What is the Constitutional provision on foreign ownership of land in the

Philippines?

Section 7, Article XII of the 1987 Constitution states:

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

The rule clearly therefore is that aliens, whether individuals or corporations, are disqualified
from acquiring lands of the public domain. Hence, they are also disqualified from acquiring
private lands.

Note: The Supreme Court in the case of “United Church Board for World Ministries v. Sebastian”
reiterated the consistent ruling 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. 

What is the purpose for this Constitutional prohibition?

The primary purpose of the Constitutional provision is the conservation of the national patrimony. In
the classic case of Krivenko v. Register of Deeds, the Supreme Court held:

Under section 1 of Article XIII of the Constitution, "natural resources, with the exception of public
agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation
is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the
hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may
alienate their agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is
included in Article XIII, and it reads as follows:

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

This constitutional provision closes the only remaining avenue through which agricultural resources
may leak into aliens' hands. It would certainly be futile to prohibit the alienation of public agricultural
lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural
lands in the hands of Filipino citizens.

Does the term “private agricultural lands” exclude residential lots from
the prohibition?

If the term “private agricultural lands” is to be construed as not including residential lots or lands not
strictly agricultural, the result would be that “aliens may freely acquire and possess not only
residential lots and houses for themselves but entire subdivisions, and whole towns and cities,” and
that “they may validly buy and hold in their names lands of any area for building homes, factories,
industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses,
playgrounds, airfields, and a host of other uses and purposes that are not, in appellant's words,
strictly agricultural.” That this is obnoxious to the conservative spirit of the Constitution is beyond
question.

What are the exceptions to the restriction on foreigners’ acquisition of

land in the Philippines?
[1] Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by Batas
Pambansa 185 and R.A. 8179
[2] Acquisition before the 1935 Constitution
[3] Purchase of not more than 40% interest in a condominium project
[4] Acquisition through hereditary succession if the foreigner is a legal or natural heir

What are the limitations on land ownership by former Filipino citizens?

Before the enactment of Republic Act 9225 (Citizenship Retention and Re-acquisition Act of 2003),
Filipinos who were naturalized as U.S. citizens were deemed to have lost their Filipino citizenship.

Under RA 9255, former Filipinos who became naturalized citizens of foreign countries are
deemed not to have lost their Philippine citizenship. Thus they can enjoy all the rights and
privileges of a Filipino regarding land ownership in the Philippines.

If a former Filipino who is now a naturalized citizen of a foreign country does not want
however to avail of the Dual Citizen Law in the Philippines, he or she can still acquire land
based on BP (Batas Pambansa) 185 and RA (Republic Act) 8179 but subject to the following
limitations:

For residential use (BP 185 enacted in March 1982): Up to 1,000 square meters of residential land,
and pp to one (1) hectare of agricultural of farm land

For business / commercial use (RA 8179 which amended the Foreign Investment Act of 1991): Up to
5,000 square meters of urban land, and p to three (3) hectares of rural land

Can foreigners own condominium units or corporations?

The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners to acquire
condominium units and shares in condominium corporations provided that the total controlling
interest of foreigners in the condominium project does not exceed 40 percent. (Condominium owners
have exclusive rights over the space “encompassed by the walls, ceilings, and floors” of their units
but are only co-owners of the common areas, such as the hallways, lobbies, entrances and exits,
and parking bays.)

What is meant by ownership on the basis of hereditary succession?

When the foreigner is married to a Filipino citizen, and the spouse dies, the non-Filipino as the
natural heir will become the legal owner of the property. Children, as legal heirs, may also own real
property. Every natural child, legitimate or illegitimate can inherit real property even if he or she does
not hold Filipino citizenship.
Filipinos who are naturalized as U.S. citizens lose their Filipino citizenship. Despite the loss of
citizenship, they remain eligible to acquire real property in the Philippines by hereditary succession.
Children born to them in the U.S. are also eligible to inherit real property even if they are U.S.
citizens.

Please take note however that ‘hereditary succession” refers to intestate succession wherein
the person dies without leaving a last will and testament. Transfer of ownership of land
cannot be done through a last will and testament.

What are the property rights of a foreigner married to a Filipino citizen?

1. The foreigner can legally own a house or building in the Philippines as long as he or she does not
own the land on which the structure is built. For this purpose, the documents like Deed of Sale can
contain the name of the foreigner-spouse, except for the title. (Please take note of the Muller case
which we will discuss below.)

