G.R. Nos.

113472-73 December 20, 1994

ONG CHING PO, YU SIOK LIAN DAVID ONG and JIMMY ONG, petitioners,
vs.
COURT OF APPEALS and SOLEDAD PARIAN, respondents.
Bautista, Salva, Arrieta, Salva for petitioner.
Arthem Maceda Potian for private respondent.

QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the Decision of the Court of
Appeals dated July 15, 1993, which dismissed the petition for certiorari in CA-G.R. CV Nos. 28391-92.
I
On July 23, 1947, Ong Joi Jong sold a parcel of land located at Fundidor Street, San Nicolas to private respondent
Soledad Parian, the wife of Ong Yee. The latter, the brother of petitioner Ong Ching Po, died in January 1983; while
petitioner Ong Ching Po died in October 1986. The said sale was evidenced by a notarized Deed of Sale written in English.
Subsequently, the document was registered with the Register of Deeds of Manila, which issued Transfer Certificate of
Title No. 9260 dated September 2, 1947 in the name of private respondent.
According to private respondent, she entrusted the administration of the lot and building to petitioner Ong Ching Po
when she and her husband settled in Iloilo. When her husband died, she demanded that the lot be vacated because she
was going to sell it. Unfortunately, petitioners refused to vacate the said premises.
On March 19, 1984, private respondent filed a case for unlawful detainer against petitioner Ong Ching Po before the
Metropolitan Trial Court of Manila, Branch 26. The inferior court dismissed her case. The dismissal was affirmed by the
Regional Trial Court, Branch 10, Manila. The decision of the Regional Trial Court was, in turn, affirmed by the Court of
Appeals, which dismissed the petition. The decision of the Court of Appeals became final and executory.
Petitioners, on the other hand, claimed that on July 23, 1946, petitioner Ong Ching Po bought the said parcel of land
from Ong Joi Jong. The sale was evidenced by a photo copy of a Deed of Sale written in Chinese with the letter head
"Sincere Trading Co." (Exh. "B"). An English translation of said document (Exh. "C") read as follows:
Deed of Sale
I, Ong Joi Jong, a party to this Deed of Sale hereby sell in absolutely (sic) manner a lot located on No. 4
Fundidor Street, San Nicolas an (sic) area consisting 213 square meters including a one-story house
erected thereon unto Mr. Ong Ching Po for the sum of P6,000.00 the receipt of which is hereby
acknowledged by me and consequently I have executed and signed the government registered title (sic)
the said lot inclusive of the house erected thereon, now belong (sic) to Mr. Ong Ching Po unequivocally.
And the purpose of this document is to precisely serve as proof of the sale.
Addendum: I have acceded to the request of Mr. Ong Ching Po into signing another document in favor
of Soledad Parian (She is the Filipino wife of Ong Yee, brother of Ong Ching Po) for the purpose of
facilitating the issuance of the new title by the City Register of Deeds and for the reason that he is not
yet a Filipino. I certify to the truthfulness of this fact.

Lot Seller: Ong Joi Jong

(Exhibits for the plaintiff, p. 4)
On December 6, 1983, petitioner Ong Ching Po executed a Deed of Absolute Sale conveying to his children, petitioners
Jimmy and David Ong, the same property sold by Ong Joi Jong to private respondent in 1947. On December 12 1985,
petitioners Ong Ching Po, Jimmy Ong and David Ong filed an action for reconveyance and damages against private
respondent in the Regional Trial Court, Branch 53, Manila, docketed as Case No. 85-33962.
On July 26, 1986, private respondent filed an action for quieting of title against petitioners Ong Ching Po and his wife,
petitioner Yu Siok Lian, in the Regional Trial Court, Branch 58, Manila, docketed as Civil Case No.
86-36818. Upon her motion, the case was consolidated with Civil Case No.
85-33962. On May 30 1990, the trial court rendered a decision in favor of private respondent. On appeal by petitioners
to the Court of Appeals, the said court affirmed the decision of the Regional Trial Court.
Hence, this petition.
II
According to petitioners, the Court of Appeals erred:
(1) When it gave full faith and credit to the Deed of Sale (Exh. "A") in favor of private respondent,
instead of the Deed of Sale (Exh. "B" and its translation, Exh. "C") in favor of petitioner Ong Ching Po.
(2) When it concluded that the acts of petitioners were not acts of ownership; and
(3) When it ruled that no express nor implied trust existed between petitioners and private respondent
(Rollo, pp. 17-18).
As stated by petitioners themselves, what is in dispute ". . . is not so much as to which between Exhibit "A" and "Exhibit
"B" is more weighty, but whether this document is what it purports to be (i.e., a deed of conveyance in favor of Soledad
Parian [private respondent] or it was only resorted to or executed as a subterfuge because the real buyer (Ong Ching Po)
was an alien and it was agreed upon between Ong Ching Po and his brother (Ong Yee, Soledad Parian's husband) that
the land be registered in the name of Soledad Parian in order to avoid legal complications and to facilitate registration
and transfer and that the said title would be transferred by Soledad to Ong Ching Po or his successors-in-interest and
that she would be holding the title in trust for him" (Rollo, pp. 19-20).
We cannot go along with the claim that petitioner Ong Ching Po merely used private respondent as a dummy to have
the title over the parcel of land registered in her name because being an alien he was disqualified to own real property
in the Philippines. To sustain such an outrageous contention would be giving a high premium to a violation of our
nationalization laws.
Assuming that Exhibit "B" is in existence and that it was duly executed, still petitioners cannot claim ownership of the
disputed lot by virtue thereof.
Section 5, Article XIII of the 1935 Constitution provides, as follows:
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.
Section 14, Article XIV of the 1973 Constitution provides, as follows:

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 in the public domain.
Section 7, Article XII of the 1987 Constitution provides:
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 in the public domain.
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" (II Bernas, The Constitution of the Philippines 439-440 [1988 ed.]).
The 1935 Constitution reserved the right to participate in the "disposition, exploitation, development and utilization" of
all "lands of the public domain and other natural resources of the Philippines" for Filipino citizens or corporations at
least sixty percent of the capital of which was owned by Filipinos. Aliens, whether individuals or corporations, have been
disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.
Petitioner Ong Ching Po was a Chinese citizen; therefore, he was disqualified from acquiring and owning real property.
Assuming that the genuineness and due execution of Exhibit "B" has been established, the same is null and void, it being
contrary to law.
On the other end of the legal spectrum, the deed of sale executed by Ong Joi Jong in favor of private respondent (Exh.
"A") is a notarized document.
To remove the mantle of validity bestowed by law on said document, petitioners claim that private respondent admitted
that she did not pay anything as consideration for the purported sale in her favor. In the same breath, petitioners said
that private respondent implied in her deposition that it was her husband who paid for the property. It appears,
therefore, that the sale was financed out of conjugal funds and that it was her husband who handled the transaction for
the purchase of the property. Such transaction is a common practice in Filipino-family affairs.
It is not correct to say that private respondent never took possession of the property. Under the law, possession is
transferred to the vendee by virtue of the notarized deed of conveyance. Under Article 1498 of the Civil Code of the
Philippines, "when the sale is made through a public instrument, the execution thereof shall be equivalent to the
delivery of the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred." If
what petitioners meant was that private respondent never lived in the building constructed on said land, it was because
her family had settled in Iloilo.
There is no document showing the establishment of an express trust by petitioner Ong Ching Po as trustor and private
respondent as trustee. Not even Exhibit "B" can be considered as such a document because private respondent, the
registered owner of the property subject of said "deed of sale," was not a party thereto. The oral testimony to prove the
existence of the express trust will not suffice. Under Article 1443 of the Civil Code of the Philippines, "No express trust
concerning an immovable or any interest therein may be proved by parole evidence."
Undaunted, petitioners argue that if they cannot prove an express trust in writing, they can prove an implied trust orally.
While an implied trust may be proved orally (Civil Code of the Philippines, Art. 1457), the evidence must be trustworthy
and received by the courts with extreme caution, because such kind of evidence may be easily fabricated (Salao v. Salao,
70 SCRA 65 [1976]). It cannot be made to rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations (Cf. De Leon v. Molo-Peckson, et al., 116 Phil. 1267 [1962]). Petitioners do not claim that Ong Yee was not in
a financial position to acquire the land and to introduce the improvements thereon. On the other hand, Yu Siok Lian, the
wife of petitioner Ong Ching Po, admitted in her testimony in court that Ong Yee was a stockholder of Lam Sing
Corporation and was engaged in business.

The Court of Appeals did not give any credence to Exhibit "B" and its translation, Exhibit "C", because these documents
had not been properly authenticated.
Under Section 4, Rule 130 of the Revised Rules of Court:
Secondary Evidence when Original is lost or destroyed. When the original writing has been lost or
destroyed, or cannot be produced in court, upon proof of its execution and lost or destruction, or
unavailability, its contents may be proved by a copy, or by a recital of its contents in some authentic
document, or by the recollection of the witnesses.
Secondary evidence is admissible when the original documents were actually lost or destroyed. But prior to the
introduction of such secondary evidence, the proponent must establish the former existence of the document. The
correct order of proof is as follows: existence; execution; loss; contents. This order may be changed if necessary in the
discretion of the court (De Vera v. Aguilar, 218 SCRA 602 [1993]).
Petitioners failed to adduce evidence as to the genuineness and due execution of the deed of sale, Exhibit "B".
The due execution of the document may be established by the person or persons who executed it; by the person before
whom its execution was acknowledged; or by any person who was present and saw it executed or who after its
execution, saw it and recognized the signatures; or by a person to whom the parties to the instrument had previously
confessed the execution thereof (De Vera v. Aguilar, supra).
Petitioner Yu Siok Lian testified that she was present when said document was executed, but the trial court rejected her
claim and held:
If it is true that she was present, why did she not sign said document, even merely as a witness? Her oral
testimony is easy to concoct or fabricate. Furthermore, she was married only on September 6, 1946 to
the plaintiff, Ong Ching Po, in Baguio City where she apparently resided, or after the deed of sale was
executed. The Court does not believe that she was present during the execution and signing of the deed
of sale involved therein, notwithstanding her pretensions to the contrary (Decision p. 6, Records p. 414).
As to the contention of petitioners that all the tax receipts, tax declaration, rental receipts, deed of sale (Exh. "B") and
transfer certificate of title were in their possession, private respondent explained that she and her husband entrusted
said lot and building to petitioners when they moved to Iloilo.
As observed by the Court of Appeals:
We find, however, that these acts, even if true, are not necessarily reflective of dominion, as even a
mere administrator or manager may lawfully perform them pursuant to his appointment or employment
(Rollo,
p. 10).
It is markworthy that all the tax receipts were in the name of private respondent and her husband. The rental receipts
were also in the name of her husband.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

G.R. No. 113539 March 12, 1998

CELSO R. HALILI and ARTHUR R. HALILI, petitioners,
vs.
COURT OF APPEALS, HELEN MEYERS GUZMAN, DAVID REY GUZMAN and EMILIANO CATANIAG,respondents.

PANGANIBAN, J.:
The factual findings of a trial court, when affirmed by the Court of Appeals, may no longer be reviewed and reversed by
this Court in a petition for review under Rule 45 of the Rules of Court. The transfer of an interest in a piece of land to an
alien may no longer be assailed on constitutional grounds after the entire parcel has been sold to a qualified citizen.
The Case
These familiar and long-settled doctrines are applied by this Court in denying this petition under Rule 45 to set aside the
Decision 1 of the Court of Appeals 2 in CA-GR CV No. 37829 promulgated on September 14, 1993, the dispositive portion
of which states: 3
WHEREFORE, and upon all the foregoing, the Decision of the court below dated March 10, 1992
dismissing the complaint for lack of merit is AFFIRMED without pronouncement as to costs.
The Facts
The factual antecedents, as narrated by Respondent Court, are not disputed by the parties. We reproduce them in part,
as follows:
Simeon de Guzman, an American citizen, died sometime in 1968, leaving real properties in the
Philippines. His forced heirs were his widow, defendant appellee [herein private respondent] Helen
Meyers Guzman, and his son, defendant appellee [also herein private respondent] David Rey Guzman,
both of whom are also American citizens. On August 9, 1989, Helen executed a deed of quitclaim (Annex
A-Complaint), assigning [,] transferring and conveying to David Rey all her rights, titles and interests in
and over six parcels of land which the two of them inherited from Simeon.
Among the said parcels of land is that now in litigation, . . . situated in Bagbaguin, Sta. Maria, Bulacan,
containing an area of 6,695 square meters, covered by Transfer Certificate of Title No. T-170514 of the
Registry of Deeds of Bulacan. The quitclaim having been registered, TCT No. T-170514 was cancelled and
TCT No. T-120259 was issued in the name of appellee David Rey Guzman.
On February 5, 1991, David Rey Guzman sold said parcel of land to defendant-appellee [also herein
private respondent] Emiliano Cataniag, upon which TCT No. T-120259 was cancelled and TCT No. T130721(M) was issued in the latter's name. 4
Petitioners, who are owners of the adjoining lot, filed a complaint before the Regional Trial Court of Malolos, Bulacan,
questioning the constitutionality and validity of the two conveyances between Helen Guzman and David Rey Guzman,
and between the latter and Emiliano Cataniag and claiming ownership thereto based on their right of legal
redemption under Art. 1621 5 of the Civil Code.
In its decision 6 dated March 10, 1992, 7 the trial court dismissed the complaint. It ruled that Helen Guzman's waiver of
her inheritance in favor of her son was not contrary to the constitutional prohibition against the sale of land to an alien,
since the purpose of the waiver was simply authorize David Rey Guzman to dispose of their properties in accordance
with the Constitution and the laws of the Philippines, and not to subvert them. On the second issue, it held that the

