA 477, 491.

24
Constantino v. Heirs of Pedro Constantino, Jr., 718 Phil. 575, 585 (2013),
citing Packaging Products Corporation v. National Labor Relations Commission, 236 Phil.
225, 234-235 (1987).

EN BANC

G.R. No. L-17587             September 12, 1967

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y

CANON FAUSTINO, deceased, plaintiff-appellant,
vs.
LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng,
deceased, defendant-appellant.

Nicanor S. Sison for plaintiff-appellant.

Ozaeta, Gibbs & Ozaeta for defendant-appellant.

CASTRO, J.:

Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of
land in Manila. This parcel, with an area of 2,582.30 square meters, is located on Rizal Avenue and
opens into Florentino Torres street at the back and Katubusan street on one side. In it are two
residential houses with entrance on Florentino Torres street and the Hen Wah Restaurant with
entrance on Rizal Avenue. The sisters lived in one of the houses, while Wong Heng, a Chinese,
lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the
property, paying a monthly rental of P2,620.

On September 22, 1957 Justina Santos became the owner of the entire property as her sister died
with no other heir. Then already well advanced in years, being at the time 90 years old, blind,
crippled and an invalid, she was left with no other relative to live with. Her only companions in the
house were her 17 dogs and 8 maids. Her otherwise dreary existence was brightened now and then
by the visits of Wong's four children who had become the joy of her life. Wong himself was the
trusted man to whom she delivered various amounts for safekeeping, including rentals from her
property at the corner of Ongpin and Salazar streets and the rentals which Wong himself paid as
lessee of a part of the Rizal Avenue property. Wong also took care of the payment; in her behalf, of
taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security guard, and her
household expenses.

"In grateful acknowledgment of the personal services of the lessee to her," Justina Santos executed
on November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then
already leased to him and another portion fronting Florentino Torres street. The lease was for 50
years, although the lessee was given the right to withdraw at any time from the agreement; the
monthly rental was P3,120. The contract covered an area of 1,124 square meters. Ten days later
(November 25), the contract was amended (Plff Exh. 4) so as to make it cover the entire property,
including the portion on which the house of Justina Santos stood, at an additional monthly rental of
P360. For his part Wong undertook to pay, out of the rental due from him, an amount not exceeding
P1,000 a month for the food of her dogs and the salaries of her maids.

On December 21 she executed another contract (Plff Exh. 7) giving Wong the option to buy the
leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The
option, written in Tagalog, imposed on him the obligation to pay for the food of the dogs and the
salaries of the maids in her household, the charge not to exceed P1,800 a month. The option was
conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the Court
of First Instance of Rizal. It appears, however, that this application for naturalization was withdrawn
when it was discovered that he was not a resident of Rizal. On October 28, 1958 she filed a petition
to adopt him and his children on the erroneous belief that adoption would confer on them Philippine
citizenship. The error was discovered and the proceedings were abandoned.

On November 18, 1958 she executed two other contracts, one (Plff Exh. 5) extending the term of the
lease to 99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years. Both contracts
are written in Tagalog.

In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to
respect the contracts she had entered into with Wong, but in a codicil (Plff Exh. 17) of a later date
(November 4, 1959) she appears to have a change of heart. Claiming that the various contracts
were made by her because of machinations and inducements practiced by him, she now directed
her executor to secure the annulment of the contracts.

On November 18 the present action was filed in the Court of First Instance of Manila. The complaint
alleged that the contracts were obtained by Wong "through fraud, misrepresentation, inequitable
conduct, undue influence and abuse of confidence and trust of and (by) taking advantage of the
helplessness of the plaintiff and were made to circumvent the constitutional provision prohibiting
aliens from acquiring lands in the Philippines and also of the Philippine Naturalization Laws." The
court was asked to direct the Register of Deeds of Manila to cancel the registration of the contracts
and to order Wong to pay Justina Santos the additional rent of P3,120 a month from November 15,
1957 on the allegation that the reasonable rental of the leased premises was P6,240 a month.

In his answer, Wong admitted that he enjoyed her trust and confidence as proof of which he
volunteered the information that, in addition to the sum of P3,000 which he said she had delivered to
him for safekeeping, another sum of P22,000 had been deposited in a joint account which he had
with one of her maids. But he denied having taken advantage of her trust in order to secure the
execution of the contracts in question. As counterclaim he sought the recovery of P9,210.49 which
he said she owed him for advances.