2. When the foreigner is married to a Filipino citizen, and the spouse dies, the non-Filipino as the
natural heir will become the legal owner of the property.

One website states that “in the event of death of the Filipino spouse, the foreign spouse is allowed a
reasonable amount of time to dispose of the property and collect the proceeds or the property will
pass to any Filipino heirs and or relatives.” I cannot however find any RA or PD or Department of
Justice opinion which backs up this assertion. The Constitutional provision is clear that the foreigner-
spouse, in the event of death of the Filipino spouse, has the legal right to own the property.

Note: What are the rights of a foreigner (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? Please read the Supreme Court decision in Borromeo vs.
Descallar, G.R. No. 159310, February 24, 2009.

The facts of the Muller case and the Supreme Court decision

1. Petitioner Elena Buenaventura Muller (“Elena” for brevity) and respondent Helmut Muller
(“Helmut” for brevity) were married in Hamburg, Germany on September 22, 1989. The couple
resided in Germany at a house owned by respondent's parents but decided to move and reside
permanently in the Philippines in 1992. By this time, Helmut had inherited the house in Germany
from his parents which he sold and used the proceeds for the purchase of a parcel of land in
Antipolo, Rizal at the cost of P528,000.00 and the construction of a house amounting to
P2,300,000.00. The Antipolo property was registered in the name of Elena under Transfer Certificate
of Title No. 219438 of the Register of Deeds of Marikina, Metro Manila.

2. Due to incompatibilities and Helmut’s alleged womanizing, drinking, and maltreatment, the
spouses eventually separated.

On September 26, 1994, Helmut filed a petition for separation of properties before the Regional Trial
Court of Quezon City (“RTC” for brevity).
3. On August 12, 1996, the RTC rendered a decision which terminated the regime of absolute
community of property between the couple. It also decreed the separation of properties between
them and ordered the equal partition of personal properties located within the country, excluding
those acquired by gratuitous title during the marriage.

With regards the Antipolo property, the court held that it was acquired using Helmut’s
personal funds. However, it ruled that Helmut cannot recover his funds because the property
was purchased in violation of Section 7, Article XII of the Constitution.The RTC explained:

Pursuant to Article 92 of the Family Code, properties acquired by gratuitous title by either spouse
during the marriage shall be excluded from the community property. The real property, therefore,
inherited by Helmut in Germany is excluded from the absolute community of property of the
spouses.

Necessarily, the proceeds of the sale of said real property as well as the personal properties
purchased thereby, belong exclusively to Helmut. However, the part of that inheritance used by
Helmut for acquiring the house and lot in this country cannot be recovered by him, its acquisition
being a violation of Section 7, Article XII of the Constitution. The law will leave the parties in the
situation where they are in without prejudice to a voluntary partition by the parties of the said real
property.

4. Helmut appealed to the Court of Appeals (“CA” for brevity). The CA overturned the RTC decision
stating that Helmut merely asked for reimbursement for the purchase of the Antipolo property, and
not acquisition or transfer of ownership to him (and that therefore there was no violation of the
Constitution).

The CA further said that Elena’s ownership over the property was in trust for her husband Helmut.
As regards the house, the CA ruled that there is nothing in the Constitution which prohibits Helmut
from acquiring it.

5. Elena then appealed to the Supreme Court (“SC” for brevity). The SC overturned the CA and
thereby reinstated the decision of the RTC which was favorable to Elena.

The SC ruled that Helmut was aware of the Constitutional prohibition and expressly admitted his
knowledge. He declared that he had the Antipolo property titled in Elena’s because of the said
prohibition. His attempt at subsequently asserting or claiming a right on the said property cannot be
sustained.

The SC also said that “the Court of Appeals erred in holding that an implied trust was created and
resulted by operation of law in view of the marriage. Except for the exception provided in cases of
hereditary succession, Helmut’s disqualification from owning lands in the Philippines is absolute. Not
even an ownership in trust is allowed. Besides, where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in favor of the party who is
guilty of the fraud. To hold otherwise would allow circumvention of the constitutional prohibition.”

