V.

Property
a) When Conflict Arises
b) Rule as to Real and Personal Property
c) Specific Rules as to Ownership of Real Property

lex situs does not apply

Laurel v. Garcia, 187 SCRA 797 (1990)

FACTS: The instant case pertain to two petitions for prohibition seeking to
enjoin respondents, their representatives and agents from proceeding with the
bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-
Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990.

The subject property in this case is one of the four (4) properties in Japan
acquired by the Philippine government under the Reparations Agreement
entered into with Japan on May 9, 1956.

The properties and the capital goods and services procured from the Japanese
government for national development projects are part of the indemnification to
the Filipino people for their losses in life and property and their suffering
during World War II. The Reparations Agreement provides that reparations
valued at $550 million would be payable in twenty (20) years in accordance
with annual schedules of procurements to be fixed by the Philippine and
Japanese governments.

The Roppongi property was acquired from the Japanese government under the
Second Year Schedule and listed under the heading "Government Sector",
through Reparations Contract No. 300 dated June 27, 1958. The Roppongi
property consists of the land and building "for the Chancery of the Philippine
Embassy". As intended, it became the site of the Philippine Embassy until the
latter was transferred to Nampeidai on July 22, 1976 when the Roppongi
building needed major repairs. Due to the failure of our government to provide
necessary funds, the Roppongi property has remained undeveloped since that
time.

A proposal was presented to President Corazon C. Aquino by former Philippine

Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a
lease agreement with a Japanese firm - Kajima Corporation — which shall
construct two (2) buildings in Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai. The consideration of
the construction would be the lease to the foreign corporation of one (1) of the
buildings to be constructed in Roppongi and the two (2) buildings in
Nampeidai. The other building in Roppongi shall then be used as the Philippine
Embassy Chancery. At the end of the lease period, all the three leased
buildings shall be occupied and used by the Philippine government. No change
of ownership or title shall occur.

The Philippine government retains the title all throughout the lease period and
thereafter. However, the government has not acted favorably on this proposal
which is pending approval and ratification between the parties. Instead, on
August 11, 1986, President Aquino created a committee to study the
disposition/utilization of Philippine government properties in Tokyo and Kobe,
Japan through Administrative Order No. 3, followed by Administrative Orders
Numbered 3-A, B, C and D.

On July 25, 1987, the President issued Executive Order No. 296 entitling non-
Filipino citizens or entities to avail of separations' capital goods and services in
the event of sale, lease or disposition. The four properties in Japan including
the Roppongi were specifically mentioned in the first "Whereas" clause.

Amidst opposition by various sectors, the Executive branch of the government

has been pushing, with great vigor, its decision to sell the reparations
properties starting with the Roppongi lot. The property has twice been set for
bidding at a minimum floor price of $225 million. The first bidding was a
failure since only one bidder qualified. The second one, after postponements,
has not yet materialized. The last scheduled bidding on February 21, 1990 was
restrained by his Court. Later, the rules on bidding were changed such that the
$225 million floor price became merely a suggested floor price.

ISSUE/S: FIRST CASE - Appropriation of the Roppongi and related properties.

- The respondents, for their part, refute the petitioner's contention by saying
that the subject property is not governed by our Civil Code but by the laws of
Japan where the property is located. They rely upon the rule of lex situs which
is used in determining the applicable law regarding the acquisition, transfer
and devolution of the title to a property.

SECOND CASE – Executive Order No. 296 was assailed on the ground that it
contravenes the constitutional mandate to conserve and develop the national
patrimony stated in the Preamble of the 1987 Constitution. It also allegedly
violates:

(1) The reservation of the ownership and acquisition of alienable lands of the
public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution;
Sections 22 and 23 of Commonwealth Act 141);

(2) The preference for Filipino citizens in the grant of rights, privileges and
concessions covering the national economy and patrimony (Section 10, Article
VI, Constitution);

(3) The protection given to Filipino enterprises against unfair competition and
trade practices;

(4) The guarantee of the right of the people to information on all matters of
public concern (Section 7, Article III, Constitution);

(5) The prohibition against the sale to non-Filipino citizens or entities not
wholly owned by Filipino citizens of capital goods received by the Philippines
under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and

(6) The declaration of the state policy of full public disclosure of all transactions
involving public interest (Section 28, Article III, Constitution).

tn: property is of public dominion but has become patrimonial

RULING: THE PETITIONS ARE GRANTED. The issue is the authority of the
respondent officials to validly dispose of property belonging to the State. And
the validity of the procedures adopted to effect its sale. This is governed by
Philippine Law. The rule of lex situs does not apply.