subject land was urban; hence, petitioners had no reason to invoke their right of redemption under Art. 1621 of the Civil
Code.
The Halilis sought a reversal from the Court of Appeals which, however, denied their appeal. Respondent Court affirmed
the factual finding of the trial court that the subject land was urban. Citing Tejido vs. Zamacoma, 8 and Yap
vs. Grageda, 9 it further held that, although the transfer of the land to David Rey may have been invalid for being
contrary to the Constitution, there was no more point in allowing herein petitioners to recover the property, since it has
passed on to and was thus already owned by a qualified person.
Hence, this petition. 10
Issues
The petition submits the following assignment of errors:
. . . the Honorable Court of Appeals
1. Erred in affirming the conclusion of the trial court that the land in question is urban, not rural
2. Erred in denying petitioners' right of redemption under Art. 1621 of the Civil Code
3. Having considered the conveyance from Helen Meyers Guzman to her son David Rey Guzman illegal,
erred in not declaring the same null and void[.] 11
The Court's Ruling
The petition has no merit.
First Issue: The Land Is Urban;
Thus, No Right of Redemption
The first two errors assigned by petitioners being interrelated the determination of the first being a prerequisite to
the resolution of the second shall be discussed together
Subject Land Is Urban
Whether the land in dispute is rural or urban is a factual question which, as a rule, is not reviewable by this Court. 12Basic
and long-settled is the doctrine that findings of fact of a trial judge, when affirmed by the Court of Appeals, are binding
upon the Supreme Court. This admits of only a few exceptions, such as when the findings are grounded entirely on
speculation, surmises or conjectures; when an inference made by the appellate court from its factual findings is
manifestly mistaken, absurd or impossible; when there is grave abuse of discretion in the appreciation of facts; when the
findings of the appellate court go beyond the issues of the case, run contrary to the admissions of the parties to the case
or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; when there is a
misappreciation of facts; when the findings of fact are conclusions without mention of the specific evidence on which
they are based, are premised on the absence of evidence or are contradicted by evidence on record. 13
The instant case does not fall within any of the aforecited exceptions. In fact, the conclusion of the trial court that the
subject property is urban land is based on clear and convincing evidence, as shown in its decision which disposed
thus:
. . . As observed by the court, almost all the roadsides along the national ghighway [sic] of Bagbaguin, Sta.
Maria, Bulacan, are lined up with residential, commercial or industrial establishments. Lined up along

the Bagbaguin Road are factories of feeds, woodcrafts [sic] and garments, commercial stores for tires,
upholstery materials, feeds supply and spare parts. Located therein likewise were the Pepsi-Cola
Warehouse, the Cruz Hospital, three gasoline stations, apartment buildings for commercial purposes
and construction firms. There is no doubt, therefore, that the community is a commercial area thriving
in business activities. Only a short portion of said road [is] vacant. It is to be noted that in the Tax
Declaration in the name of Helen Meyers Guzman[,] the subject land is termed agricultural[,] while in
the letter addressed to defendant Emiliano Cataniag, dated October 3, 1991, the Land Regulatory Board
attested that the subject property is commercial and the trend of development along the road is
commercial. The Board's classification is based on the present condition of the property and the
community thereat. Said classification is far more later [sic] than the tax declaration. 14
No Ground to Invoke
Right of Redemption
In view of the finding that the subject land is urban in character, petitioners have indeed no right to invoke Art. 1621 of
the Civil Code, which presupposes that the land sought to be redeemed is rural. The provision is clearly worded and
admits of no ambiguity in construction:
Art. 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural
land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any
rural land.
xxx xxx xxx
Under this article, both lands that sought to be redeemed and the adjacent lot belonging to the person exercising the
right of redemption must be rural. If one or both are urban, the right cannot be invoked. 15 The purpose of this
provision, which is limited in scope to rural lands not exceeding one hectare, is to favor agricultural development. 16 The
subject land not being rural and, therefore, not agricultural, this purpose would not be served if petitioners are granted
the right of redemption under Art. 1621. Plainly, under the circumstances, they cannot invoke it.
Second Issue: Sale to Cataniag Valid
Neither do we find any reversible error in the appellate court's holding that the sale of the subject land to Private
Respondent Cataniag renders moot any question on the constitutionally of the prior transfer made by Helen Guzman to
her son David Rey.
True, Helen Guzman's deed of quitclaim in which she assigned, transferred and conveyed to David Rey all her rights,
titles and interests over the property she had inherited from her husband collided with the Constitution, Article XII,
Section 7 of which 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.
The landmark case of Krivenko vs. Register of Deeds 17 settled the issue as to who are qualified (and disqualified) to own
public as well as private lands in the Philippines. Following a long discourse maintaining that the "public agricultural
lands" mentioned in Section 1, Article XIII of the 1935 Constitution, include residential, commercial and industrial lands,
the Court then stated:
Under section 1 of Article XIII [now Sec. 2, Art. XII] 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. Undoubtedly, as above indicated, section 5 [now Sec. 7] is intended to
insure the policy of nationalization contained in section 1 [now Sec. 2]. Both sections must, therefore, be
read together for they have the same purpose and the same subject matter. It must be noticed that the
persons against whom the prohibition is directed in section 5 [now Sec. 7] are the very same persons
who under section 1 [now Sec. 2] are disqualified "to acquire or hold lands of the public domain in the
Philippines." And the subject matter of both sections is the same, namely, the non transferability of
"agricultural land" to aliens . . . . 18
The Krivenko rule was recently reiterated in Ong Ching Po vs. Court of Appeals, 19 which involves a sale of land to a
Chinese citizen. The Court sad:
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" (II Bernas, The Constitution of the Philippines 439-440 [1988 ed.]).
The 1935 Constitution reserved the right to participate in the "disposition, exploitation, development
and utilization" of all "lands of the public domain and other natural resources of the Philippines" for
Filipino citizens or corporations at least sixty percent of the capital of which was owned by Filipinos.
Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence,
they have also been disqualified from acquiring private lands. 20
In fine, non-Filipinos cannot acquire or hold title to private lands or to lands of the public domain, except only by way of
legal succession. 21
But what is the effect of a subsequent sale by the disqualified alien vendee to a qualified Filipino citizen? This is not a
novel question. Jurisprudence is consistent that "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." 22
Thus, in United Church Board of Word Ministries vs. Sebastian, 23 in which an alien resident who owned properties in the
Philippines devised to an American non-stock corporation part of his shares of stock in a Filipino corporation that owned
a tract of land in Davao del Norte, the Court sustained the invalidity of such legacy. However, upon proof that ownership
of the American corporation has passed on to a 100 percent Filipino corporation, the Court ruled that the defect in the
will was "rectified by the subsequent transfer of the property."
The present case is similar to De Castro vs. Tan. 24 In that case, a residential lot was sold to a Chinese. Upon his death, his
widow and children executed an extrajudicial settlement, whereby said lot was allotted to one of his sons who became a
naturalized Filipino. The Court did not allow the original vendor to have the sale annulled and to recover the property,
for the reason that the land has since become the property of a naturalized Filipino citizen who is constitutionally
qualified to own land.
Likewise, in the cases of Sarsosa vs. Cuenco, 25 Godinez vs. Pak Luen, 26 Vasquez vs. Li Seng Giap 27 and Herrera vs. Luy
Kim Guan, 28 which similarly involved the sale of land to an alien who thereafter sold the same to a Filipino citizen, the

Court again applied the rule that the subsequent sale can no longer be impugned on the basis of the invalidity of the
initial transfer.
The rationale of this principle was explained in Vasquez vs. Li Seng Giap thus:
. . . [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 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. 29
Accordingly, since the disputed land is now owned by Private Respondent Cataniag, a Filipino citizen, the prior invalid
transfer can no longer be assailed. The objective of the constitutional provision to keep our land in Filipino hands
has been served.
WHEREFORE, the petition is hereby DENIED. The challenged Decision is AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.
Footnotes
1 Rollo, pp. 19-30.
2 Ninth Division, composed of JJ. Cezar D. Francisco, ponente; Gloria C. Paras (chairman) and
Buenaventura J. Guerrero, concurring.
3 Assailed Decision, p. 12; rollo, p. 30.
4 Assailed Decision, p. 2; rollo, p. 20.
5 Art. 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural
land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any
rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and
other apparent servitudes for the benefit of other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner
of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the
one who first requested the redemption.
6 CA Rollo, pp. 29-31.
7 Penned by Judge Valentin R. Cruz.
8 138 SCRA 78, August 7, 1985.
9 121 SCRA 244, March 28, 1983.
10 This case was considered submitted for resolution upon receipt by this Court of petitioners'
memorandum on November 8, 1996.

11 Petition, p. 6; rollo, p. 12.

12 First Philippine International Bank vs. Court of Appeals, 252 SCRA 259, January 24, 1996.
13 Fuentes vs. Court of Appeals, 268 SCRA 703, February 26, 1997; Geronimo vs. Court of Appeals, 224
SCRA 494, July 5, 1993. See also Lacanilao vs. Court of Appeals, 262 SCRA 486, September 26, 1996;
Verendia vs. Court of Appeals, 217 SCRA 417, January 22, 1993.
14 RTC decision, p.3; CA rollo, p. 31.
15 Tolentino, ibid.; Cortes vs. Flores, 47 Phil 1992, September 6, 1924.
16 Tolentino, Civil Code of the Philippines, 1992 ed., Vol. V, p. 182; Del Pilar vs. Catindig, 35 Phil 263,
November 4, 1916.
17 79 Phil 461, November 15, 1947, per Moran, CJ.
18 Ibid., pp. 473-474.
19 239 SCRA 341, December 20, 1994, per Quiason, J.
20 At p. 346.
21 Cf. Ramirez vs. Vda. de Ramirez, 111 SCRA 704, February 15, 1982.
22 United Church Board of World Ministries vs. Sebastian, 159 SCRA 446, 451-452, March 30, 1988; per
Cruz, J. See also Tejido vs. Zamacoma, 138 SCRA 78, August 7, 1985; Sarsosa vda. de Barsobia vs. Cuenco,
113 SCRA 547, April 16, 1982; Godinez vs Fong Pak Luen, 120 SCRA 223, January 27, 1983; Yap vs.
Maravillas, 121 SCRA 244, March 28, 1983; De Castro vs. Tan, 129 SCRA 85, April 30, 1984.
23 Ibid.
24 Supra.
25 Supra.
26 Supra.
27 96 Phil 447, January 31, 1955, per Padilla, J.
28 1 SCRA 406, January 31, 1961, per Barrera, J.
29 Supra, p. 453.

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 period 5 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, Doa 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 Doa 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
Hun26 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 P56,564.3528 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 Doa 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 Doa 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 food29 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
theKrivenko 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.1awphl.nt
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
theKrivenko 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. Alienvendee 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
theKrivenko 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).

Id. at 876.

55 Phil. 99 (1930).

77 Phil. 470 (1946).

Civ. Code, art. 1197.

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

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

T.s.n., pp. 70-71, 73-74, June 20, 1960 (emphasis added).

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.

16

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

27

According to the lower court the amount should be P38,422.94, but the difference appears to be the result of
an error in addition.
28

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

93 Phil. 827.

93 Phil. 843.

93 Phil. 855.

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

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

At p. 835.

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).

G.R. No. 124293

January 31, 2005

J.G. SUMMIT HOLDINGS, INC., petitioner,

vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET PRIVATIZATION TRUST; and
PHILYARDS HOLDINGS, INC., respondents.
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the petitioner, J.G. Summit Holdings, Inc. for reconsideration of
our Resolution dated September 24, 2003 and to elevate this case to the Court En Banc. The petitioner questions the
Resolution which reversed our Decision of November 20, 2000, which in turn reversed and set aside a Decision of the
Court of Appeals promulgated on July 18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as follows:
On January 27, 1997, 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 Shipyard, Inc. (SNS) which subsequently became the
Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will
contribute P330 million for the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient
features is the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its
interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] to any third party without
giving the other under the same terms the right of first refusal. This provision shall not apply if the transferee is a
corporation owned or controlled by the GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank
(PNB). Such interests were subsequently transferred to the National Government pursuant to Administrative Order No.
14. On December 8, 1986, President Corazon C. 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. Thereafter, on February 27, 1987, a trust agreement was
entered into between the National Government and the APT wherein the latter was named the trustee of the National
Government's share in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations
to PNB, the National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing KAWASAKI's
shareholdings to 2.59%.
In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National
Government's share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they
agreed that the latter's right of first refusal under the JVA be "exchanged" for the right to top by five percent (5%) the
highest bid for the said shares. They further agreed that KAWASAKI would be entitled to name a company in which it
was a stockholder, which could exercise the right to top. On September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI)1 would exercise its right to top.
At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of the JVA between
NIDC and KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the National Government's 87.6% equity

share in PHILSECO. The provisions of the ASBR were explained to the interested bidders who were notified that the
bidding would be held on December 2, 1993. A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Government's equity in
PHILSECO consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECO's outstanding capital stock),
which will be sold as a whole block in accordance with the rules herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the
Committee on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National
Government's 87.67% equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (P1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding,
for the purpose of determining whether or not it should be endorsed by the APT Board of Trustees to the COP, and the
latter approves the same. The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings,
Inc., that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT
within which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five
(5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option to Top the Highest
Bid," they shall so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten
percent (10%) of the highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph
6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring
them as the preferred bidder and they shall have a period of ninety (90) days from the receipt of the APT's notice within
which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to exercise their "Option to Top the
Highest Bid" within the thirty (30)-day period, APT will declare the highest bidder as the winning bidder.
xxx xxx xxx
12.0 The bidder shall be solely responsible for examining with appropriate care these rules, the official bid forms,
including any addenda or amendments thereto issued during the bidding period. The bidder shall likewise be responsible
for informing itself with respect to any and all conditions concerning the PHILSECO Shares which may, in any manner,
affect the bidder's proposal. Failure on the part of the bidder to so examine and inform itself shall be its sole risk and no
relief for error or omission will be given by APT or COP. . . .
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. 2 submitted a bid of Two Billion and Thirty
Million Pesos (P2,030,000,000.00) with an acknowledgment of KAWASAKI/[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to act on APT's
recommendation based on the result of this bidding. Should the COP approve the highest bid, APT shall advise Kawasaki
Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National
Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)

