G.R. No.

159310               February 24, 2009

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

DECISION

PUNO, C.J.:

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

The facts are as follows:

Wilhelm Jambrich, an Austrian, arrived in the Philippines in 1983 after he was assigned by his
employer, Simmering-Graz Panker A.G., an Austrian company, to work at a project in Mindoro. In
1984, he transferred to Cebu and worked at the Naga II Project of the National Power Corporation.
There, he met respondent Antonietta Opalla-Descallar, a separated mother of two boys who was
working as a waitress at St. Moritz Hotel. Jambrich befriended respondent and asked her to tutor
him in English. In dire need of additional income to support her children, respondent agreed. The
tutorials were held in Antonietta’s residence at a squatters’ area in Gorordo Avenue.

Jambrich and respondent fell in love and decided to live together in a rented house in Hernan
Cortes, Mandaue City. Later, they transferred to their own house and lots at Agro-Macro
Subdivision, Cabancalan, Mandaue City. In the Contracts to Sell dated November 18, 19851 and
March 10, 19862 covering the properties, Jambrich and respondent were referred to as the buyers. A
Deed of Absolute Sale dated November 16, 19873 was likewise issued in their favor. However, when
the Deed of Absolute Sale was presented for registration before the Register of Deeds, registration
was refused on the ground that Jambrich was an alien and could not acquire alienable lands of the
public domain. Consequently, Jambrich’s name was erased from the document. But it could be
noted that his signature remained on the left hand margin of page 1, beside respondent’s signature
as buyer on page 3, and at the bottom of page 4 which is the last page. Transfer Certificate of Title
(TCT) Nos. 24790, 24791 and 24792 over the properties were issued in respondent’s name alone.

Jambrich also formally adopted respondent’s two sons in Sp. Proc. No. 39-MAN,4 and per Decision
of the Regional Trial Court of Mandaue City dated May 5, 1988.5

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

Jambrich met petitioner Camilo F. Borromeo sometime in 1986. Petitioner was engaged in the real
estate business. He also built and repaired speedboats as a hobby. In 1989, Jambrich purchased an
engine and some accessories for his boat from petitioner, for which he became indebted to the latter
for about ₱150,000.00. To pay for his debt, he sold his rights and interests in the Agro-Macro
properties to petitioner for ₱250,000, as evidenced by a "Deed of Absolute Sale/Assignment."6 On
July 26, 1991, when petitioner sought to register the deed of assignment, he discovered that titles to
the three lots have been transferred in the name of respondent, and that the subject property has
already been mortgaged.
On August 2, 1991, petitioner filed a complaint against respondent for recovery of real property
before the Regional Trial Court of Mandaue City. Petitioner alleged that the Contracts to Sell dated
November 18, 1985 and March 10, 1986 and the Deed of Absolute Sale dated November 16, 1987
over the properties which identified both Jambrich and respondent as buyers do not reflect the true
agreement of the parties since respondent did not pay a single centavo of the purchase price and
was not in fact a buyer; that it was Jambrich alone who paid for the properties using his exclusive
funds; that Jambrich was the real and absolute owner of the properties; and, that petitioner acquired
absolute ownership by virtue of the Deed of Absolute Sale/Assignment dated July 11, 1991 which
Jambrich executed in his favor.

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

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

In its decision, the court a quo found—

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

xxx

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

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

xxx

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

The dispositive portion of the Decision states:

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

1) Declaring plaintiff as the owner in fee simple over the residential house of strong materials
and three parcels of land designated as Lot Nos. 1, 3 and 5 which are covered by TCT Nos.
24790, 24791 and 24792 issued by the Register of Deeds of Mandaue City;

2) Declaring as null and void TCT Nos. 24790, 24791 and 24792 issued in the name of
defendant Antoniet[t]a Descallar by the Register of Deeds of Mandaue City;

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

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

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

6) To pay the costs.11

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

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

Petitioner’s motion for reconsideration was denied.

Hence, this petition for review.

Petitioner assigns the following errors:

I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING

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

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

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

First, who purchased the subject properties?

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

On the other hand, respondent was employed as a waitress from 1984 to 1985 with a monthly salary
of not more than ₱1,000.00. In 1986, when the parcels of land were acquired, she was unemployed,
as admitted by her during the pre-trial conference. Her allegations of income from a copra business
were unsubstantiated. The supposed copra business was actually the business of her mother and
their family, with ten siblings. She has no license to sell copra, and had not filed any income tax
return. All the motorized bancas of her mother were lost to fire, and the last one left standing was
already scrap. Further, the Child Study Report15 submitted by the Department of Social Welfare and
Development (DSWD) in the adoption proceedings of respondent’s two sons by Jambrich disclosed
that:

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

The DSWD Home Study Report17 further disclosed that:

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

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

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

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

(3) In 1986-1987, respondent lived in Syria with Jambrich and her two children for ten
months, where she was completely under the support of Jambrich.

(4) Jambrich executed a Last Will and Testament, where he, as owner, bequeathed the
subject properties to respondent.

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

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

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

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

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

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

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

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

We affirm the Regional Trial Court.

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

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

SO ORDERED.

REYNATO S. PUNO
Chief Justice
G.R. No. 73002 December 29, 1986

THE DIRECTOR OF LANDS, petitioner,

vs.
INTERMEDIATE APPELLATE COURT and ACME PLYWOOD & VENEER CO. INC.,
ETC., respondents.

D. Nacion Law Office for private respondent.

NARVASA, J.:

The Director of Lands has brought this appeal by certiorari from a judgment of the Intermediate
Appellate Court affirming a decision of the Court of First Instance of Isabela, which ordered
registration in favor of Acme Plywood & Veneer Co., Inc. of five parcels of land measuring 481, 390
square meters, more or less, acquired by it from Mariano and Acer Infiel, members of the Dumagat
tribe.

The registration proceedings were for confirmation of title under Section 48 of Commonwealth Act
No. 141 (The Public Land Act). as amended: and the appealed judgment sums up the findings of the
trial court in said proceedings in this wise:

1. That Acme Plywood & Veneer Co. Inc., represented by Mr. Rodolfo Nazario is a
corporation duly organized in accordance with the laws of the Republic of the Philippines and
registered with the Securities and Exchange Commission on December 23, 1959;

2. That Acme Plywood & Veneer Co. Inc., represented by Mr. Rodolfo Nazario can acquire
real properties pursuant to the provisions of the Articles of Incorporation particularly on the
provision of its secondary purposes (paragraph (9), Exhibit 'M-l');

3. That the land subject of the Land Registration proceeding was ancestrally acquired by
Acme Plywood & Veneer Co., Inc., on October 29, 1962, from Mariano Infiel and Acer Infiel,
both members of the Dumagat tribe and as such are cultural minorities;

4. That the constitution of the Republic of the Philippines of 1935 is applicable as the sale
took place on October 29, 1962;

5. That the possession of the Infiels over the land relinquished or sold to Acme Plywood &
Veneer Co., Inc., dates back before the Philippines was discovered by Magellan as the
ancestors of the Infiels have possessed and occupied the land from generation to generation
until the same came into the possession of Mariano Infiel and Acer Infiel;

6. That the possession of the applicant Acme Plywood & Veneer Co., Inc., is continuous,
adverse and public from 1962 to the present and tacking the possession of the Infiels who
were granted from whom the applicant bought said land on October 29, 1962, hence the
possession is already considered from time immemorial.