The assertion that the opinion of the Secretary of Justice sheds light on the
relevance of the lex situs rule is misplaced. The opinion does not tackle the
alienability of the real properties procured through reparations nor the
existence in what body of the authority to sell them. In discussing who are
capable of acquiring the lots, the Secretary merely explains that it is the foreign
law which should determine who can acquire the properties so that the
constitutional limitation on acquisition of lands of the public domain to Filipino
citizens and entities wholly owned by Filipinos is inapplicable. We see no point
in belaboring whether or not this opinion is correct. Why should we discuss
who can acquire the Roppongi lot when there is no showing that it can be sold?

Assuming for the sake of argument, however, that the Roppongi property is no
longer of public dominion, there is another obstacle to its sale by the
respondents. There is no law authorizing its conveyance. It is not for the
President to convey valuable real property of the government on his or her own
sole will. Any such conveyance must be authorized and approved by a law
enacted by the Congress. It requires executive and legislative concurrence. The
Court did not uphold the authority of the president to sell the Roppongi
property.

It is indeed true that the Roppongi property is valuable not so much because of
the inflated prices fetched by real property in Tokyo but more so because of its
symbolic value to all Filipinos — veterans and civilians alike. Whether or not
the Roppongi and related properties will eventually be sold is a policy
determination where both the President and Congress must concur.
Considering the properties' importance and value, the laws on conversion and
disposition of property of public dominion must be faithfully followed.

As property of public dominion, the Roppongi lot is outside the commerce of

man. It cannot be alienated. Its ownership is a special collective ownership for
general use and enjoyment, an application to the satisfaction of collective
needs, and resides in the social group. The purpose is not to serve the State as
a juridical person, but the citizens; it is intended for the common and public
welfare and cannot be the object of appropration.

The applicable provisions of the Civil Code are:

ART. 419. Property is either of public dominion or of private ownership.

ART. 420. The following things are property of public dominion

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks shores roadsteads, and others of
similar character;

(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in
the preceding article, is patrimonial property.

The Roppongi property is correctly classified under paragraph 2 of Article 420

of the Civil Code as property belonging to the State and intended for some
public service.

Has the intention of the government regarding the use of the property been
changed because the lot has been Idle for some years? Has it become
patrimonial?

The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any
such conversion happens only if the property is withdrawn from public use
(Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property
continues to be part of the public domain, not available for private
appropriation or ownership until there is a formal declaration on the part of
the government to withdraw it from being such (Ignacio v. Director of Lands,
108 Phil. 335 [1960]).

Abandonment - an abandonment of the intention to use the Roppongi property

for public service and to make it patrimonial property under Article 422 of the
Civil Code must be definite Abandonment cannot be inferred from the non-use
alone specially if the non-use was attributable not to the government's own
deliberate and indubitable will but to a lack of financial support to repair and
improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368
[1988]). Abandonment must be a certain and positive act based on correct legal
premises.

Executive Order No. 296 is based on the wrong premise or assumption that the
Roppongi and the three other properties were earlier converted into alienable
real properties.

Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of
the sources of funds for its implementation, the proceeds of the disposition of
the properties of the Government in foreign countries, did not withdraw the
Roppongi property from being classified as one of public dominion when it
mentions Philippine properties abroad. Section 63 (c) refers to properties which
are alienable and not to those reserved for public use or service. Rep Act No.
6657, therefore, does not authorize the Executive Department to sell the
Roppongi property. It merely enumerates possible sources of future funding to
augment (as and when needed) the Agrarian Reform Fund created under
Executive Order No. 299. Obviously any property outside of the commerce of
man cannot be tapped as a source of funds.

WHETHER OR NOT JAPAN LAW AND NOT OUR CIVIL CODE SHOULD
APPLY: PHILIPPINE LAW APPLIES. There is no conflict of law in the present
case. A conflict of law situation arises only when: (1) There is a dispute over the
title or ownership of an immovable, such that the capacity to take and transfer
immovables, the formalities of conveyance, the essential validity and effect of
the transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-383);
and (2) A foreign law on land ownership and its conveyance is asserted to
conflict with a domestic law on the same matters. Hence, the need to determine
which law should apply. In the instant case, none of the elements exists.
Trial court had jurisdiction to order marital property in Costa Rica to be
sold and its proceeds divided.
Roberts v. Locke, 304 P.3d 116 (2013)

FACTS: The instant case is a Wyoming case pertaining to an appeal filed by

Appellant Amy Roberts. She was married to the Appellee Steven Locke and they
were divorced in mid-July of 2010. Among their marital assets was a
beachfront property in Costa Rica. After a trial, the district court ordered the
property sold and the proceeds divided, and later held Roberts in contempt for
impeding the sale.

On September 24, 2009, Roberts filed a complaint for divorce against Locke in
the Second Judicial District Court for Albany County in Laramie, Wyoming.
The parties are tenured professors at the University of Wyoming. Roberts asked
the court to equitably divide the assets and debts she and Locke had
accumulated during their twenty-three year marriage.