Wong's admission of the receipt of P22,000 and P3,000 was the cue for the filing of an amended
complaint. Thus on June 9, 1960, aside from the nullity of the contracts, the collection of various
amounts allegedly delivered on different occasions was sought. These amounts and the dates of
their delivery are P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1, 1957); P10,000 (Dec. 6, 1957);
P22,000 and P3,000 (as admitted in his answer). An accounting of the rentals from the Ongpin and
Rizal Avenue properties was also demanded.

In the meantime as a result of a petition for guardianship filed in the Juvenile and Domestic
Relations Court, the Security Bank & Trust Co. was appointed guardian of the properties of Justina
Santos, while Ephraim G. Gochangco was appointed guardian of her person.

In his answer, Wong insisted that the various contracts were freely and voluntarily entered into by
the parties. He likewise disclaimed knowledge of the sum of P33,724.27, admitted receipt of
P7,344.42 and P10,000, but contended that these amounts had been spent in accordance with the
instructions of Justina Santos; he expressed readiness to comply with any order that the court might
make with respect to the sums of P22,000 in the bank and P3,000 in his possession.

The case was heard, after which the lower court rendered judgment as follows:

[A]ll the documents mentioned in the first cause of action, with the exception of the first which
is the lease contract of 15 November 1957, are declared null and void; Wong Heng is
condemned to pay unto plaintiff thru guardian of her property the sum of P55,554.25 with
legal interest from the date of the filing of the amended complaint; he is also ordered to pay
the sum of P3,120.00 for every month of his occupation as lessee under the document of
lease herein sustained, from 15 November 1959, and the moneys he has consigned since
then shall be imputed to that; costs against Wong Heng.

From this judgment both parties appealed directly to this Court. After the case was submitted for
decision, both parties died, Wong Heng on October 21, 1962 and Justina Santos on December 28,
1964. Wong was substituted by his wife, Lui She, the other defendant in this case, while Justina
Santos was substituted by the Philippine Banking Corporation.

Justina Santos maintained — now reiterated by the Philippine Banking Corporation — that the lease
contract (Plff Exh. 3) should have been annulled along with the four other contracts (Plff Exhs. 4-7)
because it lacks mutuality; because it included a portion which, at the time, was in custodia legis;
because the contract was obtained in violation of the fiduciary relations of the parties; because her
consent was obtained through undue influence, fraud and misrepresentation; and because the lease
contract, like the rest of the contracts, is absolutely simulated.

Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this
agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides
that "the contract must bind both contracting parties; its validity or compliance cannot be left to the
will of one of them."

We have had occasion to delineate the scope and application of article 1308 in the early case
of Taylor v. Uy Tieng Piao.1 We said in that case:
 Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the
insertion in a contract for personal service of a resolutory condition permitting the
cancellation of the contract by one of the parties. Such a stipulation, as can be readily seen,
does not make either the validity or the fulfillment of the contract dependent upon the will of
the party to whom is conceded the privilege of cancellation; for where the contracting parties
have agreed that such option shall exist, the exercise of the option is as much in the
fulfillment of the contract as any other act which may have been the subject of agreement.
Indeed, the cancellation of a contract in accordance with conditions agreed upon beforehand
is fulfillment.2

And so it was held in Melencio v. Dy Tiao Lay  3 that a "provision in a lease contract that the lessee,
at any time before he erected any building on the land, might rescind the lease, can hardly be
regarded as a violation of article 1256 [now art. 1308] of the Civil Code."

The case of Singson Encarnacion v. Baldomar  4 cannot be cited in support of the claim of want of
mutuality, because of a difference in factual setting. In that case, the lessees argued that they could
occupy the premises as long as they paid the rent. This is of course untenable, for as this Court said,
"If this defense were to be allowed, so long as defendants elected to continue the lease by
continuing the payment of the rentals, the owner would never be able to discontinue it; conversely,
although the owner should desire the lease to continue the lessees could effectively thwart his
purpose if they should prefer to terminate the contract by the simple expedient of stopping payment
of the rentals." Here, in contrast, the right of the lessee to continue the lease or to terminate it is so
circumscribed by the term of the contract that it cannot be said that the continuance of the lease
depends upon his will. At any rate, even if no term had been fixed in the agreement, this case would
at most justify the fixing of a period5 but not the annulment of the contract.