7. That the land sought to be registered is a private land pursuant to the provisions of
Republic Act No. 3872 granting absolute ownership to members of the non-Christian Tribes
 on land occupied by them or their ancestral lands, whether with the alienable or disposable
public land or within the public domain;

8. That applicant Acme Plywood & Veneer Co. Inc., has introduced more than Forty-Five
Million (P45,000,000.00) Pesos worth of improvements, said improvements were seen by the
Court during its ocular investigation of the land sought to be registered on September 18,
1982;

9. That the ownership and possession of the land sought to be registered by the applicant
was duly recognized by the government when the Municipal Officials of Maconacon, Isabela,
have negotiated for the donation of the townsite from Acme Plywood & Veneer Co., Inc., and
this negotiation came to reality when the Board of Directors of the Acme Plywood & Veneer
Co., Inc., had donated a part of the land bought by the Company from the Infiels for the
townsite of Maconacon Isabela (Exh. 'N') on November 15, 1979, and which donation was
accepted by the Municipal Government of Maconacon, Isabela (Exh. 'N-l'), during their
special session on November 22, 1979.

The Director of Lands takes no issue with any of these findings except as to the applicability of the
1935 Constitution to the matter at hand. Concerning this, he asserts that, the registration
proceedings have been commenced only on July 17, 1981, or long after the 1973 Constitution had
gone into effect, the latter is the correctly applicable law; and since section 11 of its Article XIV
prohibits private corporations or associations from holding alienable lands of the public domain,
except by lease not to exceed 1,000 hectares (a prohibition not found in the 1935 Constitution which
was in force in 1962 when Acme purchased the lands in question from the Infiels), it was reversible
error to decree registration in favor of Acme Section 48, paragraphs (b) and (c), of Commonwealth
Act No. 141, as amended, reads:

SEC. 48. The following described citizens of the Philippines, occupying lands of the public
domain or claiming to own any such lands or an interest therein, but whose titles have not
been perfected or completed, may apply to the Court of First Instance of the province where
the land is located for confirmation of their claims, and the issuance of a certificate of title
therefor, under the Land Registration Act, to wit:

xxx xxx xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of acquisition or ownership, for at least thirty years
immediately preceding the filing of the application for confirmation of title except when
prevented by war or force majeure. These shall be conclusively presumed to have performed
all the conditions essential to a Government grant and shall be entitled to a certificate of title
under the provisions of this chapter.

(c) Members of the National Cultural minorities who by themselves or through their
predecessors-in-interest have been in open. continuous, exclusive and notorious possession
and occupation of lands of the public domain suitable to agriculture, whether disposable or
not, under a bona fide claim of ownership for at least 30 years shall be entitled to the rights
granted in subsection (b) hereof.

The Petition for Review does not dispute-indeed, in view of the quoted findings of the trial court
which were cited and affirmed by the Intermediate Appellate Court, it can no longer controvert before
this Court-the fact that Mariano and Acer Infiel, from whom Acme purchased the lands in question on
October 29, 1962, are members of the national cultural minorities who had, by themselves and
through their progenitors, possessed and occupied those lands since time immemorial, or for more
than the required 30-year period and were, by reason thereof, entitled to exercise the right granted in
Section 48 of the Public Land Act to have their title judicially confirmed. Nor is there any pretension
that Acme, as the successor-in-interest of the Infiels, is disqualified to acquire and register
ownership of said lands under any provisions of the 1973 Constitution other than Section 11 of its
Article XIV already referred to.

Given the foregoing, the question before this Court is whether or not the title that the Infiels had
transferred to Acme in 1962 could be confirmed in favor of the latter in proceedings instituted by it in
1981 when the 1973 Constitution was already in effect, having in mind the prohibition therein against
private corporations holding lands of the public domain except in lease not exceeding 1,000
hectares.

The question turns upon a determination of the character of the lands at the time of institution of the
registration proceedings in 1981. If they were then still part of the public domain, it must be
answered in the negative. If, on the other hand, they were then already private lands, the
constitutional prohibition against their acquisition by private corporations or associations obviously
does not apply.

In this regard, attention has been invited to Manila Electric Company vs. Castro-Bartolome, et
al,   where a similar set of facts prevailed. In that case, Manila Electric Company, a domestic
1

corporation more than 60% of the capital stock of which is Filipino-owned, had purchased in 1947
two lots in Tanay, Rizal from the Piguing spouses. The lots had been possessed by the vendors and,
before them, by their predecessor-in-interest, Olimpia Ramos, since prior to the outbreak of the
Pacific War in 1941. On December 1, 1976, Meralco applied to the Court of First Instance of Rizal,
Makati Branch, for confirmation of title to said lots. The court, assuming that the lots were public
land, dismissed the application on the ground that Meralco, a juridical person, was not qualified to
apply for registration under Section 48(b) of the Public Land Act which allows only Filipino citizens or
natural persons to apply for judicial confirmation of imperfect titles to public land. Meralco appealed,
and a majority of this Court upheld the dismissal. It was held that:

..., the said land is still public land. It would cease to be public land only upon the issuance of
the certificate of title to any Filipino citizen claiming it under section 48(b). Because it is still
public land and the Meralco, as a juridical person, is disqualified to apply for its registration
under section 48(b), Meralco's application cannot be given due course or has to be
dismissed.

Finally, it may be observed that the constitutional prohibition makes no distinction between
(on the one hand) alienable agricultural public lands as to which no occupant has an
imperfect title and (on the other hand) alienable lands of the public domain as to which an
occupant has on imperfect title subject to judicial confirmation.

Since section 11 of Article XIV does not distinguish, we should not make any distinction or
qualification. The prohibition applies to alienable public lands as to which a Torrens title may
be secured under section 48(b). The proceeding under section 48(b) 'presupposes that the
land is public' (Mindanao vs. Director of Lands, L-19535, July 30, 1967, 20 SCRA 641, 644).

The present Chief Justice entered a vigorous dissent, tracing the line of cases beginning
with Carino in 1909   thru Susi in 1925   down to Herico in 1980,   which developed, affirmed and
2 3 4

reaffirmed the doctrine that open, exclusive and undisputed possession of alienable public land for
the period prescribed by law creates the legal fiction whereby the land, upon completion of the
requisite period ipso jure and without the need of judicial or other sanction, ceases to be public land
and becomes private property. That said dissent expressed what is the better — and, indeed, the
correct, view-becomes evident from a consideration of some of the principal rulings cited therein,

The main theme was given birth, so to speak, in Carino involving the Decree/Regulations of June
25, 1880 for adjustment of royal lands wrongfully occupied by private individuals in the Philippine
Islands. It was ruled that:

It is true that the language of articles 4 and 5   attributes title to those 'who may prove'
5

possession for the necessary time and we do not overlook the argument that this means may
prove in registration proceedings. It may be that an English conveyancer would have
recommended an application under the foregoing decree, but certainly it was not calculated
to convey to the mind of an Igorot chief the notion that ancient family possessions were in
danger, if he had read every word of it. The words 'may prove' (acrediten) as well or better, in
view of the other provisions, might be taken to mean when called upon to do so in any
litigation. There are indications that registration was expected from all but none sufficient to
show that, for want of it, ownership actually gained would be lost. The effect of the proof,
wherever made, was not to confer title, but simply to establish it, as already conferred by the
decree, if not by earlier law. ...

