G.R. No. 156364 (2007)
Topics:
Prohibition against aliens from owning land in the Philippines
Summary:
Petition for Review on Certiorari assailing CA Decision affirming the Order of the HLURB that set aside the levy made by the sheriff. The Court is also confounded by how the HLURB and CA missed that Hulst and his wife are foreign nationals who are disqualified under the Constitution from owning real property in their names.
Doctrines:
- Void contracts, exceptions
- In pari delicto
Facts:
Jacobus Bernhard Hulst and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders, Inc. for the purchase of a 210-sq m residential unit in respondent’s townhouse project in Batangas.
When PR Builders failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with interest, damages and attorney’s fees. HLURB ruled in favor of the spouses. Meanwhile, they divorced and Jacobus assigned his rights to Ida who pursued the case.
A Writ of Execution was issued to the Ex-Officio Sheriff of RTC Tanauan. PR Builders filed a complaint and the levy was set aside. The Sheriff set a public auction of the said levied properties, to which PR Builders filed a motion to quash on the ground that the sheriff made an over levy.
Despite the complaint, the Sheriff proceeded with the auction since there was no restraining order from the HLURB. The 15 parcels of land was then awarded to Holly Properties Realty and the sheriff subsequently remitted the legal fees and submitted the contracts of sale to HLURB. He then received orders to suspend proceedings on the auction as to the disparity between the appraised value and the value as levied by the Sheriff.
Issue:
Whether the Hulst’s complaint is actionable despite being contrary to the prohibition of acquiring lands
Ruling:
Yes. Generally, parties to a void agreement cannot expect the aid of the law, and the courts leave them as they are, because they are deemed in pari delicto or “in equal fault.” However, exception provides that return of what has been given under a void contract may be allowed in the following: (a) the innocent party (Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest (Art. 1413, Civil Code); (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code); (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code); (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code); and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts. 1418-1419, Civil Code).
In this case, the agreement executed by the parties is a Contract to Sell and not a contract of sale. In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside. On the other hand, a contract to sell is similar to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.
Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership.
Thus, exception (c) is applied by the Court. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Hulst, thus, is entitled to the recovery only of the purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved.