THOMAS C. CHEESMAN, petitioner, vs.
INTERMEDIATE This appeal concerns the attempt by an American citizen
APPELLATE COURT and ESTELITA PADILLA, respondents.
Constitutional Law; Prohibition against Aliens to Acquire
Residential Lands; Even if it were a fact that petitioners Filipina
wife used conjugal funds to purchase the lot in question,
petitioner, who is an alien, cannot recover or hold the lot so
acquired, in view of the prohibition in the Constitution as to the
sale to aliens of residential lands.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.
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. 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.
The facts are stated in the opinion of the Court
Altares on June 4, 1974 and sold by defendant Criselda
(petitioner Thomas Cheesman) to annulfor lack of consent on Cheesman to Estelita Padilla on July 12, 1981; and
his partthe sale by his Filipino wife (Criselda) of a residential
lot and building to Estelita Padilla, also a Filipino. 2. That the transaction regarding the transfer of their property
took place during the existence of their marriage as the couple
Thomas Cheesman and Criselda P. Cheesman were married on were married on December 4, 1970 and the questioned property
December 4, 1970 but have been separated since February15, was acquired sometime on June 4, 1974.
1981.1
The action resulted in a judgment dated June 24, 1982,10
On June 4, 1974, a Deed of Sale and Transfer of Possessory declaring void ab initio the sale executed by Criselda Cheesman
Rights was executed by Armando Altares conveying a parcel of in favor of Estelita M. Padilla, and ordering the delivery of the
unregistered land and the house thereon (at No. 7 Neptune property to Thomas Cheesman as administrator of the conjugal
Street, Gordon Heights, Olongapo City) in favor of Criselda P. partnership property, and the payment to him of P5,000.00 as
Cheesman, of legal age, Filipino citizen, married to Thomas attorneys fees and expenses of litigation.11
Cheesman, and residing at Lot No. 1, Blk. 8, Filtration Road,
Sta. Rita, Olongapo City x x.2 Thomas Cheesman, although The judgment was however set aside as regards Estelita Padilla
aware of the deed, did not object to the transfer being made only on a petition for relief filed by the latter, grounded on fraud,
to his wife.3 mistake and/or excusable negligence which had seriously
impaired her right to present her case adequately.12 After the
Thereafterand again with the knowledge of Thomas petition for relief from judgment was given due course,
Cheesman and also without any protest by himtax according to petitioner, a new judge presided over the case.13
declarations for the property purchased were issued in the name
only of Criselda Cheesman and Criselda assumed exclusive Estelita Padilla filed a supplemental pleading on December 20,
management and administration of said property, leasing it to 1982 as her own answer to the complaint, and a motion for
tenants.4 On July 1, 1981, Criselda Cheesman sold the property summary judgment on May 17, 1983. Although there was initial
to Estelita M. Padilla, without the knowledge or consent of opposition by Thomas Cheesman to the motion, the parties
Thomas Cheesman.5 The deed described Criselda as being . . . . ultimately agreed on the rendition by the court of a summary
of legal age, married to an American citizen, x x.6 judgment after entering into a stipulation of facts, at the hearing
of the motion on June 21, 1983, the stipulation being of the
Thirty days later, or on July 31, 1981, Thomas Cheesman following tenor:14
brought suit in the Court of First Instance at Olongapo City
against his wife, Criselda, and Estelita Padilla, praying for the (1) that the property in question was bought during the
existence of the marriage between the plaintiff and the defendant
annulment of the sale on the ground that the transaction had
Criselda P. Cheesman;
been executed without his knowledge and consent.7 An answer
was filed in the names of both defendants, alleging that (1) the
(2) that the property bought during the marriage was registered
property sold was paraphernal, having been purchased by
in the name of Criselda Cheesman and that the Deed of Sale and
Criselda with funds exclusively belonging to her (her own
Transfer of Possessory Rights executed by the former owner-
separate money); (2) Thomas Cheesman, being an American,
vendor Armando Altares in favor of Criselda Cheesman made
was disqualified to have any interest or right of ownership in the
no mention of the plaintiff;
land; and (3) Estelita Padilla was a buyer in good faith.8
(3) that the property, subject of the proceedings, was sold by
During the pre-trial conference, the parties agreed upon certain
defendant Criselda Cheesman in favor of the other defendant
facts which were subsequently set out in a pre-trial Order dated
Estelita M. Padilla, without the written consent of the plaintiff.
October 22, 1981,9 as follows:
Obviously upon the theory that no genuine issue existed any
1. Both parties recognize the existence of the Deed of Sale over
longer and there was hence no need of a trial, the parties having
the residential house located at No. 7 Granada St., Gordon
in fact submitted, as also stipulated, their respective memoranda
Heights, Olongapo City, which was acquired from Armando
each praying for a favorable verdict, the Trial Court15 rendered
1
a Summary Judgment dated August 3, 1982 declaring the
sale executed by x x Criselda Cheesman in favor of x x Estelita
Padilla to be valid, dismissing Thomas Cheesmans complaint
and ordering him to immediately turn over the possession of
the house and lot subject of x x (the) case to x x Estelita Padilla
x x.16
The Trial Court found that
1) the evidence on record satisfactorily overcame the disputable
presumption in Article 160 of the Civil Codethat all property
of the marriage belongs to the conjugal partnership unless it be
proved that it pertains exclusively to the husband or to the
wifeand that the immovable in question was in truth
Criseldas paraphernal property;
2) that moreover, said legal presumption in Article 160 could
not apply inasmuch as the husband-plaintiff is an American
citizen and therefore disqualified under the Constitution to
acquire and own real properties; and
3) that the exercise by Criselda of exclusive acts of dominion
with the knowledge of her husband had led x x Estelita Padilla
to believe that the properties were the exclusive properties of
Criselda Cheesman and on the faith of such a belief she bought
the properties from her and for value, and therefore, Thomas
Cheesman was, under Article 1473 of the Civil Code, estopped
to impugn the transfer to Estelita Padilla.
Thomas Cheesman appealed to the Intermediate Appellate
Court. There he assailed the Trial Court acts (1) of granting
Estelita Padillas petition for relief, and its resolution of matters
not subject of said petition; (2) of declaring valid the sale to
Estelita Padilla despite the lack of consent thereto by him, and
the presumption of the conjugal character of the property in
question pursuant to Article 160 of the Civil Code; (3) of
disregarding the judgment of June 24, 1982 which, not having
been set aside as against Criselda Cheesman, continued to be
binding on her; and (4) of making findings of fact not supported
by evidence. All of these contentions were found to be without
merit by the Appellate Tribunal which, on January 7, 1986,
promulgated a decision (erroneously denominated, Report)17
affirming the Summary Judgment complained of, having
found no reversible error therein.
Once more, Thomas Cheesman availed of the remedy of appeal,
this time to this Court. Here, he argues that it was reversible
error for the Intermediate Appellate Court
1) to find that the presumption that the property in question is
conjugal in accordance with Article 160 had been satisfactorily
overcome by Estelita Padilla;18
2) to rule that Estelita Padilla was a purchaser of said property in
good faith, it appearing:
a) that the deed by which the property was conveyed to Criselda
Cheesman described her as married to Thomas
C. Cheesman, as well as the deed by which the property was
later conveyed to Estelita Padilla by Criselda Cheesman also
described her as married to an American citizen, and both said
descriptions had thus placed Estelita on knowledge of the
conjugal nature of the property; and
b) that furthermore, Estelita had admitted to stating in the deed
by which she acquired the property a price much lower than that
actually paid in order to avoid payment of more obligation to
the government;19
3) to decline to declare that the evidence did not warrant the
grant of Estelita Padillas petition for relief on the ground of
fraud, mistake and/or excusable negligence;20
4) to hold that Thomas Cheesman had waived his objection to
Estelitas petition for relief by failing to appeal from the order
granting the same;
5) to accord to Estelita Padilla a relief other than that she had
specifically prayed for in her petition for relief, i.e., the
restoration of the purchase price which Estelita allegedly paid to
Criselda;21 and
6) to fail to declare that Thomas Cheesmans citizenship is not a
bar to his action to recover the lot and house for the conjugal
partnership.22
Such conclusions as that (1) fraud, mistake or excusable
negligence existed in the premises justifying relief to Estelita
Padilla under Rule 38 of the Rules of Court, or (2) that Criselda
Cheesman had used money she had brought into her marriage to
Thomas Cheesman to purchase the lot and house in question, or
(3) that Estelita Padilla believed in good faith that Criselda
Cheesman was the exclusive owner of the property that she
(Estelita) intended to and did in fact buyderived from the
evidence adduced by the parties, the facts set out in the
pleadings or otherwise appearing on recordare conclusions or
findings of fact. As distinguished from a question of law
which exists when the doubt or difference arises as to what the
2
law is on a certain state of factsthere is a question of fact
when the doubt or difference arises as to the truth or the
falsehood of alleged facts;23 or when the query necessarily
invites calibration of the whole evidence considering mainly the
credibility of witnesses, existence and relevancy of specific
surrounding circumstances, their relation; to each other and to
the whole and the probabilities of the situation.24
Now, it is axiomatic that only questions of law, distinctly set
forth, may be raised in a petition for the review on certiorari of a
decision of the Court of Appeals presented to this Court.25 As
everyone knows or ought to know, the appellate jurisdiction of
this Court is limited to reviewing errors of law, accepting as
conclusive the factual findings of the lower court upon its own
assessment of the evidence.26 The creation of the Court of
Appeals was precisely intended to take away from the Supreme
Court the work of examining the evidence, and confine its task
to the determination of questions which do not call for the
reading and study of transcripts containing the testimony of
witnesses.27 The rule of conclusiveness of the factual findings
or conclusions of the Court of Appeals is, to be sure, subject to
certain exceptions,28 none of which however obtains in the case
at bar.
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 Padillas 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.
These considerations dispose of the first three (3) points that
petitioner Cheesman seeks to make in his appeal. They also
make unnecessary an extended discussion of the other issues
raised by him. As to them, it should suffice to restate certain
fundamental propositions.
An order of a Court of First Instance (now Regional Trial Court)
granting a petition for relief under Rule 38 is interlocutory and is
not appealable. Hence, the failure of the party who opposed the
petition to appeal from said order, or his participation in the
proceedings subsequently had, cannot be construed as a waiver stage of the proceedings be reviewed and overturned. But even
of his objection to the petition for relief so as to preclude his if it were a fact that said wife had used conjugal funds to make
raising the same question on appeal from the judgment on the the acquisition, the considerations just set out militate, on high
merits of the main case. Such a party need not repeat his constitutional grounds, against his recovering and holding the
objections to the petition for relief, or perform any act thereafter property so acquired, or any part thereof. And whether in such
(e.g., take formal exception) in order to preserve his right to an event, he may recover from his wife any share of the money
question the same eventually, on appeal, it being sufficient for used for the purchase or charge her with unauthorized
this purpose that he has made of record the action which he disposition or expenditure of conjugal funds is not now inquired
desires the court to take or his objection to the action of the into; that would be, in the premises, a purely academic exercise.
court and his grounds therefor.29 An equally decisive consideration is that Estelita Padilla is a
purchaser in good faith, both the Trial Court and the Appellate
Again, the prayer in a petition for relief from judgment under Court having found that Cheesmans own conduct had led her to
Rule 38 is not necessarily the same prayer in the petitioners believe the property to be exclusive property of the latters wife,
complaint, answer or other basic pleading. This should be freely disposable by her without his consent or intervention. An
obvious. Equally obvious is that once a petition for relief is innocent buyer for value, she is entitled to the protection of the
granted and the judgment subject thereof set aside, and further law in her purchase, particularly as against Cheesman, who
proceedings are thereafter had, the Court in its judgment on the would assert rights to the property denied him by both letter and
merits may properly grant the relief sought in the petitioners spirit of the Constitution itself.
basic pleadings, although different from that stated in his
petition for relief. WHEREFORE, the appealed decision is AFFIRMED, with costs
against petitioner.
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

3
G.R. No. L-17587 September 12, 1967 him, an amount not exceeding P1,000 a month for the food of maids. But he denied having taken advantage of her trust in
her dogs and the salaries of her maids. order to secure the execution of the contracts in question. As
PHILIPPINE BANKING CORPORATION, representing counterclaim he sought the recovery of P9,210.49 which he said
the estate of JUSTINA SANTOS Y CANON FAUSTINO, On December 21 she executed another contract (Plff Exh. 7) she owed him for advances.
deceased, plaintiff-appellant, giving Wong the option to buy the leased premises for
vs. P120,000, payable within ten years at a monthly installment of Wong's admission of the receipt of P22,000 and P3,000 was the
LUI SHE in her own behalf and as administratrix of the P1,000. The option, written in Tagalog, imposed on him the cue for the filing of an amended complaint. Thus on June 9,
intestate estate of Wong Heng, deceased, defendant- obligation to pay for the food of the dogs and the salaries of the 1960, aside from the nullity of the contracts, the collection of
appellant. maids in her household, the charge not to exceed P1,800 a various amounts allegedly delivered on different occasions was
month. The option was conditioned on his obtaining Philippine sought. These amounts and the dates of their delivery are
Justina Santos y Canon Faustino and her sister Lorenzo were the citizenship, a petition for which was then pending in the Court P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1, 1957); P10,000
owners in common of a piece of land in Manila. This parcel, of First Instance of Rizal. It appears, however, that this (Dec. 6, 1957); P22,000 and P3,000 (as admitted in his answer).
with an area of 2,582.30 square meters, is located on Rizal application for naturalization was withdrawn when it was An accounting of the rentals from the Ongpin and Rizal Avenue
Avenue and opens into Florentino Torres street at the back and discovered that he was not a resident of Rizal. On October 28, properties was also demanded.
Katubusan street on one side. In it are two residential houses 1958 she filed a petition to adopt him and his children on the In the meantime as a result of a petition for guardianship filed in
with entrance on Florentino Torres street and the Hen Wah erroneous belief that adoption would confer on them Philippine the Juvenile and Domestic Relations Court, the Security Bank &
Restaurant with entrance on Rizal Avenue. The sisters lived in citizenship. The error was discovered and the proceedings were Trust Co. was appointed guardian of the properties of Justina
one of the houses, while Wong Heng, a Chinese, lived with his abandoned. Santos, while Ephraim G. Gochangco was appointed guardian of
family in the restaurant. Wong had been a long-time lessee of a On November 18, 1958 she executed two other contracts, one her person.
portion of the property, paying a monthly rental of P2,620. (Plff Exh. 5) extending the term of the lease to 99 years, and In his answer, Wong insisted that the various contracts were
On September 22, 1957 Justina Santos became the owner of the another (Plff Exh. 6) fixing the term of the option of 50 years. freely and voluntarily entered into by the parties. He likewise
entire property as her sister died with no other heir. Then already Both contracts are written in Tagalog. disclaimed knowledge of the sum of P33,724.27, admitted
well advanced in years, being at the time 90 years old, blind, In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 receipt of P7,344.42 and P10,000, but contended that these
crippled and an invalid, she was left with no other relative to & 279), she bade her legatees to respect the contracts she had amounts had been spent in accordance with the instructions of
live with. Her only companions in the house were her 17 dogs entered into with Wong, but in a codicil (Plff Exh. 17) of a later Justina Santos; he expressed readiness to comply with any order
and 8 maids. Her otherwise dreary existence was brightened date (November 4, 1959) she appears to have a change of heart. that the court might make with respect to the sums of P22,000 in
now and then by the visits of Wong's four children who had Claiming that the various contracts were made by her because of the bank and P3,000 in his possession.
become the joy of her life. Wong himself was the trusted man to machinations and inducements practiced by him, she now The case was heard, after which the lower court rendered
whom she delivered various amounts for safekeeping, including directed her executor to secure the annulment of the contracts. judgment as follows:
rentals from her property at the corner of Ongpin and Salazar On November 18 the present action was filed in the Court of [A]ll the documents mentioned in the first cause of action, with
streets and the rentals which Wong himself paid as lessee of a First Instance of Manila. The complaint alleged that the the exception of the first which is the lease contract of 15
part of the Rizal Avenue property. Wong also took care of the contracts were obtained by Wong "through fraud, November 1957, are declared null and void; Wong Heng is
payment; in her behalf, of taxes, lawyers' fees, funeral expenses, misrepresentation, inequitable conduct, undue influence and condemned to pay unto plaintiff thru guardian of her property
masses, salaries of maids and security guard, and her household abuse of confidence and trust of and (by) taking advantage of the sum of P55,554.25 with legal interest from the date of the
expenses. the helplessness of the plaintiff and were made to circumvent the filing of the amended complaint; he is also ordered to pay the
"In grateful acknowledgment of the personal services of the constitutional provision prohibiting aliens from acquiring lands sum of P3,120.00 for every month of his occupation as lessee
lessee to her," Justina Santos executed on November 15, 1957 a in the Philippines and also of the Philippine Naturalization under the document of lease herein sustained, from 15
contract of lease (Plff Exh. 3) in favor of Wong, covering the Laws." The court was asked to direct the Register of Deeds of November 1959, and the moneys he has consigned since then
portion then already leased to him and another portion fronting Manila to cancel the registration of the contracts and to order shall be imputed to that; costs against Wong Heng.
Florentino Torres street. The lease was for 50 years, although Wong to pay Justina Santos the additional rent of P3,120 a
the lessee was given the right to withdraw at any time from the month from November 15, 1957 on the allegation that the From this judgment both parties appealed directly to this Court.
agreement; the monthly rental was P3,120. The contract covered reasonable rental of the leased premises was P6,240 a month. After the case was submitted for decision, both parties died,
an area of 1,124 square meters. Ten days later (November 25), In his answer, Wong admitted that he enjoyed her trust and Wong Heng on October 21, 1962 and Justina Santos on
the contract was amended (Plff Exh. 4) so as to make it cover confidence as proof of which he volunteered the information December 28, 1964. Wong was substituted by his wife, Lui She,
the entire property, including the portion on which the house of that, in addition to the sum of P3,000 which he said she had the other defendant in this case, while Justina Santos was
Justina Santos stood, at an additional monthly rental of P360. delivered to him for safekeeping, another sum of P22,000 had substituted by the Philippine Banking Corporation.
For his part Wong undertook to pay, out of the rental due from been deposited in a joint account which he had with one of her

4
Justina Santos maintained now reiterated by the Philippine although the owner should desire the lease to continue the
Banking Corporation that the lease contract (Plff Exh. 3) lessees could effectively thwart his purpose if they should prefer The testimony of Atty. Yumol cannot be read out of context in
should have been annulled along with the four other contracts to terminate the contract by the simple expedient of stopping order to warrant a finding that Wong practically dictated the
(Plff Exhs. 4-7) because it lacks mutuality; because it included a payment of the rentals." Here, in contrast, the right of the lessee terms of the contract. What this witness said was:
portion which, at the time, was in custodia legis; because the to continue the lease or to terminate it is so circumscribed by the
contract was obtained in violation of the fiduciary relations of term of the contract that it cannot be said that the continuance of Q Did you explain carefully to your client, Doa Justina, the
the parties; because her consent was obtained through undue the lease depends upon his will. At any rate, even if no term had contents of this document before she signed it?
influence, fraud and misrepresentation; and because the lease been fixed in the agreement, this case would at most justify the
contract, like the rest of the contracts, is absolutely simulated. fixing of a period5 but not the annulment of the contract. 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
Paragraph 5 of the lease contract states that "The lessee may at Nor is there merit in the claim that as the portion of the property don't really know if I have expressed my opinion, but I told her
any time withdraw from this agreement." It is claimed that this formerly owned by the sister of Justina Santos was still in the that we would rather not execute any contract anymore, but to
stipulation offends article 1308 of the Civil Code which process of settlement in the probate court at the time it was hold it as it was before, on a verbal month to month contract of
provides that "the contract must bind both contracting parties; its leased, the lease is invalid as to such portion. Justina Santos lease.
validity or compliance cannot be left to the will of one of them." became the owner of the entire property upon the death of her
sister Lorenzo on September 22, 1957 by force of article 777 of Q But, she did not follow your advice, and she went with the
We have had occasion to delineate the scope and application of the Civil Code. Hence, when she leased the property on contract just the same?
article 1308 in the early case of Taylor v. Uy Tieng Piao.1 We November 15, she did so already as owner thereof. As this Court
said in that case: explained in upholding the sale made by an heir of a property A She agreed first . . .
under judicial administration:
Article 1256 [now art. 1308] of the Civil Code in our opinion Q Agreed what?
creates no impediment to the insertion in a contract for personal That the land could not ordinarily be levied upon while in
service of a resolutory condition permitting the cancellation of custodia legis does not mean that one of the heirs may not sell A Agreed with my objectives that it is really onerous and that I
the contract by one of the parties. Such a stipulation, as can be the right, interest or participation which he has or might have in was really right, but after that, I was called again by her and she
readily seen, does not make either the validity or the fulfillment the lands under administration. The ordinary execution of told me to follow the wishes of Mr. Wong Heng.
of the contract dependent upon the will of the party to whom is property in custodia legis is prohibited in order to avoid
conceded the privilege of cancellation; for where the contracting interference with the possession by the court. But the sale made xxx xxx xxx
parties have agreed that such option shall exist, the exercise of by an heir of his share in an inheritance, subject to the result of
the option is as much in the fulfillment of the contract as any the pending administration, in no wise stands in the way of such Q So, as far as consent is concerned, you were satisfied
other act which may have been the subject of agreement. Indeed, administration.6 that this document was perfectly proper?
the cancellation of a contract in accordance with conditions
agreed upon beforehand is fulfillment.2 It is next contended that the lease contract was obtained by xxx xxx xxx
Wong in violation of his fiduciary relationship with Justina
And so it was held in Melencio v. Dy Tiao Lay 3 that a Santos, contrary to article 1646, in relation to article 1941 of the A Your Honor, if I have to express my personal opinion,
"provision in a lease contract that the lessee, at any time before Civil Code, which disqualifies "agents (from leasing) the I would say she is not, because, as I said before, she told me
he erected any building on the land, might rescind the lease, can property whose administration or sale may have been entrusted "Whatever Mr. Wong wants must be followed."8
hardly be regarded as a violation of article 1256 [now art. 1308] to them." But Wong was never an agent of Justina Santos. The
of the Civil Code." relationship of the parties, although admittedly close and Wong might indeed have supplied the data which Atty. Yumol
confidential, did not amount to an agency so as to bring the case embodied in the lease contract, but to say this is not to detract
The case of Singson Encarnacion v. Baldomar 4 cannot be cited within the prohibition of the law. from the binding force of the contract. For the contract was fully
in support of the claim of want of mutuality, because of a explained to Justina Santos by her own lawyer. One incident,
difference in factual setting. In that case, the lessees argued that Just the same, it is argued that Wong so completely dominated related by the same witness, makes clear that she voluntarily
they could occupy the premises as long as they paid the rent. her life and affairs that the contracts express not her will but consented to the lease contract. This witness said that the
This is of course untenable, for as this Court said, "If this only his. Counsel for Justina Santos cites the testimony of Atty. original term fixed for the lease was 99 years but that as he
defense were to be allowed, so long as defendants elected to Tomas S. Yumol who said that he prepared the lease contract on doubted the validity of a lease to an alien for that length of time,
continue the lease by continuing the payment of the rentals, the the basis of data given to him by Wong and that she told him he tried to persuade her to enter instead into a lease on a month-
owner would never be able to discontinue it; conversely, that "whatever Mr. Wong wants must be followed."7 to-month basis. She was, however, firm and unyielding. Instead