That ruling assumed a more doctrinal character because expressed in more categorical language,
in Susi:

.... In favor of Valentin Susi, there is, moreover, the presumption juris et de jure established
in paragraph (b) of section 45 of Act No. 2874, amending Act No. 926, that all the necessary
requirements for a grant by the Government were complied with, for he has been in actual
and physical possession, personally and through his predecessors, of an agricultural land of
the public domain openly, continuously, exclusively and publicly since July 26, 1984, with a
right to a certificate of title to said land under the provisions of Chapter VIII of said Act. So
that when Angela Razon applied for the grant in her favor, Valentin Susi had already
acquired, by operation of law not only a right to a grant, but a grant of the Government, for it
is not necessary that a certificate of title should be issued in order that said grant may be
sanctioned by the courts, an application therefore is sufficient, under the provisions of
section 47 of Act No. 2874. If by a legal fiction, Valentin Susi had acquired the land in
question by a grant of the State, it had already ceased to be of the public domain and had
become private property, at least by presumption, of Valentin Susi, beyond the control of the
Director of Lands. Consequently, in selling the land in question of Angela Razon, the Director
of Lands disposed of a land over which he had no longer any title or control, and the sale
thus made was void and of no effect, and Angela Razon did not thereby acquire any right.  6

Succeeding cases, of which only some need be mentioned, likeof Lacaste vs. Director of
Lands,   Mesina vs. Vda. de Sonza,   Manarpac vs. Cabanatuan,   Miguel vs. Court of
7 8 9

Appeals   and Herico vs. Dar, supra, by invoking and affirming the Susi doctrine have firmly rooted it
10

in jurisprudence.

Herico, in particular, appears to be squarely affirmative: 11

.... Secondly, under the provisions of Republic Act No. 1942, which the respondent Court
held to be inapplicable to the petitioner's case, with the latter's proven occupation and
cultivation for more than 30 years since 1914, by himself and by his predecessors-in-
interest, title over the land has vested on petitioner so as to segregate the land from the
 mass of public land. Thereafter, it is no longer disposable under the Public Land Act as by
free patent. ....

xxx xxx xxx

As interpreted in several cases, when the conditions as specified in the foregoing provision
are complied with, the possessor is deemed to have acquired, by operation of law, a right to
a grant, a government grant, without the necessity of a certificate of title being issued. The
land, therefore, ceases to be of the public domain and beyond the authority of the Director of
Lands to dispose of. The application for confirmation is mere formality, the lack of which
does not affect the legal sufficiency of the title as would be evidenced by the patent and the
Torrens title to be issued upon the strength of said patent. 12

Nothing can more clearly demonstrate the logical inevitability of considering possession of public
land which is of the character and duration prescribed by statute as the equivalent of an express
grant from the State than the dictum of the statute itself   that the possessor(s) "... shall be
13

conclusively presumed to have performed all the conditions essential to a Government grant and
shall be entitled to a certificate of title .... " No proof being admissible to overcome a conclusive
presumption, confirmation proceedings would, in truth be little more than a formality, at the most
limited to ascertaining whether the possession claimed is of the required character and length of
time; and registration thereunder would not confer title, but simply recognize a title already vested.
The proceedings would not originally convert the land from public to private land, but only confirm
such a conversion already affected by operation of law from the moment the required period of
possession became complete. As was so well put in Carino, "... (T)here are indications that
registration was expected from all, but none sufficient to show that, for want of it, ownership actually
gained would be lost. The effect of the proof, wherever made, was not to confer title, but simply to
establish it, as already conferred by the decree, if not by earlier law."

If it is accepted-as it must be-that the land was already private land to which the Infiels had a legally
sufficient and transferable title on October 29, 1962 when Acme acquired it from said owners, it must
also be conceded that Acme had a perfect right to make such acquisition, there being nothing in the
1935 Constitution then in force (or, for that matter, in the 1973 Constitution which came into effect
later) prohibiting corporations from acquiring and owning private lands.

Even on the proposition that the land remained technically "public" land, despite immemorial
possession of the Infiels and their ancestors, until title in their favor was actually confirmed in
appropriate proceedings under the Public Land Act, there can be no serious question of Acmes right
to acquire the land at the time it did, there also being nothing in the 1935 Constitution that might be
construed to prohibit corporations from purchasing or acquiring interests in public land to which the
vendor had already acquired that type of so-called "incomplete" or "imperfect" title. The only
limitation then extant was that corporations could not acquire, hold or lease public agricultural lands
in excess of 1,024 hectares. The purely accidental circumstance that confirmation proceedings were
brought under the aegis of the 1973 Constitution which forbids corporations from owning lands of the
public domain cannot defeat a right already vested before that law came into effect, or invalidate
transactions then perfectly valid and proper. This Court has already held, in analogous
circumstances, that the Constitution cannot impair vested rights.

We hold that the said constitutional prohibition   has no retroactive application to the sales
14

application of Binan Development Co., Inc. because it had already acquired a vested right to
the land applied for at the time the 1973 Constitution took effect.
 That vested right has to be respected. It could not be abrogated by the new Constitution.
Section 2, Article XIII of the 1935 Constitution allows private corporations to purchase public
agricultural lands not exceeding one thousand and twenty-four hectares. Petitioner'
prohibition action is barred by the doctrine of vested rights in constitutional law.

xxx xxx xxx

The due process clause prohibits the annihilation of vested rights. 'A state may not impair
vested rights by legislative enactment, by the enactment or by the subsequent repeal of a
municipal ordinance, or by a change in the constitution of the State, except in a legitimate
exercise of the police power'(16 C.J.S. 1177-78).

xxx xxx xxx

In the instant case, it is incontestable that prior to the effectivity of the 1973 Constitution the
right of the corporation to purchase the land in question had become fixed and established
and was no longer open to doubt or controversy.

Its compliance with the requirements of the Public Land Law for the issuance of a patent had
the effect of segregating the said land from the public domain. The corporation's right to
obtain a patent for the land is protected by law. It cannot be deprived of that right without due
process (Director of Lands vs. CA, 123 Phil. 919). <äre||anº•1àw> 
15

The fact, therefore, that the confirmation proceedings were instituted by Acme in its own name must
be regarded as simply another accidental circumstance, productive of a defect hardly more than
procedural and in nowise affecting the substance and merits of the right of ownership sought to be
confirmed in said proceedings, there being no doubt of Acme's entitlement to the land. As it is
unquestionable that in the light of the undisputed facts, the Infiels, under either the 1935 or the 1973
Constitution, could have had title in themselves confirmed and registered, only a rigid subservience
to the letter of the law would deny the same benefit to their lawful successor-in-interest by valid
conveyance which violates no constitutional mandate.