calendar days from the date of receipt of such advice from APT within which to exercise their "Option to Top the Highest
Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993 "subject to the right of
Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to top its bid on the grounds that:
(a) the KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular
Life violated the ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and
prejudicing the weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the same option to
top to PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public
bidding or auction sale; and (e) the JG Summit consortium was not estopped from questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject
bidding. On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and
that the COP had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock
Purchase Agreement. Consequently, petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057. On
May 11, 1994, said petition was referred to the Court of Appeals. On July 18, 1995, the Court of Appeals denied the
same for lack of merit. It ruled that the petition for mandamus was not the proper remedy to question the
constitutionality or legality of the right of first refusal and the right to top that was exercised by KAWASAKI/PHI, and that
the matter must be brought "by the proper party in the proper forum at the proper time and threshed out in a full
blown trial." The Court of Appeals further ruled that the right of first refusal and the right to top are prima facie legal
and that the petitioner, "by participating in the public bidding, with full knowledge of the right to top granted to
KAWASAKI/[PHILYARDS] isestopped from questioning the validity of the award given to [PHILYARDS] after the latter
exercised the right to top and had paid in full the purchase price of the subject shares, pursuant to the ASBR." Petitioner
filed a Motion for Reconsideration of said Decision which was denied on March 15, 1996. Petitioner thus filed a Petition
for Certiorari with this Court alleging grave abuse of discretion on the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the Court of Appeals erred when
it dismissed the petition on the sole ground of the impropriety of the special civil action of mandamus because the
petition was also one of certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose capitalization
must be sixty percent (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI under the Asset
Specific Bidding Rules (ASBR) drafted for the sale of the 87.67% equity of the National Government in PHILSECO is illegal
not only because it violates the rules on competitive bidding but more so, because it allows foreign corporations to
own more than 40% equity in the shipyard. It also held that "although the petitioner had the opportunity to examine the
ASBR before it participated in the bidding, it cannot be estopped from questioning the unconstitutional, illegal and
inequitable provisions thereof." Thus, this Court voided the transfer of the national government's 87.67% share in
PHILSECO to Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to the said
shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the Court
of Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million
Pesos (P2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECO's total
capitalization;
(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred
Thousand Pesos (P2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x resolution: (1) Whether
PHILSECO is a public utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to
40% of the total capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the
principles of competitive bidding.3 (citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first issue, we held that
Philippine Shipyard and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public
utility4 and that no law declares a shipyard to be a public utility. 5 On the second issue, we found nothing in the 1977
Joint Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from
acquiring more than 40% of PHILSECOs total capitalization.6 On the final issue, we held that the right to top granted to
KAWASAKI in exchange for its right of first refusal did not violate the principles of competitive bidding. 7
On October 20, 2003, the petitioner filed a Motion for Reconsideration 8 and a Motion to Elevate This Case to the
Court En Banc.9 Public respondents Committee on Privatization (COP) and Asset Privatization Trust (APT), and private
respondent Philyards Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.s (JG Summits)
Motion for Reconsideration and Motion to Elevate This Case to the Court En Banc on January 29, 2004 and February 3,
2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this litigation are the following:
1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.
2. Whether the motion for reconsideration raises any new matter or cogent reason to warrant a reconsideration
of this Courts Resolution of September 24, 2003.
Motion to Elevate this Case to the
Court En Banc
The petitioner prays for the elevation of the case to the Court en banc on the following grounds:
1. The main issue of the propriety of the bidding process involved in the present case has been confused with
the policy issue of the supposed fate of the shipping industry which has never been an issue that is
determinative of this case.10
2. The present case may be considered under the Supreme Court Resolution dated February 23, 1984 which
included among en banc cases those involving a novel question of law and those where a doctrine or principle
laid down by the Court en banc or in division may be modified or reversed.11
3. There was clear executive interference in the judicial functions of the Court when the Honorable Jose Isidro
Camacho, Secretary of Finance, forwarded to Chief Justice Davide, a memorandum dated November 5, 2001,
attaching a copy of the Foreign Chambers Report dated October 17, 2001, which matter was placed in the
agenda of the Court and noted by it in a formal resolution dated November 28, 2001. 12
Opposing J.G. Summits motion to elevate the case en banc, PHILYARDS points out the petitioners inconsistency in
previously opposing PHILYARDS Motion to Refer the Case to the Court En Banc. PHILYARDS contends that J.G. Summit

should now be estopped from asking that the case be referred to the Court en banc. PHILYARDS further contends that
the Supreme Court en banc is not an appellate court to which decisions or resolutions of its divisions may be appealed
citing Supreme Court Circular No. 2-89 dated February 7, 1989.13 PHILYARDS also alleges that there is no novel question
of law involved in the present case as the assailed Resolution was based on well-settled jurisprudence. Likewise,
PHILYARDS stresses that the Resolution was merely an outcome of the motions for reconsideration filed by it and the
COP and APT and is "consistent with the inherent power of courts to amend and control its process and orders so as to
make them conformable to law and justice. (Rule 135, sec. 5)"14Private respondent belittles the petitioners allegations
regarding the change in ponente and the alleged executive interference as shown by former Secretary of Finance Jose
Isidro Camachos memorandum dated November 5, 2001 arguing that these do not justify a referral of the present case
to the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En Banc should be granted, J.G. Summit further argued that:
its Opposition to the Office of the Solicitor Generals Motion to Refer is different from its own Motion to Elevate;
different grounds are invoked by the two motions; there was unwarranted "executive interference"; and the change
in ponente is merely noted in asserting that this case should be decided by the Court en banc.15
We find no merit in petitioners contention that the propriety of the bidding process involved in the present case has
been confused with the policy issue of the fate of the shipping industry which, petitioner maintains, has never been an
issue that is determinative of this case. The Courts Resolution of September 24, 2003 reveals a clear and definitive
ruling on the propriety of the bidding process. In discussing whether the right to top granted to KAWASAKI in exchange
for its right of first refusal violates the principles of competitive bidding, we made an exhaustive discourse on the rules
and principles of public bidding and whether they were complied with in the case at bar. 16This Court categorically ruled
on the petitioners argument that PHILSECO, as a shipyard, is a public utility which should maintain a 60%-40% Filipinoforeign equity ratio, as it was a pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding
industry which was beyond avoidance.17
We reject petitioners argument that the present case may be considered under the Supreme Court Resolution dated
February 23, 1984 which included among en banc cases those involving a novel question of law and those where a
doctrine or principle laid down by the court en banc or in division may be modified or reversed. The case was resolved
based on basic principles of the right of first refusal in commercial law and estoppel in civil law. Contractual obligations
arising from rights of first refusal are not new in this jurisdiction and have been recognized in numerous
cases.18 Estoppel is too known a civil law concept to require an elongated discussion. Fundamental principles on public
bidding were likewise used to resolve the issues raised by the petitioner. To be sure, petitioner leans on the right to top
in a public bidding in arguing that the case at bar involves a novel issue. We are not swayed. The right to top was merely
a condition or a reservation made in the bidding rules which was fully disclosed to all bidding parties. In Bureau Veritas,
represented by Theodor H. Hunermann v. Office of the President, et al., 19 we dealt with this conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA
1245), that in an "invitation to bid, there is a condition imposed upon the bidders to the effect that the bidding shall be
subject to the right of the government to reject any and all bids subject to its discretion. In the case at bar, the
government has made its choice and unless an unfairness or injustice is shown, the losing bidders have no cause to
complain nor right to dispute that choice. This is a well-settled doctrine in this jurisdiction and elsewhere."
The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that
function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere
therewith, unless it is apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486
[1960]). x x x The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison,
evaluation, and deliberation. This task can best be discharged by the Government agencies concerned, not by the Courts.
The role of the Courts is to ascertain whether a branch or instrumentality of the Government has transgressed its
constitutional boundaries. But the Courts will not interfere with executive or legislative discretion exercised within those
boundaries. Otherwise, it strays into the realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by
a government entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest
Credit Corp. v. Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion
must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty
enjoined by law, as to act at all in contemplation of law, where the power is exercised in an arbitrary and despotic
manner by reason of passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-40867, 26 July 1988, 163
SCRA 489).
The facts in this case do not indicate any such grave abuse of discretion on the part of public respondents when they
awarded the CISS contract to Respondent SGS. In the "Invitation to Prequalify and Bid" (Annex "C," supra), the CISS
Committee made an express reservation of the right of the Government to "reject any or all bids or any part thereof
or waive any defects contained thereon and accept an offer most advantageous to the Government." It is a wellsettled rule that where such reservation is made in an Invitation to Bid, the highest or lowest bidder, as the case may
be, is not entitled to an award as a matter of right (C & C Commercial Corp. v. Menor, L-28360, 27 January 1983, 120
SCRA 112). Even the lowest Bid or any Bid may be rejected or, in the exercise of sound discretion, the award may be
made to another than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur., 788). (emphases
supplied)1awphi1.nt
Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the government in the bidding
rules which was made known to all parties. It was a condition imposed on all bidders equally, based on the APTs
exercise of its discretion in deciding on how best to privatize the governments shares in PHILSECO. It was not a
whimsical or arbitrary condition plucked from the ether and inserted in the bidding rules but a condition which the APT
approved as the best way the government could comply with its contractual obligations to KAWASAKI under the JVA and
its mandate of getting the most advantageous deal for the government. The right to top had its history in the mutual
right of first refusal in the JVA and was reached by agreement of the government and KAWASAKI.
Further, there is no "executive interference" in the functions of this Court by the mere filing of a memorandum by
Secretary of Finance Jose Isidro Camacho. The memorandum was merely "noted" to acknowledge its filing. It had no
further legal significance. Notably too, the assailed Resolution dated September 24, 2003 was decided unanimously by
the Special First Division in favor of the respondents.
Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court 20 and the Court en banc is
not an appellate court to which decisions or resolutions of a Division may be appealed. 21
For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioners Motion for Reconsideration. First, that a fair resolution of the
case should be based on contract law, not on policy considerations; the contracts do not authorize the right to top to be
derived from the right of first refusal.22 Second, that neither the right of first refusal nor the right to top can be legally
exercised by the consortium which is not the proper party granted such right under either the JVA or the Asset Specific
Bidding Rules (ASBR).23 Third, that the maintenance of the 60%-40% relationship between the National Investment and
Development Corporation (NIDC) and KAWASAKI arises from contract and from the Constitution because PHILSECO is a
landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation.24
On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to show compelling
reasons to warrant a reconsideration of the Decision of the Court.25 PHILYARDS denies that the Decision is based mainly
on policy considerations and points out that it is premised on principles governing obligations and contracts and
corporate law such as the rule requiring respect for contractual stipulations, upholding rights of first refusal, and
recognizing the assignable nature of contracts rights. 26 Also, the ruling that shipyards are not public utilities relies on
established case law and fundamental rules of statutory construction. PHILYARDS stresses that KAWASAKIs right of first
refusal or even the right to top is not limited to the 40% equity of the latter. 27 On the landholding issue raised by J.G.

Summit, PHILYARDS emphasizes that this is a non-issue and even involves a question of fact. Even assuming that this
Court can take cognizance of such question of fact even without the benefit of a trial, PHILYARDS opines that
landholding by PHILSECO at the time of the bidding is irrelevant because what is essential is that ultimately a qualified
entity would eventually hold PHILSECOs real estate properties.28 Further, given the assignable nature of the right of first
refusal, any applicable nationality restrictions, including landholding limitations, would not affect the right of first refusal
itself, but only the manner of its exercise.29 Also, PHILYARDS argues that if this Court takes cognizance of J.G. Summits
allegations of fact regarding PHILSECOs landholding, it must also recognize PHILYARDS assertions that PHILSECOs
landholdings were sold to another corporation.30 As regards the right of first refusal, private respondent explains that
KAWASAKIs reduced shareholdings (from 40% to 2.59%) did not translate to a deprivation or loss of its contractually
granted right of first refusal.31 Also, the bidding was valid because PHILYARDS exercised the right to top and it was of no
moment that losing bidders later joined PHILYARDS in raising the purchase price. 32
In cadence with the private respondent PHILYARDS, public respondents COP and APT contend:
1. The conversion of the right of first refusal into a right to top by 5% does not violate any provision in the JVA
between NIDC and KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed by the constitutional restriction on foreign
ownership.
3. The petitioner is legally estopped from assailing the validity of the proceedings of the public bidding as it
voluntarily submitted itself to the terms of the ASBR which included the provision on the right to top.
4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact that PHILYARDS
formed a consortium to raise the required amount to exercise the right to top the highest bid by 5% does not
violate the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does not apply to
PHILSECO because as admitted by petitioner itself, PHILSECO no longer owns real property.
6. Petitioners motion to elevate the case to the Court en banc is baseless and would only delay the termination
of this case.33
In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the public and private
respondents in this wise:
1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders through the exercise of
a right to top, which is contrary to law and the constitution is null and void for being violative of substantive due
process and the abuse of right provision in the Civil Code.
a. The bidders[] right to top was actually exercised by losing bidders.
b. The right to top or the right of first refusal cannot co-exist with a genuine competitive bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start of this case but is shamelessly ignored by the
respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was agreed upon and at the time
of the bidding are most relevant.
d. Whether a shipyard is a public utility is not the core issue in this case.
3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to the right to top.
a. The history behind the birth of the right to top shows fraud and bad faith.
b. The right of first refusal was, indeed, "effectively useless."
4. Petitioner is not legally estopped to challenge the right to top in this case.
a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or against public
policy.
b. Deception was patent; the right to top was an attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced from the right of first refusal is not new and we have
already ruled on the issue in our Resolution of September 24, 2003. We upheld the mutual right of first refusal in the
JVA.34 We also ruled that nothing in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECOs total
capitalization.35 Likewise, nothing in the JVA or ASBR bars the conversion of the right of first refusal to the right to top. In
sum, nothing new and of significance in the petitioners pleading warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right of first refusal nor the right to top can legally be
exercised by the consortium which is not the proper party granted such right under either the JVA or the ASBR. Thus, we
held:
The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and
ICTSI), has joined PHILYARDS in the latter's effort to raise P2.131 billion necessary in exercising the right to top is not
contrary to law, public policy or public morals. There is nothing in the ASBR that bars the losing bidders from joining
either the winning bidder (should the right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as
it did), to raise the purchase price. The petitioner did not allege, nor was it shown by competent evidence, that the
participation of the losing bidders in the public bidding was done with fraudulent intent. Absent any proof of fraud, the
formation by [PHILYARDS] of a consortium is legitimate in a free enterprise system. The appellate court is thus correct in
holding the petitioner estopped from questioning the validity of the transfer of the National Government's shares in
PHILSECO to respondent.36
Further, we see no inherent illegality on PHILYARDS act in seeking funding from parties who were losing bidders. This is
a purely commercial decision over which the State should not interfere absent any legal infirmity. It is emphasized that
the case at bar involves the disposition of shares in a corporation which the government sought to privatize. As such, the
persons with whom PHILYARDS desired to enter into business with in order to raise funds to purchase the shares are
basically its business. This is in contrast to a case involving a contract for the operation of or construction of a
government infrastructure where the identity of the buyer/bidder or financier constitutes an important consideration. In
such cases, the government would have to take utmost precaution to protect public interest by ensuring that the parties
with which it is contracting have the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI could exercise
its right of first refusal only up to 40% of the shares of PHILSECO due to the constitutional prohibition on landholding by
corporations with more than 40% foreign-owned equity. It further argues that since KAWASAKI already held at least 40%
equity in PHILSECO, the right of first refusal was inutile and as such, could not subsequently be converted into the right

