Filomena Gerona De Castro vs.

Joaquin Teng Queen Tan Facts: In 1938, Filomena Gerona De Castro sold the residential lot in Bulan Sorsogon to Tan Tai, a Chinese Citizen. Tan Tai died leaving the property to his widow and children (Joachin Teng Queen Tan and the other two)

Elizabeth Lee and Pacita Yu Lee, Hon. Judge Jose D. Alovera vs. Republic of the Philippines Facts: Carmen, et.al all surnamed Dilangalen sold to Lee Liong, a Chinese citizen a parcel of land located at the corner of Roxas Avenue and Pavia Street, Roxas City. In 1948, the former owners filed with the CFI Capiz an action against the heirs of Lee Liong for annulment of sale and recovery of land for reason of the constitutional prohibition against alien to acquire ownership or private agricultural land, However this was rebuffed by the Trial Court, Court of Appeals and Supreme Court by which the latter Court rely on the Doctrine of Pari Delicto hence the vendee nor the vendor may no longer recover such property. On July 1, 1968, the former owners filed an action for recovery of the same parcel of land. The heirs on the other hand filed a motion to dismiss the case on the ground of res judicata. The Trial Court dismissed the petition and when it was raised on the Supreme Court, the Supreme Court held that the suit was barred by res judicata. On September7, 1968, Elizabeth Manuel-Lee and Pacita Yu-Lee filed with the RTC, Roxas City a petition for reconstitution of title. They alleged that they were the widows of the deceased Lee Bing Hoo and Lee Bun Ting, who were the heirs of Lee Liong. Furthermore, it was alleged that the Elizabeth acquired her share of the land through an extra-judicial settlement and donation in her favor by her deceased husband Hoo while Pacita acquired her share through succession from her husband Ting. Previously, on December 9, 1948, the ROD of Capiz issued a certification that a transfer certificate of title over the property was issued in the name of Liong. However, the records of the ROD were burned during the war. Thus, petitioners here filed a petition for reconstitution of title. The RTC ordered the reconstitution of Title, however, the Solicitor General filed before the Court of Appeals for Annulment of Judgment of Reconstitution on the ground of the Constitutional prohibition of alien to acquire ownership of private agricultural land.

Before the death of Tan Tai, Joachin, one of the sons of Tan Tai became a naturalized Filipino. Six years after Tans death, the heirs executed an extra-judicial settlement of the estate wherein the entirety of the lot was allotted to Joachin. On June 15, 1968, Petitioner commenced a suit against the heirs of Tan Tai for annulment of the sale for alleged violation of the 1935 constitution prohibiting the sale of the land to aliens. The respondent filed an answer to the complaint and sought for the dismissal of the complaints on the ground that, (a) lack of cause of action, as both are in pari delicto and that the land was now being owned by a naturalized Filipimo, (b) laches and (c) acquisitive prescription.

The court dismissed the complaint however, it sustained the first two grounds, hence this is now the subject for review.

Issue: WON the sale of a land to an alien which subsequently conveyed the same to a naturalized Filipino is valid. Held: Yes. Independently of the doctrine of pari delicto, the petitioner cannot have the sale annulled and recover the lot she herself has sold. While the vendee was an alien at the time of the sale, the land has since become the property, of respondent Joaquin Teng, a naturalized Philippine citizen, who is constitutionally qualified to own land. ... The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. Applying by analogy the ruling of this Court in Vasquez vs. Giap and Li Seng Giap & Sons. ... if the ban on aliens from acquiring not only agricultural but also urban lands, as construed by this Court in the Krivenko case, is to preserve the nation's lands for future generations of Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization. (Sarsosa Vda. de Barsobia vs. Cuenco, 113 SCRA 547, at 553.)

Issue: WON the petitioners are entitled for the subject land. Held: Yes. The sale of the land in question was consummated sometime in March 1936, during the effectivity of the 1935 Constitution. Under the 1935 Constitution, aliens could not acquire private agricultural lands, save in cases of hereditary succession. Thus, Lee Liong, a chinese citizen, was disqualified to acquire the land in question.