The Court, in the light of the foregoing, is of the view, and so holds, that the majority ruling
in Meralco must be reconsidered and no longer deemed to be binding precedent. The correct rule,
as enunciated in the line of cases already referred to, is that alienable public land held by a
possessor, personally or through his predecessors-in-interest, openly, continuously and exclusively
for the prescribed statutory period (30 years under The Public Land Act, as amended) is converted
to private property by the mere lapse or completion of said period, ipso jure. Following that rule and
on the basis of the undisputed facts, the land subject of this appeal was already private property at
the time it was acquired from the Infiels by Acme. Acme thereby acquired a registrable title, there
being at the time no prohibition against said corporation's holding or owning private land. The
objection that, as a juridical person, Acme is not qualified to apply for judicial confirmation of title
under section 48(b) of the Public Land Act is technical, rather than substantial and, again, finds its
answer in the dissent in Meralco:

6. To uphold respondent judge's denial of Meralco's application on the technicality that the
Public Land Act allows only citizens of the Philippines who are natural persons to apply for
confirmation of their title would be impractical and would just give rise to multiplicity of court
actions. Assuming that there was a technical error not having filed the application for
registration in the name of the Piguing spouses as the original owners and vendors, still it is
conceded that there is no prohibition against their sale of the land to the applicant Meralco
and neither is there any prohibition against the application being refiled with retroactive effect
 in the name of the original owners and vendors (as such natural persons) with the end result
of their application being granted, because of their indisputable acquisition of ownership by
operation of law and the conclusive presumption therein provided in their favor. It should not
be necessary to go through all the rituals at the great cost of refiling of all such applications
in their names and adding to the overcrowded court dockets when the Court can after all
these years dispose of it here and now. (See Francisco vs. City of Davao)

The ends of justice would best be served, therefore, by considering the applications for
confirmation as amended to conform to the evidence, i.e. as filed in the names of the original
persons who as natural persons are duly qualified to apply for formal confirmation of the title
that they had acquired by conclusive presumption and mandate of the Public Land Act and
who thereafter duly sold to the herein corporations (both admittedly Filipino corporations duly
qualified to hold and own private lands) and granting the applications for confirmation of title
to the private lands so acquired and sold or exchanged.

There is also nothing to prevent Acme from reconveying the lands to the Infiels and the latter from
themselves applying for confirmation of title and, after issuance of the certificate/s of title in their
names, deeding the lands back to Acme. But this would be merely indulging in empty charades,
whereas the same result is more efficaciously and speedily obtained, with no prejudice to anyone, by
a liberal application of the rule on amendment to conform to the evidence suggested in the dissent
in Meralco.

While this opinion seemingly reverses an earlier ruling of comparatively recent vintage, in a real
sense, it breaks no precedent, but only reaffirms and re-established, as it were, doctrines the
soundness of which has passed the test of searching examination and inquiry in many past cases.
Indeed, it is worth noting that the majority opinion, as well as the concurring opinions of Chief Justice
Fernando and Justice Abad Santos, in Meralco rested chiefly on the proposition that the petitioner
therein, a juridical person, was disqualified from applying for confirmation of an imperfect title to
public land under Section 48(b) of the Public Land Act. Reference to the 1973 Constitution and its
Article XIV, Section 11, was only tangential limited to a brief paragraph in the main opinion, and may,
in that context, be considered as essentially obiter. Meralco, in short, decided no constitutional
question.

WHEREFORE, there being no reversible error in the appealed judgment of the Intermediate
Appellate Court, the same is hereby affirmed, without costs in this instance.

SO ORDERED.

Feria, Yap, Fernan, Alampay, Cruz, Paras and Feliciano, JJ., concur.
G.R. No. L-27644 November 29, 1973

ROSA CRUZ, CELEDONIA CABRERA and LEONCIA CABRERA, petitioners,

vs.
HON. PEDRO C. NAVARRO, Judge of the Court of First Instance of Rizal, Branch II, Pasig,
ALFONSO SANDOVAL and ROSA RUIZ, respondents.

O. R. Victoriano for petitioners.

Tomas Trinidad for respondents.

CASTRO, J.:

Before this Court is a petition for certiorari to review the orders of the Court of First Instance of Rizal
(Branch II, Pasig) dated April 24, 1967 and May 25, 1967 dismissing the petition below of Rosa
Cruz, Celedonia Cabrera and Leoncia Cabrera for review of the decree of registration issued in favor
of the private respondent spouses Alfonso Sandoval and Rosa Ruiz in land Registration Case 5725,
LRC Record N-30582.

Sometime in 1966 the respondent Alfonso Sandoval filed with the Court of First Instance of Rizal
(Branch II, Pasig) an application for registration (under Act 496) of five (5) parcels of land with an
aggregate area of four and one-half hectares, more or less, situated in the municipality of Antipolo,
province of Rizal. Under date of August 1, 1966, the respondent Judge Pedro C. Navarro issued a
notice of initial hearing which reads:

To the Solicitor General, the Director of Lands, the Director of Public Works, the
Director of Forestry, the Officer-in-Charge, Parks and Wildlife Office, Manila; The
District Land Office No. 7, 234 Tanduay St., San Miguel, Manila; the Reforestation
Administration, Diliman, Quezon City; the Provincial Governor, the Provincial Fiscal,
the Provincial Treasurer, the District Engineer, Pasig, Rizal; the Municipal Mayor,
Antipolo, Rizal; Nicolas Magtaos, Maximina Aquino, Felipe Aquino, Pedro Manuel,
Roque Samson, Irineo Galang, Angel Zapanta, Benjamin Aquino, Ramon Masaquel,
Anastacia Esguerra, Juan Santos, Felipe Aquino, Leonor Sto. Domingo, Mayamot,
Antipolo, Rizal; Rosa Ruiz, 380 Dr. Sixto Antonio St., Maybunga, Pasig, Rizal; AND
TO ALL WHOM IT MAY CONCERN: ...

Only the Director of Lands filed an opposition, which was however subsequently withdrawn on the
ground that "On the basis of the findings made in the investigation conducted by this Office on the
land involved therein, we have come to the conclusion that our opposition thereto cannot be
sustained."

On December 1, 1966, no oppositor having appeared, the court a quo, after a hearing ex parte,
declared the respondent spouses the owners of the five parcels of land. On January 3, 1967 the
court ordered the issuance of the corresponding decree of registration.