Chief among those assets were a Smith Barney investment account, a plot of
land and a house in Indiana, what had been the marital home in Laramie, and
a beachfront property in Costa Rica, on which they had built a house and
apartments. Their debts, including one against the Smith Barney account,
largely related to their credit financing of the purchase and improvement of
their real property.

In a Pre-trial Statement, Locke proposed that the district court order the
Indiana property sold, and require that the proceeds be used first to retire the
debt on that property, and then to compensate him for his premarital
investment in the property, with any remainder of the sale price to be divided
evenly between the parties. He also asked that the decree allow him to retain
the Laramie home and require him to pay the mortgage and other debt
associated with it. He further proposed that the court order the Costa Rican
property to be sold, require the proceeds to be used to pay off the Smith Barney
debt related to that property, and then equally split the remainder of the
proceeds from the sale of the Costa Rican property and any equity left in the
Smith Barney account between the parties.

On the other hand, Roberts argued in her pretrial statement that the court
should award both the Indiana and Laramie properties to Locke and require
him to pay the indebtedness associated with both of them. She proposed that
she be awarded the Costa Rican property, apparently free of any debt incurred
in purchasing and improving it.

The parties were unable to come to agreement on a property division, and the
divorce action proceeded to trial. The district court generally adopted Locke's
proposed distribution, used the Costa Rican property as the keystone of its
property division order, and directed that it and the Indiana property be sold.
With respect to the latter, the court ordered the proceeds from that sale to be
used to retire the debt on that property and to pay Locke for the value of his
premarital interest in it. Any remaining proceeds were to be equally divided
between Roberts and Locke. The court ordered that the proceeds of the sale of
the Costa Rican property be used to pay off the indebtedness related to its
purchase and improvement, including the Smith Barney debt, and to pay
Roberts for the value of her one-half share of the equity in what had been the
marital home in Laramie. The parties were to equally divide any remaining
equity in the Costa Rican property. Once the Smith Barney debt was paid and
Locke received credit for his premarital investment in that account, the
remaining value of the stocks and bonds held in the Smith Barney account was
to be divided evenly between Roberts and Locke.

On August 19, 2011, Roberts received a show cause order informing her that
Locke had asked the court to hold her in contempt for failing to cooperate in
the sale of the Costa Rican property in violation of the divorce decree. The
district court held a hearing on November 9, and issued an order on November
16 declining to hold Roberts in contempt. However, the court found that the
parties had received an offer of $550,000 on the property, and it instructed
them to make a counteroffer not to exceed $640,000, and to accept any offer
which equaled or exceeded $600,000.

Roberts did not seek review of the order requiring that a counteroffer be made
and requiring acceptance of any offer over $600,000. Approximately two weeks
after the order was entered, she entered into a three-year lease of one of the
Costa Rican apartments. Two weeks later she entered into a second three-year
lease of another apartment. Locke was not a party to either of those lease
agreements. Both agreements noted that Roberts would accept rent only in the
form of in-person cash payments into what was apparently a Costa Rican bank
account to which only she had access.

ISSUES: COSTA RICA VS. WYOMING JURISDICTION ON COSTA RICA

PROPERTIES

RULING: Roberts has not shown that the district court abused its discretion in
holding her in contempt of court, or that the court lacked jurisdiction to order
her to convey her interest in the Costa Rican property to Locke.

Under Wyoming Rule of Civil Procedure 44.1 and the comparable federal rule,
neither Wyoming's courts nor those of the United States will take judicial
notice of the laws of a foreign country. Consequently, litigants who wish to take
advantage of allegedly applicable foreign law must plead and prove it or have
their cases determined in accordance with the law of the forum court. ]
Wyoming statutes specify the proof of foreign law a litigant must provide. With
respect to foreign written laws, a litigant must provide printed copies of those
laws and show that they were published upon the authority of its government,
or that they are in a form commonly accepted in that country's courts as
evidence of the existing law. As to the unwritten or common law of a foreign
country, the proponent must provide either admissible parol evidence or the
books of reported cases adjudicated in that country's courts. Nothing presented
in the case indicates that a Costa Rican court would even exercise jurisdiction
to distribute property owned by two non-resident parties going through a
divorce in another country.