Nor is there merit in the claim that as the portion of the property formerly owned by the sister of
Justina Santos was still in the process of settlement in the probate court at the time it was leased,
the lease is invalid as to such portion. Justina Santos became the owner of the entire property upon
the death of her sister Lorenzo on September 22, 1957 by force of article 777 of the Civil Code.
Hence, when she leased the property on November 15, she did so already as owner thereof. As this
Court explained in upholding the sale made by an heir of a property under judicial administration:

That the land could not ordinarily be levied upon while in custodia legis does not mean that
one of the heirs may not sell the right, interest or participation which he has or might have in
the lands under administration. The ordinary execution of property in custodia legis is
prohibited in order to avoid interference with the possession by the court. But the sale made
by an heir of his share in an inheritance, subject to the result of the pending administration,
in no wise stands in the way of such administration. 6

It is next contended that the lease contract was obtained by Wong in violation of his fiduciary
relationship with Justina Santos, contrary to article 1646, in relation to article 1941 of the Civil Code,
which disqualifies "agents (from leasing) the property whose administration or sale may have been
entrusted to them." But Wong was never an agent of Justina Santos. The relationship of the parties,
although admittedly close and confidential, did not amount to an agency so as to bring the case
within the prohibition of the law.

Just the same, it is argued that Wong so completely dominated her life and affairs that the contracts
express not her will but only his. Counsel for Justina Santos cites the testimony of Atty. Tomas S.
Yumol who said that he prepared the lease contract on the basis of data given to him by Wong and
that she told him that "whatever Mr. Wong wants must be followed." 7
The testimony of Atty. Yumol cannot be read out of context in order to warrant a finding that Wong
practically dictated the terms of the contract. What this witness said was:

Q Did you explain carefully to your client, Doña Justina, the contents of this document before
she signed it?

A I explained to her each and every one of these conditions and I also told her these
conditions were quite onerous for her, I don't really know if I have expressed my opinion, but
I told her that we would rather not execute any contract anymore, but to hold it as it was
before, on a verbal month to month contract of lease.

Q But, she did not follow your advice, and she went with the contract just the same?

A She agreed first . . .

Q Agreed what?

A Agreed with my objectives that it is really onerous and that I was really right, but after that,
I was called again by her and she told me to follow the wishes of Mr. Wong Heng.

xxx     xxx     xxx

Q So, as far as consent is concerned, you were satisfied that this document was perfectly
proper?

xxx     xxx     xxx

A Your Honor, if I have to express my personal opinion, I would say she is not, because, as I
said before, she told me — "Whatever Mr. Wong wants must be followed." 8

Wong might indeed have supplied the data which Atty. Yumol embodied in the lease contract, but to
say this is not to detract from the binding force of the contract. For the contract was fully explained to
Justina Santos by her own lawyer. One incident, related by the same witness, makes clear that she
voluntarily consented to the lease contract. This witness said that the original term fixed for the lease
was 99 years but that as he doubted the validity of a lease to an alien for that length of time, he tried
to persuade her to enter instead into a lease on a month-to-month basis. She was, however, firm
and unyielding. Instead of heeding the advice of the lawyer, she ordered him, "Just follow Mr. Wong
Heng."9 Recounting the incident, Atty. Yumol declared on cross examination:

Considering her age, ninety (90) years old at the time and her condition, she is a wealthy
woman, it is just natural when she said "This is what I want and this will be done." In
particular reference to this contract of lease, when I said "This is not proper," she said —
"You just go ahead, you prepare that, I am the owner, and if there is any illegality, I am the
only one that can question the illegality."10

Atty. Yumol further testified that she signed the lease contract in the presence of her close friend,
Hermenegilda Lao, and her maid, Natividad Luna, who was constantly by her side. 11 Any of them
could have testified on the undue influence that Wong supposedly wielded over Justina Santos, but
neither of them was presented as a witness. The truth is that even after giving his client time to think
the matter over, the lawyer could not make her change her mind. This persuaded the lower court to
uphold the validity of the lease contract against the claim that it was procured through undue
influence.

Indeed, the charge of undue influence in this case rests on a mere inference 12 drawn from the fact
that Justina Santos could not read (as she was blind) and did not understand the English language
in which the contract is written, but that inference has been overcome by her own evidence.