to top. 37 Petitioner also asserts that, at present, PHILSECO continues to violate the constitutional provision on
landholdings as its shares are more than 40% foreign-owned.38 PHILYARDS admits that it may have previously held land
but had already divested such landholdings.39 It contends, however, that even if PHILSECO owned land, this would not
affect the right of first refusal but only the exercise thereof. If the land is retained, the right of first refusal, being a
property right, could be assigned to a qualified party. In the alternative, the land could be divested before the exercise
of the right of first refusal. In the case at bar, respondents assert that since the right of first refusal was validly converted
into a right to top, which was exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e., 60% of
its shares are owned by Filipinos), then there is no violation of the Constitution. 40 At first, it would seem that questions
of fact beyond cognizance by this Court were involved in the issue. However, the records show that PHILYARDS admits it
had owned land up until the time of the bidding.41 Hence, the only issue is whether 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.
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 co-shareholder before they are offered to a third party. The agreement
of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions
of the Constitution limiting 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 Anti-Dummy 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 co-production, 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 twenty-five 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.
xxx xxx xxx
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.42(emphases supplied)
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."43 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 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.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of ownership as the owner could
not sell or dispose of his properties. The contract in Lui She prohibited the owner of the land from selling, donating,
mortgaging, or encumbering the property during the 50-year period of the option to buy. This is not so in the case at bar
where the mutual right of first refusal in favor of NIDC and KAWASAKI does not amount to a virtual transfer of land to a
non-Filipino. In fact, the case at bar involves a right of first refusal over shares of stockwhile the Lui She case involves
an option to buy the land itself. As discussed earlier, there is a distinction between the shareholders ownership of
shares and the corporations ownership of land arising from the separate juridical personalities of the corporation and
its shareholders.
We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to violate the Constitution
as its foreign equity is above 40% and yet owns long-term leasehold rights which are real rights.45It cites Article 415 of
the Civil Code which includes in the definition of immovable property, "contracts for public works, and servitudes and
other real rights over immovable property."46 Any existing landholding, however, is denied by PHILYARDS citing its
recent financial statements.47 First, these are questions of fact, the veracity of which would require introduction of
evidence. The Court needs to validate these factual allegations based on competent and reliable evidence. As such, the
Court cannot resolve the questions they pose. Second, J.G. Summit misreads the provisions of the Constitution cited in
its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40% corporation, and this
violates the Constitution x x x The violation continues to this day because under the law, it continues to own real
property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed
in 1977), provided:
"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."
32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public domain are corporations at
least 60% of which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution applies only to ownership of
land.48 It does not extend to immovable or real property as defined under Article 415 of the Civil Code.Otherwise, we
would have a strange situation where the ownership of immovable property such as trees, plants and growing fruit
attached to the land49 would be limited to Filipinos and Filipino corporations only.
III.
WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is DENIED WITH FINALITY and the
decision appealed from is AFFIRMED. The Motion to Elevate This Case to the Court En Banc is likewise DENIED for lack of
merit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga, JJ., concur.

Footnotes
1

Also referred to in this Resolution as "PHILYARDS."

Also referred to as J G Summit.

Resolution promulgated on September 24, 2003, pp. 2 10.

Id. at 10 13.

Id. at 14 22.

Id. at 22 25.

Id. at 26 32.

Rollo, p. 1854.

Rollo, p. 1876.

10

J.G. Summits Motion to Elevate this Case to the Court En Banc dated October 17, 2003, p. 3; Rollo, p. 1878.

11

Id.

12

Id.

13

2. A decision or resolution of a Division of the Court, when concurred in by a majority of its Members who
actually took part in the deliberations on the issues in a case and voted thereon, and in no case without the
concurrence of at least three of such Members, is a decision or resolution of the Supreme Court (Section 4[3],
Article VIII, 1987 Constitution).
3. The Court en banc is not an Appellate Court to which decisions or resolutions of a Division may be
appealed.

xxx xxx xxx

5. A resolution of the Division denying a partys motion for referral to the Court en banc of any Division
case, shall be final and not appealable to the Court en banc.
6. When a decision or resolution is referred by a Division to the Court en banc, the latter may, in the
absence of sufficiently important reasons, decline to take cognizance of the same, in which case, the
decision or resolution shall be returned to the referring Division.
7. No motion for reconsideration of the action of the Court en banc declining to take cognizance of a
referral by a Division, shall be entertained.
14

PHILYARDS Comment dated February 3, 2004, pp. 26-27; Rollo, pp. 1996-1997.

15

J.G. Summits Consolidated Comment dated March 8, 2004.

16

Resolution dated September 24, 2003, pp. 26-32.

17

Id., pp. 10-22.

18

See Bastida and Ysmael & Co., Inc. v. Dy Buncio & Co., Inc., 93 Phil. 195 (1953); Garcia v. Burgos , 291 SCRA 546
(1998); Sadhwani v. CA , 281 SCRA 75 (1997); Paraaque Kings Enterprises, Incorporated v. CA, 268 SCRA 727
(1997); Polytechnic University of the Philippines v. CA , 368 SCRA 691 (2001); and Guzman, Bocaling & Co. v.
Bonnevie, 206 SCRA 668 (1992).
19

G.R. No. 101678, February 3, 1992, 205 SCRA 705.

20

Sec. 4(3), Art. VIII, Constitution.

21

Supreme Court Circular No. 2-89, February 7, 1989.

22

J.G. Summits Motion for Reconsideration dated October 17, 2003, pp. 8-9; Rollo, pp. 1861-1862.

23

Id. at 10-13; Rollo, pp. 1863-1866.

24

Id. at 13-19; Rollo, pp. 1866-1872.

25

PHILYARDS Comment dated February 3, 2004, p. 1; Rollo, p. 1971.

26

Id. at 2; Rollo, p. 1972.

27

Id. at 5; Rollo, p. 1975.

28

Id. at 9; Rollo, p. 1979.

29

Id. at 12; Rollo, p. 1982.

30

Id.

31

Id. at 14; Rollo, p. 1984.

32

Id. at 19; Rollo, p. 1989.

33

COP and APTs Comment dated January 14, 2004, pp. 14-15; Rollo, pp. 1927-1928.

34

Resolution dated September 24, 2003, pp. 23-24.

35

Id. at 22.

36

Resolution dated September 24, 2003, pp. 31-32.

37

J.G. Summits Consolidated Reply dated March 11, 2004, p. 14; Rollo, p. 2109.

38

Id.

39

PHILYARDS Manifestation and Comment dated June 26, 2002, p. 10; Rollo, p. 1334.

40

PHILYARDS Comment dated February 3, 2004, pp. 8-16; Rollo, pp. 1978-1986.

41

PHILYARDS Manifestation and Comment dated June 26, 2002, p. 10; Rollo, p. 1334.

42

Constitution, Article XII, National Economy and Patrimony.

43

J.G. Summits Consolidated Comment dated March 8, 2004, p. 17; Rollo, p. 2112.

44

Philippine Banking Corporation v. Lui She, No. L-17587, September 12, 1967, 21 SCRA 52.

45

J.G. Summits Motion for Reconsideration dated October 17, 2003, p. 14; Rollo, p. 1867.

46

Id. at 15; Rollo, p. 1868.

47

PHILYARDS Manifestation and Comment dated June 26, 2002, p. 10; Rollo, p. 1334.

48

COP and APTs Comment dated January 14, 2004, p. 36; Rollo, p. 1949.

49

Art. 415(2), Civil Code.

G.R. No. L-8451

December 20, 1957

THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC., petitioner,

vs.
THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF DAVAO CITY, respondents.
Teodoro Padilla, for petitioner.
Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista and Troadio T. Quianzon, Jr.,
for respondents.

FELIX, J.:
This is a petition for mandamus filed by the Roman Catholic Apostolic Administrator of Davao seeking the reversal of a
resolution by the Land Registration Commissioner in L.R.C. Consulta No. 14. The facts of the case are as follows:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City of Davao, executed a deed of sale of a
parcel of land located in the same city covered by Transfer Certificate No. 2263, in favor of the Roman Catholic Apostolic
Administrator of Davao Inc., s corporation sole organized and existing in accordance with Philippine Laws, with Msgr.
Clovis Thibault, a Canadian citizen, as actual incumbent. When the deed of sale was presented to Register of Deeds of
Davao for registration, the latter.
having in mind a previous resolution of the Fourth Branch of the Court of First Instance of Manila wherein the
Carmelite Nuns of Davao were made to prepare an affidavit to the effect that 60 per cent of the members of
their corporation were Filipino citizens when they sought to register in favor of their congregation of deed of
donation of a parcel of land
required said corporation sole to submit a similar affidavit declaring that 60 per cent of the members thereof were
Filipino citizens.
The vendee in the letter dated June 28, 1954, expressed willingness to submit an affidavit, both not in the same tenor as
that made the Progress of the Carmelite Nuns because the two cases were not similar, for whereas the congregation of
the Carmelite Nuns had five incorporators, the corporation sole has only one; that according to their articles of
incorporation, the organization of the Carmelite Nuns became the owner of properties donated to it, whereas the case
at bar, the totality of the Catholic population of Davao would become the owner of the property bought to be registered.
As the Register of Deeds entertained some doubts as to the registerability if the document, the matter was referred to
the Land Registration Commissioner en consulta for resolution in accordance with section 4 of Republic Act No. 1151.
Proper hearing on the matter was conducted by the Commissioner and after the petitioner corporation had filed its
memorandum, a resolution was rendered on September 21, 1954, holding that in view of the provisions of Section 1 and
5 of Article XIII of the Philippine Constitution, the vendee was not qualified to acquire private lands in the Philippines in
the absence of proof that at least 60 per centum of the capital, property, or assets of the Roman Catholic Apostolic
Administrator of Davao, Inc., was actually owned or controlled by Filipino citizens, there being no question that the
present incumbent of the corporation sole was a Canadian citizen. It was also the opinion of the Land Registration
Commissioner that section 159 of the corporation Law relied upon by the vendee was rendered operative by the
aforementioned provisions of the Constitution with respect to real estate, unless the precise condition set therein
that at least 60 per cent of its capital is owned by Filipino citizens be present, and, therefore, ordered the Registered
Deeds of Davao to deny registration of the deed of sale in the absence of proof of compliance with such condition.

After the motion to reconsider said resolution was denied, an action for mandamus was instituted with this Court by
said corporation sole, alleging that under the Corporation Law as well as the settled jurisprudence on the matter, the
deed of sale executed by Mateo L. Rodis in favor of petitioner is actually a deed of sale in favor of the Catholic Church
which is qualified to acquire private agricultural lands for the establishment and maintenance of places of worship, and
prayed that judgment be rendered reserving and setting aside the resolution of the Land Registration Commissioner in
question. In its resolution of November 15, 1954, this Court gave due course to this petition providing that the
procedure prescribed for appeals from the Public Service Commission of the Securities and Exchange Commissions (Rule
43), be followed.
Section 5 of Article XIII of the Philippine Constitution reads as follows:
SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except
to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the
Philippines.
Section 1 of the same Article also provides the following:
SECTION 1. All agricultural, timber, and mineral lands of the public domain, water, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be limited to cititzens of the Philippines, or to corporations or
associations at least sixty per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT,
grant, lease, or concession AT THE TIME OF THE INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER
CONSTITUTION. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license,
concession, or leases for the exploitation, development, or utilization of any of the natural resources shall be granted for
a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of water power, in which cases other than the
development and limit of the grant.
In virtue of the foregoing mandates of the Constitution, who are considered "qualified" to acquire and hold agricultural
lands in the Philippines? What is the effect of these constitutional prohibition of the right of a religious corporation
recognized by our Corporation Law and registered as a corporation sole, to possess, acquire and register real estates in
its name when the Head, Manager, Administrator or actual incumbent is an alien?
Petitioner consistently maintained that a corporation sole, irrespective of the citizenship of its incumbent, is not
prohibited or disqualified to acquire and hold real properties. The Corporation Law and the Canon Law are explicit in
their provisions that a corporation sole or "ordinary" is not the owner of the of the properties that he may acquire but
merely the administrator thereof. The Canon Law also specified that church temporalities are owned by the Catholic
Church as a "moral person" or by the diocess as minor "moral persons" with the ordinary or bishop as administrator.
And elaborating on the composition of the Catholic Church in the Philippines, petitioner explained that as a religious
society or organization, it is made up of 2 elements or divisions the clergy or religious members and the faithful or lay
members. The 1948 figures of the Bureau of Census showed that there were 277,551 Catholics in Davao and aliens
residing therein numbered 3,465. Ever granting that all these foreigners are Catholics, petitioner contends that Filipino
citizens form more than 80 per cent of the entire Catholics population of that area. As to its clergy and religious
composition, counsel for petitioner presented the Catholic Directory of the Philippines for 1954 (Annex A) which
revealed that as of that year, Filipino clergy and women novices comprise already 60.5 per cent of the group. It was,
therefore, allowed that the constitutional requirement was fully met and satisfied.
Respondents, on the other hand, averred that although it might be true that petitioner is not the owner of the land
purchased, yet he has control over the same, with full power to administer, take possession of, alienate, transfer,
encumber, sell or dispose of any or all lands and their improvements registered in the name of the corporation sole and
can collect, receive, demand or sue for all money or values of any kind that may be kind that may become due or owing
to said corporation, and vested with authority to enter into agreements with any persons, concerns or entities in

connection with said real properties, or in other words, actually exercising all rights of ownership over the properties. It
was their stand that the theory that properties registered in the name of the corporation sole are held in true for the
benefit of the Catholic population of a place, as of Davao in the case at bar should be sustained because a
conglomeration of persons cannot just be pointed out as the cestui que trust or recipient of the benefits from the
property allegedly administered in their behalf. Neither can it be said that the mass of people referred to as such
beneficiary exercise ant right of ownership over the same. This set-up, respondents argued, falls short of a trust. The
respondents instead tried to prove that in reality, the beneficiary of ecclesiastical properties are not members or faithful
of the church but someone else, by quoting a portion a portion of the ought of fidelity subscribed by a bishop upon his
elevation to the episcopacy wherein he promises to render to the Pontificial Father or his successors an account of
his pastoral office and of all things appertaining to the state of this church.
Respondents likewise advanced the opinion that in construing the constitutional provision calling for 60 per cent of
Filipino citizenship, the criterion of the properties or assets thereof.
In solving the problem thus submitted to our consideration, We can say the following: A corporation sole is a special
form of corporation usually associated with the clergy. Conceived and introduced into the common law by sheer
necessity, this legal creation which was referred to as "that unhappy freak of English law" was designed to facilitate the
exercise of the functions of ownership carried on by the clerics for and on behalf of the church which was regarded as
the property owner (See I Couvier's Law Dictionary, p. 682-683).
A corporation sole consists of one person only, and his successors (who will always be one at a time), in some particular
station, who are incorporated by law in order to give them some legal capacities and advantages, particularly that of
perpetuity, which in their natural persons they could not have had. In this sense, the king is a sole corporation; so is a
bishop, or dens, distinct from their several chapters (Reid vs. Barry, 93 Fla. 849, 112 So. 846).
The provisions of our Corporation law on religious corporations are illuminating and sustain the stand of petitioner.
Section 154 thereof provides:
SEC. 154. For the administration of the temporalities of any religious denomination, society or church and the
management of the estates and the properties thereof, it shall be lawful for the bishop, chief priest, or presiding
either of any such religious denomination, society or church to become a corporation sole, unless inconsistent
wit the rules, regulations or discipline of his religious denomination, society or church or forbidden by
competent authority thereof.
See also the pertinent provisions of the succeeding sections of the same Corporation Law copied hereunder:
SEC. 155. In order to become a corporation sole the bishop, chief priest, or presiding elder of any religious
denomination, society or church must file with the Securities and Exchange Commissioner articles of
incorporation setting forth the following facts:
xxx xxx xxx.
(3) That as such bishop, chief priest, or presiding elder he is charged with the administration of the temporalities
and the management of the estates and properties of his religious denomination, society, or church within its
territorial jurisdiction, describing it;
xxx xxx xxx.
(As amended by Commonwealth Act No. 287).
SEC. 157. From and after the filing with the Securities and Exchange Commissioner of the said articles of
incorporation, which verified by affidavit or affirmation as aforesaid and accompanied by the copy of the
commission, certificate of election, or letters of appointment of the bishop, chief priest, or presiding elder, duly