In sum, the Supreme Court ruled that, as the RTC had originally decided, Elena cannot be
ordered to reimburse Helmut his money used for the purchase of the lot and the construction
of the house in Antipolo.
Property rights of foreigners living in with Filipino citizens
“What are the rights of a foreigner (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?” This is the question answered by the Supreme Court in its decision
in Borromeo vs. Descallar, G.R. No. 159310, February 24, 2009.

The facts of the Borromeo vs. Descallar case and the Supreme Court ruling

1. 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 Antonietta Opalla-Descallar (“Descallar” for brevity), a separated mother of two boys
who was working as a waitress at St. Moritz Hotel. Jambrich befriended Descallar and asked her to
tutor him in English. In dire need of additional income to support her children, she agreed. The
tutorials were held in Antonietta’s residence at a squatters’ area in Gorordo Avenue.

2. Jambrich and Descallar 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 and
March 10, 1986 covering the properties, Jambrich and Descallar were referred to as the buyers. A
Deed of Absolute Sale dated November 16, 1987 was likewise issued in their favor.

3. 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 Descallar’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
Descallar’s name alone.

4. Jambrich also formally adopted respondent’s two sons.

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

6. Jambrich met petitioner Camilo F. Borromeo (“Borromeo” for brevity) sometime in 1986. Borromeo
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 Borromeo, for which
he became indebted to the latter for about Php 150,000.00. To pay for his debt, he sold his rights
and interests in the Agro-Macro properties to Borromeo for Php 250,000, as evidenced by a “Deed
of Absolute Sale/Assignment.”

7. On July 26, 1991, when Borromeo sought to register the deed of assignment, he discovered that
titles to the three lots have been transferred in the name of Descallar, and that the subject property
has already been mortgaged.

8. On August 2, 1991, Borromeo filed a complaint against Descallar for recovery of real property
before the Regional Trial Court of Mandaue City. He alleged:
(a) 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 Descallar as
buyers do not reflect the true agreement of the parties since Descallar did not pay a single centavo
of the purchase price and was not in fact a buyer;

(b) that it was Jambrich alone who paid for the properties using his exclusive funds;

(c) that Jambrich was the real and absolute owner of the properties; and,

(d) that he acquired absolute ownership by virtue of the Deed of Absolute Sale/Assignment dated
July 11, 1991 which Jambrich executed in his favor.
9. In her Answer, Descallar denied 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.

10. At the trial, Descallar presented evidence showing her alleged financial capacity to buy the
disputed property with money from a supposed copra business. Borromeo, 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.

11. The Mandaue City RTC ruled in favor of Borromeo. The court concluded that:

It is highly improbable and impossible that Descallar could acquire the properties under litigation or
could contribute any amount for their acquisition which according to her is worth more than Php
700,000.00 when while she was working as [a] waitress at St. Moritz Hotel earning Php 1,000.00 a
month as salary and tips of more or less Php 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.
The trial court, citing the Supreme Court decision in United Church Board for World
Ministries v. Sebastian ruled in favor of Borromeo.That decision reiterated the consistent ruling
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. The trial stated in its ruling:

While the acquisition and the purchase of 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 Mandaue City RTC thus rendered judgment in favor of Borromeo by:

(a) declaring that Borromeo was the owner of the properties in dispute;

(b) declaring as null and void the titles registered in Descallar’s name;

(c) ordering the Register of Deeds to cancel the titles issued in Descallar’s name and to issue new
titles in Borromeo’s name.
12. Descallar appealed to the Court of Appeals. In a Decision dated April 10, 2002, 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. When his motion for reconsideration was denied, Borromeo filed a petition for review with the
Supreme Court. The Court reversed the Court of Appeals and affirmed the decision of the Mandaue
City RTC. The Supreme Court ruled:

(a) Jambrich was the source of fund used to purchase the three parcels of land, and to construct the
house thereon. He therefore 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
in Borromeo’s favor.

(b) 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 to Jambrich and Descallar. She 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.

(c) Since the true buyer of the disputed house and lots was Jambrich (an Austrian), what now is the
effect of registration of the properties in his name?

[1] It is settled that registration is not a mode of acquiring ownership. It is only a means of confirming
the fact of its existence with notice to the world at large. 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 Descallar 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, and that it is perfect, absolute
and indefeasible. 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.
This is the situation in the instant case. Descallar 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.

[2] 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
Borromeo who is a Filipino citizen.
[3] The rationale behind the Court’s ruling in United Church Board for World Ministries, as reiterated
in subsequent cases, 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.