Nor is there merit in the claim that her consent to the lease contract, as well as to the rest of the
contracts in question, was given out of a mistaken sense of gratitude to Wong who, she was made to
believe, had saved her and her sister from a fire that destroyed their house during the liberation of
Manila. For while a witness claimed that the sisters were saved by other persons (the brothers
Edilberto and Mariano Sta. Ana)13 it was Justina Santos herself who, according to her own witness,
Benjamin C. Alonzo, said "very emphatically" that she and her sister would have perished in the fire
had it not been for Wong.14 Hence the recital in the deed of conditional option (Plff Exh. 7) that
"[I]tong si Wong Heng ang siyang nagligtas sa aming dalawang magkapatid sa halos ay tiyak na
kamatayan", and the equally emphatic avowal of gratitude in the lease contract (Plff Exh. 3).

As it was with the lease contract (Plff Exh. 3), so it was with the rest of the contracts (Plff Exhs. 4-7)
— the consent of Justina Santos was given freely and voluntarily. As Atty. Alonzo, testifying for her,
said:

[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres and/or both. When
we had conferences, they used to tell me what the documents should contain. But, as I said,
I would always ask the old woman about them and invariably the old woman used to tell me:
"That's okay. It's all right."15

But the lower court set aside all the contracts, with the exception of the lease contract of November
15, 1957, on the ground that they are contrary to the expressed wish of Justina Santos and that their
considerations are fictitious. Wong stated in his deposition that he did not pay P360 a month for the
additional premises leased to him, because she did not want him to, but the trial court did not believe
him. Neither did it believe his statement that he paid P1,000 as consideration for each of the
contracts (namely, the option to buy the leased premises, the extension of the lease to 99 years, and
the fixing of the term of the option at 50 years), but that the amount was returned to him by her for
safekeeping. Instead, the court relied on the testimony of Atty. Alonzo in reaching the conclusion that
the contracts are void for want of consideration.

Atty. Alonzo declared that he saw no money paid at the time of the execution of the documents, but
his negative testimony does not rule out the possibility that the considerations were paid at some
other time as the contracts in fact recite. What is more, the consideration need not pass from one
party to the other at the time a contract is executed because the promise of one is the consideration
for the other.16

With respect to the lower court's finding that in all probability Justina Santos could not have intended
to part with her property while she was alive nor even to lease it in its entirety as her house was built
on it, suffice it to quote the testimony of her own witness and lawyer who prepared the contracts (Plff
Exhs. 4-7) in question, Atty. Alonzo:

The ambition of the old woman, before her death, according to her revelation to me, was to
see to it that these properties be enjoyed, even to own them, by Wong Heng because Doña
Justina told me that she did not have any relatives, near or far, and she considered Wong
Heng as a son and his children her grandchildren; especially her consolation in life was
when she would hear the children reciting prayers in Tagalog. 17
 She was very emphatic in the care of the seventeen (17) dogs and of the maids who helped
her much, and she told me to see to it that no one could disturb Wong Heng from those
properties. That is why we thought of the ninety-nine (99) years lease; we thought of
adoption, believing that thru adoption Wong Heng might acquire Filipino citizenship; being
the adopted child of a Filipino citizen.18

This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For the testimony just
quoted, while dispelling doubt as to the intention of Justina Santos, at the same time gives the clue
to what we view as a scheme to circumvent the Constitutional prohibition against the transfer of
lands to aliens. "The illicit purpose then becomes the illegal causa"19 rendering the contracts
void.

Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they
reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be
sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to
buy real property on condition that he is granted Philippine citizenship. As this Court said in Krivenko
v. Register of Deeds:20

[A]liens are not completely excluded by the Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is temporary, they may be
granted temporary rights such as a lease contract which is not forbidden by the Constitution.
Should they desire to remain here forever and share our fortunes and misfortunes, Filipino
citizenship is not impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of
which the Filipino owner cannot sell or otherwise dispose of his property, 21 this to last for 50 years,
then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner
divests himself in stages not only of the right to enjoy the land ( jus possidendi, jus utendi, jus
fruendi and jus abutendi) but also of the right to dispose of it ( jus disponendi) — rights the sum total
of which make up ownership. It is just as if today the possession is transferred, tomorrow, the use,
the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up
are consolidated in an alien. And yet this is just exactly what the parties in this case did within the
space of one year, with the result that Justina Santos' ownership of her property was reduced to a
hollow concept. If this can be done, then the Constitutional ban against alien landholding in the
Philippines, as announced in Krivenko v. Register of Deeds,22 is indeed in grave peril.