The fact that the Court did not annul the sale of the land to an alien did not validate the transaction, for it was still contrary to the constitutional proscription against aliens acquiring lands of the public or private domain. However, the proper party to assail the illegality of the transaction was not the parties to the transaction. "In sales of real estate to aliens incapable of holding title thereto by virtue of the provisions of the Constitution both the vendor and the vendee are deemed to have committed the constitutional violation and being thus in pari delicto the courts will

not afford protection to either party." The proper party to assail the sale is the Solicitor General. This was what was done in this case when the Solicitor General initiated an action for annulment of judgment of reconstitution of title. While it took the Republic more than sixty years to assert itself, it is not barred from initiating such action. Prescription never against the State. Although ownership of the land cannot revert to the original sellers, because of the doctrine of pari delicto, the Solicitor General may initiate an action for reversion or escheat of the land to the State, subject to other defenses, as hereafter set forth. In this case, subsequent circumstances militate against escheat proceedings because the land is now in the hands of Filipinos. The original vendee, Lee Liong, has since died and the land has been inherited by his heirs and subsequently their heirs, petitioners herein. Petitioners are Filipino citizens, a fact the Solicitor General does not dispute. The constitutional proscription on alien ownership of lands of the public or private domain was intended to protect lands from falling in the hands of non-Filipinos. In this case, however, there would be no more public policy violated since the land is in the hands of Filipinos qualified to acquire and own such land. "If land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid. Thus, the subsequent transfer of the property to qualified Filipinos may no longer be impugned on the basis of the invalidity of the initial transfer. The objective of the constitutional provision to keep our lands in Filipino hands has been achieved. Philip Matthews vs. Benjamin Taylor and Joselyn Taylor Facts: Benjamin Taylor, a British national and JoselynTaylor were married. During their marriage, the couple bought a property in Boracay Island. The sale was allegedly financed by Benjamin Taylor. Consequently, they introduced improvements over the property by using Benjamins funds hence, converting the property to vacation and tourist resort. However, the relationship between the two turned sour and eventually, Joselyn ran away wth Kim Philipssen. On June 8, 1992, Joselyn executed a SPA in favor of Benjamin, authorizing him to maintain, sell, lease, sun-lease and otherwise entered into contract with third parties. Joselyn and Matthews entered into a lease agreement on July 20, 1992 and thereafter took possession and management of the resort. However, Benjamin sought to declare the agreement null and void for the reason that it was entered without his consent. That any transaction involving the said property requires his consent considering it was his funds being used to acquire and introduce improvements over the property. The RTC rendered its judgment declaring the agreement null and void. When it was raised in the CA, the CA affirms the decision of the CA.

Yes. It is undisputed that Joselyn acquired the Boracay property in 1989. Said acquisition was evidenced by a Deed of Sale with Joselyn as the vendee. The property was also declared for taxation purposes under her name. When Joselyn leased the property to petitioner, Benjamin sought the nullification of the contract on two grounds: first, that he was the actual owner of the property since he provided the funds used in purchasing the same; and second, that Joselyn could not enter into a valid contract involving the subject property without his consent. The trial and appellate courts both focused on the property relations of petitioner and respondent in light of the Civil Code and Family Code provisions. They, however, failed to observe the applicable constitutional principles, which, in fact, are the more decisive. Section 7, Article XII of the 1987 Constitution states: Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.1avvphi1 Aliens, whether individuals or corporations, have been disqualified from acquiring lands of the public domain. Hence, by virtue of the aforecited constitutional provision, they are also disqualified from acquiring private lands. The primary purpose of this constitutional provision is the conservation of the national patrimony. Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is reserved only to Filipino citizens or corporations at least sixty percent of the capital of which is owned by Filipinos. Under Section 1 of Article XIII of the Constitution, "natural resources, with the exception of public agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their agricultural lands in favor of aliens. It is partly to prevent this result that Section 5 is included in Article XIII, and it reads as follows: "Section 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." This constitutional provision closes the only remaining avenue through which agricultural resources may leak into aliens hands. It would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens. x x x xxxx If the term "private agricultural lands" is to be construed as not including residential lots or lands not strictly agricultural, the result would be that "aliens may freely acquire and possess not only residential lots and houses for themselves but entire subdivisions, and whole towns and cities," and that "they may validly buy and hold in their names lands of any area for building homes, factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses, playgrounds, airfields, and a host of other uses and purposes that are not, in appellants words, strictly agricultural." (Solicitor Generals Brief, p. 6) That this is obnoxious to the conservative spirit of the Constitution is beyond question. The rule is clear and inflexible: aliens are absolutely not allowed to acquire public or private lands in the Philippines, save only in constitutionally recognized exceptions. There is no rule more settled than this constitutional prohibition, as more and more aliens attempt to circumvent the provision by

Issue: WON the subject property of the agreement of lease is the exclusive property of Jocelyn Taylor, a Filipino citizen. Held:

trying to own lands through another. In a long line of cases, we have settled issues that directly or indirectly involve the above constitutional provision. We had cases where aliens wanted that a particular property be declared as part of their fathers estate; that they be reimbursed the funds used in purchasing a property titled in the name of another; that an implied trust be declared in their (aliens) favor; and that a contract of sale be nullified for their lack of consent.

