PHILIPPINE BANKING CORPORATION VS.

LUI SHE,
G.R. NO. 17587
CASTRO, J.:

FACTS:

Justina who inherited parcels of land in Manila executed a contract

of lease in favor of Wong, covering a portion already leased to him
and another portion of the property. The lease was for 50 years,
although the lessee was give the right to withdraw at anytime from
the agreement with a stipulated monthly rental.

She executed another contract giving Wong the option to buy

the leased premises for P120,000 payable within 10 years at
monthly installment of P1,000. The option was conditioned on his
obtaining Philippine citizenship, which was then pending. His
application for naturalization was withdrawn when it was discovered
that he was a resident of Rizal.

She executed two other contracts one extending the term to

99 years and the term fixing the term of the option of 50 years. In
the two wills, she bade her legatees to respect the contract she had
entered into with Wong, but it appears to have a change of heart in
a codicil. Claiming that the various contracts were made because of
her machinations and inducements practiced by him, she now
directed her executor to secure the annulment of the contracts.

The complaint alleged that Wong obtained the contracts

through fraud. Wong denied having taken advantage of her trust in
order to secure the execution of the contracts on question. He
insisted that the various contracts were freely and voluntarily entered
into by the parties.

The lower court declared all the contracts null and void with
the exception of the first, which is the contract of lease.

ISSUE:

Whether or not the contracts entered into by the parties are

void.

DECISION:

The contract is void. The Court held the lease and the rest of
the contracts were obtained with the consent of Justina freely given
and voluntarily, hence the claim that the consent was vitiated due to
fraud or machination is bereft of merit. However the contacts are not
necessarily valid because the Constitution provides that aliens are
not allowed to own lands in the Philippines. The illicit purpose then
becomes the illegal causa, rendering the contracts void.
 It does not follow from what has been said that because the
parties are in pari delicto they will be left where they are, without
relief. For one thing, the original parties who were guilty of violation
of fundamental charter have died and have since substituted by their
administrators to whom it would e unjust to impute their guilt. For
another thing, Article 1416 of the Civil Code provides an exception
to the pari de licto, that when the agreement is not illegal per se but
is merely prohibited, and the prohibition of the law is designed for
the protection of the plaintiff, he may recover what he has paid or
delivered.