It does not follow from what has been said, however, that because the parties are in pari delicto they
will be left where they are, without relief. For one thing, the original parties who were guilty of a
violation of the fundamental charter have died and have since been substituted by their
administrators to whom it would be unjust to impute their guilt. 23 For another thing, and this is not
only cogent but also important, article 1416 of the Civil Code provides, as an exception to the rule
on pari delicto, that "When the agreement is not illegal per se but is merely prohibited, and the
prohibition by law is designed for the protection of the plaintiff, he may, if public policy is thereby
enhanced, recover what he has paid or delivered." The Constitutional provision that "Save in
cases of hereditary succession, no private agricultural land shall be transferred or assigned except
to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in
the Philippines"24 is an expression of public policy to conserve lands for the Filipinos. As this Court
said in Krivenko:

It is well to note at this juncture that in the present case we have no choice. We are
construing the Constitution as it is and not as we may desire it to be. Perhaps the effect of
our construction is to preclude aliens admitted freely into the Philippines from owning sites
 where they may build their homes. But if this is the solemn mandate of the Constitution, we
will not attempt to compromise it even in the name of amity or equity . . . .

For all the foregoing, we hold that under the Constitution aliens may not acquire private or
public agricultural lands, including residential lands, and, accordingly, judgment is affirmed,
without costs.25

That policy would be defeated and its continued violation sanctioned if, instead of setting the
contracts aside and ordering the restoration of the land to the estate of the deceased Justina
Santos, this Court should apply the general rule of pari delicto. To the extent that our ruling in this
case conflicts with that laid down in Rellosa v. Gaw Chee Hun  26 and subsequent similar cases, the
latter must be considered as pro tanto qualified.

The claim for increased rentals and attorney's fees, made in behalf of Justina Santos, must be
denied for lack of merit.

And what of the various amounts which Wong received in trust from her? It appears that he kept two
classes of accounts, one pertaining to amount which she entrusted to him from time to time, and
another pertaining to rentals from the Ongpin property and from the Rizal Avenue property, which he
himself was leasing.

With respect to the first account, the evidence shows that he received P33,724.27 on November 8,
1957 (Plff Exh. 16); P7,354.42 on December 1, 1957 (Plff Exh. 13); P10,000 on December 6, 1957
(Plff Exh. 14) ; and P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of P70,007.19. He
claims, however, that he settled his accounts and that the last amount of P18,928.50 was in fact
payment to him of what in the liquidation was found to be due to him.

He made disbursements from this account to discharge Justina Santos' obligations for taxes,
attorneys' fees, funeral services and security guard services, but the checks (Def Exhs. 247-278)
drawn by him for this purpose amount to only P38,442.84. 27 Besides, if he had really settled his
accounts with her on August 26, 1959, we cannot understand why he still had P22,000 in the bank
and P3,000 in his possession, or a total of P25,000. In his answer, he offered to pay this amount if
the court so directed him. On these two grounds, therefore, his claim of liquidation and settlement of
accounts must be rejected.

After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts), there is a difference of

P31,564 which, added to the amount of P25,000, leaves a balance of P56,564.35 28 in favor of
Justina Santos.

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

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

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

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

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Angeles,
JJ., concur.

Separate Opinions

FERNANDO, J., concurring:

With the able and well-written opinion of Justice Castro, I am in full agreement. The exposition of the
facts leaves nothing to be desired and the statement of the law is notable for its comprehensiveness
and clarity. This concurring opinion has been written solely to express what I consider to be the
unfortunate and deplorable consequences of applying the pari delicto concept, as was, to my mind,
indiscriminately done, to alien landholding declared illegal under the Krivenko doctrine in some past
decisions.

It is to be remembered that in Krivenko v. The Register of Deeds of Manila,1 this Court over strong
dissents held that residential and commercial lots may be considered agricultural within the meaning
of the constitutional provision prohibiting the transfer of any private agricultural land to individuals,
corporations or associations not qualified to acquire or hold lands of the public domain in the
Philippines save in cases of hereditary succession.

That provision of the Constitution took effect on November 15, 1935 when the Commonwealth
Government was established. The interpretation as set forth in the Krivenko decision was only
handed down on November 15, 1947. Prior to that date there were many who were of the opinion
that the phrase agricultural land should be construed strictly and not be made to
cover residential and commercial lots. Acting on that belief, several transactions were entered into
transferring such lots to alien vendees by Filipino-vendors.

After the Krivenko decision, some Filipino vendors sought recovery of the lots in question on
the ground that the sales were null and void. No definite ruling was made by this Court until
September of 1953, when on the 29th of said month, Rellosa v. Gaw Chee Hun,2 Bautista v. Uy
Isabelo,3 Talento v. Makiki,4 Caoile v. Chiao Peng5 were decided.