certified as prescribed in the section immediately preceding such the bishop, chief priest, or presiding elder, as
the case may be, shall become a corporation sole and all temporalities, estates, and properties the religious
denomination, society, or church therefore administered or managed by him as such bishop, chief priest, or
presiding elder, shall be held in trust by him as a corporation sole, for the use, purpose, behalf, and sole benefit of
his religious denomination, society, or church, including hospitals, schools, colleges, orphan, asylums, parsonages,
and cemeteries thereof. For the filing of such articles of incorporation, the Securities and Exchange
Commissioner shall collect twenty-five pesos. (As amended by Commonwealth Act. No. 287); and.
SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society,
or by the diocese, synod, or district organization of any religious denomination or church shall, on its
incorporation, pass to the corporation and shall be held in trust for the use, purpose behalf, and benefit of the
religious society, or order so incorporated or of the church of which the diocese, or district organization is an
organized and constituent part.
The Cannon Law contains similar provisions regarding the duties of the corporation sole or ordinary as administrator of
the church properties, as follows:
Al Ordinario local pertenence vigilar diligentemente sobre la administracion de todos los bienes eclesiasticos
que se hallan en su territorio y no estuvieren sustraidos de su jurisdiccion, salvs las prescriciones legitimas que le
concedan mas aamplios derechos.
Teniendo en cuenta los derechos y las legitimas costumbres y circunstancias, procuraran los Ordinarios regular
todo lo concerniente a la administracion de los bienes eclesciasticos, dando las oportunas instucciones
particularles dentro del narco del derecho comun. (Title XXVIII, Codigo de Derecho Canonico, Lib. III, Canon
1519).1
That leaves no room for doubt that the bishops or archbishops, as the case may be, as corporation's sole are
merely administrators of the church properties that come to their possession, in which they hold in trust for the church.
It can also be said that while it is true that church properties could be administered by a natural persons, problems
regarding succession to said properties can not be avoided to rise upon his death. Through this legal fiction, however,
church properties acquired by the incumbent of a corporation sole pass, by operation of law, upon his death not his
personal heirs but to his successor in office. It could be seen, therefore, that a corporation sole is created not only to
administer the temporalities of the church or religious society where he belongs but also to hold and transmit the same
to his successor in said office. If the ownership or title to the properties do not pass to the administrators, who are the
owners of church properties?.
Bouscaren and Elis, S.J., authorities on cannon law, on their treatise comment:
In matters regarding property belonging to the Universal Church and to the Apostolic See, the Supreme Pontiff
exercises his office of supreme administrator through the Roman Curia; in matters regarding other church
property, through the administrators of the individual moral persons in the Church according to that norms, laid
down in the Code of Cannon Law. This does not mean, however, that the Roman Pontiff is the owner of all the
church property; but merely that he is the supreme guardian (Bouscaren and Ellis, Cannon Law, A Text and
Commentary, p. 764).
and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia Canonica, ruled in the case of Trinidad vs. Roman
Catholic Archbishop of Manila, 63 Phil. 881, that:
The second question to be decided is in whom the ownership of the properties constituting the endowment of
the ecclesiastical or collative chaplaincies is vested.
Canonists entertain different opinions as to the persons in whom the ownership of the ecclesiastical properties
is vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while

many doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is
more probable that ownership, strictly speaking, does not reside in the latter, and, consequently, ecclesiastical
properties are owned by the churches, institutions and canonically established private corporations to which
said properties have been donated.
Considering that nowhere can We find any provision conferring ownership of church properties on the Pope although he
appears to be the supreme administrator or guardian of his flock, nor on the corporation sole or heads of dioceses as
they are admittedly mere administrators of said properties, ownership of these temporalities logically fall and develop
upon the church, diocese or congregation acquiring the same. Although this question of ownership of ecclesiastical
properties has off and on been mentioned in several decisions of the Court yet in no instance was the subject of
citizenship of this religious society been passed upon.
We are not unaware of the opinion expressed by the late Justice Perfecto in his dissent in the case of Agustines vs. Court
of First Instance of Bulacan, 80 Phil. 565, to the effect that "the Roman Catholic Archbishop of Manila is only a branch of
a universal church by the Pope, with permanent residence in Rome, Italy". There is no question that the Roman Catholic
Church existing in the Philippines is a tributary and part of the international religious organization, for the word "Roman"
clearly expresses its unity with and recognizes the authority of the Pope in Rome. However, lest We become hasty in
drawing conclusions, We have to analyze and take note of the nature of the government established in the Vatican City,
of which it was said:
GOVERNMENT. In the Roman Catholic Church supreme authority and jurisdiction over clergy and laity alike as
held by the pope who (since the Middle Ages) is elected by the cardinals assembled in conclave, and holds office
until his death or legitimate abdication. . . While the pope is obviously independent of the laws made, and the
officials appointed, by himself or his predecessors, he usually exercises his administrative authority according to
the code of canon law and through the congregations, tribunals and offices of the Curia Romana. In their
respective territories (called generally dioceses) and over their respective subjects, the patriarchs, metropolitans
or archbishops and bishops exercise a jurisdiction which is called ordinary (as attached by law to an office given
to a person. . . (Collier's Encyclopedia, Vol. 17, p. 93).
While it is true and We have to concede that in the profession of their faith, the Roman Pontiff is the supreme head; that
in the religious matters, in the exercise of their belief, the Catholic congregation of the faithful throughout the world
seeks the guidance and direction of their Spiritual Father in the Vatican, yet it cannot be said that there is a merger of
personalities resultant therein. Neither can it be said that the political and civil rights of the faithful, inherent or acquired
under the laws of their country, are affected by that relationship with the Pope. The fact that the Roman Catholic Church
in almost every country springs from that society that saw its beginning in Europe and the fact that the clergy of this
faith derive their authorities and receive orders from the Holy See do not give or bestow the citizenship of the Pope
upon these branches. Citizenship is a political right which cannot be acquired by a sort of "radiation". We have to realize
that although there is a fraternity among all the catholic countries and the dioceses therein all over the globe, the
universality that the word "catholic" implies, merely characterize their faith, a uniformity in the practice and the
interpretation of their dogma and in the exercise of their belief, but certainly they are separate and independent from
one another in jurisdiction, governed by different laws under which they are incorporated, and entirely independent on
the others in the management and ownership of their temporalities. To allow theory that the Roman Catholic Churches
all over the world follow the citizenship of their Supreme Head, the Pontifical Father, would lead to the absurdity of
finding the citizens of a country who embrace the Catholic faith and become members of that religious society, likewise
citizens of the Vatican or of Italy. And this is more so if We consider that the Pope himself may be an Italian or national
of any other country of the world. The same thing be said with regard to the nationality or citizenship of the corporation
sole created under the laws of the Philippines, which is not altered by the change of citizenship of the incumbent
bishops or head of said corporation sole.
We must therefore, declare that although a branch of the Universal Roman Catholic Apostolic Church, every Roman
Catholic Church in different countries, if it exercises its mission and is lawfully incorporated in accordance with the laws
of the country where it is located, is considered an entity or person with all the rights and privileges granted to such
artificial being under the laws of that country, separate and distinct from the personality of the Roman Pontiff or the

Holy See, without prejudice to its religious relations with the latter which are governed by the Canon Law or their rules
and regulations.
We certainly are conscious of the fact that whatever conclusion We may draw on this matter will have a far reaching
influence, nor can We overlook the pages of history that arouse indignation and criticisms against church landholdings.
This nurtured feeling that snowbailed into a strong nationalistic sentiment manifested itself when the provisions on
natural to be embodied in the Philippine Constitution were framed, but all that has been said on this regard referred
more particularly to landholdings of religious corporations known as "Friar Estates" which have already bee acquired by
our government, and not to properties held by corporations sole which, We repeat, are properties held in trust for the
benefit of the faithful residing within its territorial jurisdiction. Though that same feeling probably precipitated and
influenced to a large extent the doctrine laid down in the celebrated Krivenco decision, We have to take this matter in
the light of legal provisions and jurisprudence actually obtaining, irrespective of sentiments.
The question now left for our determination is whether the Universal Roman Catholic Apostolic Church in the Philippines,
or better still, the corporation sole named the Roman Catholic Apostolic Administrator of Davao, Inc., is qualified to
acquire private agricultural lands in the Philippines pursuant to the provisions of Article XIII of the Constitution.
We see from sections 1 and 5 of said Article quoted before, that only persons or corporations qualified to acquire hold
lands of the public domain in the Philippines may acquire or be assigned and hold private agricultural lands.
Consequently, the decisive factor in the present controversy hinges on the proposition or whether or not the petitioner
in this case can acquire agricultural lands of the public domain.
From the data secured from the Securities and Exchange Commission, We find that the Roman Catholic Bishop of
Zamboanga was incorporated (as a corporation sole) in September, 1912, principally to administer its temporalities and
manage its properties. Probably due to the ravages of the last war, its articles of incorporation werereconstructed in the
Securities and Exchange Commission on April 8, 1948. At first, this corporation sole administered all the temporalities of
the church existing or located in the island of Mindanao. Later on, however, new dioceses were formed and new
corporations sole were created to correspond with the territorial jurisdiction of the new dioceses, one of them being
petitioner herein, the Roman Catholic Apostolic Administrator of Davao, Inc., which was registered with the Securities
and Exchange Commission on September 12, 1950, and succeeded in the administrative for all the "temporalities" of the
Roman Catholic Church existing in Davao.
According to our Corporation Law, Public Act No. 1549, approved April 1, 1906, a corporation sole.
is organized and composed of a single individual, the head of any religious society or church, for the
ADMINISTRATION of the temporalities of such society or church. By "temporalities" is meant estate and
properties not used exclusively for religious worship. The successor in office of such religious head or chief priest
incorporated as a corporation sole shall become the corporation sole on ascension to office, and shall be
permitted to transact business as such on filing with the Securities and Exchange Commission a copy of his
commission, certificate of election or letter of appointment duly certified by any notary public or clerk of court
of record (Guevara's The Philippine Corporation Law, p. 223).
The Corporation Law also contains the following provisions:
SECTION 159. Any corporation sole may purchase and hold real estate and personal; property for its church,
charitable, benevolent, or educational purposes, and may receive bequests or gifts of such purposes. Such
corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from the
Court of First Instance of the province in which the property is situated; but before making the order proof must
be made to the satisfaction of the Court that notice of the application for leave to mortgage or sell has been
given by publication or otherwise in such manner and for such time as said Court or the Judge thereof may have
directed, and that it is to the interest of the corporation that leave to mortgage or sell must be made by petition,
duly verified by the bishop, chief priest, or presiding elder acting as corporation sole, and may be opposed by
any member of the religious denomination, society or church represented by the corporation sole: Provided,

however, That in cases where the rules, regulations, and discipline of the religious denomination, society or
church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling and
mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the
intervention of the Courts shall not be necessary.
It can, therefore, be noticed that the power of a corporation sole to purchase real property, like the power exercised in
the case at bar, it is not restricted although the power to sell or mortgage sometimes is, depending upon the rules,
regulations, and discipline of the church concerned represented by said corporation sole. If corporations sole can
purchase and sell real estate for its church, charitable, benevolent, or educational purposes, can they register said real
properties? As provided by law, lands held in trust for specific purposes me be subject of registration (section 69, Act
496), and the capacity of a corporation sole, like petitioner herein, to register lands belonging to it is acknowledged, and
title thereto may be issued in its name (Bishop of Nueva Segovia vs. Insular Government, 26 Phil. 300-1913). Indeed it is
absurd that while the corporations sole that might be in need of acquiring lands for the erection of temples where the
faithful can pray, or schools and cemeteries which they are expressly authorized by law to acquire in connection with
the propagation of the Roman Catholic Apostolic faith or in furtherance of their freedom of religion they could not
register said properties in their name. As professor Javier J. Nepomuceno very well says "Man in his search for the
immortal and imponderable, has, even before the dawn of recorded history, erected temples to the Unknown God, and
there is no doubt that he will continue to do so for all time to come, as long as he continues 'imploring the aid of Divine
Providence'" (Nepomuceno's Corporation Sole, VI Ateneo Law Journal, No. 1, p. 41, September, 1956). Under the
circumstances of this case, We might safely state that even before the establishment of the Philippine Commonwealth
and of the Republic of the Philippines every corporation sole then organized and registered had by express provision of
law the necessary power and qualification to purchase in its name private lands located in the territory in which it
exercised its functions or ministry and for which it was created, independently of the nationality of its incumbent unique
and single member and head, the bishop of the dioceses. It can be also maintained without fear of being gainsaid that
the Roman Catholic Apostolic Church in the Philippines has no nationality and that the framers of the Constitution, as
will be hereunder explained, did not have in mind the religious corporations sole when they provided that 60 per
centum of the capital thereof be owned by Filipino citizens.
There could be no controversy as to the fact that a duly registered corporation sole is an artificial being having the right
of succession and the power, attributes, and properties expressly authorized by law or incident to its existence (section
1, Corporation Law). In outlining the general powers of a corporation. Public Act. No. 1459 provides among others:
SEC. 13. Every corporation has the power:
(5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and otherwise deal with such real and
personal property as the purpose for which the corporation was formed may permit, and the transaction of the
lawful business of the corporation may reasonably and necessarily require, unless otherwise prescribed in this
Act: . . .
In implementation of the same and specially made applicable to a form of corporation recognized by the same law,
Section 159 aforequoted expressly allowed the corporation sole to purchase and hold real as well as personal properties
necessary for the promotion of the objects for which said corporation sole is created. Respondent Land Registration
Commissioner, however, maintained that since the Philippine Constitution is a later enactment than public Act No. 1459,
the provisions of Section 159 in amplification of Section 13 thereof, as regard real properties, should be considered
repealed by the former.
There is a reason to believe that when the specific provision of the Constitution invoked by respondent Commissioner
was under consideration, the framers of the same did not have in mind or overlooked this particular form of corporation.
It is undeniable that the naturalization and conservation of our national resources was one of the dominating objectives
of the Convention and in drafting the present Article XII of the Constitution, the delegates were goaded by the desire (1)
to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the
extension into the country of foreign control through peaceful economic penetration; and (3) to prevent making the
Philippines a source of international conflicts with the consequent danger to its internal security and independence (See