Because Roberts has provided no proof of her assertions regarding Costa Rican
law, her argument was rejected that those laws deprived the district court of
jurisdiction to order her to convey her interest in the Costa Rican property to
Locke in their divorce. This result seems particularly appropriate in light of the
fact that Roberts filed for divorce in Albany County and asked the district court
to utilize its power to award her the property in Costa Rica, only questioning
that court's authority to effect a property division when her efforts were
unsuccessful.
The actual situs of the shares of stocks is in the Philippines, the
corporation being domiciled here.
Tayag v. Benguet Consolidated, G.R. No. L-23145, November 29, 1968

FACTS: The instant case pertains to an appeal taken to the Court by the
Philippine corporation, the Benguet Consolidated, Inc. pertaining to the estate
of the deceased Idonah Slade Perkins, who died in New York City on March 27,
1960, to surrender to the ancillary administrator in the Philippines the stock
certificates owned by her in a Philippine corporation, Benguet Consolidated,
Inc., to satisfy the legitimate claims of local creditors.

The deceased left two stock certificates covering 33,002 shares of appellant, the
certificates being in the possession of the County Trust Company of New York,
which as noted, is the domiciliary administrator of the estate of the deceased.
On January 27, 1964, the Court of First Instance of Manila ordered the
domiciliary administrator, County Trust Company, to "produce and deposit"
them with the ancillary administrator or with the Clerk of Court. The
domiciliary administrator did not comply with the order, and on February 11,
1964, the ancillary administrator petitioned the court to "issue an order
declaring the certificate or certificates of stocks covering the 33,002 shares
issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be
declared [or] considered as lost."

ISSUE/S: Whether the company must issue the new certificates. (YES)

RULING: Yes, the company must issue the new certificates because of the
following reasons: (a) While factually the old certificates still exist, the same
may by judicial fiction be considered as LOST — in view of the refusal of the
New York administrator to surrender them, despite a lawful order of our
courts. To deny the remedy would be derogatory to the dignity of the Philippine
judiciary. The ancillary Philippine administrator is entitled to the possession of
said certificates so that he can perform his duty as such administrator. A
contrary finding by any foreign court or entity would be inimical to the honor of
our country. After all, an administrator appointed in one state has no power
over property matters in another state. (Leon and Ghessi v. Manufacturer’s Life
Ins. Co., 99 Phil. 459 [1951]). (b) The Company has nothing to fear about
contingent liability should the new certificates be issued. Its obedience to a
lawful court order certainly constitutes a valid defense.

The appealed order was affirmed.

The Court’s holding in the case of Wells Fargo Bank and Union v. Collector of
Internal Revenue finds application. "In the instant case, the actual situs of the
shares of stock is in the Philippines, the corporation being domiciled [here]." To
the force of the above undeniable proposition, not even appellant is insensible.
It does not dispute it. Nor could it successfully do so even if it were so minded.
That is all then that this case presents. It is obvious why the appeal cannot
succeed. It is always easy to conjure extreme and even oppressive possibilities.
That is not decisive. It does not settle the issue. What carries weight and
conviction is the result arrived at, the just solution obtained, grounded in the
soundest of legal doctrines and distinguished by its correspondence with what
a sense of realism requires. For through the appealed order, the imperative
requirement of justice according to law is satisfied and national dignity and
honor maintained.
USUFRUCT IN FAVOR OF ALIENS ALLOWED - usufruct, albeit a real right,
does not vest title to the land in the usufructuary and it is the vesting of
title to land in favor of aliens which is proscribed by the Constitution
Ramirez v. Vda. de Ramirez, 111 SCRA 704 (1982)
FACTS: Jose Eugenio Ramirez, a Filipino national, died in Spain on December
11, 1964, with only his widow as compulsory heir. His will was admitted to
probate by the Court of First Instance of Manila, Branch X, on July 27, 1965.
Maria Luisa Palacios was appointed administratrix of the estate.
The main issue to be determined here is the manner of partitioning the testate
estate of Jose Eugenio Ramirez among the principal beneficiaries, namely: his
widow Marcelle Demoron de Ramirez; his two grandnephews Roberto and Jorge
Ramirez; and his companion Wanda de Wrobleski.
On June 23, 1966, the administratrix submitted a project of partition as
follows: the property of the deceased is to be divided into two parts. One part
shall go to the widow 'en pleno dominio" in satisfaction of her legitime; the
other part or "free portion" shall go to Jorge and Roberto Ramirez "en nuda
propriedad." Furthermore, one third (1/3) of the free portion is charged with
the widow's usufruct and the remaining two-thirds (2/3) with a usufruct in
favor of Wanda.
The appellants claim that the usufruct over real properties of the estate in favor
of Wanda is void because it violates the constitutional prohibition against the
acquisition of lands by aliens.
ISSUE/S: Whether the appellants are correct. (NO)
RULING: The 1935 Constitution which is controlling provides as follows:

SEC. 5. Save in cases of hereditary succession, no private agricultural land

shall be transferred or assigned except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain in the
Philippines. (Art. XIII.)