Of the four decisions in September, 1953, the most extensive discussion of the question is found
in Rellosa v. Gaw Chee Hun, the opinion being penned by retired Justice Bautista Angelo with the
concurrence only of one Justice, Justice Labrador, also retired. Former Chief Justice Paras as well
as the former Justices Tuason and Montemayor concurred in the result. The necessary sixth vote for
a decision was given by the then Justice Bengzon, who had a two-paragraph concurring opinion
disagreeing with the main opinion as to the force to be accorded to the two cases, 6 therein cited.
There were two dissenting opinions by former Justices Pablo and Alex Reyes. The doctrine as
announced in the Rellosa case is that while the sale by a Filipino-vendor to an alien-vendee of a
residential or a commercial lot is null and void as held in the Krivenko case, still the Filipino-vendor
has no right to recover under a civil law doctrine, the parties being in pari delicto. The only remedy to
prevent this continuing violation of the Constitution which the decision impliedly sanctions by
allowing the alien vendees to retain the lots in question is either escheat or reversion. Thus: "By
following either of these remedies, or by approving an implementary law as above suggested, we
can enforce the fundamental policy of our Constitution regarding our natural resources without doing
violence to the principle of pari delicto."7

Were the parties really in pari delicto? Had the sale by and between Filipino-vendor and alien-
vendee occurred after the decision in the Krivenko case, then the above view would be correct that
both Filipino-vendor and alien-vendee could not be considered as innocent parties within the
contemplation of the law. Both of them should be held equally guilty of evasion of the Constitution.

Since, however, the sales in question took place prior to the Krivenko decision, at a time when the
assumption could be honestly entertained that there was no constitutional prohibition against the
sale of commercial or residential lots by Filipino-vendor to alien-vendee, in the absence of a definite
decision by the Supreme Court, it would not be doing violence to reason to free them from the
imputation of evading the Constitution. For evidently evasion implies at the very least knowledge of
what is being evaded. The new Civil Code expressly provides: "Mistakes upon a doubtful or difficult
question of law may be the basis of good faith." 8

According to the Rellosa opinion, both parties are equally guilty of evasion of the Constitution, based
on the broader principle that "both parties are presumed to know the law." This statement that the
sales entered into prior to the Krivenko decision were at that time already vitiated by a guilty
knowledge of the parties may be too extreme a view. It appears to ignore a postulate of a
constitutional system, wherein the words of the Constitution acquire meaning through Supreme
Court adjudication. 1awphîl.nèt
Reference may be made by way of analogy to a decision adjudging a statute void. Under the
orthodox theory of constitutional law, the act having been found unconstitutional was not a law,
conferred no rights, imposed no duty, afforded no protection. 9 As pointed out by former Chief Justice
Hughes though in Chicot County Drainage District v. Baxter State Bank:10 "It is quite clear, however,
that such broad statements as to the effect of a determination of unconstitutionality must be taken
with qualifications. The actual existence of a statute, prior to such a determination, is an operative
fact and may have consequences which cannot justly be ignored. The past cannot always be erased
by a new judicial declaration. The effect of subsequent ruling as to invalidity may have to be
considered in various aspects, — with respect to particular relations, individual and corporate, and
particular conduct, private and official. Questions of rights claimed to have become vested, of status,
of prior determinations deemed to have finality and acted upon accordingly, of public policy in the
light of the nature both of the statute and of its previous application, demand examination."

After the Krivenko decision, there is no doubt that continued possession by alien-vendee of property

acquired before its promulgation is violative of the Constitution. It is as if an act granting aliens the
right to acquire residential and commercial lots were annulled by the Supreme Court as contrary to
the provision of the Constitution prohibiting aliens from acquiring private agricultural land.

The question then as now, therefore, was and is how to divest the alien of such property rights on
terms equitable to both parties. That question should be justly resolved in accordance with the
mandates of the Constitution not by a wholesale condemnation of both parties for entering into
a contract at a time when there was no ban as yet arising from the Krivenko decision, which could
not have been anticipated. Unfortunately, under the Rellosa case, it was assumed that the parties,
being in pari delicto, would be left in the situation in which they were, neither being in a position to
seek judicial redress.