have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands. Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify or extinguish a juridical relation. Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault." In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." This rule, however, is subject to exceptions that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest (Art. 1413, Civil Code); (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code); (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code); (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code); and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code) and labor laws (Arts. 1418-1419, Civil Code). Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership. Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved. Further, petitioner is not entitled to actual as well as interests thereon, moral and exemplary damages and attorney's fees. J.G. Summit Holdings, Inc. vs. Court of Appeals. Facts: The National Investment and Development Corporation (NIDC), a government corporation, entered into a joint venture agreement (JVA) with Kawasaki Heavy Industries, LTD. OF Kobe, Japan (KAWASAKI) for the construction, operation and management of the Subic National

Jacobus Bernhard Hulst vs. PR Builders, Inc. Facts: Jacobus Bernhard Hulst and his spouse Ida Johanaa Hulst VanIjzeren, Dutch nationals entered in a Contract to Sell with PR Builders for the purchase of a residential unit in respondents townhouse project in Barangay Niyugan, Laurel Batangas. However, respondent failed to comply hence, petitioner sought for rescission of the contract The HLURB Arbiter rendered a decision in favor of the spouses. Meanwhile, the couple obtained a divorce. Ida assigned her rights to the petitioner. The HLURB Arbiter issued a Writ of Execution addressed to the ExOfficio Sheriff. The sheriff levied on respondents 15 parcels of land and set it to public auction on April 28, 2000. Two days before the scheduled auction, the respondents filed an urgent motion to quash writ of levy in the ground it was overlevied to the total amount of P83,616,000. On the scheduled auction date, the urgent motion was still pending resolution hence, the auction commenced. The 15 properties were sold to Holly Properties Realty Corporation for an amount of P5,450,653.On that afternoon, the HLURB Director received the order to suspend the proceedings. Four months later, the HLURB Arbiter and Director issued an order setting the sheriffs levy on respondents real property.

Issue: WON the petitioner are disqualified under the constitution from owning real property. Held: Yes. Section 7 of Article XII of the 1987 Constitution provides: Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. (Emphasis supplied). The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation, development and utilization of lands of the public domain for Filipino citizens or corporations at least 60 percent of the capital of which is owned by Filipinos. Aliens, whether individuals or corporations,

Shipyard Inc, (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation. Under the JVA, the NDC and KAWASAKI will contribute P330m for the capitalization of PHILSECO in the proportion of 60% and 40% respectively. One of the salient features is the grant to the parties the right of first refusal should either of them decide to sell, assign or transfer its interest in the joint venture. NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interest were subsequently transferred to the National Government pursuant to an Administrative order. When the former President Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage, and dispose of non-performing assets of the National Government and the APT, a trust agreement was entered into between the National Government and the APT wherein the latter was named the trustee of the National Governments Share in PHILSECO. In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Governments Share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they agreed that the latters right of first refusal under the JVA be exchanged for the right to top by 5%, the highest bid of the shares. They further agreed that KAWASAKI would be entitled to name a company in which it was a stockholder, which could exercise of the right to top. KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top. At the public hearing, petitioner, submitted a bid of two billion and thirty million pesos with an acknowledgement of KAWASAKI/PHILYARDS right to top. As petitioner was declared the highest bidder, the COP approved the sale subject to the right of KAWASAKI/PHILYARDS to top JGs bid by 5% as specified in the bidding rules. On the other hand, the respondent by virtue of right to by 5%, the highest bid for the said shares timely exercised the same. Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the maintenance of the 60%-40% relationship between the NIDC and KAWASAKI arising from the Constitution because PHILSECO is a landholding corporation and need not be a public utility bound by 60%-40% constitutional limitations.

land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%40% ratio. This transfer, by itself, does not amount to a violation of the AntiDummy Laws, absent proof of any fraudulent intent. The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECOs equity. In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders ownership of the shares which is adversely affected but the capacity of the corporation to own land that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. This is the clear import of the following provisions in the Constitution: Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into coproduction, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens . Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twentyfive years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. 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. The petitioner further argues that "an option to buy land is void in itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of first refusal, is also void." Contrary to the contention of petitioner, the case of Lui She did not that say "an option to buy land is void in itself," for we ruled as follows: x x x 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 vs. Register of Deeds: [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, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership

Issue: WON KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA considering that PHILSECO owned land until the time of the bidding and KAWASAKI already held 40% of PHILSECOs equity. Held: We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to purchase the shares of their coshareholder before they are offered to a third party. The agreement of coshareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting

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 this pace of one year, with the result that Justina Santos'[s] 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 vs. Register of Deeds, is indeed in grave peril.