On March 20, 1967 the petitioners filed a "Petition for Review of Decree of Registration" in the court
below alleging, inter alia the following:
 3. That in said application, respondent ALFONSO SANDOVAL willfully and falsely
made it appear that he is the absolute owner of the three parcels of land therein
describe as Lots 1, 2, and 3 of survey plans Psu-219557 and 219558, Kamandag,
Mayamot, Antipolo, Rizal, that he is in possession of said parcels of land, and that
there are no other persons who have any estate or interest, legal or equitable, over
the same, when, in truth and in fact he was never the owner, nor possessor of the
said parcels of and, because the petitioners herein are the real owners and
possessors thereof as described in the succeeding paragraphs hereof;

4. That on account of the actual, extrinsic fraud and the suppression of the truth
employed by respondent ALFONSO SANDOVAL as described in the immediately
preceding paragraph hereof; this Court, not knowing it, rendered in said case a
decision, dated December 1, 1966, declaring the respondents to be the registered
owners of aforementioned parcels of land and, on January 3, 1967, ordered issuance
of the decree of registration; ...;

5. That actually petitioner ROSA CRUZ is the absolute owner and possessor of,
and/or the person having an irrevocable vested interest in, aforementioned Lots 1
and 3 for the reason that lots form a part of said petitioner's Lot 25, Plan Psu-
136628, which was originally a public land but to which said petitioner had perfected
a homestead right long before respondents secured aforementioned decrees and
certificates of title, her homestead application thereof having been duly approved by
the Bureau of lands and she having fully complied with all requirements for the
acquisition of a homestead and possessed and cultivated the same as her private
property;

6. That petitioner CELEDONIA CABRERA is also the actual, absolute owner and
possessor of, and/or the person having an irrevocable vested interest in,
aforementioned Lot 1 for the reason that said lot forms a part of said petitioner's Lot
26, Psu-136628, which was originally a public land but to which said petitioner had
perfected a homestead right long before respondents secured aforementioned
decree and certificate of title, her homestead application therefor having been duly
approved by the Bureau of Lands and she having fully complied with all requirements
for the acquisition and cultivated the same as her private property;

7. That petitioner LEONCIA CABRERA is likewise the actual, absolute owner and
possessor of, and/or the person having an irrevocable vested interest in,
aforementioned Lot 2 for the reason that said lot forms a part of said petitioner's Lot
28, Psu-136628, which was originally a public land but to which said petitioner had
perfected a homestead right long before respondents secured aforementioned
decree and certificate of title, her homestead application therefor having been duly
approved by the Bureau of Lands and she having fully complied with all requirements
for the acquisition of a homestead and cultivated the same as her private property;

8. That the parcels of land presently covered by aforementioned certificates of title in

the name of the respondents have not been transferred to an innocent purchaser for
value or to any other transferee; ...

On April 3, 1967 the respondent spouses moved to dismiss the petition below on the grounds (a)
that if the lands in question were originally public lands, then the proper oppositor should be the
Director of Lands; and (b) that the imputed fraud does not constitute extrinsic fraud.
On April 24, 1967, acting on the petition, but without receiving any evidence in the premises, the
respondent Judge issued an order stating that "the Court ... finds the petition for review to be without
sufficient merit and therefore DENIES the same."

The petitioners then filed a "Motion for New Trial and/or Reconsideration" of the mentioned order,
but this was denied on May 25, 1967, in the following words:

After going over the record of the case, the Court resolves to deny the motion on the
following grounds: First, this Court found and accordingly adjudged that applicant
Alfonso Sandoval had complied with all the conditions and requisites essential to a
government grant pursuant to the provisions of Sub-Section B, Section 48 of
Commonwealth Act No. 141 as amended by Republic Act No. 1942; and the second,
petitioner's claim of having complied with all the requisites for acquiring a homestead
patent over these lots cannot prevail over the finding of this Court that the same lots
are private lands over which the Bureau of Lands has no control or authority to cede,
transfer or convey in favor of homestead applicants.

On June 15, 1967 the petitioners filed with this Court the instant petition for certiorari, in which they
allege (1) that they had legal personality to file the petition for review below because even if the
properties involved were originally public land these ceased to be such upon compliance by them
with the requirements essential to a homestead grant; (2) that they had sufficiently alleged the
existence of actual and extrinsic fraud in their petition below; and (3) that their present petition
for certiorari, rather than an appeal, contrary to the private respondents' contention, is proper
because the questioned orders of dismissal are a nullity.

We find merit in the posture taken by the petitioners.

1. In Mesina vs. Pineda vda. de Sonza  this Court, citing Susi vs. Razon,  held that once a
1 2

homestead applicant has complied with all the conditions essential to a Government grant, he
acquires "not only a right to a grant, but a grant of the Government." Thus:

... where all the necessary requirements for a grant by the Government are complied
with through actual physical possession openly, continuously, and publicly, with a
right to a certificate of title to said land under the provisions of Chapter VII of Act No.
2874, amending Act No. 926 (carried over as Chapter VIII of Commonwealth Act No.
141), the possessor is deemed to have already acquired by operation of law not only
a right to a grant, but a grant of the Government, for it is not necessary that a
certificate of title be issued in order that said grant may be sanctioned by the courts
— an application therefor being sufficient under the provisions of Section 47 of Act
No. 2874 (reproduced as Section 50, Commonwealth Act No. 141).

In Nieto vs. Quines  this Court affirmed the doctrine in these words:
3

As established during the trial and found by the trial court, Bartolome Quines had
been in the continuous and peaceful possession of Lot No. 3044 from the time his
homestead application was approved in 1918 up to 1953 when he was forcibly
ejected therefrom by Arturo Nieto. As a homestead applicant, he religiously complied
with all the requirements of the Public Land Act and, on August 29, 1930, a
homestead patent was issued in his favor.

Considering the requirement that the final proof must be presented within 5 years
from the approval of the homestead application (sec. 14, Public Land Act), it is safe
 to assume that Bartolome Quines submitted his final proof way back yet in 1923 and
that the Director of Lands approved the same not long thereafter or before the land
became the subject of cadastral proceedings in 1927. Unfortunately, there was some
delay in the ministerial act of in suing the patent and the same was actually issued
only after the cadastral court had adjudicated the land to Maria
Florentino. Nevertheless, having complied with all the terms and conditions which
would entitle him to a patent, Bartolome Quines, even without a patent actually
issued, has unquestionably acquired a vested right in the land and is to be regarded
as the equitable owner thereof.

It is our view that the petitioners have amply alleged below such real, legally protected interest over
the parcels in question sufficient to clothe them with the necessary personality to question,
independently of the Director of Lands, the validity of the grant of title over the said properties to the
private respondents.