The Framing of the Philippine Constitution by Professor Jose M. Aruego, a Delegate to the Constitutional Convention, Vol.
II. P. 592-604). In the same book Delegate Aruego, explaining the reason behind the first consideration, wrote:
At the time of the framing of Philippine Constitution, Filipino capital had been to be rather shy. Filipinos
hesitated s a general rule to invest a considerable sum of their capital for the development, exploitation and
utilization of the natural resources of the country. They had not as yet been so used to corporate as the peoples
of the west. This general apathy, the delegates knew, would mean the retardation of the development of the
natural resources, unless foreign capital would be encouraged to come and help in that development.They knew
that the naturalization of the natural resources would certainly not encourage the INVESTMENT OF FOREIGN
CAPITAL into them. But there was a general feeling in the Convention that it was better to have such a
development retarded or even postpone together until such time when the Filipinos would be ready and willing
to undertake it rather than permit the natural resources to be placed under the ownership or control of
foreigners in order that they might be immediately be developed, with the Filipinos of the future serving not as
owners but utmost as tenants or workers under foreign masters. By all means, the delegates believed, the
natural resources should be conserved for Filipino posterity.
It could be distilled from the foregoing that the farmers of the Constitution intended said provisions as barrier for
foreigners or corporations financed by such foreigners to acquire, exploit and develop our natural resources, saving
these undeveloped wealth for our people to clear and enrich when they are already prepared and capable of doing so.
But that is not the case of corporations sole in the Philippines, for, We repeat, they are mere administrators of the
"temporalities" or properties titled in their name and for the benefit of the members of their respective religion
composed of an overwhelming majority of Filipinos. No mention nor allusion whatsoever is made in the Constitution as
to the prohibition against or the liability of the Roman Catholic Church in the Philippines to acquire and hold agricultural
lands. Although there were some discussions on landholdings, they were mostly confined in the inclusion of the
provision allowing the Government to break big landed estates to put an end to absentee landlordism.
But let us suppose, for the sake of argument, that the above referred to inhibitory clause of Section 1 of Article XIII of
the constitution does have bearing on the petitioner's case; even so the clause requiring that at least 60 per centum of
the capital of the corporation be owned by Filipinos is subordinated to the petitioner's aforesaid right already existing at
the time of the inauguration of the Commonwealth and the Republic of the Philippines. In the language of Mr. Justice
Jose P. Laurel (a delegate to the Constitutional Convention), in his concurring opinion of the case of Gold Creek mining
Corporation, petitioner vs. Eulogio Rodriguez, Secretary of Agriculture and Commerce, and Quirico Abadilla, Director of
the Bureau of Mines, respondent, 66 Phil. 259:
The saving clause in the section involved of the Constitution was originally embodied in the report submitted by
the Committee on Naturalization and Preservation of Land and Other Natural Resources to the Constitutional
Convention on September 17, 1954. It was later inserted in the first draft of the Constitution as section 13 of
Article XIII thereof, and finally incorporated as we find it now. Slight have been the changes undergone by the
proviso from the time when it comes out of the committee until it was finally adopted. When first submitted
and as inserted to the first draft of the Constitution it reads: 'subject to any right, grant, lease, or concession
existing in respect thereto on the date of the adoption of the Constitution'. As finally adopted, the proviso reads:
'subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government
established under this Constitution'. This recognition is not mere graciousness but springs form the just
character of the government established. The framers of the Constitution were not obscured by the rhetoric of
democracy or swayed to hostility by an intense spirit of nationalism. They well knew that conservation of our
natural resources did not mean destruction or annihilation of acquired property rights. Withal, they erected a
government neither episodic nor stationary but well-nigh conservative in the protection of property rights. This
notwithstanding nationalistic and socialistic traits discoverable upon even a sudden dip into a variety of the
provisions embodied in the instrument.
The writer of this decision wishes to state at this juncture that during the deliberation of this case he submitted to the
consideration of the Court the question that may be termed the "vested right saving clause" contained in Section 1,
Article XII of the Constitution, but some of the members of this Court either did not agree with the theory of the writer,

or were not ready to take a definite stand on the particular point I am now to discuss deferring our ruling on such
debatable question for a better occasion, inasmuch as the determination thereof is not absolutely necessary for the
solution of the problem involved in this case. In his desire to face the issues squarely, the writer will endeavor, at least as
a disgression, to explain and develop his theory, not as a lucubration of the Court, but of his own, for he deems it better
and convenient to go over the cycle of reasons that are linked to one another and that step by step lead Us to conclude
as We do in the dispositive part of this decision.
It will be noticed that Section 1 of Article XIII of the Constitution provides, among other things, that "all agricultural lands
of the public domain and their disposition shall be limited to citizens of the Philippines or to corporations at least 60 per
centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF THE
INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER THIS CONSTITUTION."
As recounted by Mr. Justice Laurel in the aforementioned case of Gold Creek Mining Corporation vs. Rodriguez et al., 66
Phil. 259, "this recognition (in the clause already quoted), is not mere graciousness but springs from the just character of
the government established. The farmers of the Constitution were not obscured by the rhetoric of democracy or swayed
to hostility by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean
destruction or annihilation of ACQUIRED PROPERTY RIGHTS".
But respondents' counsel may argue that the preexisting right of acquisition of public or private lands by a corporation
which does not fulfill this 60 per cent requisite, refers to purchases of the Constitution and not to later transactions. This
argument would imply that even assuming that petitioner had at the time of the enactment of the Constitution the right
to purchase real property or right could not be exercised after the effectivity of our Constitution, because said power or
right of corporations sole, like the herein petitioner, conferred in virtue of the aforequoted provisions of the Corporation
Law, could no longer be exercised in view of the requisite therein prescribed that at least 60 per centum of the capital of
the corporation had to be Filipino. It has been shown before that: (1) the corporation sole, unlike the ordinary
corporations which are formed by no less than 5 incorporators, is composed of only one persons, usually the head or
bishop of the diocese, a unit which is not subject to expansion for the purpose of determining any percentage
whatsoever; (2) the corporation sole is only the administrator and not the owner of the temporalities located in the
territory comprised by said corporation sole; (3) such temporalities are administered for and on behalf of the faithful
residing in the diocese or territory of the corporation sole; and (4) the latter, as such, has no nationality and the
citizenship of the incumbent Ordinary has nothing to do with the operation, management or administration of the
corporation sole, nor effects the citizenship of the faithful connected with their respective dioceses or corporation sole.
In view of these peculiarities of the corporation sole, it would seem obvious that when the specific provision of the
Constitution invoked by respondent Commissioner (section 1, Art. XIII), was under consideration, the framers of the
same did not have in mind or overlooked this particular form of corporation. If this were so, as the facts and
circumstances already indicated tend to prove it to be so, then the inescapable conclusion would be that this
requirement of at least 60 per cent of Filipino capital was never intended to apply to corporations sole, and the
existence or not a vested right becomes unquestionably immaterial.
But let us assumed that the questioned proviso is material. yet We might say that a reading of said Section 1 will show
that it does not refer to any actual acquisition of land up to the right, qualification or power to acquire and hold private
real property. The population of the Philippines, Catholic to a high percentage, is ever increasing. In the practice of
religion of their faithful the corporation sole may be in need of more temples where to pray, more schools where the
children of the congregation could be taught in the principles of their religion, more hospitals where their sick could be
treated, more hallow or consecrated grounds or cemeteries where Catholics could be buried, many more than those
actually existing at the time of the enactment of our Constitution. This being the case, could it be logically maintained
that because the corporation sole which, by express provision of law, has the power to hold and acquire real estate and
personal property of its churches, charitable benevolent, or educational purposes (section 159, Corporation Law) it has
to stop its growth and restrain its necessities just because the corporation sole is a non-stock corporation composed of
only one person who in his unity does not admit of any percentage, especially when that person is not the owner but
merely an administrator of the temporalities of the corporation sole? The writer leaves the answer to whoever may read
and consider this portion of the decision.

Anyway, as stated before, this question is not a decisive factor in disposing the case, for even if We were to disregard
such saving clause of the Constitution, which reads: subject to any existing right, grant, etc., at the same time of the
inauguration of the Government established under this Constitution, yet We would have, under the evidence on record,
sufficient grounds to uphold petitioner's contention on this matter.
In this case of the Register of Deeds of Rizal vs. Ung Sui Si Temple, 2 G.R. No. L-6776, promulgated May 21, 1955, wherein
this question was considered from a different angle, this Court through Mr. Justice J.B.L. Reyes, said:
The fact that the appellant religious organization has no capital stock does not suffice to escape the
Constitutional inhibition, since it is admitted that its members are of foreign nationality. The purpose of the sixty
per centum requirement is obviously to ensure that corporation or associations allowed to acquire agricultural
land or to exploit natural resources shall be controlled by Filipinos; and the spirit of the Constitution demands
that in the absence of capital stock, the controlling membership should be composed of Filipino citizens.
In that case respondent-appellant Ung Siu Si Temple was not a corporation sole but a corporation aggregate, i.e., an
unregistered organization operating through 3 trustees, all of Chinese nationality, and that is why this Court laid down
the doctrine just quoted. With regard to petitioner, which likewise is a non-stock corporation, the case is different,
because it is a registered corporation sole, evidently of no nationality and registered mainly to administer the
temporalities and manage the properties belonging to the faithful of said church residing in Davao. But even if we were
to go over the record to inquire into the composing membership to determine whether the citizenship requirement is
satisfied or not, we would find undeniable proof that the members of the Roman Catholic Apostolic faith within the
territory of Davao are predominantly Filipino citizens. As indicated before, petitioner has presented evidence to
establish that the clergy and lay members of this religion fully covers the percentage of Filipino citizens required by the
Constitution. These facts are not controverted by respondents and our conclusion in this point is sensibly obvious.
Dissenting OpinionDiscussed. After having developed our theory in the case and arrived at the findings and
conclusions already expressed in this decision. We now deem it proper to analyze and delve into the basic foundation on
which the dissenting opinion stands up. Being aware of the transcendental and far-reaching effects that Our ruling on
the matter might have, this case was thoroughly considered from all points of view, the Court sparing no effort to solve
the delicate problems involved herein.
At the deliberations had to attain this end, two ways were open to a prompt dispatch of the case: (1) the reversal of the
doctrine We laid down in the celebrated Krivenko case by excluding urban lots and properties from the group of the
term "private agricultural lands" use in this section 5, Article XIII of the Constitution; and (2) by driving Our reasons to a
point that might indirectly cause the appointment of Filipino bishops or Ordinary to head the corporations sole created
to administer the temporalities of the Roman Catholic Church in the Philippines. With regard to the first way, a great
majority of the members of this Court were not yet prepared nor agreeable to follow that course, for reasons that are
obvious. As to the second way, it seems to be misleading because the nationality of the head of a diocese constituted as
a corporation sole has no material bearing on the functions of the latter, which are limited to the administration of the
temporalities of the Roman Catholic Apostolic Church in the Philippines.
Upon going over the grounds on which the dissenting opinion is based, it may be noticed that its author lingered on the
outskirts of the issues, thus throwing the main points in controversy out of focus. Of course We fully agree, as stated by
Professor Aruego, that the framers of our Constitution had at heart to insure the conservation of the natural resources
of Our motherland of Filipino posterity; to serve them as an instrument of national defense, helping prevent the
extension into the country of foreign control through peaceful economic penetration; and to prevent making the
Philippines a source of international conflicts with the consequent danger to its internal security and independence. But
all these precautions adopted by the Delegates to Our Constitutional Assembly could have not been intended for or
directed against cases like the one at bar. The emphasis and wonderings on the statement that once the capacity of a
corporation sole to acquire private agricultural lands is admitted there will be no limit to the areas that it may hold and
that this will pave the way for the "revival or revitalization of religious landholdings that proved so troublesome in our
past", cannot even furnish the "penumbra" of a threat to the future of the Filipino people. In the first place, the right of
Filipino citizens, including those of foreign extraction, and Philippine corporations, to acquire private lands is not subject

to any restriction or limit as to quantity or area, and We certainly do not see any wrong in that. The right of Filipino
citizens and corporations to acquire public agricultural lands is already limited by law. In the second place, corporations
sole cannot be considered as aliens because they have no nationality at all. Corporations sole are, under the law, mere
administrators of the temporalities of the Roman Catholic Church in the Philippines. In the third place, every corporation,
be it aggregate or sole, is only entitled to purchase, convey, sell, lease, let, mortgage, encumber and otherwise deal with
real properties when it is pursuant to or in consonance with the purposes for which the corporation was formed, and
when the transactions of the lawful business of the corporation reasonably and necessarily require such dealing
section 13-(5) of the Corporation Law, Public Act No. 1459 and considering these provisions in conjunction with
Section 159 of the same law which provides that a corporation sole may only "purchase and hold real estate and
personal properties for its church, charitable, benevolent or educational purposes", the above mentioned fear of
revitalization of religious landholdings in the Philippines is absolutely dispelled. The fact that the law
thus expressly authorizes the corporations sole to receive bequests or gifts of real properties (which were the main
source that the friars had to acquire their big haciendas during the Spanish regime), is a clear indication that the
requisite that bequests or gifts of real estate be for charitable, benevolent, or educational purposes, was, in the opinion
of the legislators, considered sufficient and adequate protection against the revitalization of religious landholdings.
Finally, and as previously stated, We have reason to believe that when the Delegates to the Constitutional Convention
drafted and approved Article XIII of the Constitution they do not have in mind the corporation sole. We come to this
finding because the Constitutional Assembly, composed as it was by a great number of eminent lawyers and jurists, was
like any other legislative body empowered to enact either the Constitution of the country or any public statute,
presumed to know the conditions existing as to particular subject matter when it enacted a statute (Board of Commerce
of Orange Country vs. Bain, 92 S.E. 176; N. C. 377).
Immemorial customs are presumed to have been always in the mind of the Legislature in enacting legislation. (In
re Kruger's Estate, 121 A. 109; 277 P. 326).
The Legislative is presumed to have a knowledge of the state of the law on the subjects upon which it legislates.
(Clover Valley Land and Stock Co. vs. Lamb et al., 187, p. 723,726.)
The Court in construing a statute, will assume that the legislature acted with full knowledge of the prior
legislation on the subject and its construction by the courts. (Johns vs. Town of Sheridan, 89 N. E. 899, 44 Ind.
App. 620.).
The Legislature is presumed to have been familiar with the subject with which it was dealing . . . . (Landers vs.
Commonwealth, 101 S. E. 778, 781.).
The Legislature is presumed to know principles of statutory construction. (People vs. Lowell, 230 N. W. 202, 250
Mich. 349, followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.).
It is not to be presumed that a provision was inserted in a constitution or statute without reason, or that a result
was intended inconsistent with the judgment of men of common sense guided by reason" (Mitchell vs. Lawden,
123 N.E. 566, 288 Ill. 326.) See City of Decatur vs. German, 142 N. E. 252, 310 Ill. 591, and may other authorities
that can be cited in support hereof.
Consequently, the Constitutional Assembly must have known:
1. That a corporation sole is organized by and composed of a single individual, the head of any religious society
or church operating within the zone, area or jurisdiction covered by said corporation sole (Article 155, Public Act
No. 1459);
2. That a corporation sole is a non-stock corporation;
3. That the Ordinary ( the corporation sole proper) does not own the temporalities which he merely administers;

