Land Titles Cases 4

8/10/2019 Land Titles Cases 4

1/55

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 certiorariunder 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 respondentSoledad 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 herebyacknowledged 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.


2/55

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 thedisputed 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:


3/55

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.


4/55

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 previouslyconfessed 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 ora

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 employmen

(Rollo,

p. 10).

It is markworthy that all the tax receipts were in the name of private respondent and her husband. The rental receiptswere also in the name of her husband.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.


5/55

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 1of the Court of Appeals 2in 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. T-

130721(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 5of the Civil Code.

In its decision6dated March 10, 1992,7the 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


6/55

subject land was urban; hence, petitioners had no reason to invoke their r ight of redemption under Art. 1621 of the Civi

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

andYap

vs.Grageda,9it 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


7/55

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 thecommunity 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.15The purpose of this

provision, which is limited in scope to rural lands not exceeding one hectare, is to favor agricultural development.16The

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 17settled 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 notbe 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


8/55

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 landsto 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, 19which 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,23in 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 thewill was "rectified by the subsequent transfer of the property."

The present case is similar to De Castro vs. Tan. 24In 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,25Godinez vs.Pak Luen,26

Vasquez vs.Li Seng Giap27and Herrera vs.Luy

Kim Guan, 28which similarly involved the sale of land to an alien who thereafter sold the same to a Filipino citizen, the


9/55

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 ofJJ.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.


10/55

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 alsoLacanilao 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 alsoTejido 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.


11/55

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 thenpending 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


12/55

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 onthe 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 shal

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 partiesdied, 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 incustodia 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.


13/55

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.1We 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 Lay3that 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 adifference 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 period5but 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 o

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 legisdoes 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 legisis 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) theproperty 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


14/55

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.

x x x x x x x x x

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

x x x x x x x x x

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."9Recounting 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.11Any 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 truthis 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 inference12drawn 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.


15/55

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)13it 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.14Hence 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"19rendering 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 reasonabl e

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


16/55

[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 grantedtemporary 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,21this 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 andjus abutendi) but also of the right to dispose of it (jus disponendi) rights thesum 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,22is indeed in grave peril.

It does not follow from what has been said, however, that because the parties are inpari delictothey 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.23For another thing, and this is not only cogent but also important, article 1416 of the Civil Code provides, as an

exception to the rule onpari delicto, that "When the agreement is not illegalper sebut 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"24is 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 agriculturallands, 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 ofpari delicto. To the extent that our ruling in this case conflicts with that laid down in Rellosa v. Gaw Chee

Hun26and subsequent similar cases, the latter must be considered aspro tantoqualified.

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 rentalsfrom 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

P38,442.84.27Besides, if he had really settled his accounts with her on August 26, 1959, we cannot understand why he


17/55

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 P56,564.3528in 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 food29masses30and salaries of her maids.31His claim for P9,210.49 must likewise be rejected as hisaverment 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.


18/55

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 thepari delictoconcept, as was, to my mind, indiscriminately done, to alien landholding declared illegal underthe Krivenkodoctrine in some past decisions.

It is to be remembered that in Krivenko v. The Register of Deeds of Manila,1this Court over strong dissents held

that residentialand commerciallots 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 Krivenkodecision was only handed down on November 15, 1947. Prior

to that date there were many who were of the opinion that the phrase agricultural landshould be construed strictly and

not be made to cover residentialand commerciallots. Acting on that belief, several transactions were entered intotransferring such lots to alien vendees by Filipino-vendors.

After the Krivenkodecision, 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,2Bautista v. Uy Isabelo,3Talento v. Makiki,4Caoile v. Chiao Peng5were 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,6therein cited.

There were two dissenting opinions by former Justices Pablo and Alex Reyes. The doctrine as announced in

the Rellosacase 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 Krivenkocase, 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 ofpari

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 Krivenkocase, 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 ofevasion of the Constitution.

Since, however, the sales in question took place prior to the Krivenkodecision, 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


19/55

According to the Rellosaopinion, 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

theKrivenkodecision 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 Krivenkodecision, 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 Krivenkodecision, which could not have been anticipated. Unfortunately, under the Rellosacase, 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 unambigouslanguage 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

theKrivenkodecision on November 15, 1947. Alien-vendee, therefore, cannot be allowed to continue owning and

exercising acts of ownership over said property, when it is clearly included within the Constitutional prohibition. Alien-

vendee should thus be made to restore the property with its fruits and rents to Filipino-vendor, its previous owner, if it

could be shown that in the utmost good faith, he transferred his title over the same to alien-vendee, upon restitution of

the purchase price of course.


20/55

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

theKrivenkodecision, 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 theKrivenkocase, be restored to thepossession 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 Krivenkocase 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

143 Phil. 873 (1922).

2Id. at 876.

355 Phil. 99 (1930).

477 Phil. 470 (1946).

5Civ. Code, art. 1197.

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

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

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

9T.s.n., pp. 54-55, June 6, 1960.

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

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


21/55

12Article 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."

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

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

15

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

16Rodriguez 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).

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

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

19Rodriguez 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 obiteras 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

21The 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].

22Supra, note 20.

23Cf.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."

24Const. art. XIII sec. 5.

25Supra, note 20, at 480-481.

2693 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.

28According 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.

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

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

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


22/55

FERNANDO, J., concurring:

179 Phil. 461 (1947).

293 Phil. 827.

393 Phil. 843.

493 Phil. 855.

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

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

7At p. 835.

8

Art. 526, par. 3. The above provision is merely a reiteration of the doctrine announced in the case of Kasilag v.Rodriguezdecided 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.)

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

10308 U.S. 731 (1940).

1179 Phil. 461, 480 (1947).


23/55

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.

R E S O L U T I O N

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 CourtEn 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 refusalshould 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)1would 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
http://www.lawphil.net/judjuris/juri2005/jan2005/gr_124293_2005.html#fnt1http://www.lawphil.net/judjuris/juri2005/jan2005/gr_124293_2005.html#fnt1http://www.lawphil.net/judjuris/juri2005/jan2005/gr_124293_2005.html#fnt1http://www.lawphil.net/judjuris/juri2005/jan2005/gr_124293_2005.html#fnt1


24/55

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 a

Documents

Land Titles Cases 4