2. Under section 38 of the Land Registration Act (Act 496), a review of the decree of registration is
warranted when the following conditions concur: (a) the petitioner has a real or dominical interest or
right, that is, he is the owner of the land ordered registered in the name of the respondent, or the
petitioner's lien or interest in the land does not appear in the decree or title issued in the name of the
applicant; (b) the petitioner has been deprived thereof or his lien or interest thereon was omitted,
through fraud; (e) the property has not yet been transferred to an innocent purchaser for value; and
(d) the petition is filed within one year from the issuance of the decree.4

The fraud that would justify review of a decree of registration must be actual, that is to say, there
must have been an intentional concealment or omission of a fact required by law to be stated in the
application or a willful statement of a claim against the truth, either of which is calculated to deceive
or deprive another of his legal rights.  The fraud must likewise be extrinsic. And it is extrinsic when it
5

is employed to deprive a party of his day in court, thereby preventing him from asserting his right to
the property registered in the name of the applicant. 6

In our opinion the petition below sufficiently alleged facts which if proved would constitute the kind of
fraud proscribed by the Land Registration Act. This fraud consists of the allegedly intentional
omission by the respondent Sandoval to properly inform the court a quo that there were persons (the
petitioners) in actual possession and cultivation of the parcels in question, with the result that the
court as well as the Chief of the Land Registration Commission were denied the exercise of their
authority to require the sending of specific individual notices of the pendency of the questioned
application in accordance with the provisions of sections 31 and 32 of the Land Registration
Act.  Thus, it is to be noted that the "Notice of Initial Hearing," supra, did not contain a specific
7

mention of the names of the petitioners, but only those of public official and private individuals who
evidently were not interested in the outcome of the questioned application.

3. Upon the foregoing disquisition, the Court is persuaded that the petitioners Rosa Cruz, Celedonia
Cabrera and Leoncia Cabrera have amply, alleged in their petition below the concurrence of the
requirements prescribed by section 38 of the Land Registration Act (Act 496) that would warrant a
review of the decree of registration. They have alleged sufficient facts to show (a) that they have a
dominical right in the parcels of land subject of the decree of registration, and (b) that they have
been deprived thereof thru actual extrinsic fraud. That the parcels have not yet been transferred to
any innocent purchaser for value, and that the petition below was filed within one year from the
issuance of the decree of registration, are not disputed.
It then behooved the court a quo to accord the petitioners a full-blown hearing — to which they were
entitled as part of the due process guarantee  — at which they could present all available evidence
8

to prove their allegations. This hearing was denied them.

4. On the matter of whether the questioned orders a quo should have been elevated to this Court for
review by way of appeal rather than by writ of certiorari, this Court is of the view that, within the
constraints of the particular environmental milieu disclosed by the record, the remedy chosen by the
petitioners is proper.

Under the provisions of R.A. 5440 which amended section 17 of the Judiciary Act of 1948 (R.A. 296)
on September 9, 1968, this Court has "exclusive jurisdiction to review, reverse, modify or affirm
on certiorari as the law or rules of court may provide, final judgments and decrees of inferior courts
as herein provided, in ... all cases in which only errors or questions of law are involved ...".

Although the petitioners have apparently treated their petition before this Court as a special civil
action for certiorari, the substantive issues raised therein are, fundamentally, matters involving pure
questions of law, for which reason this Court deemed it proper to treat the instant petition as an
appeal by way of certiorari under the provisions of R.A. 5440. Inasmuch as when the instant petition
was filed with this Court on June 15, 1967 the reglementary period for appeal prescribed by section
1, Rule 42 in relation to section 3, Rule 41 of the Revised Rules of Court had not yet elapsed, the
petition at bar is, therefore, properly cognizable by this Court.

ACCORDINGLY, the orders of the court a quo of April 24 and May 25, 1967 are set aside, and this
case is hereby ordered remanded to the said court for further proceedings in accordance with law
and consistently with the views herein expressed. No costs.

Makalintal C.J., Teehankee, Makasiar, Esguerra and Muñoz Palma, JJ., concur.
 EN BANC

[G.R. No. L-1411. September 29, 1953.]

DIONISIO RELLOSA, Petitioner, v. GAW CHEE HUN, Respondent.

Macapagal & Eusebio and Conrado Manalansan for Petitioner.

Alafriz & Alafriz for Respondent.

Quisumbing, Sycip & Quisumbing as amici curiæ.

SYLLABUS

1. CONSTITUTIONAL LAW; SALE OF LAND DURING JAPANESE MILITARY OCCUPATION,

NULL AND VOID; VENDOR CANNOT RECOVER PROPERTY, CONTRACT HAVING BEEN
ENTITLED IN "PARI DELICTO." — he phrase "private agricultural land" employed in the
Constitution of September 4, 1943 of the then Republic of the Philippines includes
residential lands (Krivenko v. Register of Deeds, 42 Off. Gaz., 471). But the vendor in a
sale of residential land executed in February 1944 cannot have the sale declared null
and void nor rescind the contract and recover the property, because both vendor and
vendee are in pari delicto (Cabauatan v. Uy Hoo, L-2207, January 23, 1951; Bough and
Bough v. Cantiveros and Hanopol, 40 Phil., 210, 216).

2. D.; ID.; ID.; EXCEPTIONS TO "PARI DELICTO" DOCTRINE, EXPLAINED. —The

doctrine of pari delicto is subject to one important limitation, namely, "whenever public
policy is considered as advanced by allowing either party to sue for relief against the
transaction" (3 Pomeroy’s Equity Jurisprudence, 5th ed., p. 733). But not all contracts
which are illegal for being opposed to public policy come under this limitation. The
cases in which this limitation may apply, only "include the class of contracts which are
intrinsically contrary to public policy, — contracts in which the illegality itself consists in
their opposition to public policy, and any other species of illegal contracts in which,
from their particular circumstances, incidental and collateral motives of public policy
require relief." Examples of this class of contracts are usurious contracts, marriage-
brokerage contracts and gambling contracts. (Idem, pp. 735-737.) A sale of residential
land executed during the Japanese military occupation wherein both parties were in pari
delicto does not come under this exception because it is not intrinsically contrary to
public policy, nor one where the illegality itself consists in its opposition to public policy.
It is illegal not because it is against public policy but because it is against the
Constitution.

DECISION

BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the Court of Appeals holding that the sale in
question is valid and, even if it were invalid, plaintiff cannot maintain the action under
the principle of pari delicto.

On February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of land, together
with the house erected thereon, situated in the City of Manila, Philippines, for the sum
of P25,000. The vendor remained in possession of the property under a contract of
lease entered into on the same date between the same parties. Alleging that the sale
was executed subject to the condition that the vendee, being a Chinese citizen, would
obtain the approval of the Japanese Military Administration in accordance with (seirei)
No. 6 issued on April 2, 1943, by the Japanese authorities, and said approval has not
been obtained, and that, even if said requirement were met, the sale would at all
events be void under article XIII, section 5, of our Constitution, the vendor instituted
the present action in the Court of First Instance of Manila seeking the annulment of the
sale as well as the lease covering the land and the house above mentioned, and praying
that, once the sale and the lease are declared null and void, the vendee be ordered to
return to vendor the duplicate of the title covering the property, and be restrained from
in any way dispossessing the latter of said property.

Defendant answered the complaint setting up as special defense that the sale referred
to in the complaint was absolute and unconditional and was in every respect valid and
binding between the parties, it being not contrary to law, morals and public order, and
that plaintiff is guilty of estoppel in that, by having executed a deed of lease over the
property, he thereby recognized the title of defendant to that property.

Issues having been joined, and the requisite evidence presented by both parties, the
court declared both the sale and the lease valid and binding and dismissed the
complaint. The court likewise ordered plaintiff to turn over the property to defendant
and to pay a rental of P50 a month from August 1, 1945 until the property has been
actually delivered. As this decision was affirmed in toto by the Court of Appeals, plaintiff
sued out the present petition for review.