5
of heeding the advice of the lawyer, she ordered him, "Just Santos was given freely and voluntarily. As Atty. Alonzo, She was very emphatic in the care of the seventeen (17) dogs
follow Mr. Wong Heng."9 Recounting the incident, Atty. Yumol testifying for her, said: and of the maids who helped her much, and she told me to see to
declared on cross examination: it that no one could disturb Wong Heng from those properties.
[I]n nearly all documents, it was either Mr. Wong Heng or Judge That is why we thought of the ninety-nine (99) years lease; we
Considering her age, ninety (90) years old at the time and her Torres and/or both. When we had conferences, they used to tell thought of adoption, believing that thru adoption Wong Heng
condition, she is a wealthy woman, it is just natural when she me what the documents should contain. But, as I said, I would might acquire Filipino citizenship; being the adopted child of a
said "This is what I want and this will be done." In particular always ask the old woman about them and invariably the old Filipino citizen.18
reference to this contract of lease, when I said "This is not woman used to tell me: "That's okay. It's all right."15
proper," she said "You just go ahead, you prepare that, I am This is not to say, however, that the contracts (Plff Exhs. 3-7)
the owner, and if there is any illegality, I am the only one that But the lower court set aside all the contracts, with the exception are valid. For the testimony just quoted, while dispelling doubt
can question the illegality."10 of the lease contract of November 15, 1957, on the ground that as to the intention of Justina Santos, at the same time gives the
they are contrary to the expressed wish of Justina Santos and clue to what we view as a scheme to circumvent the
Atty. Yumol further testified that she signed the lease contract in that their considerations are fictitious. Wong stated in his Constitutional prohibition against the transfer of lands to aliens.
the presence of her close friend, Hermenegilda Lao, and her deposition that he did not pay P360 a month for the additional "The illicit purpose then becomes the illegal causa"19 rendering
maid, Natividad Luna, who was constantly by her side.11 Any premises leased to him, because she did not want him to, but the the contracts void.
of them could have testified on the undue influence that Wong trial court did not believe him. Neither did it believe his
supposedly wielded over Justina Santos, but neither of them was statement that he paid P1,000 as consideration for each of the Taken singly, the contracts show nothing that is necessarily
presented as a witness. The truth is that even after giving his contracts (namely, the option to buy the leased premises, the illegal, but considered collectively, they reveal an insidious
client time to think the matter over, the lawyer could not make extension of the lease to 99 years, and the fixing of the term of pattern to subvert by indirection what the Constitution directly
her change her mind. This persuaded the lower court to uphold the option at 50 years), but that the amount was returned to him prohibits. To be sure, a lease to an alien for a reasonable period
the validity of the lease contract against the claim that it was by her for safekeeping. Instead, the court relied on the testimony is valid. So is an option giving an alien the right to buy real
procured through undue influence. of Atty. Alonzo in reaching the conclusion that the contracts are property on condition that he is granted Philippine citizenship.
void for want of consideration. As this Court said in Krivenko v. Register of Deeds:20
Indeed, the charge of undue influence in this case rests on a
mere inference12 drawn from the fact that Justina Santos could Atty. Alonzo declared that he saw no money paid at the time of [A]liens are not completely excluded by the Constitution from
not read (as she was blind) and did not understand the English the execution of the documents, but his negative testimony does the use of lands for residential purposes. Since their residence in
language in which the contract is written, but that inference has not rule out the possibility that the considerations were paid at the Philippines is temporary, they may be granted temporary
been overcome by her own evidence. some other time as the contracts in fact recite. What is more, the rights such as a lease contract which is not forbidden by the
consideration need not pass from one party to the other at the Constitution. Should they desire to remain here forever and
Nor is there merit in the claim that her consent to the lease time a contract is executed because the promise of one is the share our fortunes and misfortunes, Filipino citizenship is not
contract, as well as to the rest of the contracts in question, was consideration for the other.16 impossible to acquire.
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 With respect to the lower court's finding that in all probability But if an alien is given not only a lease of, but also an option to
destroyed their house during the liberation of Manila. For while Justina Santos could not have intended to part with her property buy, a piece of land, by virtue of which the Filipino owner
a witness claimed that the sisters were saved by other persons while she was alive nor even to lease it in its entirety as her cannot sell or otherwise dispose of his property,21 this to last for
(the brothers Edilberto and Mariano Sta. Ana)13 it was Justina house was built on it, suffice it to quote the testimony of her 50 years, then it becomes clear that the arrangement is a virtual
Santos herself who, according to her own witness, Benjamin C. own witness and lawyer who prepared the contracts (Plff Exhs. transfer of ownership whereby the owner divests himself in
Alonzo, said "very emphatically" that she and her sister would 4-7) in question, Atty. Alonzo: stages not only of the right to enjoy the land ( jus possidendi, jus
have perished in the fire had it not been for Wong.14 Hence the utendi, jus fruendi and jus abutendi) but also of the right to
recital in the deed of conditional option (Plff Exh. 7) that The ambition of the old woman, before her death, according to dispose of it ( jus disponendi) rights the sum total of which
"[I]tong si Wong Heng ang siyang nagligtas sa aming dalawang her revelation to me, was to see to it that these properties be make up ownership. It is just as if today the possession is
magkapatid sa halos ay tiyak na kamatayan", and the equally enjoyed, even to own them, by Wong Heng because Doa transferred, tomorrow, the use, the next day, the disposition, and
emphatic avowal of gratitude in the lease contract (Plff Exh. 3). Justina told me that she did not have any relatives, near or far, so on, until ultimately all the rights of which ownership is made
and she considered Wong Heng as a son and his children her up are consolidated in an alien. And yet this is just exactly what
As it was with the lease contract (Plff Exh. 3), so it was with the grandchildren; especially her consolation in life was when she the parties in this case did within the space of one year, with the
rest of the contracts (Plff Exhs. 4-7) the consent of Justina would hear the children reciting prayers in Tagalog.17 result that Justina Santos' ownership of her property was reduced
to a hollow concept. If this can be done, then the Constitutional

6
ban against alien landholding in the Philippines, as announced in And what of the various amounts which Wong received in trust [T]he documents bear the earmarks of genuineness; the trouble
Krivenko v. Register of Deeds,22 is indeed in grave peril. from her? It appears that he kept two classes of accounts, one is that they were made only by Francisco Wong and Antonia
pertaining to amount which she entrusted to him from time to Matias, nick-named Toning, which was the way she signed
It does not follow from what has been said, however, that time, and another pertaining to rentals from the Ongpin property the loose sheets, and there is no clear proof that Doa Justina
because the parties are in pari delicto they will be left where and from the Rizal Avenue property, which he himself was had authorized these two to act for her in such liquidation; on
they are, without relief. For one thing, the original parties who leasing. the contrary if the result of that was a deficit as alleged and
were guilty of a violation of the fundamental charter have died sought to be there shown, of P9,210.49, that was not what Doa
and have since been substituted by their administrators to whom With respect to the first account, the evidence shows that he Justina apparently understood for as the Court understands her
it would be unjust to impute their guilt.23 For another thing, and received P33,724.27 on November 8, 1957 (Plff Exh. 16); statement to the Honorable Judge of the Juvenile Court . . . the
this is not only cogent but also important, article 1416 of the P7,354.42 on December 1, 1957 (Plff Exh. 13); P10,000 on reason why she preferred to stay in her home was because there
Civil Code provides, as an exception to the rule on pari delicto, December 6, 1957 (Plff Exh. 14) ; and P18,928.50 on August she did not incur in any debts . . . this being the case, . . . the
that "When the agreement is not illegal per se but is merely 26, 1959 (Def. Exh. 246), or a total of P70,007.19. He claims, Court will not adjudicate in favor of Wong Heng on his
prohibited, and the prohibition by law is designed for the however, that he settled his accounts and that the last amount of counterclaim; on the other hand, while it is claimed that the
protection of the plaintiff, he may, if public policy is thereby P18,928.50 was in fact payment to him of what in the expenses were much less than the rentals and there in fact
enhanced, recover what he has paid or delivered." The liquidation was found to be due to him. should be a superavit, . . . this Court must concede that daily
Constitutional provision that "Save in cases of hereditary expenses are not easy to compute, for this reason, the Court
succession, no private agricultural land shall be transferred or He made disbursements from this account to discharge Justina faced with the choice of the two alternatives will choose the
assigned except to individuals, corporations, or associations Santos' obligations for taxes, attorneys' fees, funeral services and middle course which after all is permitted by the rules of proof,
qualified to acquire or hold lands of the public domain in the security guard services, but the checks (Def Exhs. 247-278) Sec. 69, Rule 123 for in the ordinary course of things, a person
Philippines"24 is an expression of public policy to conserve drawn by him for this purpose amount to only P38,442.84.27 will live within his income so that the conclusion of the Court
lands for the Filipinos. As this Court said in Krivenko: Besides, if he had really settled his accounts with her on August will be that there is neither deficit nor superavit and will let the
26, 1959, we cannot understand why he still had P22,000 in the matter rest here.
It is well to note at this juncture that in the present case we have bank and P3,000 in his possession, or a total of P25,000. In his
no choice. We are construing the Constitution as it is and not as answer, he offered to pay this amount if the court so directed Both parties on appeal reiterate their respective claims but we
we may desire it to be. Perhaps the effect of our construction is him. On these two grounds, therefore, his claim of liquidation agree with the lower court that both claims should be denied.
to preclude aliens admitted freely into the Philippines from and settlement of accounts must be rejected. Aside from the reasons given by the court, we think that the
owning sites where they may build their homes. But if this is the claim of Justina Santos totalling P37,235, as rentals due to her
solemn mandate of the Constitution, we will not attempt to After subtracting P38,442.84 (expenditures) from P70,007.19 after deducting various expenses, should be rejected as the
compromise it even in the name of amity or equity . . . . (receipts), there is a difference of P31,564 which, added to the evidence is none too clear about the amounts spent by Wong for
amount of P25,000, leaves a balance of P56,564.3528 in favor of food29 masses30 and salaries of her maids.31 His claim for
For all the foregoing, we hold that under the Constitution aliens Justina Santos. P9,210.49 must likewise be rejected as his averment of
may not acquire private or public agricultural lands, including liquidation is belied by his own admission that even as late as
residential lands, and, accordingly, judgment is affirmed, As to the second account, the evidence shows that the monthly 1960 he still had P22,000 in the bank and P3,000 in his
without costs.25 income from the Ongpin property until its sale in Rizal Avenue possession.
July, 1959 was P1,000, and that from the Rizal Avenue property,
That policy would be defeated and its continued violation of which Wong was the lessee, was P3,120. Against this account ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are
sanctioned if, instead of setting the contracts aside and ordering the household expenses and disbursements for the care of the 17 annulled and set aside; the land subject-matter of the contracts is
the restoration of the land to the estate of the deceased Justina dogs and the salaries of the 8 maids of Justina Santos were ordered returned to the estate of Justina Santos as represented by
Santos, this Court should apply the general rule of pari delicto. charged. This account is contained in a notebook (Def. Exh. 6) the Philippine Banking Corporation; Wong Heng (as substituted
To the extent that our ruling in this case conflicts with that laid which shows a balance of P9,210.49 in favor of Wong. But it is by the defendant-appellant Lui She) is ordered to pay the
down in Rellosa v. Gaw Chee Hun 26 and subsequent similar claimed that the rental from both the Ongpin and Rizal Avenue Philippine Banking Corporation the sum of P56,564.35, with
cases, the latter must be considered as pro tanto qualified. properties was more than enough to pay for her monthly legal interest from the date of the filing of the amended
expenses and that, as a matter of fact, there should be a balance complaint; and the amounts consigned in court by Wong Heng
The claim for increased rentals and attorney's fees, made in in her favor. The lower court did not allow either party to shall be applied to the payment of rental from November 15,
behalf of Justina Santos, must be denied for lack of merit. recover against the other. Said the court: 1959 until the premises shall have been vacated by his heirs.
Costs against the defendant-appellant.

7
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon,
J.P., Zaldivar, Sanchez and Angeles, JJ., concur.

8
G.R. No. L-27952 February 15, 1982
TESTATE ESTATE OF JOSE EUGENIO RAMIREZ,
MARIA LUISA PALACIOS, Administratrix, petitioner-
appellee,
vs.
MARCELLE D. VDA. DE RAMIREZ, ET AL., oppositors,
JORGE and ROBERTO RAMIREZ, legatees, oppositors-
appellants.
The main issue in this appeal 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.
The task is not trouble-free because the widow Marcelle is a
French who lives in Paris, while the companion Wanda is an
Austrian who lives in Spain. Moreover, the testator provided for
substitutions.
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. In due time she
submitted an inventory of the estate as follows:
INVENTARIO
Una sexta parte (1/6) proindiviso de un te
rreno, con sus mejoras y edificaciones, situadoen
la Escolta, Manila.............................................................
P500,000.00
Una sexta parte (1/6) proindiviso de dos
parcelas de terreno situadas en Antipolo, Rizal...................
658.34
Cuatrocientos noventa y uno (491) acciones
de la 'Central Azucarera de la Carlota a P17.00
por
................................................................................8,347.00
Diez mil ochocientos seize (10,806) acciones
de la 'Central Luzon Milling Co.', disuelta y en
liquidacion a P0.15 por
..............................................1,620.90
Cuenta de Ahorros en el Philippine Trust
Co..............................................................................................
2,350.73
TOTAL.............................................................. P512,976.97
MENOS:
Deuda al Banco de las Islas Filipinas, garan-
tizada con prenda de las acciones de La Carlota ......... P
5,000,00
VALOR LIQUIDO........................................... P507,976.97
The testamentary dispositions are as follows:
A.En nuda propiedad, a D. Roberto y D. Jorge Ramirez,
ambas menores de edad, residentes en Manila, I.F., calle
'Alright, No. 1818, Malate, hijos de su sobrino D. Jose Ma.
Ramirez, con sustitucion vulgar a favor de sus respectivos
descendientes, y, en su defecto, con sustitucion vulgar reciprocal
entre ambos.
El precedente legado en nuda propiedad de la participacion
indivisa de la finca Santa Cruz Building, lo ordena el testador a
favor de los legatarios nombrados, en atencion a que dicha
propiedad fue creacion del querido padre del otorgante y por ser
aquellos continuadores del apellido Ramirez,
B.Y en usufructo a saber:
a. En cuanto a una tercera parte, a favor de la esposa del
testador, Da. Marcelle Ramirez, domiciliada en IE PECO, calle
del General Gallieni No. 33, Seine Francia, con sustitucion
9
accion vulgar u fideicomisaria a favor de Da. Wanda de Wrobleski, de
Palma de Mallorca, Son Rapina Avenida de los Reyes 13,
b.Y en cuanto a las dos terceras partes restantes, a favor de la
nombrada Da. Wanda de Nrobleski con sustitucion vulgar v
fideicomisaria a saber:
accion En cuanto a la mitad de dichas dos terceras partes, a favor de D.
Juan Pablo Jankowski, de Son Rapina Palma de Mallorca; y
encuanto a la mitad restante, a favor de su sobrino, D. Horace V.
Ramirez, San Luis Building, Florida St. Ermita, Manila, I.F.
A pesar de las sustituciones fideiconiisarias precedentemente
ordinadas, las usufiructuarias nombradas conjuntamente con los
nudo propietarios, podran en cualquier memento vender a
tercero los bienes objeto delegado, sin intervencion alguna de
los titulares fideicomisaarios.
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.
Jorge and Roberto opposed the project of partition on the
grounds: (a) that the provisions for vulgar substitution in favor
of Wanda de Wrobleski with respect to the widow's usufruct and
in favor of Juan Pablo Jankowski and Horacio V. Ramirez, with
respect to Wanda's usufruct are invalid because the first heirs
Marcelle and Wanda) survived the testator; (b) that the
provisions for fideicommissary substitutions are also invalid
because the first heirs are not related to the second heirs or
substitutes within the first degree, as provided in Article 863 of
the Civil Code; (c) that the grant of a usufruct over real property
in the Philippines in favor of Wanda Wrobleski, who is an alien,
violates Section 5, Article III of the Philippine Constitution; and
that (d) the proposed partition of the testator's interest in the
Santa Cruz (Escolta) Building between the widow Marcelle and
the appellants, violates the testator's express win to give this
property to them Nonetheless, the lower court approved the
project of partition in its order dated May 3, 1967. It is this order
which Jorge and Roberto have appealed to this Court.
1. The widow's legitime.
 substitution "provided such substitution does not go beyond one
The appellant's do not question the legality of giving Marcelle The fideicommissary substitution is described in the Civil Code degree from the heir originally instituted."
one-half of the estate in full ownership. They admit that the as follows:
testator's dispositions impaired his widow's legitime. Indeed, What is meant by "one degree" from the first heir is explained
under Art. 900 of the Civil Code "If the only survivor is the ART. 863. A fideicommissary substitution by virtue of which by Tolentino as follows:
widow or widower, she or he shall be entitled to one-half of the the fiduciary or first heir instituted is entrusted with the
hereditary estate." And since Marcelle alone survived the obligation to preserve and to transmit to a second heir the whole Scaevola Maura, and Traviesas construe "degree" as
deceased, she is entitled to one-half of his estate over which he or part of inheritance, shall be valid and shall take effect, designation, substitution, or transmission. The Supreme Court of
could impose no burden, encumbrance, condition or substitution provided such substitution does not go beyond one degree from Spain has decidedly adopted this construction. From this point
of any kind whatsoever. (Art. 904, par. 2, Civil Code.) the heir originally instituted, and provided further that the of view, there can be only one tranmission or substitution, and
fiduciary or first heir and the second heir are living at time of the the substitute need not be related to the first heir. Manresa,
It is the one-third usufruct over the free portion which the death of the testator. Morell and Sanchez Roman, however, construe the word
appellants question and justifiably so. It appears that the court a "degree" as generation, and the present Code has obviously
quo approved the usufruct in favor of Marcelle because the It will be noted that the testator provided for a vulgar followed this interpretation. by providing that the substitution
testament provides for a usufruct in her favor of one-third of the substitution in respect of the legacies of Roberto and Jorge shall not go beyond one degree "from the heir originally
estate. The court a quo erred for Marcelle who is entitled to one- Ramirez, the appellants, thus: con sustitucion vulgar a favor de instituted." The Code thus clearly indicates that the second heir
half of the estate "en pleno dominio" as her legitime and which sus respectivos descendientes, y, en su defecto, con substitution must be related to and be one generation from the first heir.
is more than what she is given under the will is not entitled to vulgar reciprocal entre ambos.
have any additional share in the estate. To give Marcelle more From this, it follows that the fideicommissary can only be either
than her legitime will run counter to the testator's intention for as The appellants do not question the legality of the substitution so a child or a parent of the first heir. These are the only relatives
stated above his dispositions even impaired her legitime and provided. The appellants question the sustitucion vulgar y who are one generation or degree from the fiduciary (Op. cit.,
tended to favor Wanda. fideicomisaria a favor de Da. Wanda de Wrobleski" in pp. 193-194.)
connection with the one-third usufruct over the estate given to
2. The substitutions. the widow Marcelle However, this question has become moot (b) There is no absolute duty imposed on Wanda to
because as We have ruled above, the widow is not entitled to transmit the usufruct to the substitutes as required by Arts. 865
It may be useful to recall that "Substitution is the appoint- any usufruct. and 867 of the Civil Code. In fact, the appellee admits "that the
judgment of another heir so that he may enter into the testator contradicts the establishment of a fideicommissary
inheritance in default of the heir originally instituted." (Art. 857, The appellants also question the sustitucion vulgar y substitution when he permits the properties subject of the
Civil Code. And that there are several kinds of substitutions, fideicomisaria in connection with Wanda's usufruct over two usufruct to be sold upon mutual agreement of the usufructuaries
namely: simple or common, brief or compendious, reciprocal, thirds of the estate in favor of Juan Pablo Jankowski and Horace and the naked owners." (Brief, p. 26.)
and fideicommissary (Art. 858, Civil Code.) According to v. Ramirez.
Tolentino, "Although the Code enumerates four classes, there 3. The usufruct of Wanda.
are really only two principal classes of substitutions: the simple They allege that the substitution in its vulgar aspect as void
and the fideicommissary. The others are merely variations of because Wanda survived the testator or stated differently The appellants claim that the usufruct over real properties of the
these two." (111 Civil Code, p. 185 [1973].) because she did not predecease the testator. But dying before the estate in favor of Wanda is void because it violates the
testator is not the only case for vulgar substitution for it also constitutional prohibition against the acquisition of lands by
The simple or vulgar is that provided in Art. 859 of the Civil includes refusal or incapacity to accept the inheritance as aliens.
Code which reads: provided in Art. 859 of the Civil Code, supra. Hence, the vulgar
substitution is valid. The 1935 Constitution which is controlling provides as follows:
ART. 859. The testator may designate one or more persons to
substitute the heir or heirs instituted in case such heir or heirs As regards the substitution in its fideicommissary aspect, the SEC. 5. Save in cases of hereditary succession, no private
should die before him, or should not wish, or should be appellants are correct in their claim that it is void for the agricultural land shall be transferred or assigned except to
incapacitated to accept the inheritance. following reasons: individuals, corporations, or associations qualified to acquire or
hold lands of the public domain in the Philippines. (Art. XIII.)
A simple substitution, without a statement of the cases to which (a) The substitutes (Juan Pablo Jankowski and Horace V.
it refers, shall comprise the three mentioned in the preceding Ramirez) are not related to Wanda, the heir originally instituted. The court a quo upheld the validity of the usufruct given to
paragraph, unless the testator has otherwise provided. Art. 863 of the Civil Code validates a fideicommissary Wanda on the ground that the Constitution covers not only

10
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.

IN VIEW OF THE FOREGOING, the estate of Jose Eugenio

Ramirez is hereby ordered distributed as follows:

One-half (1/2) thereof to his widow as her legitime;

One-half (1/2) thereof which is the free portion to Roberto and

Jorge Ramirez in naked ownership and the usufruct to Wanda de
Wrobleski with a simple substitution in favor of Juan Pablo
Jankowski and Horace V. Ramirez.

11
G.R. No. 130115. July 16, 2008.* In his answer, the respondent countered that on October 11, (Exh. D). This Deed of Sale, in effect, cancelled Tax Dec. No.
1958, Felix Ting Ho sold the commercial and residential 5982 and the same was registered in the name of the buyer
FELIX TING HO, JR., MERLA TING HO BRADEN, buildings to his sister-in-law, Victoria Cabasal, and the bakery Gregorio Fontela, as per Tax Dec. No. 7580 (Exh. D-2). In
JUANA TING HO & LYDIA TING HO BELENZO, to his brother-in-law, Gregorio Fontela.5 He alleged that he turn Victoria Cabasal and her husband Gregorio Fontela sold to
acquired said properties from the respective buyers on October Vicente Teng Gui on October 28, 1961 the buildings which were
petitioners, vs. VICENTE TENG GUI, respondent.
28, 1961 and has since then been in possession of subject bought by them from Felix Ting Ho and their tax declarations
properties in the concept of an owner; and that on January 24, for the building they bought (Exhs. C-2 and D-2) were
1978, Original Certificate of Title No. P-1064 covering the accordingly cancelled and the said buildings were registered in
This is a Petition for Review on Certiorari1 assailing the subject lot was issued to him pursuant to a miscellaneous sales the name of the defendant Vicente Teng Gui (Exhs. C-3 and
Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. patent granted to him on January 3, 1978.6 D-3). On October 25, 1966 the father of the parties Felix Ting
42993 which reversed and set aside the Decision of the Regional Ho executed an Affidavit of Transfer, Relinquishment and
Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case The undisputed facts as found by the trial court (RTC), and Renouncement of Rights and Interest including Improvements
No. 558-0-88. affirmed by the appellate court (CA), are as follows: on Land in favor of his eldest son the defendant Vicente Teng
Gui. On the basis of the said document the defendant who then
The instant case traces its origin to an action for partition filed [T]he plaintiffs and the defendant are all brothers and sisters,
chose Filipino citizenship filed a miscellaneous sales application
by petitioners Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana the defendant being the oldest. They are the only legitimate
with the Bureau of Lands. Miscellaneous Sales Patent No. 7457
Ting Ho and Lydia Ting Ho Belenzo against their brother, children of the deceased Spouses Felix Ting Ho and Leonila
of the land which was then identified to be Lot No. 418, Ts-308
respondent Vicente Teng Gui, before the RTC, Branch 74 of Cabasal. Felix Ting Ho died on June 26, 1970 while the wife
consisting of 774 square meters was issued to the applicant
Olongapo City. The controversy revolves around a parcel of Leonila Cabasal died on December 7, 1978. The defendant
Vicente Teng Gui and accordingly on the 24th of January, 1978
land, and the improvements established thereon, which, Vicente Teng Gui is the oldest among the children as he was
Original Certificate of Title No. P-1064 covering the lot in
according to petitioners, should form part of the estate of their born on April 5, 1943. The father of the plaintiffs and the
question was issued to the defendant Vicente Teng Gui.
deceased father, Felix Ting Ho, and should be partitioned defendant was a Chinese citizen although their mother was
Although the buildings and improvements on the land in
equally among each of the siblings. Filipino. That sometime in 1947, the father of the plaintiffs and
question were sold by Felix Ting Ho to Victoria Cabasal and
defendant, Felix Ting Ho, who was already then married to their
In their complaint before the RTC, petitioners alleged that their mother Leonila Cabasal, occupied a parcel of land identified to Gregorio Fontela in 1958 and who in turn sold the buildings to
father Felix Ting Ho died intestate on June 26, 1970, and left (sic) as Lot No. 18 Brill which was thereafter identified as Lot the defendant in 1961 the said Felix Ting Ho and his wife
upon his death an estate consisting of the following: remained in possession of the properties as Felix Ting Ho
No. 16 situated at Afable Street, East Bajac-Bajac, Olongapo
continued to manage the bakery while the wife Leonila Cabasal
City, by virtue of the permission granted him by the then U.S.
a) A commercial land consisting of 774 square meters, more or continued to manage the sari-sari store. During all the time that
Naval Reservation Office, Olongapo, Zambales. The couple
less, located at Nos. 16 and 18 Afable St., East Bajac-Bajac, the alleged buildings were sold to the spouses Victoria Cabasal
thereafter introduced improvements on the land. They built a
Olongapo City, covered by Original Certificate of Title No. P- and Gregorio Fontela in 1958 and the subsequent sale of the
house of strong material at 16 Afable Street which is a
1064 and Tax Declaration No. 002-2451; same to the defendant Vicente Teng Gui in October of 1961 the
commercial and residential house and another building of strong
plaintiffs and the defendant continued to live and were under the
b) A two-storey residential house on the aforesaid lot; material at 18 Afable Street which was a residential house and a
custody of their parents until their father Felix Ting Ho died in
bakery. The couple, as well as their children, lived and resided
1970 and their mother Leonila Cabasal died in 1978.7
c) A two-storey commercial building, the first floor rented to in the said properties until their death. The father, Felix Ting Ho
(Emphasis supplied)
different persons and the second floor, Bonanza Hotel, operated had managed the bakery while the mother managed the sari-sari
by the defendant also located on the above described lot; and store. Long before the death of Felix Ting Ho, who died on June In light of these factual findings, the RTC found that Felix Ting
26, 1970, he executed on October 11, 1958 a Deed of Absolute Ho, being a Chinese citizen and the father of the petitioners and
d) A sari-sari store (formerly a bakery) also located on the Sale of a house of strong material located at 16 Afable Street,
respondent, resorted to a series of simulated transactions in order
above described lot.3 Olongapo, Zambales, specifically described in Tax Dec. No. to preserve the right to the lot and the properties thereon in the
5432, in favor of Victoria Cabasal his sister-in-law (Exh. C). hands of the family. As stated by the trial court:
According to petitioners, the said lot and properties were titled
This Deed of Sale cancelled the Tax Dec. of Felix Ting Ho over
and tax declared under trust in the name of respondent Vicente
the said building (Exh. C-1) and the building was registered in After a serious consideration of the testimonies given by both
Teng Gui for the benefit of the deceased Felix Ting Ho who,
the name of the buyer Victoria Cabasal, as per Tax Dec. No. one of the plaintiffs and the defendant as well as the
being a Chinese citizen, was then disqualified to own public
7579 (Exh. C-2). On the same date, October 11, 1958 the said documentary exhibits presented in the case, the Court is inclined
lands in the Philippines; and that upon the death of Felix Ting
Felix Ting Ho also sold a building of strong material located at to believe that Felix Ting Ho, the father of the plaintiffs and the
Ho, the respondent took possession of the same for his own
18 Afable Street, described in Tax Dec. No. 5982, in favor of defendant, and the husband of Leonila Cabasal thought of
exclusive use and benefit to their exclusion and prejudice.4
Gregorio Fontela, of legal age, an American citizen, married preserving the properties in question by transferring the said
12
properties to his eldest son as he thought that he cannot acquire respondent the entire conjugal share of their deceased father in Regarding the properties erected over the said lot, the CA held
the properties as he was a Chinese citizen. To transfer the the lot and properties in question contrary to its own finding that that the finding that the sales of the two-storey commercial and
improvements on the land to his eldest son the defendant an implied trust existed between the parties. The respondent, on residential buildings and sari-sari store to Victoria Cabasal and
Vicente Teng Gui, he first executed simulated Deeds of Sales in the other hand, asserted that the RTC erred in not ruling that the Gregorio Fontela and subsequently to respondent were without
favor of the sister and brother-in-law of his wife in 1958 and lot and properties do not form part of the estate of Felix Ting Ho consideration and simulated is supported by evidence, which
after three (3) years it was made to appear that these vendees and are owned entirely by him. clearly establishes that these properties should form part of the
had sold the improvements to the defendant Vicente Teng Gui estate of the late spouses Felix Ting Ho and Leonila Cabasal.
who was then 18 years old. The Court finds that these On appeal, the CA reversed and set aside the decision of the
transaction (sic) were simulated and that no consideration was RTC. The appellate court held that the deceased Felix Ting Ho Thus, while the appellate court dismissed the complaint for
ever paid by the vendees. was never the owner and never claimed ownership of the subject partition with respect to the lot in question, it awarded the
lot since he is disqualified under Philippine laws from owning petitioners a four-fifths (4/5) share of the subject properties
With regards (sic) to the transfer and relinquishment of Felix public lands, and that respondent Vicente Teng Gui was the erected on the said lot. The dispositive portion of the CA ruling
Ting Hos right to the land in question in favor of the defendant, rightful owner over said lot by virtue of Miscellaneous Sales reads as follows:
the Court believes, that although from the face of the document Patent No. 7457 issued in his favor, viz.:
it is stated in absolute terms that without any consideration Felix WHEREFORE, premises considered, the decision appealed
Ting Ho was transferring and renouncing his right in favor of his The deceased Felix Ting Ho, plaintiffs and defendants late from is REVERSED and SET ASIDE and NEW JUDGMENT
son, the defendant Vicente Teng Gui, still the Court believes that father, was never the owner of the subject lot, now identified as rendered:
the transaction was one of implied trust executed by Felix Ting Lot No. 418, Ts-308 covered by OCT No. P-1064 (Exh. A;
Record, p. 104). As stated by Felix Ting Ho no less in the 1. DISMISSING plaintiff-appellants complaint with respect
Ho for the benefit of his family. . .8
to the subject parcel of land, identified as Lot No. 418, Ts-308,
Notwithstanding such findings, the RTC considered the Affidavit of Transfer, Relinquishment and Renouncement of covered by OCT No. P-1064, in the name of plaintiff-appellants
Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest etc. (Exh. B; Record, p. 107), executed on [should be defendant-appellant];
Rights and Interests over the land as a donation which was October 25, 1966 he, the late Felix Ting Ho, was merely a
possessor or occupant of the subject lot by virtue of a 2. DECLARING that the two-storey commercial building, the
accepted by the donee, the herein respondent. With respect to
permission granted . . . by the then U.S. Naval Reservation two-storey residential building and sari-sari store (formerly a
the properties in the lot, the trial court held that although the
Office, Olongapo, Zambales. The late Felix Ting Ho was never bakery), all erected on the subject lot No. 418, Ts-308, form part
sales were simulated, pursuant to Article 1471 of the New Civil
the owner and never claimed ownership of the land. (Emphasis of the estate of the deceased spouses Felix Ting Ho and Leonila
Code9 it can be assumed that the intention of Felix Ting Ho in
supplied) Cabasal, and that plaintiff-appellants are entitled to four-fifths
such transaction was to give and donate such properties to the
(4/5) thereof, the remaining one-fifth (1/5) being the share of the
respondent. As a result, it awarded the entire conjugal share of
The affidavit, Exhibit B, was subscribed and sworn to before a defendant-appellant;
Felix Ting Ho in the subject lot and properties to the respondent
Land Investigator of the Bureau of Lands and in the said
and divided only the conjugal share of his wife among the 3. DIRECTING the court a quo to partition the said two-storey
affidavit, the late Felix Ting Ho expressly acknowledged that
siblings. The dispositive portion of the RTC decision decreed: commercial building, two-storey residential building and sari-
because he is a Chinese citizen he is not qualified to purchase
sari store (formerly a bakery) in accordance with Rule 69 of the
WHEREFORE, judgment is hereby rendered in favor of the public lands under Philippine laws for which reason he thereby
Revised Rules of Court and pertinent provisions of the Civil
plaintiffs and against the defendant as the Court orders the transfers, relinquishes and renounces all his rights and interests
Code;
partition and the adjudication of the subject properties, Lot 418, in the subject land, including all the improvements thereon to his
Ts-308, specifically described in original Certificate of Title No. son, the defendant Vicente Teng Gui, who is of legal age, single, 4. Let the records of this case be remanded to the court of
P-1064 and the residential and commercial houses standing on Filipino citizen and qualified under the public land law to origin for further proceedings;
the lot specifically described in Tax Decs. Nos. 9179 and 9180 acquire lands.
in the name of Vicente Teng Gui in the following manner, to 5. Let a copy of this decision be furnished the Office of the
Defendant Vicente Teng Gui acquired the subject land by sales
wit: To the defendant Vicente Teng Gui is adjudicated an Solicitor General; and
patent or purchase from the government and not from his father,
undivided six-tenth (6/10) of the aforementioned properties and
the late Felix Ting Ho. It cannot be said that he acquired or 6. There is no pronouncement as to costs.
to each of the plaintiffs Felix Ting Ho, Jr., Merla Ting-Ho
bought the land in trust for his father because on December 5,
Braden, Juana Ting and Lydia Ting Ho-Belenzo each an SO ORDERED.12
1977 when the subject land was sold to him by the government
undivided one-tenth (1/10) of the properties. . .10
and on January 3, 1978 when Miscellaneous Sales Patent No.
Both petitioners and respondent filed their respective motions
From this decision, both parties interposed their respective 7457 was issued, the late Felix Ting Ho was already dead, for reconsideration from this ruling, which were summarily
appeals. The petitioners claimed that the RTC erred in awarding having died on June 6, 1970 (TSN, January 10, 1990, p. 4).11

13
denied by the CA in its Resolution13 dated August 5, 1997.
Hence, this petition.
According to the petitioners, the CA erred in declaring that Lot
No. 418, Ts-308 does not form part of the estate of the deceased
Felix Ting Ho and is owned alone by respondent. Respondent,
on the other hand, contends that he should be declared the sole
owner not only of Lot No. 418, Ts-308 but also of the properties
erected thereon and that the CA erred in not dismissing the
complaint for partition with respect to the said properties.
The primary issue for consideration is whether both Lot No.
418, Ts-308 and the properties erected thereon should be
included in the estate of the deceased Felix Ting Ho.
We affirm the CA ruling.
With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of
the 1935 Constitution states:
Section 1. All agricultural timber, and mineral lands of the
public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy and other natural
resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or
associations at least sixty per centum of the capital of which is
owned by such citizens, subject to any existing right, grant,
lease, or concession at the time of the inauguration of the
Government established under this Constitution . . . (Emphasis
supplied)
Our fundamental law cannot be any clearer. The right to acquire
lands of the public domain is reserved for Filipino citizens or
corporations at least sixty percent of the capital of which is
owned by Filipinos. Thus, in Krivenko v. Register of Deeds,14
the Court enunciated that:
. . . 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. We are satisfied, however, that
aliens 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 convey the land, and in all cases under this Decree registration
impossible to acquire.15 shall be made in the office of the Register of Deeds of the
province or city where the land lies. The fees for registration
In the present case, the father of petitioners and respondent was shall be paid by the grantee. After due registration and issuance
a Chinese citizen; therefore, he was disqualified from acquiring of the certificate of title, such land shall be deemed to be
and owning real property in the Philippines. In fact, he was only registered land to all intents and purposes under this Decree.16
occupying the subject lot by virtue of the permission granted (Emphasis supplied)
him by the then U.S. Naval Reservation Office of Olongapo,
Zambales. As correctly found by the CA, the deceased Felix Under the law, a certificate of title issued pursuant to any grant
Ting Ho was never the owner of the subject lot in light of the or patent involving public land is as conclusive and indefeasible
constitutional proscription and the respondent did not at any as any other certificate of title issued to private lands in the
instance act as the dummy of his father. ordinary or cadastral registration proceeding. The effect of the
registration of a patent and the issuance of a certificate of title to
On the other hand, the respondent became the owner of Lot No. the patentee is to vest in him an incontestable title to the land, in
418, Ts-308 when he was granted Miscellaneous Sales Patent the same manner as if ownership had been determined by final
No. 7457 on January 3, 1978, by the Secretary of Natural decree of the court, and the title so issued is absolutely
Resources By Authority of the President of the Philippines, conclusive and indisputable, and is not subject to collateral
and when Original Certificate of Title No. P-1064 was attack.17
correspondingly issued in his name. The grant of the
miscellaneous sales patent by the Secretary of Natural Nonetheless, petitioners invoke equity considerations and claim
Resources, and the corresponding issuance of the original that the ruling of the RTC that an implied trust was created
certificate of title in his name, show that the respondent between respondent and their father with respect to the subject
possesses all the qualifications and none of the disqualifications lot should be upheld.
to acquire alienable and disposable lands of the public domain.
These issuances bear the presumption of regularity in their This contention must fail because the prohibition against an
performance in the absence of evidence to the contrary. alien from owning lands of the public domain is absolute and
not even an implied trust can be permitted to arise on equity
Registration of grants and patents involving public lands is considerations.
governed by Section 122 of Act No. 496, which was
subsequently amended by Section 103 of Presidential Decree In the case of Muller v. Muller,18 wherein the respondent, a
German national, was seeking reimbursement of funds claimed
No. 1529, viz.:
by him to be given in trust to his petitioner wife, a Philippine
Sec. 103. Certificate of title pursuant to patents.Whenever citizen, for the purchase of a property in Antipolo, the Court, in
public land is by the Government alienated, granted or conveyed rejecting the claim, ruled that:
to any person, the same shall be brought forthwith under the
operation of this Decree. It shall be the duty of the official Respondent was aware of the constitutional prohibition and
issuing the instrument of alienation, grant, patent or conveyance expressly admitted his knowledge thereof to this Court. He
in behalf of the Government to cause such instrument to be filed declared that he had the Antipolo property titled in the name of
with the Register of Deeds of the province or city where the land the petitioner because of the said prohibition. His attempt at
lies, and to be there registered like other deeds and conveyance, subsequently asserting or claiming a right on the said property
whereupon a certificate of title shall be entered as in other cases cannot be sustained.
of registered land, and an owners duplicate issued to the
The Court of Appeals erred in holding that an implied trust was
grantee. The deeds, grant, patent or instrument of conveyance
created and resulted by operation of law in view of petitioners
from the Government to the grantee shall not take effect as a
marriage to respondent. Save for the exception provided in cases
conveyance or bind the land, but shall operate only as a contract
of hereditary succession, respondents disqualification from
between the Government and the grantee and as evidence of
owning lands in the Philippines is absolute. Not even an
authority to the Register of Deeds to make registration. It is the
ownership in trust is allowed. Besides, where the purchase is
act of registration that shall be the operative act to affect and
made in violation of an existing statute and in evasion of its
14
express provision, no trust can result in favor of the party who is
guilty of the fraud. To hold otherwise would allow
circumvention of the constitutional prohibition.
Invoking the principle that a court is not only a court of law but
also a court of equity, is likewise misplaced. It has been held
that equity as a rule will follow the law and will not permit that
to be done indirectly which, because of public policy, cannot be
done directly . . .19
Court holds that the two-storey residential house, two-storey
residential building and sari-sari store form part of the estate of
the late spouses Felix Ting Ho and Leonila Cabasal, entitling the
petitioners to a four-fifths (4/5) share thereof.
IN VIEW WHEREOF, the petition is DENIED. The assailed
Decision dated December 27, 1996 of the Court of Appeals in
CA-G.R. CV No. 42993 is hereby AFFIRMED.

Coming now to the issue of ownership of the properties erected

on the subject lot, the Court agrees with the finding of the trial
court, as affirmed by the appellate court, that the series of
transactions resorted to by the deceased were simulated in order
to preserve the properties in the hands of the family. The records
show that during all the time that the properties were allegedly
sold to the spouses Victoria Cabasal and Gregorio Fontela in
1958 and the subsequent sale of the same to respondent in 1961,
the petitioners and respondent, along with their parents,
remained in possession and continued to live in said properties.

However, the trial court concluded that:

In fairness to the defendant, although the Deeds of Sale

executed by Felix Ting Ho regarding the improvements in favor
of Victoria Cabasal and Gregorio Fontela and the subsequent
transfer of the same by Gregorio Fontela and Victoria Cabasal to
the defendant are all simulated, yet, pursuant to Article 1471 of
the New Civil Code it can be assumed that the intention of Felix
Ting Ho in such transaction was to give and donate the
improvements to his eldest son the defendant Vicente Teng Gui .
. .20

Its finding was based on Article 1471 of the Civil Code, which
provides that:

Art. 1471. If the price is simulated, the sale is void, but the
act may be shown to have been in reality a donation, or some
other act or contract.21

The Court holds that the reliance of the trial court on the
provisions of Article 1471 of the Civil Code to conclude that the
simulated sales were a valid donation to the respondent is
misplaced because its finding was based on a mere assumption
when the law requires positive proof.