Would it not have been more in consonance with the Constitution, if instead the decision
compelled the restitution of the property by the alien-vendee to the Filipino-vendor? Krivenko
decision held in clear, explicit and unambigous language that: "We are deciding the instant case
under section 5 of Article XIII of the Constitution which is more comprehensive and more absolute in
the sense that it prohibits the transfer to aliens of any private agricultural land including residential
land whatever its origin might have been . . . . This prohibition [Rep. Act No. 133] makes no
distinction between private lands that are strictly agricultural and private lands that are residential or
commercial. The prohibition embraces the sale of private lands of any kind in favor of aliens,
which is again a clear implementation and a legislative interpretation of the constitutional
prohibition. . . . It is well to note at this juncture that in the present case we have no choice. We are
construing the Constitution as it is and not as we may desire it to be. Perhaps the effect of our
construction is to preclude aliens, admitted freely into the Philippines, from owning sites where they
may build their homes. But if this is the solemn mandate of the Constitution, we will not attempt to
compromise it even in the name of amity or equity."11

Alien-vendee is therefore incapacitated or disqualified to acquire and hold real estate. That
incapacity and that disqualification should date from the adoption of the Constitution on
November 15, 1935. That incapacity and that disqualification, however, was made known to
Filipino-vendor and to alien-vendee only upon the promulgation of the Krivenko decision on
November 15, 1947. Alien-vendee, therefore, cannot be allowed to continue owning and exercising
acts of ownership over said property, when it is clearly included within the Constitutional prohibition.
Alien-vendee should thus be made to restore the property with its fruits and rents to Filipino-vendor,
its previous owner, if it could be shown that in the utmost good faith, he transferred his title
over the same to alien-vendee, upon restitution of the purchase price of course.
The Constitution bars alien-vendees from owning the property in question. By dismissing those suits,
the lots remained in alien hands. Notwithstanding the solution of escheat or reversion offered,
they are still at the moment of writing, for the most part in alien hands. There have been after almost
twenty years no proceedings for escheat or reversion.

Yet it is clear that an alien-vendee cannot consistently with the constitutional provision, as
interpreted in the Krivenko decision, continue owning and exercising acts of ownership over the real
estate in question. It ought to follow then, if such a continuing violation of the fundamental law is to
be put an end to, that the Filipino-vendor, who in good faith entered into, a contract with an
incapacitated person, transferring ownership of a piece of land after the Constitution went into full
force and effect, should, in the light of the ruling in the Krivenko case, be restored to the possession
and ownership thereof, where he has filed the appropriate case or proceeding. Any other
construction would defeat the ends and purposes not only of this particular provision in question but
the rest of the Constitution itself.

The Constitution frowns upon the title remaining in the alien-vendees. Restoration of the property
upon payment of price received by Filipino vendor or its reasonable equivalent as fixed by the court
is the answer. To give the constitutional provision full force and effect, in consonance with the
dictates of equity and justice, the restoration to Filipino-vendor upon the payment of a price
fixed by the court is the better remedy. He thought he could transfer the property to an alien and
did so. After the Krivenko case had made clear that he had no right to sell nor an alien-vendee to
purchase the property in question, the obvious solution would be for him to reacquire the same.
That way the Constitution would be given, as it ought to be given, respect and deference.

It may be said that it is too late at this stage to hope for such a solution, the Rellosa opinion,
although originally concurred in by only one justice, being too firmly imbedded. The writer however
sees a welcome sign in the adoption by the Court in this case of the concurring opinion of the then
Justice, later Chief Justice, Bengzon. Had it been followed then, the problem would not be still with
us now. Fortunately, it is never too late — not even in constitutional adjudication.

Footnotes

1
43 Phil. 873 (1922).

2
Id. at 876.

3
55 Phil. 99 (1930).

4
77 Phil. 470 (1946).

5
Civ. Code, art. 1197.

6
Jakosalem vs. Rafols, 73 Phil. 628 (1942).

7
T.s.n., pp. 73-74, June 20, 1960.

8
T.s.n., pp. 70-71, 73-74, June 20, 1960 (emphasis added).
9
T.s.n., pp. 54-55, June 6, 1960.

10
T.s.n., p. 86, June 20, 1960 (emphasis added).

11
T.s.n., pp. 69-70, June 20, 1960.

12
Article 1332 of the Civil Code provides that "When one of the parties is unable to read or if
the contract is in a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been fully explained to
the former."