The court a quo upheld the validity of the usufruct given to Wanda on the
ground that the Constitution covers not only succession by operation of law
but also testamentary succession. We are of the opinion that the Constitutional
provision which enables aliens to acquire private lands does not extend to
testamentary succession for otherwise the prohibition will be for naught and
meaningless. Any alien would be able to circumvent the prohibition by paying
money to a Philippine landowner in exchange for a devise of a piece of land.
This opinion notwithstanding, We uphold the usufruct in favor of Wanda
because a usufruct, albeit a real right, does not vest title to the land in the
usufructuary and it is the vesting of title to land in favor of aliens which is
proscribed by the Constitution.
Aliens are absolutely not allowed to acquire public or private lands in the
Philippines, save only in constitutionally recognized exceptions.
Matthews v. Taylor, G.R. No. 164584, June 22, 2009

FACTS: On June 30, 1988, respondent Benjamin A. Taylor (Benjamin), a

British subject, married Joselyn C. Taylor (Joselyn), a 17-year old Filipina.4 On
June 9, 1989, while their marriage was subsisting, Joselyn bought from Diosa
M. Martin a 1,294 square-meter lot (Boracay property) situated at Manoc-
Manoc, Boracay Island, Malay, Aklan, for and in consideration of
₱129,000.00.5 The sale was allegedly financed by Benjamin.6 Joselyn and
Benjamin, also using the latter’s funds, constructed improvements thereon and
eventually converted the property to a vacation and tourist resort known as the
Admiral Ben Bow Inn.7 All required permits and licenses for the operation of
the resort were obtained in the name of Ginna Celestino, Joselyn’s sister.
However, Benjamin and Joselyn had a falling out, and Joselyn ran away with
Kim Philippsen. On June 8, 1992, Joselyn executed a Special Power of Attorney
(SPA) in favor of Benjamin, authorizing the latter to maintain, sell, lease, and
sub-lease and otherwise enter into contract with third parties with respect to
their Boracay property.
On July 20, 1992, Joselyn as lessor and petitioner Philip Matthews as lessee,
entered into an Agreement of Lease10 (Agreement) involving the Boracay
property for a period of 25 years, with an annual rental of ₱12,000.00. The
agreement was signed by the parties and executed before a Notary Public.
Petitioner thereafter took possession of the property and renamed the resort as
Music Garden Resort.
Claiming that the Agreement was null and void since it was entered into by
Joselyn without his (Benjamin’s) consent, Benjamin instituted an action for
Declaration of Nullity of Agreement of Lease with Damages11 against Joselyn
and the petitioner. Benjamin claimed that his funds were used in the
acquisition and improvement of the Boracay property, and coupled with the
fact that he was Joselyn’s husband, any transaction involving said property
required his consent.
The RTC considered the Boracay property as community property of Benjamin
and Joselyn; thus, the consent of the spouses was necessary to validate any
contract involving the property. On appeal to the CA, petitioner still failed to
obtain a favorable decision.

ISSUE/S: Whether or not the the Agreement of Lease of a parcel of land

entered into by a Filipino wife without the consent of her British husband is
valid. (YES)

RULING: Benjamin has no right to nullify the Agreement of Lease between

Joselyn and petitioner. Benjamin, being an alien, is absolutely prohibited from
acquiring private and public lands in the Philippines. Considering that Joselyn
appeared to be the designated "vendee" in the Deed of Sale of said property, she
acquired sole ownership thereto. In fine, the Agreement of Lease entered into
between Joselyn and petitioner cannot be nullified on the grounds advanced by
Benjamin. Thus, the Court upheld its validity.

Section 7, Article XII of the 1987 Constitution states: Section 7. Save in cases
of hereditary succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain.

Aliens, whether individuals or corporations, have been disqualified from

acquiring lands of the public domain. Hence, by virtue of the aforecited
constitutional provision, they are also disqualified from acquiring private
lands.19 The primary purpose of this constitutional provision is the
conservation of the national patrimony.20 Our fundamental law cannot be any
clearer. The right to acquire lands of the public domain is reserved only to
Filipino citizens or corporations at least sixty percent of the capital of which is
owned by Filipinos.
In Krivenko v. Register of Deeds,22 cited in Muller v. Muller,23 we had the
occasion to explain the constitutional prohibition:

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

"Section 5. Save in cases of hereditary succession, no private agricultural land

will be transferred or assigned except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain in the
Philippines."

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

xxxx

If the term "private agricultural lands" is to be construed as not including

residential lots or lands not strictly agricultural, the result would be that
"aliens may freely acquire and possess not only residential lots and houses for
themselves but entire subdivisions, and whole towns and cities," and that "they
may validly buy and hold in their names lands of any area for building homes,
factories, industrial plants, fisheries, hatcheries, schools, health and vacation
resorts, markets, golf courses, playgrounds, airfields, and a host of other uses
and purposes that are not, in appellant’s words, strictly agricultural." (Solicitor
General’s Brief, p. 6) That this is obnoxious to the conservative spirit of the
Constitution is beyond question.24

The rule is clear and inflexible: aliens are absolutely not allowed to acquire
public or private lands in the Philippines, save only in constitutionally
recognized exceptions.25 There is no rule more settled than this constitutional
prohibition, as more and more aliens attempt to circumvent the provision by
trying to own lands through another. In a long line of cases, we have settled
issues that directly or indirectly involve the above constitutional provision. We
had cases where aliens wanted that a particular property be declared as part of
their father’s estate;26 that they be reimbursed the funds used in purchasing a
property titled in the name of another;27 that an implied trust be declared in
their (aliens’) favor;28 and that a contract of sale be nullified for their lack of
consent.29

In Ting Ho, Jr. v. Teng Gui,30 Felix Ting Ho, a Chinese citizen, acquired a
parcel of land, together with the improvements thereon. Upon his death, his
heirs (the petitioners therein) claimed the properties as part of the estate of
their deceased father, and sought the partition of said properties among
themselves. We, however, excluded the land and improvements thereon from
the estate of Felix Ting Ho, precisely because he never became the owner
thereof in light of the above-mentioned constitutional prohibition.

In Muller v. Muller,31 petitioner Elena Buenaventura Muller and respondent

Helmut Muller were married in Germany. During the subsistence of their
marriage, respondent purchased a parcel of land in Antipolo City and
constructed a house thereon. The Antipolo property was registered in the name
of the petitioner. They eventually separated, prompting the respondent to file a
petition for separation of property. Specifically, respondent prayed for
reimbursement of the funds he paid for the acquisition of said property. In
deciding the case in favor of the petitioner, the Court held that respondent was
aware that as an alien, he was prohibited from owning a parcel of land situated
in the Philippines. He had, in fact, declared that when the spouses acquired
the Antipolo property, he had it titled in the name of the petitioner because of
said prohibition. Hence, we denied his attempt at subsequently asserting a
right to the said property in the form of a claim for reimbursement. Neither did
the Court declare that an implied trust was created by operation of law in view
of petitioner’s marriage to respondent. We said that to rule otherwise would
permit circumvention of the constitutional prohibition.

In Frenzel v. Catito,32 petitioner, an Australian citizen, was married to Teresita

Santos; while respondent, a Filipina, was married to Klaus Muller. Petitioner
and respondent met and later cohabited in a common-law relationship, during
which petitioner acquired real properties; and since he was disqualified from
owning lands in the Philippines, respondent’s name appeared as the vendee in
the deeds of sale. When their relationship turned sour, petitioner filed an
action for the recovery of the real properties registered in the name of
respondent, claiming that he was the real owner. Again, as in the other cases,
the Court refused to declare petitioner as the owner mainly because of the
constitutional prohibition. The Court added that being a party to an illegal
contract, he could not come to court and ask to have his illegal objective
carried out. One who loses his money or property by knowingly engaging in an
illegal contract may not maintain an action for his losses.

Finally, in Cheesman v. Intermediate Appellate Court,33 petitioner (an

American citizen) and Criselda Cheesman acquired a parcel of land that was
later registered in the latter’s name. Criselda subsequently sold the land to a
third person without the knowledge of the petitioner. The petitioner then
sought the nullification of the sale as he did not give his consent thereto. The
Court held that assuming that it was his (petitioner’s) intention that the lot in
question be purchased by him and his wife, he acquired no right whatever over
the property by virtue of that purchase; and in attempting to acquire a right or
interest in land, vicariously and clandestinely, he knowingly violated the
Constitution; thus, the sale as to him was null and void.
CONSTITUTIONAL PROHIBITION AGAINST ALINES OWNING LANDS IN THE
PHILIPPINES: The fundamental law prohibits the sale to aliens of
residential land.
Cheesman v. IAC, 193 SCRA 93 (1991)

FACTS: The instant case is an appeal concerning the attempt by an American

citizen (petitioner Thomas Cheesman) to annul — for lack of consent on his
part — the sale by his Filipino wife (Criselda) of a residential lot and building to
Estelita Padilla, also a Filipino. Thomas Cheesman and Criselda P. Cheesman
were married on December 4, 1970 but have been separated since February
15, 1981.

On June 4, 1974, a "Deed of Sale and Transfer of Possessory Rights" was

executed by Armando Altares conveying a parcel of unregistered land and the
house thereon (at No. 7 Neptune Street, Gordon Heights, Olongapo City) in
favor of "Criselda P. Cheesman, of legal age, Filipino citizen, married to Thomas
Cheesman, and residing at Lot No. 1, Blk. 8, Filtration Road, Sta. Rita,
Olongapo City . . ." Thomas Cheesman, although aware of the deed, did not
object to the transfer being made only to his wife. Thereafter—and again with
the knowledge of Thomas Cheesman and also without any protest by him—tax
declarations for the property purchased were issued in the name only of
Criselda Cheesman and Criselda assumed exclusive management and
administration of said property, leasing it to tenants.

On July 1, 1981, Criselda Cheesman sold the property to Estelita M. Padilla,

without the knowledge or consent of Thomas Cheesman. The deed described
Criselda as being" . . . of legal age, married to an American citizen,. .”

It is noteworthy that both the Trial Court and the Intermediate Appellate Court
reached the same conclusions on the three (3) factual matters above set forth,
after assessment of the evidence and determination of the probative value
thereof. Both Courts found that the facts on record adequately proved fraud,
mistake or excusable negligence by which Estelita Padilla's rights had been
substantially impaired; that the funds used by Criselda Cheesman was money
she had earned and saved prior to her marriage to Thomas Cheesman, and
that Estelita Padilla did believe in good faith that Criselda Cheesman was the
sole owner of the property in question. Consequently, these determinations of
fact will not be here disturbed, this Court having been cited to no reason for
doing so.

ISSUE/S: Whether the sale to aliens of residential land is valid. (NO)

RULING: Finally, the fundamental law prohibits the sale to aliens of residential
land. Section 14, Article XIV of the 1973 Constitution ordains that, "Save in
cases of hereditary succession, no private land shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain."30 Petitioner Thomas Cheesman was, of course,
charged with knowledge of this prohibition. Thus, assuming that it was his
intention that the lot in question be purchased by him and his wife, he
acquired no right whatever over the property by virtue of that purchase; and in
attempting to acquire a right or interest in land, vicariously and clandestinely,
he knowingly violated the Constitution; the sale as to him was null and void.31
In any event, he had and has no capacity or personality to question the
subsequent sale of the same property by his wife on the theory that in so doing
he is merely exercising the prerogative of a husband in respect of conjugal
property. To sustain such a theory would permit indirect controversion of the
constitutional prohibition. If the property were to be declared conjugal, this
would accord to the alien husband a not insubstantial interest and right over
land, as he would then have a decisive vote as to its transfer or disposition.
This is a right that the Constitution does not permit him to have.

As already observed, the finding that his wife had used her own money to
purchase the property cannot, and will not, at this stage of the proceedings be
reviewed and overturned. But even if it were a fact that said wife had used
conjugal funds to make the acquisition, the considerations just set out militate,
on high constitutional grounds, against his recovering and holding the property
so acquired or any part thereof. And whether in such an event, he may recover
from his wife any share of the money used for the purchase or charge her with
unauthorized disposition or expenditure of conjugal funds is not now inquired
into; that would be, in the premises, a purely academic exercise. An equally
decisive consideration is that Estelita Padilla is a purchaser in good faith, both
the Trial Court and the Appellate Court having found that Cheesman's own
conduct had led her to believe the property to be exclusive property of the
latter's wife, freely disposable by her without his consent or intervention. An
innocent buyer for value, she is entitled to the protection of the law in her
purchase, particularly as against Cheesman, who would assert rights to the
property denied him by both letter and spirit of the Constitution itself.
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. Aliens are not completely excluded by the
Constitution from use of lands for residential purposes.
Llantino v. Co Liong Chong, 188 SCRA 592 (1990)

FACTS: The instant case is an appeal perfected before the effectivity of Republic
Act 5440, from the decision * of the Court of First Instance of Catanduanes in
Civil Case No. 611, to quiet title with damages, entitled Gregorio Llantino, et al.
vs. Cong Liong Chong alias Juan Molina, dismissing the complaint and
declaring that the contract of lease entered into between the plaintiffs and the
defendant valid and in accordance with law.

Plaintiffs (petitioners herein) aver that they are the owners of a commercial-
residential land situated in the municipality of Virac, Catanduanes, described
in paragraph 2 of the complaint, which sometime in 1954 they leased to the
defendant (private respondent) who was then a Chinese national and went by
the name of Co Liong Chong for a period of thirteen (13) years for the sum of
P6,150.00 for the whole period. The defendant was placed in possession of the
property but knowing that the period of the least would end with the year
1967, petitioners requested private respondent for a conference but the latter
did not honor the request and instead he informed the petitioners that he had
already constructed a commercial building on the land worth P50,000.00; that
the lease contract was for a period of sixty (60) years, counted from 1954; and
that he is already a Filipino citizen. The claim of Chong came as a surprise to
the Llantinos because they did not remember having agreed to a sixty-year
lease agreement as that would virtually make Chong the owner of the realty
which, as a Chinese national, he had no right to own and neither could he have
acquired such ownership after naturalization subsequent to 1954. On
December 16, 1967, in order to avoid a court litigation the Llantinos once more
invited Chong to a conference about the matter but again Chong ignored the
invitation.