The respondent was unable to show, and the records are bereft
of any evidence, that the simulated sales of the properties were
intended by the deceased to be a donation to him. Thus, the

15

G.R. No. 124293. January 31, 2005.*
J.G. SUMMIT HOLDINGS, INC., petitioner, vs. COURT
OF APPEALS; COMMITTEE ON PRIVATIZATION, its
Chairman and Members; ASSET PRIVATIZATION
TRUST; and PHILYARDS HOLDINGS, INC., respondents.
I. Facts
The undisputed facts of the case, as set forth in our Resolution
of September 24, 2003, are as follows:
On January 27, 1997, the National Investment and Development
Corporation (NIDC), a government corporation, entered into a
Joint Venture Agreement (JVA) with Kawasaki Heavy
Industries, Ltd. of Kobe, Japan (KAWASAKI) for the
construction, operation and management of the Subic National
Shipyard, Inc. (SNS) which subsequently became the Philippine
Shipyard and Engineering Corporation (PHILSECO). Under the
JVA, the NIDC and KAWASAKI will contribute P330 million
for the capitalization of PHILSECO in the proportion of 60%-
40% respectively. One of its salient features is the grant to the
parties of the right of first refusal should either of them decide to
sell, assign or transfer its interest in the joint venture, viz.:
1.4 Neither party shall sell, transfer or assign all or any part of
its interest in SNS [PHILSECO] to any third party without
giving the other under the same terms the right of first refusal.
This provision shall not apply if the transferee is a corporation
owned or controlled by the GOVERNMENT or by a
KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and
interest in PHILSECO to the Philippine National Bank (PNB).
Such interests were subsequently transferred to the National
Government pursuant to Administrative Order No. 14. On
December 8, 1986, President Corazon C. Aquino issued
Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to
take title to, and possession of, conserve, manage and dispose of
non-performing assets of the National Government. Thereafter,
on February 27, 1987, a trust agreement was entered into
between the National Government and the APT wherein the
latter was named the trustee of the National Governments share
in PHILSECO. In 1989, as a result of a quasireorganization of
PHILSECO to settle its huge obligations to PNB, the National
Governments shareholdings in PHILSECO increased to 97.41% Inc., that the highest bid is acceptable to the National
thereby reducing KAWASAKIs shareholdings to 2.59%. Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty
In the interest of the national economy and the government, the (30) calendar days from the date of receipt of such advice from
COP and the APT deemed it best to sell the National APT within which to exercise their Option to Top the Highest
Governments share in PHILSECO to private entities. After a Bid by offering a bid equivalent to the highest bid plus five
series of negotiations between the APT and KAWASAKI, they (5%) percent thereof.
agreed that the latters right of first refusal under the JVA be
exchanged for the right to top by five percent (5%) the highest 6.1 Should Kawasaki Heavy Industries, Inc. and/or
bid for the said shares. They further agreed that KAWASAKI [PHILYARDS] Holdings, Inc. exercise their Option to Top the
would be entitled to name a company in which it was a Highest Bid, they shall so notify the APT about such exercise
stockholder, which could exercise the right to top. On of their option and deposit with APT the amount equivalent to
September 7, 1990, KAWASAKI informed APT that Philyards ten percent (10%) of the highest bid plus five percent (5%)
Holdings, Inc. (PHI)1 would exercise its right to top. thereof within the thirty (30)-day period mentioned in paragraph
6.0 above. APT will then serve notice upon Kawasaki Heavy
At the pre-bidding conference held on September 18, 1993, Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring
interested bidders were given copies of the JVA between NIDC them as the preferred bidder and they shall have a period of
and KAWASAKI, and of the Asset Specific Bidding Rules ninety (90) days from the receipt of the APTs notice within
(ASBR) drafted for the National Governments 87.6% equity which to pay the balance of their bid price.
share in PHILSECO. The provisions of the ASBR were
explained to the interested bidders who were notified that the 6.2 Should Kawasaki Heavy Industries, Inc. and/or
bidding would be held on December 2, 1993. A portion of the [PHILYARDS] Holdings, Inc. fail to exercise their Option to
ASBR reads: Top the Highest Bid within the thirty (30)-day period, APT will
declare the highest bidder as the winning bidder.
1.0 The subject of this Asset Privatization Trust (APT) sale
through public bidding is the National Governments equity in 12.0 The bidder shall be solely responsible for examining with
PHILSECO consisting of 896,869,942 shares of stock appropriate care these rules, the official bid forms, including any
(representing 87.67% of PHILSECOs outstanding capital addenda or amendments thereto issued during the bidding
stock), which will be sold as a whole block in accordance with period. The bidder shall likewise be responsible for informing
the rules herein enumerated. itself with respect to any and all conditions concerning the
PHILSECO Shares which may, in any manner, affect the
2.0 The highest bid, as well as the buyer, shall be subject to the bidders proposal. Failure on the part of the bidder to so examine
final approval of both the APT Board of Trustees and the and inform itself shall be its sole risk and no relief for error or
Committee on Privatization (COP). omission will be given by APT or COP. . . .
2.1 APT reserves the right in its sole discretion, to reject any or At the public bidding on the said date, petitioner J.G. Summit
all bids. Holdings, Inc.2 submitted a bid of Two Billion and Thirty
Million Pesos (P2,030,000,000.00) with an acknowledgment of
3.0 This public bidding shall be on an Indicative Price Bidding
KAWASAKI/[PHILYARDS] right to top, viz.:
basis. The Indicative price set for the National Governments
87.67% equity in PHILSECO is PESOS: ONE BILLION 4. I/We understand that the Committee on Privatization (COP)
THREE HUNDRED MILLION (P1,300,000,000.00). has up to thirty (30) days to act on APTs recommendation
based on the result of this bidding. Should the COP approve the
6.0 The highest qualified bid will be submitted to the APT
highest bid, APT shall advise Kawasaki Heavy Industries, Inc.
Board of Trustees at its regular meeting following the bidding,
and/or its nominee, [PHILYARDS] Holdings, Inc. that the
for the purpose of determining whether or not it should be
highest bid is acceptable to the National Government. Kawasaki
endorsed by the APT Board of Trustees to the COP, and the
Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc.
latter approves the same. The APT shall advise Kawasaki Heavy
shall then have a period of thirty (30) calendar days from the
Industries, Inc. and/or its nominee, [PHILYARDS] Holdings,
date of receipt of such advice from APT within which to
16
exercise their Option to Top the Highest Bid by offering a bid On November 20, 2000, this Court rendered x x x [a] Decision KAWASAKI can exercise its right of first refusal only up to
equivalent to the highest bid plus five (5%) percent thereof. ruling among others that the Court of Appeals erred when it 40% of the total capitalization of PHILSECO; and (3) Whether
dismissed the petition on the sole ground of the impropriety of the right to top granted to KAWASAKI violates the principles of
As petitioner was declared the highest bidder, the COP approved the special civil action of mandamus because the petition was competitive bidding.3 (citations omitted)
the sale on December 3, 1993 subject to the right of Kawasaki also one of certiorari. It further ruled that a shipyard like
Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top PHILSECO is a public utility whose capitalization must be sixty In a Resolution dated September 24, 2003, this Court ruled in
JGSMIs bid by 5% as specified in the bidding rules. percent (60%) Filipino-owned. Consequently, the right to top favor of the respondents. On the first issue, we held that
granted to KAWASAKI under the Asset Specific Bidding Rules Philippine Shipyard and Engineering Corporation (PHIL-SECO)
On December 29, 1993, petitioner informed APT that it was is not a public utility, as by nature, a shipyard is not a public
(ASBR) drafted for the sale of the 87.67% equity of the National
protesting the offer of PHI to top its bid on the grounds that: (a) utility4 and that no law declares a shipyard to be a public
Government in PHILSECO is illegalnot only because it
the KAWASAKI/PHI consortium composed of KAWASAKI, utility.5 On the second issue, we found nothing in the 1977 Joint
violates the rules on competitive biddingbut more so, because
[PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Venture Agreement (JVA) which prevents Kawasaki Heavy
it allows foreign corporations to own more than 40% equity in
Life violated the ASBR because the last four (4) companies Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring
the shipyard. It also held that although the petitioner had the
were the losing bidders thereby circumventing the law and more than 40% of PHILSECOs total capitalization.6 On the
opportunity to examine the ASBR before it participated in the
prejudicing the weak winning bidder; (b) only KAWASAKI final issue, we held that the right to top granted to KAWASAKI
bidding, it cannot be estopped from questioning the
could exercise the right to top; (c) giving the same option to top in exchange for its right of first refusal did not violate the
unconstitutional, illegal and inequitable provisions thereof.
to PHI constituted unwarranted benefit to a third party; (d) no principles of competitive bidding.7
Thus, this Court voided the transfer of the national governments
right of first refusal can be exercised in a public bidding or
87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and
auction sale; and (e) the JG Summit consortium was not On October 20, 2003, the petitioner filed a Motion for
upheld the right of JG Summit, as the highest bidder, to take title
estopped from questioning the proceedings. Reconsideration8 and a Motion to Elevate This Case to the
to the said shares, viz.:
Court En Banc.9 Public respondents Committee on Privatization
On February 2, 1994, petitioner was notified that PHI had fully (COP) and Asset Privatization Trust (APT), and private
WHEREFORE, the instant petition for review on certiorari is
paid the balance of the purchase price of the subject bidding. On respondent Philyards Holdings, Inc. (PHILYARDS) filed their
GRANTED. The assailed Decision and Resolution of the Court
February 7, 1994, the APT notified petitioner that PHI had Comments on J.G. Summit Holdings, Inc.s (JG Summits)
of Appeals are REVERSED and SET ASIDE. Petitioner is
exercised its option to top the highest bid and that the COP had Motion for Reconsideration and Motion to Elevate This Case to
ordered to pay to APT its bid price of Two Billion Thirty
approved the same on January 6, 1994. On February 24, 1994, the Court En Banc on January 29, 2004 and February 3, 2004,
Million Pesos (P2,030,000,000.00), less its bid deposit plus
the APT and PHI executed a Stock Purchase Agreement. respectively.
interests upon the finality of this Decision. In turn, APT is
Consequently, petitioner filed with this Court a Petition for
ordered
Mandamus under G.R. No. 114057. On May 11, 1994, said II. Issues
petition was referred to the Court of Appeals. On July 18, 1995, to:
the Court of Appeals denied the same for lack of merit. It ruled Based on the foregoing, the relevant issues to resolve to end this
that the petition for mandamus was not the proper remedy to (a) accept the said amount of P2,030,000,000.00 less bid deposit litigation are the following:
question the constitutionality or legality of the right of first and interests from petitioner;
1. Whether there are sufficient bases to elevate the case at bar to
refusal and the right to top that was exercised by
the Court en banc.
KAWASAKI/PHI, and that the matter must be brought by the (b) execute a Stock Purchase Agreement with petitioner;
proper party in the proper forum at the proper time and threshed 2. Whether the motion for reconsideration raises any new matter
(c) cause the issuance in favor of petitioner of the certificates of
out in a full blown trial. The Court of Appeals further ruled that or cogent reason to warrant a reconsideration of this Courts
stocks representing 87.6% of PHILSECOs total capitalization;
the right of first refusal and the right to top are prima facie legal Resolution of September 24, 2003.
and that the petitioner, by participating in the public bidding, (d) return to private respondent PHGI the amount of Two Billion
with full knowledge of the right to top granted to One Hundred Thirty-One Million Five Hundred Thousand Pesos Motion to Elevate this Case to the
KAWASAKI/[PHILYARDS] is . . . estopped from questioning (P2,131,500,000.00); and
Court En Banc
the validity of the award given to [PHILYARDS] after the latter
exercised the right to top and had paid in full the purchase price (e) cause the cancellation of the stock certificates issued to PHI. The petitioner prays for the elevation of the case to the Court en
of the subject shares, pursuant to the ASBR. Petitioner filed a banc on the following grounds:
SO ORDERED.
Motion for Reconsideration of said Decision which was denied
on March 15, 1996. Petitioner thus filed a Petition for Certiorari In separate Motions for Reconsideration, respondents 1. The main issue of the propriety of the bidding process
with this Court alleging grave abuse of discretion on the part of submit[ted] three basic issues for x x x resolution: (1) Whether involved in the present case has been confused with the policy
the appellate court. PHILSECO is a public utility; (2) Whether under the 1977 JVA,
17
issue of the supposed fate of the shipping industry which has
never been an issue that is determinative of this case.10
2. The present case may be considered under the Supreme Court
Resolution dated February 23, 1984 which included among en
banc cases those involving a novel question of law and those
where a doctrine or principle laid down by the Court en banc or
in division may be modified or reversed.11
3. There was clear executive interference in the judicial
functions of the Court when the Honorable Jose Isidro Camacho,
Secretary of Finance, forwarded to Chief Justice Davide, a
memorandum dated November 5, 2001, attaching a copy of the
Foreign Chambers Report dated October 17, 2001, which matter
was placed in the agenda of the Court and noted by it in a formal
resolution dated November 28, 2001.12
Opposing J.G. Summits motion to elevate the case en banc,
PHILYARDS points out the petitioners inconsistency in
previously opposing PHILYARDS Motion to Refer the Case to
the Court En Banc. PHILYARDS contends that J.G. Summit
should now be estopped from asking that the case be referred to
the Court en banc. PHILYARDS further contends that the
Supreme Court en banc is not an appellate court to which
decisions or resolutions of its divisions may be appealed citing
Supreme Court Circular No. 2-89 dated February 7, 1989.13
PHILYARDS also alleges that there is no novel question of law
involved in the present case as the assailed Resolution was based
on well-settled jurisprudence. Likewise, PHILYARDS stresses
that the Resolution was merely an outcome of the motions for
reconsideration filed by it and the COP and APT and is
consistent with the inherent power of courts to amend and
control its process and orders so as to make them conformable to
law and justice. (Rule 135, sec. 5)14 Private respondent
belittles the petitioners allegations regarding the change in
ponente and the alleged executive interference as shown by
former Secretary of Finance Jose Isidro Camachos
memorandum dated November 5, 2001 arguing that these do not
justify a referral of the present case to the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En that in an invitation to bid, there is a condition imposed upon
Banc should be granted, J.G. Summit further argued that: its the bidders to the effect that the bidding shall be subject to the
Opposition to the Office of the Solicitor Generals Motion to right of the government to reject any and all bids subject to its
Refer is different from its own Motion to Elevate; different discretion. In the case at bar, the government has made its
grounds are invoked by the two motions; there was unwarranted choice and unless an unfairness or injustice is shown, the losing
executive interference; and the change in ponente is merely bidders have no cause to complain nor right to dispute that
noted in asserting that this case should be decided by the Court choice. This is a well-settled doctrine in this jurisdiction and
en banc.15
We find no merit in petitioners contention that the propriety of
the bidding process involved in the present case has been
confused with the policy issue of the fate of the shipping
industry which, petitioner maintains, has never been an issue
that is determinative of this case. The Courts Resolution of
September 24, 2003 reveals a clear and definitive ruling on the
propriety of the bidding process. In discussing whether the right
to top granted to KAWASAKI in exchange for its right of first
refusal violates the principles of competitive bidding, we made
an exhaustive discourse on the rules and principles of public
bidding and whether they were complied with in the case at
bar.16 This Court categorically ruled on the petitioners
argument that PHILSECO, as a shipyard, is a public utility
which should maintain a 60%-40% Filipino-foreign equity ratio,
as it was a pivotal issue. In doing so, we recognized the impact
of our ruling on the shipbuilding industry which was beyond
avoidance.17
We reject petitioners argument that the present case may be
considered under the Supreme Court Resolution dated February
23, 1984 which included among en banc cases those involving a
novel question of law and those where a doctrine or principle
laid down by the court en banc or in division may be modified
or reversed. The case was resolved based on basic principles of
the right of first refusal in commercial law and estoppel in civil
law. Contractual obligations arising from rights of first refusal
are not new in this jurisdiction and have been recognized in
numerous cases.18 Estoppel is too known a civil law concept to
require an elongated discussion. Fundamental principles on
public bidding were likewise used to resolve the issues raised by
the petitioner. To be sure, petitioner leans on the right to top in a
public bidding in arguing that the case at bar involves a novel
issue. We are not swayed. The right to top was merely a
condition or a reservation made in the bidding rules which was
fully disclosed to all bidding parties. In Bureau Veritas,
represented by Theodor H. Hunermann v. Office of the
President, et al.,19 we dealt with this conditionality, viz.:
x x x It must be stressed, as held in the case of A.C. Esguerra &
Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245),
elsewhere.
18
The discretion to accept or reject a bid and award contracts is
vested in the Government agencies entrusted with that function.
The discretion given to the authorities on this matter is of such
wide latitude that the Courts will not interfere therewith, unless
it is apparent that it is used as a shield to a fraudulent award
(Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The exercise
of this discretion is a policy decision that necessitates prior
inquiry, investigation, comparison, evaluation, and deliberation.
This task can best be discharged by the Government agencies
concerned, not by the Courts. The role of the Courts is to
ascertain whether a branch or instrumentality of the Government
has transgressed its constitutional boundaries. But the Courts
will not interfere with executive or legislative discretion
exercised within those boundaries. Otherwise, it strays into the
realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that
the Courts will set aside the award of a contract made by a
government entity. Grave abuse of discretion implies a
capricious, arbitrary and whimsical exercise of power (Filinvest
Credit Corp. v. Intermediate Appellate Court, No. 65935, 30
September 1988, 166 SCRA 155). The abuse of discretion must
be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform a duty enjoined by law, as
to act at all in contemplation of law, where the power is
exercised in an arbitrary and despotic manner by reason of
passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et
al[.], L-40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of
discretion on the part of public respondents when they awarded
the CISS contract to Respondent SGS. In the Invitation to
Prequalify and Bid (Annex C, supra), the CISS Committee
made an express reservation of the right of the Government to
reject any or all bids or any part thereof or waive any defects
contained thereon and accept an offer most advantageous to the
Government. It is a well-settled rule that where such
reservation is made in an Invitation to Bid, the highest or lowest
bidder, as the case may be, is not entitled to an award as a matter
of right (C & C Commercial Corp. v. Menor, L-28360, 27
January 1983, 120 SCRA 112). Even the lowest Bid or any Bid
may be rejected or, in the exercise of sound discretion, the
award may be made to another than the lowest bidder (A.C.
Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur., 788).
(emphases supplied)
Like the condition in the Bureau Veritas case, the right to top
was a condition imposed by the government in the bidding rules
which was made known to all parties. It was a condition On the other hand, private respondent PHILYARDS asserts that submitted itself to the terms of the ASBR which included the
imposed on all bidders equally, based on the APTs exercise of J.G. Summit has not been able to show compelling reasons to provision on the right to top.
its discretion in deciding on how best to privatize the warrant a reconsideration of the Decision of the Court.25
governments shares in PHILSECO. It was not a whimsical or PHILYARDS denies that the Decision is based mainly on policy 4. The right to top was exercised by PHILYARDS as the
arbitrary condition plucked from the ether and inserted in the considerations and points out that it is premised on principles nominee of KAWASAKI and the fact that PHILYARDS formed
bidding rules but a condition which the APT approved as the governing obligations and contracts and corporate law such as a consortium to raise the required amount to exercise the right to
best way the government could comply with its contractual the rule requiring respect for contractual stipulations, upholding top the highest bid by 5% does not violate the JVA or the
obligations to KAWASAKI under the JVA and its mandate of rights of first refusal, and recognizing the assignable nature of ASBR.
getting the most advantageous deal for the government. The contracts rights.26 Also, the ruling that shipyards are not public
5. The 60%-40% Filipino-foreign constitutional requirement for
right to top had its history in the mutual right of first refusal in utilities relies on established case law and fundamental rules of
the acquisition of lands does not apply to PHILSECO because as
the JVA and was reached by agreement of the government and statutory construction. PHILYARDS stresses that
admitted by petitioner itself, PHILSECO no longer owns real
KAWASAKI. KAWASAKIs right of first refusal or even the right to top is
property.
not limited to the 40% equity of the latter.27 On the landholding
Further, there is no executive interference in the functions of issue raised by J.G. Summit, PHILYARDS emphasizes that this 6. Petitioners motion to elevate the case to the Court en banc is
this Court by the mere filing of a memorandum by Secretary of is a non-issue and even involves a question of fact. Even baseless and would only delay the termination of this case.33
Finance Jose Isidro Camacho. The memorandum was merely assuming that this Court can take cognizance of such question of
noted to acknowledge its filing. It had no further legal fact even without the benefit of a trial, PHILYARDS opines that In a Consolidated Comment dated March 8, 2004, J.G. Summit
significance. Notably too, the assailed Resolution dated landholding by PHILSECO at the time of the bidding is countered the arguments of the public and private respondents in
September 24, 2003 was decided unanimously by the Special irrelevant because what is essential is that ultimately a qualified this wise:
First Division in favor of the respondents. entity would eventually hold PHILSECOs real estate
1. The award by the APT of 87.67% shares of PHILSECO to
properties.28 Further, given the assignable nature of the right of
Again, we emphasize that a decision or resolution of a Division PHILYARDS with losing bidders through the exercise of a right
first refusal, any applicable nationality restrictions, including
is that of the Supreme Court20 and the Court en banc is not an to top, which is contrary to law and the constitution is null and
landholding limitations, would not affect the right of first refusal
appellate court to which decisions or resolutions of a Division void for being violative of substantive due process and the abuse
itself, but only the manner of its exercise.29 Also, PHILYARDS
may be appealed.21 of right provision in the Civil Code.
argues that if this Court takes cognizance of J.G. Summits
For all the foregoing reasons, we find no basis to elevate this allegations of fact regarding PHILSECOs landholding, it must a. The bidders[] right to top was actually exercised by losing
case to the Court en banc. also recognize PHILYARDS assertions that PHILSECOs bidders.
landholdings were sold to another corporation.30 As regards the
Motion for Reconsideration right of first refusal, private respondent explains that b. The right to top or the right of first refusal cannot co-exist
KAWASAKIs reduced shareholdings (from 40% to 2.59%) did with a genuine competitive bidding.
not translate to a deprivation or loss of its contractually granted
right of first refusal.31 Also, the bidding was valid because c. The benefits derived from the right to top were unwarranted.
Three principal arguments were raised in the petitioners Motion
for Reconsideration. First, that a fair resolution of the case PHILYARDS exercised the right to top and it was of no moment
2. The landholding issue has been a legitimate issue since the
should be based on contract law, not on policy considerations; that losing bidders later joined PHILYARDS in raising the
start of this case but is shamelessly ignored by the respondents.
the contracts do not authorize the right to top to be derived from purchase price.32
the right of first refusal.22 Second, that neither the right of first a. The landholding issue is not a non-issue.
In cadence with the private respondent PHILYARDS, public
refusal nor the right to top can be legally exercised by the
respondents COP and APT contend: b. The landholding issue does not pose questions of fact.
consortium which is not the proper party granted such right
under either the JVA or the Asset Specific 1. The conversion of the right of first refusal into a right to top c. That PHILSECO owned land at the time that the right of first
by 5% does not violate any provision in the JVA between NIDC refusal was agreed upon and at the time of the bidding are most
Bidding Rules (ASBR).23 Third, that the maintenance of the
and KAWASAKI. relevant.
60%-40% relationship between the National Investment and
Development Corporation (NIDC) and KAWASAKI arises from 2. PHILSECO is not a public utility and therefore not governed d. Whether a shipyard is a public utility is not the core issue in
contract and from the Constitution because PHILSECO is a by the constitutional restriction on foreign ownership. this case.
landholding corporation and need not be a public utility to be
bound by the 60%-40% constitutional limitation.24 3. The petitioner is legally estopped from assailing the validity 3. Fraud and bad faith attend the alleged conversion of an in-
of the proceedings of the public bidding as it voluntarily existent right of first refusal to the right to top.