4. That under the law the nationality of said Ordinary or of any administrator has absolutely no bearing on the
nationality of the person desiring to acquire real property in the Philippines by purchase or other lawful means
other than by hereditary succession, who according to the Constitution must be a Filipino (sections 1 and 5,
Article XIII).
5. That section 159 of the Corporation Law expressly authorized the corporation sole to purchase and holdreal
estate for its church, charitable, benevolent or educational purposes, and to receive bequests or gifts for such
purposes;
6. That in approving our Magna Carta the Delegates to the Constitutional Convention, almost all of whom were
Roman Catholics, could not have intended to curtail the propagation of the Roman Catholic faith or the
expansion of the activities of their church, knowing pretty well that with the growth of our population more
places of worship, more schools where our youth could be taught and trained; more hallow grounds where to
bury our dead would be needed in the course of time.
Long before the enactment of our Constitution the law authorized the corporations sole even to receive bequests or
gifts of real estates and this Court could not, without any clear and specific provision of the Constitution, declare that
any real property donated, let as say this year, could no longer be registered in the name of the corporation sole to
which it was conveyed. That would be an absurdity that should not receive our sanction on the pretext that corporations
sole which have no nationality and are non-stock corporations composed of only one person in the capacity of
administrator, have to establish first that at least sixty per centum of their capital belong to Filipino citizens. The new
Civil Code even provides:
ART. 10. In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body
intended right and justice to prevail.
Moreover, under the laws of the Philippines, the administrator of the properties of a Filipino can acquire, in the name of
the latter, private lands without any limitation whatsoever, and that is so because the properties thus acquired are not
for and would not belong to the administrator but to the Filipino whom he represents. But the dissenting Justice
inquires: If the Ordinary is only the administrator, for whom does he administer? And who can alter or overrule his acts?
We will forthwith proceed to answer these questions. The corporations sole by reason of their peculiar constitution and
form of operation have no designed owner of its temporalities, although by the terms of the law it can be safely implied
that the Ordinary holds them in trust for the benefit of the Roman Catholic faithful to their respective locality or diocese.
Borrowing the very words of the law, We may say that the temporalities of every corporation sole are held in trust for
the use, purpose, behalf and benefit of the religious society, or order so incorporated or of the church to which the
diocese, synod, or district organization is an organized and constituent part (section 163 of the Corporation Law).
In connection with the powers of the Ordinary over the temporalities of the corporation sole, let us see now what is the
meaning and scope of the word "control". According to the Merriam-Webster's New International Dictionary, 2nd ed., p.
580, on of the acceptations of the word "control" is:
4. To exercise restraining or directing influence over; to dominate; regulate; hence, to hold from action; to curb;
subject; also, Obs. to overpower.
SYN: restrain, rule, govern, guide, direct; check, subdue.
It is true that under section 159 of the Corporation Law, the intervention of the courts is not necessary, to mortgageor
sell real property held by the corporation sole where the rules, regulations and discipline of the religious denomination,
society or church concerned presented by such corporation sole regulates the methods of acquiring, holding, selling and
mortgaging real estate, and that the Roman Catholic faithful residing in the jurisdiction of the corporation sole has no
say either in the manner of acquiring or of selling real property. It may be also admitted that the faithful of the diocese
cannot govern or overrule the acts of the Ordinary, but all this does not mean that the latter can administer the
temporalities of the corporation sole without check or restraint. We must not forget that when a corporation sole is

incorporated under Philippine laws, the head and only member thereof subjects himself to the jurisdiction of the
Philippine courts of justice and these tribunals can thus entertain grievances arising out of or with respect to the
temporalities of the church which came into the possession of the corporation sole as administrator. It may be alleged
that the courts cannot intervene as to the matters of doctrine or teachings of the Roman Catholic Church. That is correct,
but the courts may step in, at the instance of the faithful for whom the temporalities are being held in trust, to check
undue exercise by the corporation sole of its power as administrator to insure that they are used for the purpose or
purposes for which the corporation sole was created.
American authorities have these to say:
It has been held that the courts have jurisdiction over an action brought by persons claiming to be members of a
church, who allege a wrongful and fraudulent diversion of the church property to uses foreign to the purposes of
the church, since no ecclesiastical question is involved and equity will protect from wrongful diversion of the
property (Hendryx vs. Peoples United Church, 42 Wash. 336, 4 L.R.A. n.s. 1154).
The courts of the State have no general jurisdiction and control over the officers of such corporations in respect
to the performance of their official duties; but as in respect to the property which they hold for the corporation,
they stand in position of TRUSTEES and the courts may exercise the same supervision as in other cases of
trust (Ramsey vs. Hicks, 174 Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. n.s. 665; Hendryx vs. Peoples
United Church, supra.).
Courts of the state do not interfere with the administration of church rules or discipline unless civil rights
become involved and which must be protected (Morris St., Baptist Church vs. Dart, 67 S.C. 338, 45 S.E. 753, and
others). (All cited in Vol. II, Cooley's Constitutional Limitations, p. 960-964.).
If the Constitutional Assembly was aware of all the facts above enumerated and of the provisions of law relative to
existing conditions as to management and operation of corporations sole in the Philippines, and if, on the other hand,
almost all of the Delegates thereto embraced the Roman Catholic faith, can it be imagined even for an instant that when
Article XIII of the Constitution was approved the framers thereof intended to prevent or curtail from then on the
acquisition sole, either by purchase or donation, of real properties that they might need for the propagation of the faith
and for there religious and Christian activities such as the moral education of the youth, the care, attention and
treatment of the sick and the burial of the dead of the Roman Catholic faithful residing in the jurisdiction of the
respective corporations sole? The mere indulgence in said thought would impress upon Us a feeling of apprehension
and absurdity. And that is precisely the leit motiv that permeates the whole fabric of the dissenting opinion.
It seems from the foregoing that the main problem We are confronted with in this appeal, hinges around the necessity
of a proper and adequate interpretation of sections 1 and 5 of Article XIII of the Constitution. Let Us then be guided by
the principles of statutory construction laid down by the authorities on the matter:
The most important single factor in determining the intention of the people from whom the constitution
emanated is the language in which it is expressed. The words employed are to be taken in their natural sense,
except that legal or technical terms are to be given their technical meaning. The imperfections of language as a
vehicle for conveying meanings result in ambiguities that must be resolved by result to extraneous aids for
discovering the intent of the framers. Among the more important of these are a consideration of the history of
the times when the provision was adopted and of the purposes aimed at in its adoption. The debates of
constitutional convention, contemporaneous construction, and practical construction by the legislative and
executive departments, especially if long continued, may be resorted to resolve, but not to create,
ambiguities. . . . Consideration of the consequences flowing from alternative constructions of doubtful provisions
constitutes an important interpretative device. . . . The purposes of many of the broadly phrased constitutional
limitations were the promotion of policies that do not lend themselves to definite and specific formulation. The
courts have had to define those policies and have often drawn on natural law and natural rights theories in
doing so. The interpretation of constitutions tends to respond to changing conceptions of political and social
values. The extent to which these extraneous aids affect the judicial construction of constitutions cannot be

formulated in precise rules, but their influence cannot be ignored in describing the essentials of the process
(Rottschaeffer on Constitutional Law, 1939 ed., p. 18-19).
There are times that when even the literal expression of legislation may be inconsistent with the general
objectives of policy behind it, and on the basis of equity or spirit of the statute the courts rationalize a restricted
meaning of the latter. A restricted interpretation is usually applied where the effect of literal interpretation will
make for injustice and absurdity or, in the words of one court, the language must be so unreasonable 'as to
shock general common sense'. (Vol. 3, Sutherland on Statutory Construction, 3rd ed., 150.).
A constitution is not intended to be a limitation on the development of a country nor an obstruction to its
progress and foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs. Bank of New York and Trust Co., 294
N. Y. S.648; 56 N.E. 2d. 745, 293 N.Y. 749).
Although the meaning or principles of a constitution remain fixed and unchanged from the time of its adoption,
a constitution must be construed as if intended to stand for a great length of time, and it is progressive and not
static. Accordingly, it should not receive too narrow or literal an interpretation but rather the meaning given it
should be applied in such manner as to meet new or changed conditions as they arise (U.S. vs. Lassic, 313 U.S.
299, 85 L. Ed., 1368).
Effect should be given to the purpose indicated by a fair interpretation of the language used and that
construction which effectuates, rather than that which destroys a plain intent or purpose of a constitutional
provision, is not only favored but will be adopted (State ex rel. Randolph Country vs. Walden, 206 S.W. 2d 979).
It is quite generally held that in arriving at the intent and purpose the construction should be broad or liberal or
equitable, as the better method of ascertaining that intent, rather than technical (Great Southern Life Ins. Co. vs.
City of Austin, 243 S.W. 778).
All these authorities uphold our conviction that the framers of the Constitution had not in mind the corporations sole,
nor intended to apply them the provisions of section 1 and 5 of said Article XIII when they passed and approved the
same. And if it were so as We think it is, herein petitioner, the Roman Catholic Apostolic Administrator of Davao, Inc.,
could not be deprived of the right to acquire by purchase or donation real properties for charitable, benevolent and
educational purposes, nor of the right to register the same in its name with the Register of Deeds of Davao, an
indispensable requisite prescribed by the Land Registration Act for lands covered by the Torrens system.
We leave as the last theme for discussion the much debated question above referred to as "the vested right saving
clause" contained in section 1, Article XIII of the Constitution. The dissenting Justice hurls upon the personal opinion
expressed on the matter by the writer of the decision the most pointed darts of his severe criticism. We think, however,
that this strong dissent should have been spared, because as clearly indicated before, some members of this Court
either did not agree with the theory of the writer or were not ready to take a definite stand on that particular point, so
that there being no majority opinion thereon there was no need of any dissension therefrom. But as the criticism has
been made the writer deems it necessary to say a few words of explanation.
The writer fully agrees with the dissenting Justice that ordinarily "a capacity to acquire (property) in futuro, is not in itself
a vested or existing property right that the Constitution protects from impairment. For a property right to be vested (or
acquired) there must be a transition from the potential or contingent to the actual, and the proprietary interest must
have attached to a thing; it must have become 'fixed and established'" (Balboa vs. Farrales, 51 Phil. 498). But the case at
bar has to be considered as an exception to the rule because among the rights granted by section 159 of the Corporation
Law was the right to receive bequests or gifts of real properties for charitable, benevolent and educational purposes.
And this right to receive such bequests or gifts (which implies donations in futuro), is not a mere potentiality that could
be impaired without any specific provision in the Constitution to that effect, especially when the impairment would
disturbingly affect the propagation of the religious faith of the immense majority of the Filipino people and the
curtailment of the activities of their Church. That is why the writer gave us a basis of his contention what Professor
Aruego said in his book "The Framing of the Philippine Constitution" and the enlightening opinion of Mr. Justice Jose P.

Laurel, another Delegate to the Constitutional Convention, in his concurring opinion in the case of Goldcreek Mining Co.
vs. Eulogio Rodriguez et al., 66 Phil. 259. Anyway the majority of the Court did not deem necessary to pass upon said
"vested right saving clause" for the final determination of this case.
JUDGMENT
Wherefore, the resolution of the respondent Land Registration Commission of September 21, 1954, holding that in view
of the provisions of sections 1 and 5 of Article XIII of the Philippine Constitution the vendee (petitioner) is not qualified
to acquire lands in the Philippines in the absence of proof that at least 60 per centum of the capital, properties or assets
of the Roman Catholic Apostolic Administrator of Davao, Inc. is actually owned or controlled by Filipino citizens, and
denying the registration of the deed of sale in the absence of proof of compliance with such requisite, is hereby reversed.
Consequently, the respondent Register of Deeds of the City of Davao is ordered to register the deed of sale executed by
Mateo L. Rodis in favor of the Roman Catholic Apostolic Administrator of Davao, Inc., which is the subject of the present
litigation. No pronouncement is made as to costs. It is so ordered.
Bautista Angelo and Endencia, JJ., concur.
Paras, C.J., and Bengzon, J., concur in the result.
LABRADOR, J., concurring:
The case at bar squarely present this important legal question: Has the bishop or ordinary of the Roman Catholic Church
who is not a Filipino citizen, as corporation sole, the right to register land, belonging to the Church over which he
presides, in view of the Krivenko decision? Mr. Justice Felix sustains the affirmative view while Mr. Justice J. B. L. Reyes,
the negative. As the undersigned understands it, the reason given for this last view is that the constitutional provision
prohibiting land ownership by foreigners also extends to control because this lies within the scope and purpose of the
prohibition.
To our way of thinking, the question at issue depends for its resolution upon another, namely, who is the owner of the
land or property of the Church sought to be registered? Under the Canon Law the parish and the diocese have the right
to acquire and own property.
SEC. 1. La Iglesia catolica y la Sede Apostolica, libre e independientemente de la potestad civil, tiene derecho
innato de adquirir, retener y administrar bienes temporales para el logro de sus propios fines.
SEC. 2. Tambien las iglesias particulares y demas personas morales erigidas por la autoridad eclesiastica en
persona juridica, tienen derecho, a tenor de los sagrados canones, de adquirir, retener y administrar bienes
temporales. (Canon 1495) (Codigo de Derecho Canonico por Miguelez-Alonzo-Cabreros, 4a ed., p. 562.).
The Canon Law further states that Church property belongs to the non-collegiate moral person called the parish, or to
the diocese.
In canon law the ownership of ecclesiastical goods belongs to each separate juridical person in the Church (C.
1499). The property of St. John's Church does not belong to the Pope, the bishop, the pastor, or even to the
people of the parish. It belongs to the non-collegiate moral person called the parish, which has been lawfully
erected. It is not like a stock company. The civil law does not recognize this canonical principle; it insists on an
act of civil incorporation or some other legal device. (Ready Answers in Canon Law by Rev. P.J. Lydon, DD., 3rd
ed., 1948, p. 576.).
Parish. 3. A portion or subdivision of a diocese committed to the spiritual jurisdiction or care of a priest or
minister, called rector or pastor. In the Protestant Episcopal Church, it is a territorial division usually following
civil bounds, as those of a town. In the Roman Catholic Church, it is usually territorial, but whenever, as in some
parts of the United States there are different rites and languages, the boundaries and jurisdiction are