Hence, on January 10, 1968, the Llantinos filed their complaint to quiet title
with damages before the Court of First Instance of Catanduanes. After Chong
has filed an answer to the complaint and the Llantinos their reply, the trial
court set the case for pre-trial and trial for April 2, 1968. At the pre-trial, both
parties agreed upon the identity of the land as described in the complaint. It
was mutually admitted that the defendants original name was Co Liong Chong
who was then a Chinese national in 1954, when he approached the plaintiffs
and offered to lease the land in question. It was also admitted by the counsel
for the defendant that prior to the filing of the case, the plaintiffs have in fact
invited the defendant to a conference about the matter. Chong's counsel
produced the carbon original of the contract of lease entered into between
Chong and the Llantinos and the existence of the contract of lease as a public
instrument was admitted

It was also admitted that Chong had in fact constructed a building of strong
materials on the land worth P40,000.00; that Chong has become a naturalized
Filipino citizen in 1961 and that his name is no longer Co Liong Chong but
Juan Molina.
Petitioners contend that when the contract which is sought to be declared void
was entered into by and between the parties, private respondent was still a
Chinese national (Rollo, p. 48; Appellants' Brief, p. 2). However, petitioners also
stated that they do not dispute the right of private respondent to hold the
landholding in dispute under a contract of lease but they cannot fathom how
Congress could have thought of a lease contract which shall be for an indefinite
period and yet say that the period to be valid should not exceed 99 years
On the other hand, private respondent argued that even though he was still an
alien when he entered into the contract of lease (on October 5, 1954), he was
not prohibited by law to do so. In fact, prior to his becoming a naturalized
Filipino citizen in 1961, the appellants did not question his right to enter into
that contract so that the parties are in pari delicto. He constructed a building
on the property worth P40,000.00 and prays that he be awarded P30,000.00
for moral damages and P2,000.00 for Attorney's fees.

ISSUE/S: Whether or not the contract of lease entered into by and between the
petitioners including Virgilio Llantino now deceased and private respondent on
October 5, 1954 for a period of sixty (60) years is valid.

The main crux of the controversy is whether the defendant-appellee Chong had
at the time of the execution of the contract, the right to hold by lease the
property involved in the case although at the time of the execution of the
contract, he was still a Chinese national.

RULING: The Court ruled that the lower court correctly ruled that the
defendant-appellee Chong had at the time of the execution of the contract, the
right to hold by lease the property involved in the case although at the time of
the execution of the contract, he was still a Chinese national.

In the present case, it has been established that there is only one contract and
there is no option to buy the leased property in favor of Chong. There is
nothing in the record, either in the lease contract or in the complaint itself, to
indicate any scheme to circumvent the constitutional prohibition. On the
contrary, the Llantinos themselves admit openly that right from the start and
before entering into the contract, Chong had merely asked them for a lease of
the premises to which they agreed. Admittedly under the terms of the contract
there is nothing to prevent the Llantinos from disposing of their title to the land
to any qualified party but subject to the rights of the lessee Chong. Neither is
there under the terms of the said contract to indicate that the ownership of the
Llantinos of the leased premises has been virtually transferred to the lessee
(Rollo, p. 59; Appellee's Brief, p. 14).

Under the circumstances, 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. Aliens are not completely excluded by the
Constitution from 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 fortune and misfortune, Filipino citizenship
is not impossible to acquire (Philippine Banking Corporation vs. Lui She, 21
SCRA 52 [1967], citing Krivenko vs. Register of Deeds, 79 Phil. 461 [1947]).
The only instance where a contract of lease may be considered invalid is, if
there are circumstances attendant to its execution, which are used as a
scheme to circumvent the constitutional prohibition.

If an alien is given not only a lease of, but also an option to buy, a piece of
land, by virtue of which the Filipino owner cannot sell or otherwise dispose of
his property, this to last for 50 years, then it becomes clear that the
arrangement is a virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land (jus possidendi, jus
utendi, jus fruendi, and jus abutendi) — rights, the sum 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 (Philippine Banking
Corporation vs. Lui She, 21 SCRA 52 [1967]).

Coming back to the case at bar, even assuming, arguendo, that the subject
contract is prohibited, the same can no longer be questioned presently upon
the acquisition by the private respondent of Filipino citizenship. It was held
that sale of a residential land to an alien which is now in the hands of a
naturalized Filipino citizen is valid (De Castro vs. Tan, 129 SCRA 85 [1984]).

A contract is the law between the contracting parties, and when there is
nothing in it which is contrary to law, morals, good customs, public policy or
public order, the validity of the contract must be sustained (Marimperio
Compania Naviera, S.A. vs. Court of Appeals, 156 SCRA 358 [1987]).