One of the issues raised by petitioner refers to the validity of Seirei No. 6 issued on
April 2, 1943 by the Japanese authorities which prohibits an alien from acquiring any
private land not agricultural in nature during the occupation unless the necessary
approval is obtained from the Director General of the Japanese Military Administration.
Petitioner contends that the sale in question cannot have any validity under the above
military directive in view of the failure of respondent to obtain the requisite approval
and it was error for the Court of Appeals to declare said directive without any binding
effect because the occupation government could not have issued it under article 43 of
the Hague Regulations which command that laws that are municipal in character of an
occupied territory should be respected and cannot be ignored unless prevented by
military necessity.

We do not believe it necessary to consider now the question relative to the validity of
Seirei No. 6 of the Japanese Military Administration for the simple reason that in our
opinion the law that should govern the particular transaction is not the above directive
but the Constitution adopted by the then Republic of the Philippines on September 4,
1943, it appearing that the aforesaid transaction was executed on February 2, 1944.
Said Constitution, in its article VIII, section 5, provides that "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", which
provisions are similar to those contained in our present Constitution. As to whether the
phrase "private agricultural land" employed in said Constitution includes residential
lands, as the one involved herein, there can be no doubt because said phrase has
already been interpreted in the affirmative sense by this court in the recent case of
Krivenko v. Register of Deeds, 79 Phil. 461, wherein this court held that "under the
Constitution aliens may not acquire private or public agricultural lands, including
residential lands." This matter has been once more submitted to the court for
deliberation, but the ruling was reaffirmed. This ruling fully disposes of the question
touching on the validity of the sale of the property herein involved.

The sale in question having been entered into in violation of the Constitution, the next
question to be determined is, can petitioner have the sale declared null and void and
recover the property considering the effect of the law governing rescission of contracts?
Our answer must of necessity be in the negative following the doctrine laid down in the
case of Trinidad Gonzaga de Cabauatan, Et. Al. v. Uy Hoo, Et Al., 88 Phil. 103, wherein
we made the following pronouncement: "We can, therefore, say that even if the
plaintiffs can still invoke the Constitution, or the doctrine in the Krivenko Case, to set
aside the sale in question, they are now prevented from doing so if their purpose is to
recover the lands that they have voluntarily parted with, because of their guilty
knowledge that what they were doing was in violation of the Constitution. They cannot
escape this conclusion because they are presumed to know the law. As this court well
said: ’A party to an illegal contract cannot come into a court of law and ask to have his
illegal objects carried out. The law will not aid either party to an illegal agreement; it
leaves the parties where it finds them.’ The rule is expressed in the maxims: ’Ex dolo
malo non oritur actio,’ and ’In pari delicto potior est conditio defendentis.’ (Bough and
Bough v. Cantiveros and Hanopol, 40 Phil., 210, 216.)"

The doctrine above adverted to is the one known as In Pari Delicto. This is well known
not only in this jurisdiction but also in the United States where common law prevails. In
the latter jurisdiction, the doctrine is stated thus: "The proposition is universal that no
action arises, in equity or at law, from an illegal contract; no suit can be maintained for
its specific performance, or to recover the property agreed to be sold or delivered, or
the money agreed to be paid, or damages for its violation. The rule has sometimes
been laid down as though it were equally universal, that where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against the other."
(Pomeroy’s Equity Jurisprudence, Vol. 3, 5th ed., p. 728.)

It is true that this doctrine is subject to one important limitation, namely, "whenever
public policy is considered as advanced by allowing either party to sue for relief against
the transaction" (idem, p. 733). But not all contracts which are illegal because opposed
to public policy come under this limitation. The cases in which this limitation may apply
only "include the class of contracts which are intrinsically contrary to public policy, —
contracts in which the illegality itself consists in their opposition to public policy, and
any other species of illegal contracts in which, from their particular circumstances,
incidental and collateral motives of public policy require relief." Examples of this class of
contracts are usurious contracts, marriage-brokerage contracts and gambling contracts.
(Idem. pp. 735-737.)
In our opinion, the contract in question does not come under this exception because it
is not intrinsically contrary to public policy, nor one where the illegality itself consists in
its opposition to public policy. It is illegal not because it is against public policy but
because it is against the Constitution. Nor may it be contended that to apply the
doctrine of pari delicto would be tantamount to contravening the fundamental policy
embodied in the constitutional prohibition in that it would allow an alien to remain in
the illegal possession of the land, because in this case the remedy is lodged elsewhere.
To adopt the contrary view would be merely to benefit petitioner and not to enhance
public interest.

The danger foreseen by counsel in the application of the doctrine above adverted to is
more apparent than real. If we go deeper in the analysis of our situation we would not
fail to see that the best policy would be for Congress to approve a law laying down the
policy and the procedure to be followed in connection with transactions affected by our
doctrine in the Krivenko case. We hope that this should be done without much delay.
And even if this legislation be not forthcoming in the near future, we do not believe that
public interest would suffer thereby if only our executive department would follow a
more militant policy in the conservation of our natural resources as or dained by our
Constitution. And we say so because there are at present two ways by which this
situation may be remedied, to wit, (1) action for reversion, and (2) escheat to the
state. An action for reversion is slightly different from escheat proceeding, but in its
effects they are the same. They only differ in procedure. Escheat proceedings may be
instituted as a consequence of a violation of article XIII, section 5 of our Constitution,
which prohibits transfers of private agricultural lands to aliens, whereas an action for
reversion is expressly authorized by the Public Land Act (sections 122, 123, and 124 of
Commonwealth Act No. 141).

In the United States, as almost everywhere else, the doctrine which imputes to the
sovereign or to the government the ownership of all lands and makes such sovereign or
government the original source of private titles, is well recognized (42 Am. Jur., 785).
This doctrine, which was expressly affirmed in Lawrence v. Garduño, G. R. No. 16542,
and which underlies all titles in the Philippines, (See Ventura, Land Registration and
Mortgages, 2nd ed., pp. 2-3) has been enshrined in our Constitution (article XIII). The
doctrine regarding the course of all titles being the same here as in the United States, it
would seem that if escheat lies against aliens holding lands in those states of the Union
where common law prevails or where similar constitutional or statutory prohibitions
exist, no cogent reason is perceived why similar proceedings may not be instituted in
this jurisdiction.

"Escheat is an incident or attribute of sovereignty, and rests on the principle of the

ultimate ownership by the state of all property within its jurisdiction.’ (30 C.J.S., 1164.)

". . . America escheats belong universally to the state or some corporation thereof as
the ultimate proprietor of land within its Jurisdiction." (19 Am. Jur., 382.)

"An escheat is nothing more or less than the reversion of property to the state, which
takes place when the title fails." (Delany v. State, 42 N. D., 630, 174 N.W., 290, quoted
in footnote 6, 19 Am. Jur., 381.)

"As applied to the right of the state to lands purchased by an alien, it would more
properly be termed a ’forfeiture’ at common law." (19 Am. Jur., 381.)