determined by right or language; as, a Ruthenian or Polish parish. "5. The inhabitants or members of a parish,
collectively.
Diocese. 3. Eccl. The circuit or extent of a bishop's jurisdiction; the district in which a bishop has authority.
(Webster's New International Dictionary).
We are aware of the fact that some writers believe that ownership of ecclesiastical properties resides in the Roman
Catholic Pontiff as Head of the Universal Church, but the better opinion seems to be that they do belong to the parishes
and diocese as above indicated.
Canonists entertain different opinions as to the person in whom the ownership of the ecclesiastical properties is
vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while
many doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is
more probable that ownership, strictly speaking, does not reside in the latter and, consequently, ecclesiastical
properties are owned by the churches, institutions and canonically established private corporations to which
said properties have been donated. (3 Campos y Pulido, Legislacion y Jurisprudencia Canonica, P. 420, cited in
Trinidad vs. Roman Catholic Archbishop of Manila, 63 Phil., 881, 888-889.).
The property in question, therefore, appears to belong to the parish or the diocese of Davao. But the Roman Catholics of
Davao are not organized as a juridical person, either under the Canon law or under the Civil Law. Neither is there any
provision in either for their organization as a juridical person. Registration of the property in the name of the Roman
Catholics of Davao is, therefore, impossible.
As under the Civil Law, however, the organization of parishes and dioceses as juridical persons is not expressly provided
for, the corporation law has set up the fiction known as the "corporation sole."
It tolerates the corporation sole wherever and as long as the state law does not permit the legal incorporation of
the parish or diocese. The bishop officially is the legal owner. (Ready Answers in Canon Law, supra, p. 577.) .
and authorizes it to purchase and hold real estate for the Church.
SEC. 159. Any corporation sole may purchase and hold real estate and personal property for its church,
charitable, benevolent, or educational purposes, and may receive bequests or gifts for such purposes. Such
corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from the
Court of First Instance of the province in which the property is situated; but before making the order proof must
be made to the satisfaction of the court that notice of the application for leave to mortgage or sell has been
given by publication or otherwise in such manner and for such time as said court or the judge thereof may have
directed, and that it is to the interest of the corporation that leave to mortgage or sell should be granted. The
application for leave to mortgage or sell must be made by petition, duly verified by the bishop, chief priest, or
presiding elder, acting as corporation sole, and may be opposed by any member of the religious denomination,
society, or church represented by the corporation sole: Provided, however, That in cases when the rules,
regulations and discipline of the religious denomination, society or church concerned represented by such
corporation sole regulate the methods of acquiring, holding, selling, and mortgaging real estate and personal
property, such rules, regulations, and discipline shall control and the intervention of the courts shall not be
necessary. (The Corporation Law.)
And in accordance with the above section, temporalities of the Church or of parish or a diocese are allowed to be
registered in the name of the corporation sole for purposes of administration and in trust for the real owners.
The mere fact that the Corporation Law authorizes the corporation sole to acquire and hold real estate or other property
does not make the latter the real owner thereof, as his tenure of Church property is merely for the purposes of
administration. As stated above, the bishop is only the legal (technical) owner or trustee, the parish or diocese being the
beneficial owner, or cestui que trust.

Having arrived at the conclusion that the property in question belongs actually either to the parish or to the dioceses of
Davao, the next question that possess for solution is, In case of said property, whose nationality must be considered for
the purpose of determining the applicability of the constitutional provision limiting ownership of land to Filipinos, that of
the bishop or chief priest who registers as corporation sole, or that of the constituents of the parish or diocese who are
the beneficial owners of the land? We believe that of a latter must be considered, and not that of the priest clothed with
the corporate fiction and denominated as the corporation sole. The corporation sole is a mere contrivance to enable a
church to acquire, own and manage properties belonging to the church. It is only a means to an end. The constitutional
provision could not have been meant to apply to the means through which and by which property may be owned or
acquired, but to the ultimate owner of the property. Hence, the citizenship of the priest forming the corporation sole
should be no impediment if the parish or diocese which owns the property is qualified to own and possess the property.
We can take judicial notice of the fact that a great majority of the constituents of the parish or diocese of Davao are
Roman Catholics. The affidavit demanded is therefore, a mere formality.
The dissenting opinion sustains the proposition that control, not actual ownership, is the factor that determines whether
the constitutional prohibition against alien ownership of lands should or should not apply. We may assume the
correctness of the proposition that the Holy See exercises control cannot be real and actual but merely theoretical. In
any case, the constitutional prohibition is limited by its terms to ownership and ownership alone. And should the
corporation sole abuse its powers and authority in relation to the administration or disposal of the property contrary to
the wishes of the constituents of the parish or the diocese, the act may always be questioned as ultra vires.
We agree, therefore, with the reversal of the order.
Montemayor and Reyes, A., JJ., concur.
REYES, J.B.L., dissenting:
I regret not being able to assent to the opinion of Mr. Justice Felix. The decision of the Supreme Court in this case will be
of far reaching results, for once the capacity of corporations sole to acquire public and private agricultural lands is
admitted, there will be no limit to the areas they may hold until the Legislature implements section 3 of Article XIII of the
Constitution, empowering it to set a limit to the size of private agricultural land that may be held; and even then it can
only be done without prejudice to rights acquired prior to the enactment of such law. In other words, even if a limitative
law is adopted, it will not affect the landholdings acquired before the law become effective, no matter how vast the
estate should be.
The Constitutional restrictions to the acquisition of agricultural land are well known:
SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the
State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the
Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such
citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution. Natural resources, with the exception of public agricultural
land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization
of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another
twenty-five years, except as to water rights for irrigation, water supply fisheries, or industrial uses other than
the development of water power, in which cases beneficial use may be the measure and the limit of the grant.
(Article XII, Constitution of the Phil.).
SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except
to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the
Philippines. (Art. XII, Constitution of the Phil.).

In requiring corporations or associations to have sixty per cent (60%) of their capital owned by Filipino citizens, the
constitution manifestly disregarded the corporate fiction, i.e., the juridical personality of such corporations or
associations. It went behind the corporate entity and looked at the natural persons that composed it, and demanded
that a clear majority in interest (60%) should be Filipino. To me this was done to ensure that the control of its properties
(not merely the beneficial ownership thereof) remained in Filipino hands. (Aruego, Framing of the Constitution, Vol. 2.
pp. 604, 606.) .
The nationalization of the natural resources of the country was intended (1) to insure their conservation for
Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the
country of foreign control through peaceful economic penetration; and (3) to prevent making the Philippines a
source of international conflicts with the consequent danger to its internal security and independence. . . .
The convention permitted aliens to acquire an interest in the natural resources of the country and in private
agricultural lands as component elements of corporations or associations. The maximum limit of interest that
they could hold in a corporation or association would be only forty per centum of the capital. Accordingly the
control of the corporation or association would remain in Filipino hands.
In its report the committee on nationalization and preservation of lands and other natural resources
recommended that the maximum limit of interest that aliens could hold in a corporation or association should
be only twenty-five per centum of the capital. The purpose of the committee was to enable Filipino-controlled
corporations or associations, if necessary, to interest aliens to join their technical or managerial staff by giving
them a part interest in the same. The sub-committee of seven embodied this recommendation in the first draft
of the Constitution; but in the revised article on General Provisions, it raised the amount to forty per centum.
(emphasis supplied.)
It was in recognition of this basic rule that we held in Register of Deeds vs. Ung Siu Si Temple, 51 Off. Gaz. p. 2866, that if
the association had no capital, its controlling membership must be composed of Filipinos. Becauseownership divorced
from control is not true ownership.
From these premises it can be deduced that the preliminary question to be decide by the court is the following: what
and who exercises the power of control in the corporation sole known as "The Roman Catholic Apostolic Administrator
of Davao, Inc."?.
Under section 155 of the Corporation Law, the bishop, or other religious head, as corporation sole, is "charged with
the administration of the temporalities of his church." It becomes then pertinent to inquire: if he is only an administrator,
for whom does he administer? And who can alter or overrule his acts?
If his acts as administrator can not be overridden, or altered, except by himself, then obviously the control of the
corporation and its temporalities is in the bishop himself, and he must be a Filipino citizen. If, on the other hand, the
final say as to management, exploitation, encumbrance or disposition of the temporalities resides in another individual
or body of individuals, then the control resides there. To possess constitutional capacity to acquire agricultural land or
other natural resources, that body making the final decision for the corporation must have at least 60 per cent Filipino
membership.
By this test, the body of members professing the Catholic faith in the diocese of Davao does not constitute the
controlling membership. For under the rules of the Roman Catholic Church the faithful can not control the acts of the
Ordinary; they cannot override his decision, just as they do not elect or remove him. Only his hierarchical superiors can
do that; the control is from above, not from below. Hence, the fact that 90 per cent (or even 100 per cent) of the faithful
in the diocese should be composed of Filipino citizens is totally devoid of significance from the standpoint of the
constitutional restrictions in question (see Codex, Canons 1518 and 1530, paragraph 1, No. 3).
Moreover, I do not think that the body of Catholic faithful in the Davao diocese can be taken, for the purpose here under
consideration, as the Church represented by the Ordinary of Davao. That body does not constitute an entity or unit

separate and apart from the rest of the faithful throughout the world that compose the Roman Catholic Church that has
always claimed ecumenical (universal) character. There is nom Catholic Church of Davao district and independent of the
Catholic Church of Manila, Lipa or Rome. All those professing Catholic faith are members of only one single church or
religious group. Thus the Iglesia Filipina Independiente is not part of the Catholic Church, precisely because of its
independence.
If, the, the Catholic Church of Davao is part and parcel of the universal Catholic Church, it can not be considered
separate and apart from it in this case. And if considered with it, obviously the condition of 60 per cent Filipino
membership is not satisfied when all the Catholic faithful in the world are taken into account.
The unity and singleness of the various diocese of the church appears expressly recognized in section 163 of the
Corporation Law, which provides that the corporation (sole) shall hold the temporalities, not for the diocese; but for the
benefit "of the church of which the diocese is an organized or constituent part."
SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society,
or by the diocese synod, or district organization of any religious denomination or church shall, on its
incorporation, pass to the corporation and shall be held in trust for the use purpose, behalf, and benefit of the
religious society or order so incorporated or of the church of which the diocese, synod, or district organization is
an organized and constituent part.
So that, even from the standpoint of beneficial ownership, the dioceses of Davao can not be viewed as a group legally
isolated from the Catholic Church as a whole.
Nor does court control over the acts of the corporation sole constitute a guarantee of Filipino control that would satisfy
the purposes of the constitution, for the reason that under section 159 (last proviso) of the Corporation law, the court
intervention is dispensed with where the rules and discipline of the church already regulate the acquisition and
disposition of real estate and personal property.
Provided however, that in cases where the rules, regulations and discipline of the religious denomination,
society, or church concerned represented by such corporation sole regulate the methods of acquiring, holding,
selling, and mortgaging real estate and personal property, such rules, regulations, and discipline shall control
and the intervention of the courts shall not be necessary. (emphasis supplied.)
It is argued that a distinction must be drawn between the lands to be devoted to purely religious purposes and the lands
held in ordinary ownership. But where in the Constitution is such a distinction drawn? Under it, capacity to acquire
agricultural land for the erection of a church is capacity to acquire agricultural lands for any lawful purpose, whether it
be for convents or schools or seminaries or haciendas for their support or land to be held solely for enjoyment of the
revenue. Once the capacity to acquire is granted, the way is paved for the revitalization of religious landholdings that
proved so troublesome in our past. I cannot conceive that the Constitution intended to revive them.
It is also argued that, before the Constitution was adopted, the corporations sole had, by express statute, the right to
acquire agricultural land; and that the Constitution was not intended to destroy such "acquired property rights." If
followed, the argument destroys the constitutional restrictions. All aliens had a capacity to acquire agricultural land
before the Constitution came into effect, because no prohibition existed previously. Must their right to acquire and hold
agricultural land be conceded in spite of the Constitution?.
That the law should have expressly conferred capacity to acquire land upon corporations sole was not due any special
predilection for them; it was exclusively due to the principle that corporation, as artificial entities, have no inherent
rights, but only those granted by the sovereign. Unless conferred, the corporate right would not exist.
Furthermore, a capacity to acquire in futuro, is not in itself a vested existing property right that the Constitution protects
from impairment. For a property right to be vested (or acquired) there must be a transition from thepotential, or
contingent, to the actual, and the proprietary interest must have attached to a thing, it must have become "fixed or

established "(Balboa vs. Farrales, 51 Phil. 498). If mere potentialities cannot be impaired, then the law would become
unchangeable, for every variation in it will reduce some one's legal ability to do or not to do. Already in Benguet
Consolidated vs. Pineda, 3 52 Off. Gaz. 1961, we have ruled that no one has a vested right in statutory privileges or
exemptions. And in the concurring opinion in Gold Creek Mining Corp. vs. Rodriguez, 66 Phil. 259 (cited by Justice Felix),
Mr. Justice Laurel squarely declared that "contingency or expectation is neither property right." (cas. cit., p. 269.) Finally,
the point is also made that the Ordinary, as religious corporation sole, has no citizenship, and is not an alien. The answer
is that under the Constitution of the Republic, it is not enough that the acquirer of agricultural land be not an alien; he
must be a Filipino or controlled by Filipinos.
Wherefore, I am constrained to conclude:
(1) That the capacity of religious corporations sole to acquire agricultural land depends upon 60 per cent Filipino
membership of the group or body exercising control of the corporation;lawphi1.net
(2) That if control of any such corporation should be vested in a single person, then such person must be a Filipino
citizen;1awphi1.net
(3) That in the absence of evidence on these points, the order appealed from, denying registration of the conveyance,
should be affirmed.
Concepcion, J., concur.

Footnotes
1 Translation. Unless by lawful provisions more ample rights are conferred upon him, to the local Ordinary
pertains the duty to exercise diligence in the administration of all the ecclesiastical properties located within the
territory and to avoid their removal from his jurisdiction.
Taking into account the rights and the legitimate customs and circumstances, every Ordinary shall endeavor to
regulate everything concerning the administration of the ecclesiastical properties and shall give, within the
bonds of Common Law, timely and particular instructions therefor.
2 97 Phil., 58.
3 98 Phil., 711.