19
a. The history behind the birth of the right to top shows fraud Further, we see no inherent illegality on PHILYARDS act in We uphold the validity of the mutual rights of first refusal under
and bad faith. seeking funding from parties who were losing bidders. This is a the JVA between KAWASAKI and NIDC. First of all, the right
purely commercial decision over which the State should not of first refusal is a property right of PHILSECO shareholders,
b. The right of first refusal was, indeed, effectively useless. interfere absent any legal infirmity. It is emphasized that the KAWASAKI and NIDC, under the terms of their JVA. This
case at bar involves the disposition of shares in a corporation right allows them to purchase the shares of their co-shareholder
4. Petitioner is not legally estopped to challenge the right to top
which the government sought to privatize. As such, the persons before they are offered to a third party. The agreement of co-
in this case.
with whom PHILYARDS desired to enter into business with in shareholders to mutually grant this right to each other, by itself,
a. Estoppel is unavailing as it would stamp validity to an act that order to raise funds to purchase the shares are basically its does not constitute a violation of the provisions of the
is prohibited by law or against public policy. business. This is in contrast to a case involving a contract for the Constitution limiting land ownership to Filipinos and Filipino
operation of or construction of a government infrastructure corporations. As PHILYARDS correctly puts it, if PHILSECO
b. Deception was patent; the right to top was an attractive where the identity of the buyer/bidder or financier constitutes an still owns land, the right of first refusal can be validly assigned
nuisance. important consideration. In such cases, the government would to a qualified Filipino entity in order to maintain the 60%-40%
have to take utmost precaution to protect public interest by ratio. This transfer, by itself, does not amount to a violation of
c. The 10% bid deposit was placed in escrow.
ensuring that the parties with which it is contracting have the the Anti-Dummy Laws, absent proof of any fraudulent intent.
J.G. Summits insistence that the right to top cannot be sourced ability to satisfactorily construct or operate the infrastructure. The transfer could be made either to a nominee or such other
from the right of first refusal is not new and we have already party which the holder of the right of first refusal feels it can
On the landholding issue, J.G. Summit submits that since comfortably do business with. Alternatively, PHILSECO may
ruled on the issue in our Resolution of September 24, 2003. We
PHILSECO is a landholding company, KAWASAKI could divest of its landholdings, in which case KAWASAKI, in
upheld the mutual right of first refusal in the JVA.34 We also
exercise its right of first refusal only up to 40% of the shares of exercising its right of first refusal, can exceed 40% of
ruled that nothing in the JVA prevents KAWASAKI from
PHILSECO due to the constitutional prohibition on land-holding PHILSECOs equity. In fact, it can even be said that if the
acquiring more than 40% of PHILSECOs total capitalization.35
by corporations with more than 40% foreign-owned equity. It foreign shareholdings of a landholding corporation exceeds
Likewise, nothing in the JVA or ASBR bars the conversion of
further argues that since KAWASAKI already held at least 40% 40%, it is not the foreign stockholders ownership of the shares
the right of first refusal to the right to top. In sum, nothing new
equity in PHILSECO, the right of first refusal was inutile and as which is adversely affected but the capacity of the corporation to
and of significance in the petitioners pleading warrants a
such, could not subsequently be converted into the right to own landthat is, the corporation becomes disqualified to own
reconsideration of our ruling.
top.37 Petitioner also asserts that, at present, PHILSECO land. This finds support under the basic corporate law principle
Likewise, we already disposed of the argument that neither the continues to violate the constitutional provision on landholdings that the corporation and its stockholders are separate juridical
right of first refusal nor the right to top can legally be exercised as its shares are more than 40% foreign-owned.38 PHILYARDS entities. In this vein, the right of first refusal over shares pertains
by the consortium which is not the proper party granted such admits that it may have previously held land but had already to the shareholders whereas the capacity to own land pertains to
right under either the JVA or the ASBR. Thus, we held: divested such landholdings.39 It contends, however, that even if the corporation. Hence, the fact that PHILSECO owns land
PHILSECO owned land, this would not affect the right of first cannot deprive stockholders of their right of first refusal. No law
The fact that the losing bidder, Keppel Consortium (composed refusal but only the exercise thereof. If the land is retained, the disqualifies a person from purchasing shares in a landholding
of Keppel, SM Group, Insular Life Assurance, Mitsui and right of first refusal, being a property right, could be assigned to corporation even if the latter will exceed the allowed foreign
ICTSI), has joined PHILYARDS in the latters effort to raise a qualified party. In the alternative, the land could be divested equity, what the law disqualifies is the corporation from owning
P2.131 billion necessary in exercising the right to top is not before the exercise of the right of first refusal. In the case at bar, land. This is the clear import of the following provisions in the
contrary to law, public policy or public morals. There is nothing respondents assert that since the right of first refusal was validly Constitution:
in the ASBR that bars the losing bidders from joining either the converted into a right to top, which was exercised not by
winning bidder (should the right to top is not exercised) or KAWASAKI, but by PHILYARDS which is a Filipino Section 2. All lands of the public domain, waters, minerals, coal,
KAWASAKI/PHI (should it exercise its right to top as it did), to corporation (i.e., 60% of its shares are owned by Filipinos), then petroleum, and other mineral oils, all forces of potential energy,
raise the purchase price. The petitioner did not allege, nor was it there is no violation of the Constitution.40 At first, it would fisheries, forests or timber, wildlife, flora and fauna, and other
shown by competent evidence, that the participation of the seem that questions of fact beyond cognizance by this Court natural resources are owned by the State. With the exception of
losing bidders in the public bidding was done with fraudulent were involved in the issue. However, the records show that agricultural lands, all other natural resources shall not be
intent. Absent any proof of fraud, the formation by PHILYARDS admits it had owned land up until the time of the alienated. The exploration, development, and utilization of
[PHILYARDS] of a consortium is legitimate in a free enterprise bidding.41 Hence, the only issue is whether KAWASAKI had a natural resources shall be under the full control and supervision
system. The appellate court is thus correct in holding the valid right of first refusal over PHILSECO shares under the JVA of the State. The State may directly undertake such activities, or
petitioner estopped from questioning the validity of the transfer considering that PHILSECO owned land until the time of the it may enter into co-production, joint venture, or production-
of the National Governments shares in PHILSECO to bidding and KAWASAKI already held 40% of PHILSECOs sharing agreements with Filipino citizens, or corporations or
respondent.36 equity. associations at least sixty per centum of whose capital is owned

20
by such citizens. Such agreements may be for a period not reduced to a hollow concept. If this can be done, then the or associations qualified to acquire or hold lands of the public
exceeding twenty-five years, renewable for not more than Constitutional ban against alien landholding in the Philippines, domain.
twenty-five years, and under such terms and conditions as may as announced in Krivenko vs. Register of Deeds, is indeed in
be provided by law. In cases of water rights for irrigation, water grave peril.44 (emphases supplied; Citations omitted) 32.1 This provision is the same as Section 7, Article XII of the
supply, fisheries, or industrial uses other than the development 1987 Constitution.
of water power, beneficial use may be the measure and limit of In Lui She, the option to buy was invalidated because it
amounted to a virtual transfer of ownership as the owner could 32.2 Under the Public Land Act, corporations qualified to
the grant.
not sell or dispose of his properties. The contract in Lui She acquire or hold lands of the public domain are corporations at
Section 7. Save in cases of hereditary succession, no private prohibited the owner of the land from selling, donating, least 60% of which is owned by Filipino citizens (Sec. 22,
lands shall be transferred or conveyed except to individuals, mortgaging, or encumbering the property during the 50-year Commonwealth Act 141, as amended). (emphases supplied)
corporations, or associations qualified to acquire or hold lands of period of the option to buy. This is not so in the case at bar
As correctly observed by the public respondents, the prohibition
the public domain.42 (emphases supplied) where the mutual right of first refusal in favor of NIDC and
in the Constitution applies only to ownership of land.48 It does
KAWASAKI does not amount to a virtual transfer of land to a
The petitioner further argues that an option to buy land is void not extend to immovable or real property as defined under
non-Filipino. In fact, the case at bar involves a right of first
in itself (Philippine Banking Corporation v. Lui She, 21 SCRA Article 415 of the Civil Code. Otherwise, we would have a
refusal over shares of stock while the Lui She case in- volves an
52 [1967]). The right of first refusal granted to KAWASAKI, a strange situation where the ownership of immovable property
option to buy the land itself. As discussed earlier, there is a
Japanese corporation, is similarly void. Hence, the right to top, such as trees, plants and growing fruit attached to the land49
distinction between the shareholders ownership of shares and
sourced from the right of first refusal, is also void.43 Contrary would be limited to Filipinos and Filipino corporations only.
the corporations ownership of land arising from the separate
to the contention of petitioner, the case of Lui She did not that juridical personalities of the corporation and its shareholders. III.
say an option to buy land is void in itself, for we ruled as
follows: We note that in its Motion for Reconsideration, J.G. Summit
alleges that PHILSECO continues to violate the Constitution as
x x x To be sure, a lease to an alien for a reasonable period is its foreign equity is above 40% and yet owns long-term WHEREFORE, in view of the foregoing, the petitioners Motion
valid. So is an option giving an alien the right to buy real leasehold rights which are real rights.45 It cites Article 415 of for Reconsideration is DENIED WITH FINALITY and the
property on condition that he is granted Philippine citizenship. the Civil Code which includes in the definition of immovable decision appealed from is AFFIRMED. The Motion to Elevate
As this Court said in Krivenko vs. Register of Deeds: property, contracts for public works, and servitudes and other This Case to the Court En Banc is likewise DENIED for lack of
real rights over immovable property.46 Any existing merit.
[A]liens are not completely excluded by the Constitution from
landholding, however, is denied by PHILYARDS citing its
the use of lands for residential purposes. Since their residence in
recent financial statements.47 First, these are questions of fact,
the Philippines is temporary, they may be granted temporary
the veracity of which would require introduction of evidence.
rights such as a lease contract which is not forbidden by the
The Court needs to validate these factual allegations based on
Constitution. Should they desire to remain here forever and
competent and reliable evidence. As such, the Court cannot
share our fortunes and misfortunes, Filipino citizenship is not
resolve the questions they pose. Second, J.G. Summit misreads
impossible to acquire.
the provisions of the Constitution cited in its own pleadings, to
But if an alien is given not only a lease of, but also an option to wit:
buy, a piece of land, by virtue of which the Filipino owner
29.2 Petitioner has consistently pointed out in the past that
cannot sell or otherwise dispose of his property, this to last for
private respondent is not a 60%-40% corporation, and this
50 years, then it becomes clear that the arrangement is a virtual
violates the Constitution x x x The violation continues to this
transfer of ownership whereby the owner divests himself in
day because under the law, it continues to own real property . . .
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 x x x xxx xxx
dispose of it (jus disponendi)rights the sum total of which
make up ownership. It is just as if today the possession is 32. To review the constitutional provisions involved, Section 14,
transferred, tomorrow, the use, the next day, the disposition, and Article XIV of the 1973 Constitution (the JVA was signed in
so on, until ultimately all the rights of which ownership is made 1977), provided:
up are consolidated in an alien. And yet this is just exactly what
the parties in this case did within this space of one year, with the Save in cases of hereditary succession, no private lands shall
result that Justina Santos[s] ownership of her property was be transferred or conveyed except to individuals, corporations,
21
THE REGISTER OF DEEDS OF RIZAL, petitioner-
appellee,
vs.
UNG SIU SI TEMPLE, respondent-appellant.
The Register of Deeds for the province of Rizal refused to
accept for record a deed of donation executed in due form on
January 22, 1953, by Jesus Dy, a Filipino citizen, conveying a
parcel of residential land, in Caloocan, Rizal, known as lot No.
2, block 48-D, PSD-4212, G.L.R.O. Record No. 11267, in favor
of the unregistered religious organization "Ung Siu Si Temple",
operating through three trustees all of Chinese nationality. The
donation was duly accepted by Yu Juan, of Chinese nationality,
founder and deaconess of the Temple, acting in representation
and in behalf of the latter and its trustees.
The refusal of the Registrar was elevated en Consultato the IVth
Branch of the Court of First Instance of Manila. On March 14,
1953, the Court upheld the action of the Rizal Register of Deeds,
saying:
The question raised by the Register of Deeds in the above
transcribed consulta is whether a deed of donation of a parcel of
land executed in favor of a religious organization whose
founder, trustees and administrator are Chinese citizens should
be registered or not.
It appearing from the record of the Consulta that UNG SIU SI
TEMPLE is a religious organization whose deaconess, founder,
trustees and administrator are all Chinese citizens, this Court is
of the opinion and so hold that in view of the provisions of the
sections 1 and 5 of Article XIII of the Constitution of the
Philippines limiting the acquisition of land in the Philippines to
its citizens, or to corporations or associations at least sixty per
centum of the capital stock of which is owned by such citizens
adopted after the enactment of said Act No. 271, and the
decision of the Supreme Court in the case of Krivenko vs. the
Register of Deeds of Manila, the deed of donation in question
should not be admitted for admitted for registration. (Printed
Rec. App. pp 17-18).
Not satisfied with the ruling of the Court of First Instance, demands that in the absence of capital stock, the controlling
counsel for the donee Uy Siu Si Temple has appealed to this membership should be composed of Filipino citizens.
Court, claiming: (1) that the acquisition of the land in question,
for religious purposes, is authorized and permitted by Act No. To permit religious associations controlled by non-Filipinos to
271 of the old Philippine Commission, providing as follows:
to revive alien religious land holdings in this country. We can
SECTION 1. It shall be lawful for all religious associations, of not ignore the historical fact that complaints against land
whatever sort or denomination, whether incorporated in the holdings of that kind were among the factors that sparked the
Philippine Islands or in the name of other country, or not revolution of 1896.
incorporated at all, to hold land in the Philippine Islands upon
which to build churches, parsonages, or educational or charitable As to the complaint that the disqualification under article XIII is
institutions. violative of the freedom of religion guaranteed by Article III of
the Constitution, we are by no means convinced (nor has it been
SEC. 2. Such religious institutions, if not incorporated, shall shown) that land tenure is indispensable to the free exercise and
hold the land in the name of three Trustees for the use of such enjoyment of religious profession or worship; or that one may
associations; . . .. (Printed Rec. App. p. 5.) not worship the Deity according to the dictates of his own
conscience unless upon land held in fee simple.
and (2) that the refusal of the Register of Deeds violates the
freedom of religion clause of our Constitution [Art. III, Sec. The resolution appealed from is affirmed, with costs against
1(7)]. appellant.
We are of the opinion that the Court below has correctly held Pablo, Acting C.J., Bengzon, Montemayor, Reyes, A., Bautista
that in view of the absolute terms of section 5, Title XIII, of the Angelo, Labrador, and Concepcion, JJ., concur.
Constitution, the provisions of Act No. 271 of the old Philippine
Commission must be deemed repealed since the Constitution
was enacted, in so far as incompatible therewith. In providing
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,
the Constitution makes no exception in favor of religious
associations. Neither is there any such saving found in sections 1
and 2 of Article XIII, restricting the acquisition of public
agricultural lands and other natural resources to "corporations or
associations at least sixty per centum of the capital of which is
owned by such citizens" (of the Philippines).
The fact that the appellant religious organization has no capital
stock does not suffice to escape the Constitutional inhibition,
since it is admitted that its members are of foreign nationality.
The purpose of the sixty per centum requirement is obviously to
ensure that corporations or associations allowed to acquire
agricultural land or to exploit natural resources shall be
controlled by Filipinos; and the spirit of the Constitution
acquire agricultural lands would be to drive the opening wedge
22
G.R. No. 154953. June 26, 2008.*
REPUBLIC OF THE PHILIPPINES, petitioner, vs. T.A.N.
PROPERTIES, INC., respondent.
This case originated from an Application for Original
Registration of Title filed by T.A.N. Properties, Inc. covering
Lot 10705-B of the subdivision plan Csd-04-019741 which is a
portion of the consolidated Lot 10705, Cad-424, Sto. Tomas
Cadastre. The land, with an area of 564,007 square meters, or
56.4007 hectares, is located at San Bartolome, Sto. Tomas,
Batangas.
On 31 August 1999, the trial court set the case for initial hearing
at 9:30 a.m. on 11 November 1999. The Notice of Initial
Hearing was published in the Official Gazette, 20 September
1999 issue, Volume 95, No. 38, pages 6793 to 6794,4 and in the
18 October 1999 issue of Peoples Journal Taliba,5 a newspaper
of general circulation in the Philippines. The Notice of Initial
Hearing was also posted in a conspicuous place on the bulletin
board of the Municipal Building of Sto. Tomas, Batangas, as
well as in a conspicuous place on the land.6 All adjoining
owners and all government agencies and offices concerned were
notified of the initial hearing.7
On 11 November 1999, when the trial court called the case for
initial hearing, there was no oppositor other than the Opposition
dated 7 October 1999 of the Republic of the Philippines
represented by the Director of Lands (petitioner). On 15
November 1999, the trial court issued an Order8 of General
Default against the whole world except as against petitioner.
During the hearing on 19 November 1999, Ceferino Carandang
(Carandang) appeared as oppositor. The trial court gave
Carandang until 29 November 1999 within which to file his
written opposition.9 Carandang failed to file his written
opposition and to appear in the succeeding hearings. In an
Order10 dated 13 December 1999, the trial court reinstated the
Order of General Default.
During the hearings conducted on 13 and 14 December 1999,
respondent presented three witnesses: Anthony Dimayuga
Torres (Torres), respondents Operations Manager and its
authorized representative in the case; Primitivo Evangelista
(Evangelista), a 72-year old resident of San Bartolome, Sto. Petitioner appealed from the trial courts Decision. Petitioner
Tomas, Batangas since birth; and Regalado Marquez, Records alleged that the trial court erred in granting the application for
Officer II of the Land Registration Authority (LRA), Quezon registration absent clear evidence that the applicant and its
City. predecessors-in-interest have complied with the period of
possession and occupation as required by law. Petitioner alleged
The testimonies of respondents witnesses showed that Prospero that the testimonies of Evangelista and Torres are general in
Dimayuga (Kabesang Puroy) had peaceful, adverse, open, and nature. Considering the area involved, petitioner argued that
continuous possession of the land in the concept of an owner additional witnesses should have been presented to corroborate
since 1942. Upon his death, Kabesang Puroy was succeeded by Evangelistas testimony.
his son Antonio Dimayuga (Antonio). On 27 September 1960,
Antonio executed a Deed of Donation covering the land in favor The Ruling of the Court of Appeals
of one of his children, Fortunato Dimayuga (Fortunato). Later,
however, Antonio gave Fortunato another piece of land. Hence,
on 26 April 1961, Antonio executed a Partial Revocation of
Donation, and the land was adjudicated to one of Antonios In its 21 August 2002 Decision, the Court of Appeals affirmed
children, Prospero Dimayuga (Porting).11 On 8 August 1997, in toto the trial courts Decision.
Porting sold the land to respondent.
The Court of Appeals ruled that Evangelistas knowledge of the
The Ruling of the Trial Court possession and occupation of the land stemmed not only from
the fact that he worked there for three years but also because he
The trial court ruled that a juridical person or a corporation and Kabesang Puroy were practically neighbors. On
could apply for registration of land provided such entity and its Evangelistas failure to mention the name of his uncle who
predecessors-in-interest have possessed the land for 30 years or continuously worked on the land, the Court of Appeals ruled
more. The trial court ruled that the facts showed that that Evangelista should not be faulted as he was not asked to
respondents predecessors-in-interest possessed the land in the name his uncle when he testified. The Court of Appeals also
concept of an owner prior to 12 June 1945, which possession ruled that at the outset, Evangelista disclaimed knowledge of
converted the land to private property. Fortunatos relation to Kabesang Puroy, but this did not affect
Evangelistas statement that Fortunato took over the possession
The dispositive portion of the trial courts Decision reads: and cultivation of the land after Kabesang Puroys death. The
Court of Appeals further ruled that the events regarding the
WHEREFORE, and upon previous confirmation of the Order acquisition and disposition of the land became public knowledge
of General Default, the Court hereby adjudicates and decrees because San Bartolome was a small community. On the matter
Lot 10705-B, identical to Lot 13637, Cad-424, Sto. Tomas of additional witnesses, the Court of Appeals ruled that
Cadastre, on plan Csd-04-019741, situated in Barangay of San petitioner failed to cite any law requiring the corroboration of
Bartolome, Municipality of Sto. Tomas, Province of Batangas, the sole witness testimony.
with an area of 564,007 square meters, in favor of and in the
name of T.A.N. Properties, Inc., a domestic corporation duly The Court of Appeals further ruled that Torres was a competent
organized and existing under Philippine laws with principal witness since he was only testifying on the fact that he had
office at 19th Floor, PDCP Bank Building, 8737 Paseo de caused the filing of the application for registration and that
Roxas, Makati City. respondent acquired the land from Porting.
Once this Decision shall have become final, let the Petitioner comes to this Court assailing the Court of Appeals
corresponding decree of registration be issued. Decision. Petitioner raises the following grounds in its
Memorandum:
SO ORDERED.12
The Court of Appeals erred on a question of law in allowing the
grant of title to applicant corporation despite the following:
23
1. Absence of showing that it or its predecessors-in-interest In this case, respondent submitted two certifications issued by 3. Approves renewal of special use permits covering over five
had open, continuous, exclusive, and notorious possession and the Department of Environment and Natural Resources (DENR). hectares for public infrastructure projects; and
occupation in the concept of an owner since 12 June 1945 or The 3 June 1997 Certification by the Community
earlier; and 4. Issues renewal of certificates of registration for logs, poles,
Environment and Natural Resources Offices (CENRO), piles, and lumber dealers.
2. Disqualification of applicant corporation to acquire the Batangas City,16 certified that lot 10705, Cad-424, Sto. Tomas
subject tract of land.13 Cadastre situated at Barangay San Bartolome, Sto. Tomas, Under DAO No. 38, the Regional Technical Director, FMS-
Batangas with an area of 596,116 square meters falls within the DENR:
The Issues ALIENABLE AND DISPOSABLE ZONE under Project No.
30, Land Classification Map No. 582 certified [on] 31 December 1. Issues original and renewal of ordinary minor [products]
The issues may be summarized as follows: 1925. The second certification17 in the form of a memorandum (OM) permits except rattan;
to the trial court, which was issued by the Regional Technical
1. Whether the land is alienable and disposable; Director, Forest Management Services of the DENR (FMS- 2. Issues renewal of certificate of registration for logs, poles,
DENR), stated that the subject area falls within an alienable and piles and lumber dealers;
2. Whether respondent or its predecessors-in-interest had open, and disposable land, Project No. 30 of Sto. Tomas, Batangas
continuous, exclusive, and notorious possession and occupation certified on Dec. 31, 1925 per LC No. 582. 3. Approves renewal of resaw/mini-sawmill permits;
of the land in the concept of an owner since June 1945 or earlier;
and The certifications are not sufficient. DENR Administrative 4. Issues public gratuitous permits for 20 to 50 cubic meters
Order (DAO) No. 20,18 dated 30 May 1988, delineated the within calamity declared areas for public infrastructure projects;
3. Whether respondent is qualified to apply for registration of functions and authorities of the offices within the DENR. Under and
the land under the Public Land Act. DAO No. 20, series of 1988, the CENRO issues certificates of
land classification status for areas below 50 hectares. The 5. Approves original and renewal of special use permits
The Ruling of this Court Provincial Environment and Natural Resources Offices covering over five hectares for public infrastructure projects.
(PENRO) issues certificate of land classification status for lands
covering over 50 hectares. DAO No. 38,19 dated 19 April 1990,
amended DAO No. 20, series of 1988. DAO No. 38, series of
1990 retained the authority of the CENRO to issue certificates of
The petition has merit. the authority to issue certificates of land classification status,
land classification status for areas below 50 hectares, as well as
whether for areas below 50 hectares or for lands covering over
the authority of the PENRO to issue certificates of land
Respondent Failed to Prove 50 hectares. The CENRO certification in this case was issued
classification status for lands covering over 50 hectares.20 In
prior to the adoption of the DENR Manual of Approvals.
this case, respondent applied for registration of
that the Land is Alienable and Disposable
Lot 10705-B. The area covered by Lot 10705-B is over 50
hectares (564,007 square meters). The CENRO certificate
covered the entire Lot 10705 with an area of 596,116 square Hence, the certification issued by the Regional Technical
Petitioner argues that anyone who applies for registration has the meters which, as per DAO No. 38, series of 1990, is beyond the Director, FMS-DENR, in the form of a memorandum to the trial
burden of overcoming the presumption that the land forms part authority of the CENRO to certify as alienable and disposable. court, has no probative value.
of the public domain. Petitioner insists that respondent failed to
prove that the land is no longer part of the public domain. The Regional Technical Director, FMS-DENR, has no authority Further, it is not enough for the PENRO or CENRO to certify
under DAO Nos. 20 and 38 to issue certificates of land that a land is alienable and disposable. The applicant for land
The well-entrenched rule is that all lands not appearing to be registration must prove that the DENR Secretary had approved
classification. Under DAO No. 20, the Regional Technical
clearly of private dominion presumably belong to the State.14 the land classification and released the land of the public domain
Director, FMS-DENR:
The onus to overturn, by incontrovertible evidence, the as alienable and disposable, and that the land subject of the
presumption that the land subject of an application for application for registration falls within the approved area per
1. Issues original and renewal of ordinary minor products
registration is alienable and disposable rests with the verification through survey by the PENRO or CENRO. In
(OM) permits except rattan;
applicant.15 addition, the applicant for land registration must present a copy
of the original classification approved by the DENR Secretary
2. Approves renewal of resaw/mini-sawmill permits;
24
and certified as a true copy by the legal custodian of the official
records. These facts must be established to prove that the land is
alienable and disposable. Respondent failed to do so because the
certifications presented by respondent do not, by themselves,
prove that the land is alienable and disposable.
Only Torres, respondents Operations Manager, identified the
certifications submitted by respondent. The government officials
who issued the certifications were not presented before the trial
court to testify on their contents. The trial court should not have
accepted the contents of the certifications as proof of the facts
stated therein. Even if the certifications are presumed duly
issued and admissible in evidence, they have no probative value
in establishing that the land is alienable and disposable.
Public documents are defined under Section 19, Rule 132 of the
Revised Rules on Evidence as follows:
(a) The written official acts, or records of the official acts of
the sovereign authority, official bodies and tribunals, and public
officers, whether of the Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except
last wills and testaments; and
(c) Public records, kept in the Philippines, of private
documents required by law to be entered therein.
490
490
SUPREME COURT REPORTS ANNOTATED
Republic vs. T.A.N. Properties, Inc.
Applying Section 24 of Rule 132, the record of public
documents referred to in Section 19(a), when admissible for any
purpose, may be evidenced by an official publication thereof or
by a copy attested by the officer having legal custody of the
record, or by his deputy x x x. The CENRO is not the official
repository or legal custodian of the issuances of the DENR
Secretary declaring public lands as alienable and disposable.
The CENRO should have attached an official publication21 of
the DENR Secretarys issuance declaring the land alienable and testify on the veracity of the contents of the certifications.29
disposable. Torres did not prepare the certifications, he was not an officer of
CENRO or FMS-DENR, and he did not conduct any verification
Section 23, Rule 132 of the Revised Rules on Evidence survey whether the land falls within the area classified by the
provides: DENR Secretary as alienable and disposable.
Sec. 23. Public documents as evidence.Documents Petitioner also points out the discrepancy as to when the land
consisting of entries in public records made in the performance allegedly became alienable and disposable. The DENR
of a duty by a public officer are prima facie evidence of the facts Secretary certified that based on Land Classification Map No.
stated therein. All other public documents are evidence, even
against a third person, of the fact which gave rise to their 582, the land became alienable and disposable on 31 December
execution and of the date of the latter. 1925. However, the certificate on the blue print plan states that it
became alienable and disposable on 31 December 1985.
The CENRO and Regional Technical Director, FMS-DENR,
certifications do not fall within the class of public documents We agree with petitioner that while the certifications submitted
contemplated in the first sentence of Section 23 of Rule 132. by respondent show that under the Land Classification Map No.
The certifications do not reflect entries in public records made
582, the land became alienable and disposable on 31 December
in the performance of a duty by a public officer, such as entries
1925, the blue print plan states that it became alienable and
disposable on 31 December 1985. Respondent alleged that the
made by the Civil Registrar22 in the books of registries, or by a
ship captain in the ships logbook.23 The certifications are notblue print plan merely serves to prove the precise location and
the certified copies or authenticated reproductions of original the metes and bounds of the land described therein x x x and
official records in the legal custody of a government office. The
does not in any way certify the nature and classification of the
certifications are not even records of public documents.24 The land involved.30 It is true that the notation by a surveyor-
certifications are conclusions unsupported by adequate proof, geodetic engineer on the survey plan that the land formed part of
and thus have no probative value.25 Certainly, the certifications
the alienable and disposable land of the public domain is not
cannot be considered prima facie evidence of the facts stated sufficient proof of the lands classification.31 However,
therein. respondent should have at least presented proof that would
explain the discrepancy in the dates of classification. Marquez,
The CENRO and Regional Technical Director, FMS-DENR, LRA Records Officer II, testified that the documents submitted
certifications do not prove that Lot 10705-B falls within the to the court consisting of the tracing cloth plan, the technical
alienable and disposable land as proclaimed by the DENR description of Lot 10705-B, the approved subdivision plan, and
Secretary. Such government certifications do not, by their mere the Geodetic Engineers certification were faithful reproductions
issuance, prove the facts stated therein.26 Such government of the original documents in the LRA office. He did not explain
certifications may fall under the class of documents the discrepancy in the dates. Neither was the Geodetic Engineer
contemplated in the second sentence of Section 23 of Rule 132. presented to explain why the date of classification on the blue
As such, the certifications are prima facie evidence of their due print plan was different from the other certifications submitted
execution and date of issuance but they do not constitute prima by respondent.
facie evidence of the facts stated therein.
There was No Open, Continuous, Exclusive, and Notorious
The Court has also ruled that a document or writing admitted as
part of the testimony of a witness does not constitute proof of Possession and Occupation in the Concept of an Owner
the facts stated therein.27 Here, Torres, a private individual and
respondents representative, identified the certifications but the
government officials who issued the certifications did not testify
on the contents of the certifications. As such, the certifications Petitioner alleges that the trial courts reliance on the testimonies
cannot be given probative value.28 The contents of the of Evangelista and Torres was misplaced. Petitioner alleges that
certifications are hearsay because Torres was incompetent to Evangelistas statement that the possession of respondents
25
predecessors-in-interest was open, public, continuous, peaceful, the land was hearsay. He did not even tell the trial court where In Chavez v. Public Estates Authority,35 the Court traced the
and adverse to the whole world was a general conclusion of law he obtained his information. law on disposition of lands of the public domain. Under the
rather than factual evidence of possession of title. Petitioner 1935 Constitution, there was no prohibition against private
alleges that respondent failed to establish that its predecessors- The tax declarations presented were only for the years starting corporations from acquiring agricultural land. The 1973
in-interest had held the land openly, continuously, and 1955. While tax declarations are not conclusive evidence of Constitution limited the alienation of lands of the public domain
exclusively for at least 30 years after it was declared alienable ownership, they constitute proof of claim of ownership.34 to individuals who were citizens of the Philippines. Under the
and disposable. Respondent did not present any credible explanation why the 1973 Constitution, private corporations, even if wholly owned
realty taxes were only paid starting 1955 considering the claim by Filipino citizens, were no longer allowed to acquire alienable
We agree with petitioner. that the Dimayugas were allegedly in possession of the land lands of the public domain. The present 1987 Constitution
before 1945. The payment of the realty taxes starting 1955 gives continues the prohibition against private corporations from
Evangelista testified that Kabesang Puroy had been in rise to the presumption that the Dimayugas claimed ownership acquiring any kind of alienable land of the public domain.36
possession of the land before 1945. Yet, Evangelista only or possession of the land only in that year. The Court explained in Chavez:
worked on the land for three years. Evangelista testified that his
family owned a lot near Kabesang Puroys land. The Court of Land Application by a Corporation The 1987 Constitution continues the State policy in the 1973
Appeals took note of this and ruled that Evangelistas Constitution banning private corporations from acquiring any
knowledge of Kabesang Puroys possession of the land stemmed kind of alienable land of the public domain. Like the 1973
not only from the fact that he had worked thereat but more so Constitu tion, the 1987 Constitution allows private corporations
that they were practically neighbors.32 The Court of Appeals Petitioner asserts that respondent, a private corporation, cannot to hold alienable lands of the public domain only through lease.
observed: apply for registration of the land of the public domain in this xxxx
case.
In a small community such as that of San Bartolome, Sto. [I]f the constitutional intent is to prevent huge landholdings, the
Tomas, Batangas, it is not difficult to understand that people in We agree with petitioner. Constitution could have simply limited the size of alienable
the said community knows each and everyone. And, because of lands of the public domain that corporations could acquire. The
such familiarity with each other, news or events regarding the Section 3, Article XII of the 1987 Constitution provides: Constitution could have followed the limitations on individuals,
acquisition or disposition for that matter, of a vast tract of land who could acquire not more than 24 hectares of alienable lands
spreads like wildfire, thus, the reason why such an event became Sec. 3. Lands of the public domain are classified into of the public domain under the 1973 Constitution, and not more
of public knowledge to them.33 agricultural, forest or timber, mineral lands, and national parks. than 12 hectares under the 1987 Constitution.
Agricultural lands of the public domain may be further classified
Evangelista testified that Kabesang Puroy was succeeded by by law according to the uses to which they may be devoted. If the constitutional intent is to encourage economic family-size
Fortunato. However, he admitted that he did not know the exact Alienable lands of the public domain shall be limited to farms, placing the land in the name of a corporation would be
relationship between Kabesang Puroy and Fortunato, which is agricultural lands. Private corporations or associations may not more effective in preventing the break-up of farmlands. If the
rather unusual for neighbors in a small community. He did not hold such alienable lands of the public domain except by lease, farmland is registered in the name of a corporation, upon the
also know the relationship between Fortunato and Porting. In for a period not exceeding twenty-five years, renewable for not death of the owner, his heirs would inherit shares in the
fact, Evangelistas testimony is contrary to the factual finding of more than twenty-five years, and not to exceed one thousand corporation instead of subdivided parcels of the farmland. This
the trial court that Kabesang Puroy was succeeded by his son hectares in area. Citizens of the Philippines may lease not more would prevent the continuing break-up of farmlands into smaller
Antonio, not by Fortunato who was one of Antonios children. than five hundred hectares, or acquire not more than twelve and smaller plots from one generation to the next.
Antonio was not even mentioned in Evangelistas testimony. hectares thereof by purchase, homestead or grant.
In actual practice, the constitutional ban strengthens the
The Court of Appeals ruled that there is no law that requires that Taking into account the requirements of conservation, ecology, constitutional limitation on individuals from acquiring more
the testimony of a single witness needs corroboration. However, and development, and subject to the requirements of agrarian than the allowed area of alienable lands of the public domain.
in this case, we find Evangelistas uncorroborated testimony reform, the Congress shall determine, by law, the size of lands Without the constitutional ban, individuals who already acquired
insufficient to prove that respondents predecessors-in-interest of the public domain which may be acquired, developed, held, the maximum area of alienable lands of the public domain could
had been in possession of the land in the concept of an owner for or leased and the conditions therefor. easily set up corporations to acquire more alienable public lands.
more than 30 years. We cannot consider the testimony of Torres An individual could own as many corporations as his means
as sufficient corroboration. Torres testified primarily on the fact The 1987 Constitution absolutely prohibits private corporations would allow him. An individual could even hide his ownership
of respondents acquisition of the land. While he claimed to be from acquiring any kind of alienable land of the public domain. of a corporation by putting his nominees as stockholders of the
related to the Dimayugas, his knowledge of their possession of corporation. The corporation is a convenient vehicle to
26
circumvent the constitutional limitation on acquisition by proof being admissible to overcome a conclusive presumption, titles of the previous owners or predecessors-in-interest of
individuals of alienable lands of the public domain. confirmation proceedings would, in truth be little more than a TCMC.
formality, at the most limited to ascertaining whether the
The constitutional intent, under the 1973 and 1987 possession claimed is of the required character and length of Being already private land when TCMC bought them in 1979,
Constitutions, is to transfer ownership of only a limited area of time; and registration thereunder would not confer title, but the prohibition in the 1973 Constitution against corporations
alienable land of the public domain to a qualified individual. simply recognize a title already vested. The proceedings would acquiring alienable lands of the public domain except through
This constitutional intent is safeguarded by the provision not originally convert the land from public to private land, but lease (Article XIV, Section 11, 1973 Constitution) did not apply
prohibiting corporations from acquiring alienable lands of the only confirm such a conversion already effected by operation of to them for they were no longer alienable lands of the public
public domain, since the vehicle to circumvent the constitutional law from the moment the required period of possession became domain but private property.
intent is removed. The available alienable public lands are complete.
gradually decreasing in the face of an ever-growing population. What is determinative for the doctrine in Director of Lands to
The most effective way to insure faithful adherence to this x x x [A]lienable public land held by a possessor, personally or apply is for the corporate applicant for land registration to
constitutional intent is to grant or sell alienable lands of through his predecessors-in-interest, openly, continuously and establish that when it acquired the land, the same was already
exclusively for the prescribed statutory period of (30 years under private land by operation of law because the statutory
the public domain only to individuals. This, it would seem, is the The Public Land Act, as amended) is converted to private acquisitive prescriptive period of 30 years had already lapsed.
practical benefit arising from the constitutional ban.37 property by the mere lapse or completion of said period, ipso The length of possession of the land by the corporation cannot
jure. Following that rule and on the basis of the undisputed facts, be tacked on to complete the statutory 30 years acquisitive
In Director of Lands v. IAC,38 the Court allowed the land the land subject of this appeal was already private property at prescriptive period. Only an individual can avail of such
registration proceeding filed by Acme Plywood & Veneer Co., the time it was acquired from the Infiels by Acme. Acme acquisitive prescription since both the 1973 and 1987
Inc. (Acme) for five parcels of land with an area of 481,390 thereby acquired a registrable title, there being at the time no Constitutions prohibit corporations from acquiring lands of the
square meters, or 48.139 hectares, which Acme acquired from prohibition against said corporations holding or owning private public domain.
members of the Dumagat tribe. The issue in that case was land. x x x.40 (Emphasis supplied)
whether the title could be confirmed in favor of Acme when the Admittedly, a corporation can at present still apply for original
proceeding was instituted after the effectivity of the 1973 Director of Lands is not applicable to the present case. In registration of land under the doctrine in Director of
Constitution which prohibited private corporations or Director of Lands, the land x x x was already private property
associations from holding alienable lands of the public domain at the time it was acquired x x x by Acme. In this case, Lands. Republic Act No. 917642 (RA 9176) further amended
except by lease not to exceed 1,000 hectares. The Court ruled respondent acquired the land on 8 August 1997 from Porting, the Public Land Act43 and extended the period for the filing of
that the land was already private land when Acme acquired it who, along with his predecessors-in-interest, has not shown to applications for judicial confirmation of imperfect and
from its owners in 1962, and thus Acme acquired a registrable have been, as of that date, in open, continuous, and adverse incomplete titles to alienable and disposable lands of the public
title. Under the 1935 Constitution, private corporations could possession of the land for 30 years since 12 June 1945. In short, domain until 31 December 2020. Thus:
acquire public agricultural lands not exceeding 1,024 hectares when respondent acquired the land from Porting, the land was
while individuals could acquire not more than 144 hectares.39 not yet private property. Sec. 2. Section 47, Chapter VIII of the same Act, as amended,
is hereby further amended to read as follows:
In Director of Lands, the Court further ruled that open, For Director of Lands to apply and enable a corporation to file
exclusive, and undisputed possession of alienable land for the for registration of alienable and disposable land, the corporation
Sec. 47. The persons specified in the next following section
period prescribed by law created the legal fiction whereby the must have acquired the land when its transferor had already a are hereby granted time, not to extend beyond December 31,
land, upon completion of the requisite period, ipso jure and vested right to a judicial confirmation of title to the land by 2020 within which to avail of the benefits of this Chapter:
without the need of judicial or other sanction ceases to be public virtue of his open, continuous and adverse possession of the landProvided, That this period shall apply only where the area
land and becomes private property. The Court ruled: in the concept of an owner for at least 30 years since 12 June applied for does not exceed twelve (12) hectares: Provided,
1945. Thus, in Natividad v. Court of Appeals,41 the Court further, That the several periods of time designated by the
Nothing can more clearly demonstrate the logical inevitability declared: President in accordance with Section Forty-five of this Act shall
of considering possession of public land which is of the apply also to the lands comprised in the provisions of this
character and duration prescribed by statute as the equivalent of Under the facts of this case and pursuant to the above rulings, Chapter, but this Section shall not be construed as prohibiting
an express grant from the State than the dictum of the statute the parcels of land in question had already been converted to any of said persons from acting under this Chapter at any time
itself that the possessor(s) x x x shall be conclusively presumed private ownership through acquisitive prescription by the prior to the period fixed by the President.
to have performed all the conditions essential to a Government predecessors-in-interest of TCMC when the latter purchased
grant and shall be entitled to a certificate of title x x x. No them in 1979. All that was needed was the confirmation of the
27
Sec. 3. All pending applications filed before the effectivity of
this amendatory Act shall be treated as having been filed in
accordance with the provisions of this Act.