"In modern law escheat denotes a falling of the estate into the general property of the
state because the tenant is an alien or because he has died intestate without lawful
heirs to take his estate by succession, or because of some other disability to take or
hold property imposed by law." (19 Am. Jur.,

With regard to an action for reversion, the following sections of Commonwealth Act No.
141 are pertinent:jgc:chanrobles.com.ph

"SEC. 122. No land originally acquired in any manner under the provisions of this Act,
nor any permanent improvement on such land, shall be encumbered, alienated, or
transferred, except to persons, corporations, associations, or partnerships who may
acquire lands of the public domain under this Act or to corporations organized in the
Philippines authorized therefor by their charters." cralaw virtua1aw library

"SEC. 123. No land originally acquired in any manner under the provisions of any
previous Act, ordinance, royal decree, royal order, or any other provision of law
formerly in force in the Philippines with regard to public lands, terrenos baldios y
realenqos, or lands of any other denomination that were actually or presumptively of
the public domain or by royal grant or in any other form, nor any permanent
improvement on such land, shall be encumbered, alienated, or conveyed, except to
persons, corporations or associations who may acquire land of the public domain under
this Act or to corporate bodies organized in the Philippines whose charters authorize
them to do so: Provided, however, That this prohibition shall not be applicable to the
conveyance or acquisition by reason of hereditary succession duly acknowledged and
legalized by competent courts; Provided, further, That in the event of the ownership of
the lands and improvements mentioned in this section and in the last preceding section
being transferred by judicial decree to persons, corporations or associations not legally
capacitated to acquire the same under the provisions of this Act, such persons,
corporation, or associations shall be obliged to alienate said lands or improvements to
others so capacitated within the precise period of five years; otherwise, such property
shall revert to the Government." cralaw virtua1aw library

"SEC. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or
executed in violation of any of the provisions of sections one hundred and eighteen, one
hundred and twenty, one hundred and twenty-one, one hundred and twenty-two, and
one hundred and twenty-three of this Act shall be unlawful and null and void from its
execution and shall produce the effect of annulling and cancelling the grant, title,
patent, or permit originally issued, recognized or confirmed, actually or presumptively,
and cause the reversion of the property and its improvements to the State." cralaw virtua1aw library

Note that the last quoted provision declared any prohibited conveyance not only
unlawful but null and void ab initio. More important yet, it expressly provides that such
conveyances will produce "the effect of annulling and cancelling the grant, title, patent,
or permit, originally issued, recognized of confirmed, actually or presumptively", and of
causing "the reversion of the property and its improvements to the State." The
reversion would seem to be but a consequence of the annulment and cancellation of the
original grant or title, and this is so for in the event of such annulment or cancellation
no one else could legitimately claim the property except its original owner or grantor —
the state.

We repeat. There are two ways now open to our government whereby it could
implement the doctrine of this Court in the Krivenko case thereby putting in force and
carrying to its logical conclusion the mandate of our Constitution. 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. With these remedies open to us,
we see no justifiable reason for pursuing the extreme unusual remedy now vehemently
urged by the amici curiae.

In view of the foregoing, we hold that the sale in question is null and void, but plaintiff
is barred from taking the present action under the principle of pari delicto.

The decision appealed from is hereby affirmed without pronouncement as to costs.

Labrador, J., concurs.

Paras, C.J., Tuason and Montemayor, JJ., concur in theresult.

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

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y

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

Nicanor S. Sison for plaintiff-appellant.

Ozaeta, Gibbs & Ozaeta for defendant-appellant.

CASTRO, J.:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We have had occasion to delineate the scope and application of article 1308 in the early case
of Taylor v. Uy Tieng Piao.1 We said in that case:

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

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

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

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

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

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

Just the same, it is argued that Wong so completely dominated her life and affairs that the contracts
express not her will but only his. Counsel for Justina Santos cites the testimony of Atty. Tomas S.
Yumol who said that he prepared the lease contract on the basis of data given to him by Wong and
that she told him that "whatever Mr. Wong wants must be followed."7

The testimony of Atty. Yumol cannot be read out of context in order to warrant a finding that Wong
practically dictated the terms of the contract. What this witness said was:

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

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

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

A She agreed first . . .

Q Agreed what?

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

xxx     xxx     xxx

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

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

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

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

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

Indeed, the charge of undue influence in this case rests on a mere inference12 drawn from the fact
that Justina Santos could not read (as she was blind) and did not understand the English language
in which the contract is written, but that inference has been overcome by her own evidence.

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

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

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

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

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

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

The ambition of the old woman, before her death, according to her revelation to me, was to
see to it that these properties be enjoyed, even to own them, by Wong Heng because Doña
Justina told me that she did not have any relatives, near or far, and she considered Wong
Heng as a son and his children her grandchildren; especially her consolation in life was
when she would hear the children reciting prayers in Tagalog.17

She was very emphatic in the care of the seventeen (17) dogs and of the maids who helped
her much, and she told me to see to it that no one could disturb Wong Heng from those
properties. That is why we thought of the ninety-nine (99) years lease; we thought of
adoption, believing that thru adoption Wong Heng might acquire Filipino citizenship; being
the adopted child of a Filipino citizen.18

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

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

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

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

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

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

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

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

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

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

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

He made disbursements from this account to discharge Justina Santos' obligations for taxes,
attorneys' fees, funeral services and security guard services, but the checks (Def Exhs. 247-278)
drawn by him for this purpose amount to only P38,442.84.27 Besides, if he had really settled his
accounts with her on August 26, 1959, we cannot understand why he still had P22,000 in the bank
and P3,000 in his possession, or a total of P25,000. In his answer, he offered to pay this amount if
the court so directed him. On these two grounds, therefore, his claim of liquidation and settlement of
accounts must be rejected.

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

P31,564 which, added to the amount of P25,000, leaves a balance of P56,564.3528 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 Doña Justina had authorized these
two to act for her in such liquidation; on the contrary if the result of that was a deficit as
alleged and sought to be there shown, of P9,210.49, that was not what Doña Justina
apparently understood for as the Court understands her statement to the Honorable Judge of
the Juvenile Court . . . the reason why she preferred to stay in her home was because there
she did not incur in any debts . . . this being the case, . . . the Court will not adjudicate in
favor of Wong Heng on his counterclaim; on the other hand, while it is claimed that the
expenses were much less than the rentals and there in fact should be a superavit, . . . this
Court must concede that daily expenses are not easy to compute, for this reason, the Court
faced with the choice of the two alternatives will choose the middle course which after all is
permitted by the rules of proof, Sec. 69, Rule 123 for in the ordinary course of things, a
person will live within his income so that the conclusion of the Court will be that there is
neither deficit nor superavit and will let the matter rest here.

Both parties on appeal reiterate their respective claims but we agree with the lower court that both
claims should be denied. Aside from the reasons given by the court, we think that the claim of
Justina Santos totalling P37,235, as rentals due to her after deducting various expenses, should be
rejected as the evidence is none too clear about the amounts spent by Wong for 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.