13
T.s.n., p. 11, June 21, 1960.

14
T.s.n., pp. 119-120, June 20, 1960.

15
T.s.n., p. 76, June 6, 1960.

Rodriguez v. Rodriguez, G.R. L-23002, July 31, 1967; Enriquez de la Cavada v. Diaz, 37
16

Phil. 982 (1918) ; see also Puato v. Mendoza, 64 Phil. 457 (1937).

17
T.s.n., p. 79, June 6, 1960 (emphasis added).

18
T.s.n., p. 121, June 20, 1960.

19
Rodriguez v. Rodriguez, supra, note 16.

20
79 Phil. 461, 480-481 (1947) (emphasis added). The statement in Smith, Bell & Co. v.
Register of Deeds, 96 Phil. 53, 61-62 (1954), to the effect that an alien may lease lands in
the Philippines for as long as 99 years under article 1643 of the Civil Code, is obiter as the
term of the lease in that case for 25 years only, renewable for a like period, and the
character (whether temporary or permanent) of rights under a 99-year lease was not
considered.

21
The contract (Plff Exh. 6) of November 18, 1958 provides that "Sa loob nang nabanggit na
panahon limangpung (50) taon na hindi pa ginagamit ni WONG o kaniyang kaanak ang
karapatan nilang bumili, ay ang nabanggit na lupa ay hindi maaring ipagbili, ibigay, isangla, o
itali ng MAY-ARI sa iba" [Within the said period of fifty (50) years during which neither
WONG nor any of his children has exercised the option to buy, the said piece of land cannot
be sold, donated, mortgaged or encumbered in favor of other persons by the owner].

22
Supra, note 20.

23
Cf. Rellosa v. Gaw Chee Hun, 93 Phil. 827, 836 (1953) (Cesar Bengzon, J., concurring) :
"Perhaps the innocent spouse of the seller and his creditors are not barred from raising the
issue of invalidity."

24
Const. art. XIII sec. 5.

25
Supra, note 20, at 480-481.
 26
93 Phil. 827 (1953).

According to the lower court the amount should be P38,422.94, but the difference appears
27 

to be the result of an error in addition.

According to the trial court the amount should be P56,554.25, but the difference appears to
28

be due to the error pointed out in note 27.

29
T.s.n., pp. 6-8, July 26, 1960.

30
T.s.n., p. 35, July 26, 1960.

31
T.s.n., pp. 31-35, July 26, 1960.

FERNANDO, J., concurring:

1
79 Phil. 461 (1947).

2
93 Phil. 827.

3
93 Phil. 843.

4
93 Phil. 855.

5
93 Phil. 861. See also Arambulo v. Cua So, (1954) 95 Phil. 749; Dinglasan v. Lee Bun Ting,
(1956) 99 Phil. 427.

6
Bough v. Cantiveros, (1919) 40 Phil. 210 and Perez v. Herranz (1902) 7 Phil. 693.

7
At p. 835.

8
Art. 526, par. 3. The above provision is merely a reiteration of the doctrine announced in the
case of Kasilag v. Rodriguez decided on December 7, 1939 (69 Phil. 217), the pertinent
excerpt follows:

"This being the case, the question is whether good faith may be premised upon
ignorance of the laws. Manresa, commenting on article 434 in connection with the
preceding article, sustains the affirmative. He says:

"'We do not believe that in real life there are not many cases of good faith founded
upon an error of law. When the acquisition appears in a public document, the
capacity of the parties has already been passed upon by competent authority, and
even established by appeals taken from final judgments and administrative remedies
against the qualification of registrars, and the possibility of error is remote under such
circumstances; but, unfortunately, private documents and even verbal agreements
far exceed public documents in number, and while no one should be ignorant of the
law, the truth is that even we who are called upon to know and apply it fall into error
 not infrequently. However, a clear, manifest, and truly unexcusable ignorance is one
thing, to which undoubtedly refers article 2, and another and different thing is
possible and excusable error arising from complex legal principle and from the
interpretation of conflicting doctrines.

"But even ignorance of the law may be based upon an error of fact, or better still,
ignorance of a fact is possible as to the capacity to transmit and as to the intervention
of certain persons, compliance with certain formalities and appreciation of certain
acts, and error of law is possible in the interpretation of doubtful doctrines.'"
(Manresa, Commentaries on the Spanish Civil Code, Volume IV, pp. 100, 101 and
102.)

9
Norton v. Shelby County, (1886) 118 U.S. 425.

10
308 U.S. 731 (1940).

11
79 Phil. 461, 480 (1947).