Under RA 9176, the application for judicial confirmation is

limited only to 12 hectares, consistent with Section 3, Article
XII of the 1987 Constitution that a private individual may only
acquire not more than 12 hectares of alienable and disposable
land. Hence, respondent, as successor-in-interest of an
individual owner of the land, cannot apply for registration of
land in excess of 12 hectares. Since respondent applied for
56.4007 hectares, the application for the excess area of 44.4007
hectares is contrary to law, and thus void ab initio. In applying
for land registration, a private corporation cannot have any right
higher than its predecessor-in-interest from whom it derived its
right. This assumes, of course, that the corporation acquired the
land, not exceeding 12 hectares, when the land had already
become private land by operation of law. In the present case,
respondent has failed to prove that any portion of the land was
already private land when respondent acquired it from Porting in
1997.

WHEREFORE, we SET ASIDE the 21 August 2002 Decision of

the Court of Appeals in CA-G.R. CV No. 66658 and the 16
December 1999 Decision of the Regional Trial Court of
Tanauan, Batangas, Branch 6 in Land Registration Case No. T-
635. We DENY the application for registration filed by T.A.N.
Properties, Inc.

28

THE ROMAN CATHOLIC APOSTOLIC
ADMINISTRATOR OF DAVAO, INC., petitioner,
vs.
THE LAND REGISTRATION COMMISSION and THE
REGISTER OF DEEDS OF DAVAO CITY, respondents.
This is a petition for mandamus filed by the Roman Catholic
Apostolic Administrator of Davao seeking the reversal of a
resolution by the Land Registration Commissioner in L.R.C.
Consulta No. 14. The facts of the case are as follows:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and
resident of the City of Davao, executed a deed of sale of a parcel
of land located in the same city covered by Transfer Certificate
No. 2263, in favor of the Roman Catholic Apostolic
Administrator of Davao Inc., s corporation sole organized and
existing in accordance with Philippine Laws, with Msgr. Clovis
Thibault, a Canadian citizen, as actual incumbent. When the
deed of sale was presented to Register of Deeds of Davao for
registration, the latter.
having in mind a previous resolution of the Fourth Branch of the
Court of First Instance of Manila wherein the Carmelite Nuns of
Davao were made to prepare an affidavit to the effect that 60 per
cent of the members of their corporation were Filipino citizens
when they sought to register in favor of their congregation of
deed of donation of a parcel of land
required said corporation sole to submit a similar affidavit
declaring that 60 per cent of the members thereof were Filipino
citizens.
The vendee in the letter dated June 28, 1954, expressed
willingness to submit an affidavit, both not in the same tenor as
that made the Progress of the Carmelite Nuns because the two
cases were not similar, for whereas the congregation of the
Carmelite Nuns had five incorporators, the corporation sole has
only one; that according to their articles of incorporation, the
organization of the Carmelite Nuns became the owner of
properties donated to it, whereas the case at bar, the totality of
the Catholic population of Davao would become the owner of
the property bought to be registered.
As the Register of Deeds entertained some doubts as to the
registerability if the document, the matter was referred to the
Land Registration Commissioner en consulta for resolution in
accordance with section 4 of Republic Act No. 1151. Proper
hearing on the matter was conducted by the Commissioner and
after the petitioner corporation had filed its memorandum, a
resolution was rendered on September 21, 1954, holding that in
view of the provisions of Section 1 and 5 of Article XIII of the
Philippine Constitution, the vendee was not qualified to acquire
private lands in the Philippines in the absence of proof that at
least 60 per centum of the capital, property, or assets of the
Roman Catholic Apostolic Administrator of Davao, Inc., was
actually owned or controlled by Filipino citizens, there being no
question that the present incumbent of the corporation sole was a
Canadian citizen. It was also the opinion of the Land
Registration Commissioner that section 159 of the corporation
Law relied upon by the vendee was rendered operative by the
aforementioned provisions of the Constitution with respect to
real estate, unless the precise condition set therein that at
least 60 per cent of its capital is owned by Filipino citizens be
present, and, therefore, ordered the Registered Deeds of Davao
to deny registration of the deed of sale in the absence of proof of
compliance with such condition.
After the motion to reconsider said resolution was denied, an
action for mandamus was instituted with this Court by said
corporation sole, alleging that under the Corporation Law as
well as the settled jurisprudence on the matter, the deed of sale
executed by Mateo L. Rodis in favor of petitioner is actually a
deed of sale in favor of the Catholic Church which is qualified to
acquire private agricultural lands for the establishment and
maintenance of places of worship, and prayed that judgment be
rendered reserving and setting aside the resolution of the Land
Registration Commissioner in question. In its resolution of
November 15, 1954, this Court gave due course to this petition
providing that the procedure prescribed for appeals from the
Public Service Commission of the Securities and Exchange
Commissions (Rule 43), be followed.
29
Section 5 of Article XIII of the Philippine Constitution reads as
follows:
SEC. 5. Save in cases of hereditary succession, no private
agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or
hold lands of the public domain in the Philippines.
Section 1 of the same Article also provides the following:
SECTION 1. All agricultural, timber, and mineral lands of the
public domain, water, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other natural
resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be
limited to cititzens of the Philippines, or to corporations or
associations at least sixty per centum of the capital of which is
owned by such citizens, SUBJECT TO ANY EXISTING
RIGHT, grant, lease, or concession AT THE TIME OF THE
INAUGURATION OF THE GOVERNMENT ESTABLISHED
UNDER CONSTITUTION. Natural resources, with the
exception of public agricultural land, shall not be alienated, and
no license, concession, or leases for the exploitation,
development, or utilization of any of the natural resources shall
be granted for a period exceeding twenty-five years, renewable
for another twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses other than
the development of water power, in which cases other than the
development and limit of the grant.
In virtue of the foregoing mandates of the Constitution, who are
considered "qualified" to acquire and hold agricultural lands in
the Philippines? What is the effect of these constitutional
prohibition of the right of a religious corporation recognized by
our Corporation Law and registered as a corporation sole, to
possess, acquire and register real estates in its name when the
Head, Manager, Administrator or actual incumbent is an alien?
Petitioner consistently maintained that a corporation sole,
irrespective of the citizenship of its incumbent, is not prohibited
or disqualified to acquire and hold real properties. The
Corporation Law and the Canon Law are explicit in their
provisions that a corporation sole or "ordinary" is not the owner
of the of the properties that he may acquire but merely the
administrator thereof. The Canon Law also specified that church
temporalities are owned by the Catholic Church as a "moral
person" or by the diocess as minor "moral persons" with the
ordinary or bishop as administrator.
set-up, respondents argued, falls short of a trust. The
respondents instead tried to prove that in reality, the beneficiary
of ecclesiastical properties are not members or faithful of the
church but someone else, by quoting a portion a portion of the
ought of fidelity subscribed by a bishop upon his elevation to the
episcopacy wherein he promises to render to the Pontificial
Father or his successors an account of his pastoral office and of
all things appertaining to the state of this church.
denomination, society or church to become a corporation sole,
unless inconsistent wit the rules, regulations or discipline of his
religious denomination, society or church or forbidden by
competent authority thereof.
See also the pertinent provisions of the succeeding sections of
the same Corporation Law copied hereunder:

And elaborating on the composition of the Catholic Church in
the Philippines, petitioner explained that as a religious society or
organization, it is made up of 2 elements or divisions the
clergy or religious members and the faithful or lay members.
The 1948 figures of the Bureau of Census showed that there
were 277,551 Catholics in Davao and aliens residing therein
numbered 3,465. Ever granting that all these foreigners are
Catholics, petitioner contends that Filipino citizens form more
than 80 per cent of the entire Catholics population of that area.
As to its clergy and religious composition, counsel for petitioner
presented the Catholic Directory of the Philippines for 1954
(Annex A) which revealed that as of that year, Filipino clergy
and women novices comprise already 60.5 per cent of the group.
It was, therefore, allowed that the constitutional requirement was
fully met and satisfied.
Respondents, on the other hand, averred that although it might
be true that petitioner is not the owner of the land purchased, yet
he has control over the same, with full power to administer, take
possession of, alienate, transfer, encumber, sell or dispose of any
or all lands and their improvements registered in the name of the
corporation sole and can collect, receive, demand or sue for all
money or values of any kind that may be kind that may become
due or owing to said corporation, and vested with authority to
enter into agreements with any persons, concerns or entities in
connection with said real properties, or in other words, actually
exercising all rights of ownership over the properties. It was
their stand that the theory that properties registered in the name
of the corporation sole are held in true for the benefit of the
Catholic population of a place, as of Davao in the case at bar
should be sustained because a conglomeration of persons cannot
just be pointed out as the cestui que trust or recipient of the
benefits from the property allegedly administered in their behalf.
Neither can it be said that the mass of people referred to as such
beneficiary exercise ant right of ownership over the same. This
Respondents likewise advanced the opinion that in construing
SEC. 155. In order to become a corporation sole the bishop,
the constitutional provision calling for 60 per cent of Filipino
chief priest, or presiding elder of any religious denomination,
citizenship, the criterion of the properties or assets thereof.
society or church must file with the Securities and Exchange
Commissioner articles of incorporation setting forth the
following facts:
In solving the problem thus submitted to our consideration, We
can say the following: A corporation sole is a special form of
corporation usually associated with the clergy. Conceived and
xxx xxx xxx.
introduced into the common law by sheer necessity, this legal
creation which was referred to as "that unhappy freak of English
law" was designed to facilitate the exercise of the functions of
(3) That as such bishop, chief priest, or presiding elder he is
ownership carried on by the clerics for and on behalf of the
charged with the administration of the temporalities and the
church which was regarded as the property owner (See I
management of the estates and properties of his religious
Couvier's Law Dictionary, p. 682-683).
denomination, society, or church within its territorial
jurisdiction, describing it;
A corporation sole consists of one person only, and his
successors (who will always be one at a time), in some particular
xxx xxx xxx.
station, who are incorporated by law in order to give them some
legal capacities and advantages, particularly that of perpetuity,
which in their natural persons they could not have had. In this
sense, the king is a sole corporation; so is a bishop, or dens, (As amended by Commonwealth Act No. 287).
distinct from their several chapters (Reid vs. Barry, 93 Fla. 849,
112 So. 846).
SEC. 157. From and after the filing with the Securities and
Exchange Commissioner of the said articles of incorporation,
The provisions of our Corporation law on religious corporations which verified by affidavit or affirmation as aforesaid and
are illuminating and sustain the stand of petitioner. Section 154 accompanied by the copy of the commission, certificate of
thereof provides: election, or letters of appointment of the bishop, chief priest, or
presiding elder, duly certified as prescribed in the section
immediately preceding such the bishop, chief priest, or presiding
SEC. 154. For the administration of the temporalities of any elder, as the case may be, shall become a corporation sole and
religious denomination, society or church and the management all temporalities, estates, and properties the religious
of the estates and the properties thereof, it shall be lawful for the denomination, society, or church therefore administered or
bishop, chief priest, or presiding either of any such religious managed by him as such bishop, chief priest, or presiding elder,

30
shall be held in trust by him as a corporation sole, for the use,
purpose, behalf, and sole benefit of his religious denomination,
society, or church, including hospitals, schools, colleges,
orphan, asylums, parsonages, and cemeteries thereof. For the
filing of such articles of incorporation, the Securities and
Exchange Commissioner shall collect twenty-five pesos. (As
amended by Commonwealth Act. No. 287); and.
SEC. 163. The right to administer all temporalities and all
property held or owned by a religious order or society, or by the
diocese, synod, or district organization of any religious
denomination or church shall, on its incorporation, pass to the
corporation and shall be held in trust for the use, purpose behalf,
and benefit of the religious society, or order so incorporated or
of the church of which the diocese, or district organization is an
organized and constituent part.
The Cannon Law contains similar provisions regarding the matters regarding other church property, through the
duties of the corporation sole or ordinary as administrator of the administrators of the individual moral persons in the Church
church properties, as follows:
Al Ordinario local pertenence vigilar diligentemente sobre la
administracion de todos los bienes eclesiasticos que se hallan en
su territorio y no estuvieren sustraidos de su jurisdiccion, salvs
las prescriciones legitimas que le concedan mas aamplios
derechos.
Teniendo en cuenta los derechos y las legitimas costumbres y
circunstancias, procuraran los Ordinarios regular todo lo
concerniente a la administracion de los bienes eclesciasticos,
dando las oportunas instucciones particularles dentro del narco
del derecho comun. (Title XXVIII, Codigo de Derecho
Canonico, Lib. III, Canon 1519).1
That leaves no room for doubt that the bishops or archbishops,
as the case may be, as corporation's sole are merely
administrators of the church properties that come to their
possession, in which they hold in trust for the church. It can also
be said that while it is true that church properties could be
administered by a natural persons, problems regarding
succession to said properties can not be avoided to rise upon his ecclesiastical properties are owned by the churches, institutions
death. Through this legal fiction, however, church properties and canonically established private corporations to which said
acquired by the incumbent of a corporation sole pass, by properties have been donated.
operation of law, upon his death not his personal heirs but to his
successor in office. It could be seen, therefore, that a corporation
sole is created not only to administer the temporalities of the
Considering that nowhere can We find any provision conferring
church or religious society where he belongs but also to hold
ownership of church properties on the Pope although he appears
and transmit the same to his successor in said office. If the
to be the supreme administrator or guardian of his flock, nor on
ownership or title to the properties do not pass to the
the corporation sole or heads of dioceses as they are admittedly
administrators, who are the owners of church properties?.
mere administrators of said properties, ownership of these
temporalities logically fall and develop upon the church, diocese
or congregation acquiring the same. Although this question of
Bouscaren and Elis, S.J., authorities on cannon law, on their ownership of ecclesiastical properties has off and on been
treatise comment: mentioned in several decisions of the Court yet in no instance
was the subject of citizenship of this religious society been
passed upon.
In matters regarding property belonging to the Universal Church
and to the Apostolic See, the Supreme Pontiff exercises his
office of supreme administrator through the Roman Curia; in We are not unaware of the opinion expressed by the late Justice
Perfecto in his dissent in the case of Agustines vs. Court of First
Instance of Bulacan, 80 Phil. 565, to the effect that "the Roman
according to that norms, laid down in the Code of Cannon Law. Catholic Archbishop of Manila is only a branch of a universal
This does not mean, however, that the Roman Pontiff is the church by the Pope, with permanent residence in Rome, Italy".
owner of all the church property; but merely that he is the There is no question that the Roman Catholic Church existing in
supreme guardian (Bouscaren and Ellis, Cannon Law, A Text the Philippines is a tributary and part of the international
and Commentary, p. 764). religious organization, for the word "Roman" clearly expresses
its unity with and recognizes the authority of the Pope in Rome.
However, lest We become hasty in drawing conclusions, We
have to analyze and take note of the nature of the government
and this Court, citing Campes y Pulido, Legislacion y
established in the Vatican City, of which it was said:
Jurisprudencia Canonica, ruled in the case of Trinidad vs.
Roman Catholic Archbishop of Manila, 63 Phil. 881, that:
GOVERNMENT. In the Roman Catholic Church supreme
authority and jurisdiction over clergy and laity alike as held by
The second question to be decided is in whom the ownership of
the pope who (since the Middle Ages) is elected by the cardinals
the properties constituting the endowment of the ecclesiastical or
assembled in conclave, and holds office until his death or
collative chaplaincies is vested.
legitimate abdication. . . While the pope is obviously
independent of the laws made, and the officials appointed, by
himself or his predecessors, he usually exercises his
Canonists entertain different opinions as to the persons in whom administrative authority according to the code of canon law and
the ownership of the ecclesiastical properties is vested, with through the congregations, tribunals and offices of the Curia
respect to which we shall, for our purpose, confine ourselves to Romana. In their respective territories (called generally
stating with Donoso that, while many doctors cited by Fagnano dioceses) and over their respective subjects, the patriarchs,
believe that it resides in the Roman Pontiff as Head of the metropolitans or archbishops and bishops exercise a jurisdiction
Universal Church, it is more probable that ownership, strictly which is called ordinary (as attached by law to an office given to
speaking, does not reside in the latter, and, consequently, a person. . . (Collier's Encyclopedia, Vol. 17, p. 93).
31
 prejudice to its religious relations with the latter which are war, its articles of incorporation were reconstructed in the
governed by the Canon Law or their rules and regulations. Securities and Exchange Commission on April 8, 1948. At first,
While it is true and We have to concede that in the profession of this corporation sole administered all the temporalities of the
their faith, the Roman Pontiff is the supreme head; that in the church existing or located in the island of Mindanao. Later on,
religious matters, in the exercise of their belief, the Catholic however, new dioceses were formed and new corporations sole
congregation of the faithful throughout the world seeks the We certainly are conscious of the fact that whatever conclusion were created to correspond with the territorial jurisdiction of the
guidance and direction of their Spiritual Father in the Vatican, We may draw on this matter will have a far reaching influence, new dioceses, one of them being petitioner herein, the Roman
yet it cannot be said that there is a merger of personalities nor can We overlook the pages of history that arouse indignation Catholic Apostolic Administrator of Davao, Inc., which was
resultant therein. Neither can it be said that the political and civil and criticisms against church landholdings. This nurtured feeling registered with the Securities and Exchange Commission on
rights of the faithful, inherent or acquired under the laws of their that snowbailed into a strong nationalistic sentiment manifested September 12, 1950, and succeeded in the administrative for all
country, are affected by that relationship with the Pope. The fact itself when the provisions on natural to be embodied in the the "temporalities" of the Roman Catholic Church existing in
that the Roman Catholic Church in almost every country springs Philippine Constitution were framed, but all that has been said Davao.
from that society that saw its beginning in Europe and the fact on this regard referred more particularly to landholdings of
that the clergy of this faith derive their authorities and receive religious corporations known as "Friar Estates" which have
orders from the Holy See do not give or bestow the citizenship already bee acquired by our government, and not to properties
of the Pope upon these branches. Citizenship is a political right held by corporations sole which, We repeat, are properties held According to our Corporation Law, Public Act No. 1549,
which cannot be acquired by a sort of "radiation". We have to in trust for the benefit of the faithful residing within its territorial approved April 1, 1906, a corporation sole.
realize that although there is a fraternity among all the catholic jurisdiction. Though that same feeling probably precipitated and
countries and the dioceses therein all over the globe, the influenced to a large extent the doctrine laid down in the
universality that the word "catholic" implies, merely celebrated Krivenco decision, We have to take this matter in the is organized and composed of a single individual, the head of
characterize their faith, a uniformity in the practice and the light of legal provisions and jurisprudence actually obtaining, any religious society or church, for the ADMINISTRATION of
interpretation of their dogma and in the exercise of their belief, irrespective of sentiments. the temporalities of such society or church. By "temporalities" is
but certainly they are separate and independent from one another meant estate and properties not used exclusively for religious
in jurisdiction, governed by different laws under which they are worship. The successor in office of such religious head or chief
incorporated, and entirely independent on the others in the The question now left for our determination is whether the priest incorporated as a corporation sole shall become the
management and ownership of their temporalities. To allow Universal Roman Catholic Apostolic Church in the Philippines, corporation sole on ascension to office, and shall be permitted to
theory that the Roman Catholic Churches all over the world or better still, the corporation sole named the Roman Catholic transact business as such on filing with the Securities and
follow the citizenship of their Supreme Head, the Pontifical Apostolic Administrator of Davao, Inc., is qualified to acquire Exchange Commission a copy of his commission, certificate of
Father, would lead to the absurdity of finding the citizens of a private agricultural lands in the Philippines pursuant to the election or letter of appointment duly certified by any notary
country who embrace the Catholic faith and become members of provisions of Article XIII of the Constitution. public or clerk of court of record (Guevara's The Philippine
that religious society, likewise citizens of the Vatican or of Italy. Corporation Law, p. 223).
And this is more so if We consider that the Pope himself may be
an Italian or national of any other country of the world. The
We see from sections 1 and 5 of said Article quoted before, that
same thing be said with regard to the nationality or citizenship
only persons or corporations qualified to acquire hold lands of The Corporation Law also contains the following provisions:
of the corporation sole created under the laws of the Philippines,
the public domain in the Philippines may acquire or be assigned
which is not altered by the change of citizenship of the
and hold private agricultural lands. Consequently, the decisive
incumbent bishops or head of said corporation sole.
factor in the present controversy hinges on the proposition or
SECTION 159. Any corporation sole may purchase and hold
whether or not the petitioner in this case can acquire agricultural
real estate and personal; property for its church, charitable,
lands of the public domain.
benevolent, or educational purposes, and may receive bequests
We must therefore, declare that although a branch of the
or gifts of such purposes. Such corporation may mortgage or sell
Universal Roman Catholic Apostolic Church, every Roman
real property held by it upon obtaining an order for that purpose
Catholic Church in different countries, if it exercises its mission
From the data secured from the Securities and Exchange from the Court of First Instance of the province in which the
and is lawfully incorporated in accordance with the laws of the
Commission, We find that the Roman Catholic Bishop of property is situated; but before making the order proof must be
country where it is located, is considered an entity or person
Zamboanga was incorporated (as a corporation sole) in made to the satisfaction of the Court that notice of the
with all the rights and privileges granted to such artificial being
September, 1912, principally to administer its temporalities and application for leave to mortgage or sell has been given by
under the laws of that country, separate and distinct from the
manage its properties. Probably due to the ravages of the last publication or otherwise in such manner and for such time as
personality of the Roman Pontiff or the Holy See, without
32
said Court or the Judge thereof may have directed, and that it is
to the interest of the corporation that leave to mortgage or sell
must be made by petition, duly verified by the bishop, chief
priest, or presiding elder acting as corporation sole, and may be
opposed by any member of the religious denomination, society
or church represented by the corporation sole: Provided,
however, That in cases where the rules, regulations, and
discipline of the religious denomination, society or church
concerned represented by such corporation sole regulate the
methods of acquiring, holding, selling and mortgaging real
estate and personal property, such rules, regulations, and
discipline shall control and the intervention of the Courts shall
not be necessary.
It can, therefore, be noticed that the power of a corporation sole
to purchase real property, like the power exercised in the case at
bar, it is not restricted although the power to sell or mortgage
sometimes is, depending upon the rules, regulations, and
discipline of the church concerned represented by said
corporation sole. If corporations sole can purchase and sell real
estate for its church, charitable, benevolent, or educational
purposes, can they register said real properties? As provided by
law, lands held in trust for specific purposes me be subject of
registration (section 69, Act 496), and the capacity of a
corporation sole, like petitioner herein, to register lands
belonging to it is acknowledged, and title thereto may be issued
in its name (Bishop of Nueva Segovia vs. Insular Government,
26 Phil. 300-1913). Indeed it is absurd that while the
corporations sole that might be in need of acquiring lands for the
erection of temples where the faithful can pray, or schools and
cemeteries which they are expressly authorized by law to
acquire in connection with the propagation of the Roman
Catholic Apostolic faith or in furtherance of their freedom of
religion they could not register said properties in their name. As
professor Javier J. Nepomuceno very well says "Man in his
search for the immortal and imponderable, has, even before the
dawn of recorded history, erected temples to the Unknown God,
and there is no doubt that he will continue to do so for all time to
come, as long as he continues 'imploring the aid of Divine
Providence'" (Nepomuceno's Corporation Sole, VI Ateneo Law
Journal, No. 1, p. 41, September, 1956). Under the
circumstances of this case, We might safely state that even
before the establishment of the Philippine Commonwealth and
of the Republic of the Philippines every corporation sole then
organized and registered had by express provision of law the
necessary power and qualification to purchase in its name
private lands located in the territory in which it exercised its under consideration, the framers of the same did not have in
functions or ministry and for which it was created, mind or overlooked this particular form of corporation. It is
independently of the nationality of its incumbent unique and undeniable that the naturalization and conservation of our
single member and head, the bishop of the dioceses. It can be national resources was one of the dominating objectives of the
also maintained without fear of being gainsaid that the Roman Convention and in drafting the present Article XII of the
Catholic Apostolic Church in the Philippines has no nationality Constitution, the delegates were goaded by the desire (1) to
and that the framers of the Constitution, as will be hereunder insure their conservation for Filipino posterity; (2) to serve as an
explained, did not have in mind the religious corporations sole instrument of national defense, helping prevent the extension
when they provided that 60 per centum of the capital thereof be into the country of foreign control through peaceful economic
owned by Filipino citizens. penetration; and (3) to prevent making the Philippines a source
of international conflicts with the consequent danger to its
internal security and independence (See The Framing of the
Philippine Constitution by Professor Jose M. Aruego, a Delegate
There could be no controversy as to the fact that a duly
to the Constitutional Convention, Vol. II. P. 592-604). In the
registered corporation sole is an artificial being having the right
same book Delegate Aruego, explaining the reason behind the
of succession and the power, attributes, and properties expressly
first consideration, wrote:
authorized by law or incident to its existence (section 1,
Corporation Law). In outlining the general powers of a
corporation. Public Act. No. 1459 provides among others:
At the time of the framing of Philippine Constitution, Filipino
capital had been to be rather shy. Filipinos hesitated s a general
rule to invest a considerable sum of their capital for the
SEC. 13. Every corporation has the power:
development, exploitation and utilization of the natural
resources of the country. They had not as yet been so used to
corporate as the peoples of the west. This general apathy, the
(5) To purchase, hold, convey, sell, lease, lot, mortgage, delegates knew, would mean the retardation of the development
encumber, and otherwise deal with such real and personal of the natural resources, unless foreign capital would be
property as the purpose for which the corporation was formed encouraged to come and help in that development. They knew
may permit, and the transaction of the lawful business of the that the naturalization of the natural resources would certainly
corporation may reasonably and necessarily require, unless not encourage the INVESTMENT OF FOREIGN CAPITAL
otherwise prescribed in this Act: . . . into them. But there was a general feeling in the Convention that
it was better to have such a development retarded or even
postpone together until such time when the Filipinos would be
In implementation of the same and specially made applicable to ready and willing to undertake it rather than permit the natural
a form of corporation recognized by the same law, Section 159 resources to be placed under the ownership or control of
aforequoted expressly allowed the corporation sole to purchase foreigners in order that they might be immediately be developed,
and hold real as well as personal properties necessary for the with the Filipinos of the future serving not as owners but utmost
promotion of the objects for which said corporation sole is as tenants or workers under foreign masters. By all means, the
created. Respondent Land Registration Commissioner, however, delegates believed, the natural resources should be conserved for
maintained that since the Philippine Constitution is a later Filipino posterity.
enactment than public Act No. 1459, the provisions of Section
159 in amplification of Section 13 thereof, as regard real
properties, should be considered repealed by the former. It could be distilled from the foregoing that the farmers of the
Constitution intended said provisions as barrier for foreigners or
corporations financed by such foreigners to acquire, exploit and
There is a reason to believe that when the specific provision of develop our natural resources, saving these undeveloped wealth
the Constitution invoked by respondent Commissioner was for our people to clear and enrich when they are already
33
prepared and capable of doing so. But that is not the case of
corporations sole in the Philippines, for, We repeat, they are
mere administrators of the "temporalities" or properties titled in
their name and for the benefit of the members of their respective
religion composed of an overwhelming majority of Filipinos. No
mention nor allusion whatsoever is made in the Constitution as
to the prohibition against or the liability of the Roman Catholic
Church in the Philippines to acquire and hold agricultural lands.
Although there were some discussions on landholdings, they
were mostly confined in the inclusion of the provision allowing
the Government to break big landed estates to put an end to
absentee landlordism.
But let us suppose, for the sake of argument, that the above
referred to inhibitory clause of Section 1 of Article XIII of the
constitution does have bearing on the petitioner's case; even so
the clause requiring that at least 60 per centum of the capital of
the corporation be owned by Filipinos is subordinated to the
petitioner's aforesaid right already existing at the time of the
inauguration of the Commonwealth and the Republic of the
Philippines. In the language of Mr. Justice Jose P. Laurel (a
delegate to the Constitutional Convention), in his concurring
opinion of the case of Gold Creek mining Corporation,
petitioner vs. Eulogio Rodriguez, Secretary of Agriculture and
Commerce, and Quirico Abadilla, Director of the Bureau of
Mines, respondent, 66 Phil. 259:
The saving clause in the section involved of the Constitution
was originally embodied in the report submitted by the
Committee on Naturalization and Preservation of Land and
Other Natural Resources to the Constitutional Convention on
September 17, 1954. It was later inserted in the first draft of the
Constitution as section 13 of Article XIII thereof, and finally
incorporated as we find it now. Slight have been the changes
undergone by the proviso from the time when it comes out of the
committee until it was finally adopted. When first submitted and
as inserted to the first draft of the Constitution it reads: 'subject
to any right, grant, lease, or concession existing in respect
thereto on the date of the adoption of the Constitution'. As
finally adopted, the proviso reads: 'subject to any existing right,
grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution'. This
recognition is not mere graciousness but springs form the just
character of the government established. The framers of the
Constitution were not obscured by the rhetoric of democracy or conservation of our natural resources did not mean destruction
swayed to hostility by an intense spirit of nationalism. They well or annihilation of ACQUIRED PROPERTY RIGHTS".
knew that conservation of our natural resources did not mean
destruction or annihilation of acquired property rights. Withal,
they erected a government neither episodic nor stationary but
But respondents' counsel may argue that the preexisting right of
well-nigh conservative in the protection of property rights. This
acquisition of public or private lands by a corporation which
notwithstanding nationalistic and socialistic traits discoverable
does not fulfill this 60 per cent requisite, refers to purchases of
upon even a sudden dip into a variety of the provisions
the Constitution and not to later transactions. This argument
embodied in the instrument.
would imply that even assuming that petitioner had at the time
of the enactment of the Constitution the right to purchase real
property or right could not be exercised after the effectivity of
The writer of this decision wishes to state at this juncture that our Constitution, because said power or right of corporations
during the deliberation of this case he submitted to the sole, like the herein petitioner, conferred in virtue of the
consideration of the Court the question that may be termed the aforequoted provisions of the Corporation Law, could no longer
"vested right saving clause" contained in Section 1, Article XII be exercised in view of the requisite therein prescribed that at
of the Constitution, but some of the members of this Court either least 60 per centum of the capital of the corporation had to be
did not agree with the theory of the writer, or were not ready to Filipino. It has been shown before that: (1) the corporation sole,
take a definite stand on the particular point I am now to discuss unlike the ordinary corporations which are formed by no less
deferring our ruling on such debatable question for a better than 5 incorporators, is composed of only one persons, usually
occasion, inasmuch as the determination thereof is not the head or bishop of the diocese, a unit which is not subject to
absolutely necessary for the solution of the problem involved in expansion for the purpose of determining any percentage
this case. In his desire to face the issues squarely, the writer will whatsoever; (2) the corporation sole is only the administrator
endeavor, at least as a disgression, to explain and develop his and not the owner of the temporalities located in the territory
theory, not as a lucubration of the Court, but of his own, for he comprised by said corporation sole; (3) such temporalities are
deems it better and convenient to go over the cycle of reasons administered for and on behalf of the faithful residing in the
that are linked to one another and that step by step lead Us to diocese or territory of the corporation sole; and (4) the latter, as
conclude as We do in the dispositive part of this decision. such, has no nationality and the citizenship of the incumbent
Ordinary has nothing to do with the operation, management or
administration of the corporation sole, nor effects the citizenship
of the faithful connected with their respective dioceses or
It will be noticed that Section 1 of Article XIII of the
corporation sole.
Constitution provides, among other things, that "all agricultural
lands of the public domain and their disposition shall be limited
to citizens of the Philippines or to corporations at least 60 per
centum of the capital of which is owned by such citizens, In view of these peculiarities of the corporation sole, it would
SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF seem obvious that when the specific provision of the
THE INAUGURATION OF THE GOVERNMENT Constitution invoked by respondent Commissioner (section 1,
ESTABLISHED UNDER THIS CONSTITUTION." Art. XIII), was under consideration, the framers of the same did
not have in mind or overlooked this particular form of
corporation. If this were so, as the facts and circumstances
already indicated tend to prove it to be so, then the inescapable
As recounted by Mr. Justice Laurel in the aforementioned case
conclusion would be that this requirement of at least 60 per cent
of Gold Creek Mining Corporation vs. Rodriguez et al., 66 Phil.
of Filipino capital was never intended to apply to corporations
259, "this recognition (in the clause already quoted), is not mere
sole, and the existence or not a vested right becomes
graciousness but springs from the just character of the
unquestionably immaterial.
government established. The farmers of the Constitution were
not obscured by the rhetoric of democracy or swayed to hostility
by an intense spirit of nationalism. They well knew that
34
But let us assumed that the questioned proviso is material. yet
We might say that a reading of said Section 1 will show that it
does not refer to any actual acquisition of land up to the right,
qualification or power to acquire and hold private real property.
The population of the Philippines, Catholic to a high percentage,
is ever increasing. In the practice of religion of their faithful the
corporation sole may be in need of more temples where to pray,
more schools where the children of the congregation could be
taught in the principles of their religion, more hospitals where
their sick could be treated, more hallow or consecrated grounds
or cemeteries where Catholics could be buried, many more than
those actually existing at the time of the enactment of our
Constitution. This being the case, could it be logically
maintained that because the corporation sole which, by express
provision of law, has the power to hold and acquire real estate
and personal property of its churches, charitable benevolent, or
educational purposes (section 159, Corporation Law) it has to
stop its growth and restrain its necessities just because the
corporation sole is a non-stock corporation composed of only
one person who in his unity does not admit of any percentage,
especially when that person is not the owner but merely an
administrator of the temporalities of the corporation sole? The
writer leaves the answer to whoever may read and consider this
portion of the decision.
Anyway, as stated before, this question is not a decisive factor in
disposing the case, for even if We were to disregard such saving
clause of the Constitution, which reads: subject to any existing
right, grant, etc., at the same time of the inauguration of the
Government established under this Constitution, yet We would
have, under the evidence on record, sufficient grounds to uphold
petitioner's contention on this matter.
In this case of the Register of Deeds of Rizal vs. Ung Sui Si
Temple, 2 G.R. No. L-6776, promulgated May 21, 1955,
wherein this question was considered from a different angle, this
Court through Mr. Justice J.B.L. Reyes, said:
The fact that the appellant religious organization has no capital
stock does not suffice to escape the Constitutional inhibition,
since it is admitted that its members are of foreign nationality.
The purpose of the sixty per centum requirement is obviously to
ensure that corporation or associations allowed to acquire
agricultural land or to exploit natural resources shall be
controlled by Filipinos; and the spirit of the Constitution
demands that in the absence of capital stock, the controlling
membership should be composed of Filipino citizens.
In that case respondent-appellant Ung Siu Si Temple was not a
corporation sole but a corporation aggregate, i.e., an
unregistered organization operating through 3 trustees, all of
Chinese nationality, and that is why this Court laid down the
doctrine just quoted. With regard to petitioner, which likewise is
a non-stock corporation, the case is different, because it is a
registered corporation sole, evidently of no nationality and
registered mainly to administer the temporalities and manage the
properties belonging to the faithful of said church residing in
Davao. But even if we were to go over the record to inquire into
the composing membership to determine whether the citizenship
requirement is satisfied or not, we would find undeniable proof
that the members of the Roman Catholic Apostolic faith within
the territory of Davao are predominantly Filipino citizens. As
indicated before, petitioner has presented evidence to establish
that the clergy and lay members of this religion fully covers the
percentage of Filipino citizens required by the Constitution.
These facts are not controverted by respondents and our
conclusion in this point is sensibly obvious.
Dissenting OpinionDiscussed. After having developed our
theory in the case and arrived at the findings and conclusions
already expressed in this decision. We now deem it proper to
analyze and delve into the basic foundation on which the
dissenting opinion stands up. Being aware of the transcendental
and far-reaching effects that Our ruling on the matter might
have, this case was thoroughly considered from all points of
view, the Court sparing no effort to solve the delicate problems
involved herein.
At the deliberations had to attain this end, two ways were open
to a prompt dispatch of the case: (1) the reversal of the doctrine
We laid down in the celebrated Krivenko case by excluding
urban lots and properties from the group of the term "private
agricultural lands" use in this section 5, Article XIII of the
Constitution; and (2) by driving Our reasons to a point that
might indirectly cause the appointment of Filipino bishops or
Ordinary to head the corporations sole created to administer the
35
temporalities of the Roman Catholic Church in the Philippines.
With regard to the first way, a great majority of the members of
this Court were not yet prepared nor agreeable to follow that
course, for reasons that are obvious. As to the second way, it
seems to be misleading because the nationality of the head of a
diocese constituted as a corporation sole has no material bearing
on the functions of the latter, which are limited to the
administration of the temporalities of the Roman Catholic
Apostolic Church in the Philippines.
Upon going over the grounds on which the dissenting opinion is
based, it may be noticed that its author lingered on the outskirts
of the issues, thus throwing the main points in controversy out of
focus. Of course We fully agree, as stated by Professor Aruego,
that the framers of our Constitution had at heart to insure the
conservation of the natural resources of Our motherland of
Filipino posterity; to serve them as an instrument of national
defense, helping prevent the extension into the country of
foreign control through peaceful economic penetration; and to
prevent making the Philippines a source of international
conflicts with the consequent danger to its internal security and
independence. But all these precautions adopted by the
Delegates to Our Constitutional Assembly could have not been
intended for or directed against cases like the one at bar. The
emphasis and wonderings on the statement that once the
capacity of a corporation sole to acquire private agricultural
lands is admitted there will be no limit to the areas that it may
hold and that this will pave the way for the "revival or
revitalization of religious landholdings that proved so
troublesome in our past", cannot even furnish the "penumbra" of
a threat to the future of the Filipino people. In the first place, the
right of Filipino citizens, including those of foreign extraction,
and Philippine corporations, to acquire private lands is not
subject to any restriction or limit as to quantity or area, and We
certainly do not see any wrong in that. The right of Filipino
citizens and corporations to acquire public agricultural lands is
already limited by law. In the second place, corporations sole
cannot be considered as aliens because they have no nationality
at all. Corporations sole are, under the law, mere administrators
of the temporalities of the Roman Catholic Church in the
Philippines. In the third place, every corporation, be it aggregate
or sole, is only entitled to purchase, convey, sell, lease, let,
mortgage, encumber and otherwise deal with real properties
when it is pursuant to or in consonance with the purposes for
which the corporation was formed, and when the transactions of
the lawful business of the corporation reasonably and
necessarily require such dealing section 13-(5) of the
Corporation Law, Public Act No. 1459 and considering these
provisions in conjunction with Section 159 of the same law
which provides that a corporation sole may only "purchase and
hold real estate and personal properties for its church, charitable,
benevolent or educational purposes", the above mentioned fear
of revitalization of religious landholdings in the Philippines is
absolutely dispelled. The fact that the law thus expressly
authorizes the corporations sole to receive bequests or gifts of
real properties (which were the main source that the friars had to
acquire their big haciendas during the Spanish regime), is a clear
indication that the requisite that bequests or gifts of real estate
be for charitable, benevolent, or educational purposes, was, in
the opinion of the legislators, considered sufficient and adequate
protection against the revitalization of religious landholdings.
Finally, and as previously stated, We have reason to believe that
when the Delegates to the Constitutional Convention drafted and
approved Article XIII of the Constitution they do not have in
mind the corporation sole. We come to this finding because the
Constitutional Assembly, composed as it was by a great number
of eminent lawyers and jurists, was like any other legislative
body empowered to enact either the Constitution of the country
or any public statute, presumed to know the conditions existing
as to particular subject matter when it enacted a statute (Board
of Commerce of Orange Country vs. Bain, 92 S.E. 176; N. C.
377).
Immemorial customs are presumed to have been always in the
mind of the Legislature in enacting legislation. (In re Kruger's
Estate, 121 A. 109; 277 P. 326).
The Legislative is presumed to have a knowledge of the state of
the law on the subjects upon which it legislates. (Clover Valley
Land and Stock Co. vs. Lamb et al., 187, p. 723,726.)
The Court in construing a statute, will assume that the
legislature acted with full knowledge of the prior legislation on
the subject and its construction by the courts. (Johns vs. Town of
Sheridan, 89 N. E. 899, 44 Ind. App. 620.).
The Legislature is presumed to have been familiar with the
subject with which it was dealing . . . . (Landers vs.
Commonwealth, 101 S. E. 778, 781.).
The Legislature is presumed to know principles of statutory
construction. (People vs. Lowell, 230 N. W. 202, 250 Mich. 349, 6.
followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.).
It is not to be presumed that a provision was inserted in a
constitution or statute without reason, or that a result was
intended inconsistent with the judgment of men of common
sense guided by reason" (Mitchell vs. Lawden, 123 N.E. 566,
288 Ill. 326.) See City of Decatur vs. German, 142 N. E. 252,
310 Ill. 591, and may other authorities that can be cited in
support hereof.
Consequently, the Constitutional Assembly must have known:
1. That a corporation sole is organized by and composed our sanction on the pretext that corporations sole which have no
of a single individual, the head of any religious society or church nationality and are non-stock corporations composed of only one
operating within the zone, area or jurisdiction covered by said person in the capacity of administrator, have to establish first
corporation sole (Article 155, Public Act No. 1459);
2. That a corporation sole is a non-stock corporation;
3. That the Ordinary ( the corporation sole proper) does
not own the temporalities which he merely administers;
4. That under the law the nationality of said Ordinary or
of any administrator has absolutely no bearing on the nationality
of the person desiring to acquire real property in the Philippines
by purchase or other lawful means other than by hereditary
succession, who according to the Constitution must be a Filipino
(sections 1 and 5, Article XIII).
36
5. That section 159 of the Corporation Law expressly
authorized the corporation sole to purchase and hold real estate
for its church, charitable, benevolent or educational purposes,
and to receive bequests or gifts for such purposes;
That in approving our Magna Carta the Delegates to
the Constitutional Convention, almost all of whom were Roman
Catholics, could not have intended to curtail the propagation of
the Roman Catholic faith or the expansion of the activities of
their church, knowing pretty well that with the growth of our
population more places of worship, more schools where our
youth could be taught and trained; more hallow grounds where
to bury our dead would be needed in the course of time.
Long before the enactment of our Constitution the law
authorized the corporations sole even to receive bequests or gifts
of real estates and this Court could not, without any clear and
specific provision of the Constitution, declare that any real
property donated, let as say this year, could no longer be
registered in the name of the corporation sole to which it was
conveyed. That would be an absurdity that should not receive
that at least sixty per centum of their capital belong to Filipino
citizens. The new Civil Code even provides:
ART. 10. In case of doubt in the interpretation or application
of laws, it is presumed that the lawmaking body intended right
and justice to prevail.
Moreover, under the laws of the Philippines, the administrator of
the properties of a Filipino can acquire, in the name of the latter,
private lands without any limitation whatsoever, and that is so
because the properties thus acquired are not for and would not
belong to the administrator but to the Filipino whom he
represents. But the dissenting Justice inquires: If the Ordinary is
only the administrator, for whom does he administer? And who
can alter or overrule his acts? We will forthwith proceed to
answer these questions. The corporations sole by reason of their
peculiar constitution and form of operation have no designed
owner of its temporalities, although by the terms of the law it
can be safely implied that the Ordinary holds them in trust for
the benefit of the Roman Catholic faithful to their respective
locality or diocese. Borrowing the very words of the law, We
may say that the temporalities of every corporation sole are held
in trust for the use, purpose, behalf and benefit of the religious
society, or order so incorporated or of the church to which the
diocese, synod, or district organization is an organized and
constituent part (section 163 of the Corporation Law).
courts cannot intervene as to the matters of doctrine or teachings
of the Roman Catholic Church. That is correct, but the courts
may step in, at the instance of the faithful for whom the
temporalities are being held in trust, to check undue exercise by
the corporation sole of its power as administrator to insure that
they are used for the purpose or purposes for which the
corporation sole was created.
American authorities have these to say:
prevent or curtail from then on the acquisition sole, either by
purchase or donation, of real properties that they might need for
the propagation of the faith and for there religious and Christian
activities such as the moral education of the youth, the care,
attention and treatment of the sick and the burial of the dead of
the Roman Catholic faithful residing in the jurisdiction of the
respective corporations sole? The mere indulgence in said
thought would impress upon Us a feeling of apprehension and
absurdity. And that is precisely the leit motiv that permeates the
whole fabric of the dissenting opinion.

In connection with the powers of the Ordinary over the

temporalities of the corporation sole, let us see now what is the
meaning and scope of the word "control". According to the
Merriam-Webster's New International Dictionary, 2nd ed., p.
580, on of the acceptations of the word "control" is:
4. To exercise restraining or directing influence over; to
dominate; regulate; hence, to hold from action; to curb; subject;
also, Obs. to overpower.
SYN: restrain, rule, govern, guide, direct; check, subdue.
It is true that under section 159 of the Corporation Law, the
intervention of the courts is not necessary, to mortgage or sell
real property held by the corporation sole where the rules,
regulations and discipline of the religious denomination, society
or church concerned presented by such corporation sole
regulates the methods of acquiring, holding, selling and Courts of the state do not interfere with the administration of executive departments, especially if long continued, may be
mortgaging real estate, and that the Roman Catholic faithful church rules or discipline unless civil rights become involved resorted to resolve, but not to create, ambiguities. . . .
residing in the jurisdiction of the corporation sole has no say and which must be protected (Morris St., Baptist Church vs. Consideration of the consequences flowing from alternative
either in the manner of acquiring or of selling real property. It Dart, 67 S.C. 338, 45 S.E. 753, and others). (All cited in Vol. II, constructions of doubtful provisions constitutes an important
may be also admitted that the faithful of the diocese cannot Cooley's Constitutional Limitations, p. 960-964.).
govern or overrule the acts of the Ordinary, but all this does not
mean that the latter can administer the temporalities of the
corporation sole without check or restraint. We must not forget
that when a corporation sole is incorporated under Philippine
laws, the head and only member thereof subjects himself to the
jurisdiction of the Philippine courts of justice and these tribunals
can thus entertain grievances arising out of or with respect to the
temporalities of the church which came into the possession of
the corporation sole as administrator. It may be alleged that the
It seems from the foregoing that the main problem We are
It has been held that the courts have jurisdiction over an action
confronted with in this appeal, hinges around the necessity of a
brought by persons claiming to be members of a church, who
proper and adequate interpretation of sections 1 and 5 of Article
allege a wrongful and fraudulent diversion of the church
XIII of the Constitution. Let Us then be guided by the principles
property to uses foreign to the purposes of the church, since no
of statutory construction laid down by the authorities on the
ecclesiastical question is involved and equity will protect from
matter:
wrongful diversion of the property (Hendryx vs. Peoples United
Church, 42 Wash. 336, 4 L.R.A. n.s. 1154).
The most important single factor in determining the intention of
the people from whom the constitution emanated is the language
The courts of the State have no general jurisdiction and control
in which it is expressed. The words employed are to be taken in
over the officers of such corporations in respect to the
their natural sense, except that legal or technical terms are to be
performance of their official duties; but as in respect to the
given their technical meaning. The imperfections of language as
property which they hold for the corporation, they stand in
a vehicle for conveying meanings result in ambiguities that must
position of TRUSTEES and the courts may exercise the same
be resolved by result to extraneous aids for discovering the
supervision as in other cases of trust (Ramsey vs. Hicks, 174
intent of the framers. Among the more important of these are a
Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. n.s. 665;
consideration of the history of the times when the provision was
Hendryx vs. Peoples United Church, supra.).
adopted and of the purposes aimed at in its adoption. The
debates of constitutional convention, contemporaneous
construction, and practical construction by the legislative and
interpretative device. . . . The purposes of many of the broadly
phrased constitutional limitations were the promotion of policies
that do not lend themselves to definite and specific formulation.
If the Constitutional Assembly was aware of all the facts above The courts have had to define those policies and have often
enumerated and of the provisions of law relative to existing drawn on natural law and natural rights theories in doing so. The
conditions as to management and operation of corporations sole interpretation of constitutions tends to respond to changing
in the Philippines, and if, on the other hand, almost all of the conceptions of political and social values. The extent to which
Delegates thereto embraced the Roman Catholic faith, can it be these extraneous aids affect the judicial construction of
imagined even for an instant that when Article XIII of the constitutions cannot be formulated in precise rules, but their
Constitution was approved the framers thereof intended to influence cannot be ignored in describing the essentials of the
37
process (Rottschaeffer on Constitutional Law, 1939 ed., p. 18- and the curtailment of the activities of their Church. That is why
19). the writer gave us a basis of his contention what Professor
All these authorities uphold our conviction that the framers of Aruego said in his book "The Framing of the Philippine
the Constitution had not in mind the corporations sole, nor Constitution" and the enlightening opinion of Mr. Justice Jose P.
intended to apply them the provisions of section 1 and 5 of said Laurel, another Delegate to the Constitutional Convention, in his
There are times that when even the literal expression of Article XIII when they passed and approved the same. And if it
concurring opinion in the case of Goldcreek Mining Co. vs.
legislation may be inconsistent with the general objectives of were so as We think it is, herein petitioner, the Roman Catholic
Eulogio Rodriguez et al., 66 Phil. 259. Anyway the majority of
policy behind it, and on the basis of equity or spirit of the statute Apostolic Administrator of Davao, Inc., could not be deprived of
the Court did not deem necessary to pass upon said "vested right
the courts rationalize a restricted meaning of the latter. A the right to acquire by purchase or donation real properties for
saving clause" for the final determination of this case.
restricted interpretation is usually applied where the effect of charitable, benevolent and educational purposes, nor of the right
literal interpretation will make for injustice and absurdity or, in to register the same in its name with the Register of Deeds of
the words of one court, the language must be so unreasonable 'as Davao, an indispensable requisite prescribed by the Land
to shock general common sense'. (Vol. 3, Sutherland on Registration Act for lands covered by the Torrens system. JUDGMENT
Statutory Construction, 3rd ed., 150.).

We leave as the last theme for discussion the much debated Wherefore, the resolution of the respondent Land Registration
A constitution is not intended to be a limitation on the question above referred to as "the vested right saving clause" Commission of September 21, 1954, holding that in view of the
development of a country nor an obstruction to its progress and contained in section 1, Article XIII of the Constitution. The provisions of sections 1 and 5 of Article XIII of the Philippine
foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs. dissenting Justice hurls upon the personal opinion expressed on Constitution the vendee (petitioner) is not qualified to acquire
Bank of New York and Trust Co., 294 N. Y. S.648; 56 N.E. 2d. the matter by the writer of the decision the most pointed darts of lands in the Philippines in the absence of proof that at least 60
745, 293 N.Y. 749). his severe criticism. We think, however, that this strong dissent per centum of the capital, properties or assets of the Roman
should have been spared, because as clearly indicated before, Catholic Apostolic Administrator of Davao, Inc. is actually
some members of this Court either did not agree with the theory owned or controlled by Filipino citizens, and denying the
of the writer or were not ready to take a definite stand on that registration of the deed of sale in the absence of proof of
Although the meaning or principles of a constitution remain
particular point, so that there being no majority opinion thereon compliance with such requisite, is hereby reversed.
fixed and unchanged from the time of its adoption, a constitution
there was no need of any dissension therefrom. But as the Consequently, the respondent Register of Deeds of the City of
must be construed as if intended to stand for a great length of
criticism has been made the writer deems it necessary to say a Davao is ordered to register the deed of sale executed by Mateo
time, and it is progressive and not static. Accordingly, it should
few words of explanation. L. Rodis in favor of the Roman Catholic Apostolic
not receive too narrow or literal an interpretation but rather the
Administrator of Davao, Inc., which is the subject of the present
meaning given it should be applied in such manner as to meet
litigation. No pronouncement is made as to costs. It is so
new or changed conditions as they arise (U.S. vs. Lassic, 313
ordered.
U.S. 299, 85 L. Ed., 1368). The writer fully agrees with the dissenting Justice that ordinarily
"a capacity to acquire (property) in futuro, is not in itself a
vested or existing property right that the Constitution protects
Effect should be given to the purpose indicated by a fair from impairment. For a property right to be vested (or acquired)
interpretation of the language used and that construction which there must be a transition from the potential or contingent to the
effectuates, rather than that which destroys a plain intent or actual, and the proprietary interest must have attached to a thing;
purpose of a constitutional provision, is not only favored but it must have become 'fixed and established'" (Balboa vs.
will be adopted (State ex rel. Randolph Country vs. Walden, 206 Farrales, 51 Phil. 498). But the case at bar has to be considered
S.W. 2d 979). as an exception to the rule because among the rights granted by
section 159 of the Corporation Law was the right to receive
bequests or gifts of real properties for charitable, benevolent and
educational purposes. And this right to receive such bequests or
It is quite generally held that in arriving at the intent and purpose
gifts (which implies donations in futuro), is not a mere
the construction should be broad or liberal or equitable, as the
potentiality that could be impaired without any specific
better method of ascertaining that intent, rather than technical
provision in the Constitution to that effect, especially when the
(Great Southern Life Ins. Co. vs. City of Austin, 243 S.W. 778).
impairment would disturbingly affect the propagation of the
religious faith of the immense majority of the Filipino people
38