G.R. No. L-3676. January 31, 1955

This is an action to rescind the sale of a parcel of land together with the
improvements erected thereon, described in the complaint, which was sold by the
plaintiff to the defendant Li Seng Giap on 22 January 1940, on the ground that
the vendee was an alien and under the Constitution incapable to own and hold
title to lands. The case was decided upon the following stipulation of
facts:

Plaintiff and defendants in the above-entitled case, by their respective
attorneys, hereby stipulate and agree that the facts involved in this litigation
are as follows:

That plaintiff and defendant Li Seng Giap are, and were at all times
mentioned herein, of legal age and residents of the City of Manila, Philippines;
that defendant Li Seng Giap & Sons, Inc., is a corporation duly organized
and existing under and by virtue of the laws of the Philippines, with principal
office in the City of Manila, Philippines.

II

That on January 22, 1940, plaintiff sold and transferred to defendant Li Seng
Giap, then Chinese citizen, for the sum of P 14,500, a parcel of land together
with a house of strong materials existing thereon, more particularly bounded and
described as follows:

“A PARCEL OF LAND (Lot No. 22-A of the subdivision plan Psd-15360, being a
portion of Lot No. 22, Block No. 2809 of the Cadastral Survey of Manila, G. L.
R. O. Cadastral Record No. 192), situated in the District of Tondo, City of
Manila. Bounded on the NE. by lot No. 23, Block No. 2809, on the SE. by Lot No.
22-B, Block No. 2809; on the SW. by Lot No. 21, Block No. 2809; and on the NW.
by Calle Magdalena; * * * containing an area of four hundred twenty-three square
meters and forty-five square decimeters (423.45) more or less.” (Assessed
value—P15,579.00)

III

That on August 21, 1940, defendant Li Seng Giap sold and transferred unto
defendant Li Seng Giap & Sons, Inc., whose shareholding’s then were owned by
Chinese citizens, for the same sum of P14,500, the above-mentioned parcel,
together with the improvements thereon, and duly registered under Transfer
Certificate of Title No. 59684 of the Office of the Register of Deeds for the
city of Manila on August 23, 1940.

IV

That defendant Li Seng Giap was duly naturalized as a Filipino citizen on May
10, 1941, under Certificate of Naturalization No. 515, the records of which were
duly reconstituted under an order of this Honorable Court in Case No. R-603
dated May 24, 1946.

V

That defendant Li Seng Giap & Sons, Inc., is now a Filipino corporation,
96.67 per cent of its stocks being owned by Filipinos, and duly authorized by
its articles of incorporation to own, acquire or dispose of real properties.

VI

That the following are the names and respective citizenship and shareholdings
of the present stockholders of Li Seng Giap & Sons, Inc.:

Names	Citizenship	No. of shares	Per cent	Total amount
Li Seng Giap	Filipino	3,400	56.67	P340,000.00
Tang Ho de Li Seng Giap	Filipino	1,200	20.00	120,000.00
William Lee	Filipino	200	3.33	20,000.00
Henry Lee	Filipino	200	3.33	20,000.00
Thomas J. Lee	Filipino	200	3.33	20,000.00
Sofia Lee Teehankee	Filipino	200	3.33	20,000.00
Julian M. Lee	Filipino	200	3.33	20,000.00
Charles Lee	Filipino	200	3.33	20,000.00
Anthony P. Lee	Chinese	200	3.33	20,000.00
		6,000	100.00%	P600,000.00

VII

That Henry Lee was duly naturalized as a Filipino citizen on October 21,1936,
under Certificate of Naturalization No. 352, the records of which were duly
reconstituted under an order of this Honorable Court in Case No. R-407 dated May
24, 1946.

VIII

That Thomas J. Lee was duly naturalized as a Filipino citizen on May 10,
1941, under Certificate of Naturalization No. 516, the records of which were
duly reconstituted under an order of this Honorable Court in Case No. R-604
dated May 24, 1946.

IX

That Willian Lee was duly naturalized as a Filipino citizen on November 1,
1948, under Certificate of Naturalization No. 2 of the Court of First Instance
of Daet, Camarines Norte.

X

That Sofia Lee Teehankee is a Filipino citizen being married to Dr. Rafael
Teehankee, a Filipino citizen.

XI

That Julia M. Lee and Charlea Lee are both Filipinos by operation of law as
they were both minors when their father, Li Seng Giap, became a Filipino citizen
on May 10, 1941.

Manila, Philippines, September 7, 1949.

 

Respectfully Submitted:

(Sgd.) Jose S. Sarte
Counsel for the Plaintiff
Room 213
Central Hotel, Manila

Lee, Orendain & Guzman
Counsel for the
Defendants
60 Novaliches St., Manila

By: (Sgd.) Leonardo M. Guzman

The Court rendered judgment dismissing the complaintwith cost against the
plaintiff. She has appealed.

In Caoile vs. Yu Chiao, 49 Off. Gaz., 4321; Talento vs.
Makiki, 49 Off. Gaz., 4331; Bautista vs. Uy 49 Off. Gaz., 4336; Rellosa
vs. Gaw Chee, 49 Off. Gaz., 4345 and Mercado vs. Go Bio, 49
Off. Gaz., 5360, the majority, of this Court has ruled that in sales of real
estate to aliens incapable of holding title thereto by virtue of the provisions
of the Constitution^[1] both the vendor
and the vendee are deemed to have committed the constitutional violation and
being thus in pari delicto the courts will not afford protection to
either party.^[2] From this ruling three
Justices dissented.^[3]

The action is not of rescission because it is not postulated .upon any of the
grounds provided for in Article 1291 of the old Civil Code and because the
action of rescission involves lesion or damage and seeks to repair it. It is an
action for annulment under Chapter VI, Title II, Book II, on nullity of
contracts, based on a defect in the contract which invalidates it independently
of such lesion or damages.^[4] It is very
likely that the majority of this Court proceeded upon that theory when it
applied the in pari delicto rule referred to above.

In the United States the rule is that in a sale of real estate to an alien
disqualified to hold title thereto the vendor divests himself of the title to
such real estate and has no recourse against the vendee despite the latter’s
disability on account of alienage to hold title to such real estate and . the
vendee may hold it against the whole world except as against the State. It is
only the State that is entitled by proceedings in the nature of office
found to have a forfeiture or escheat declared against the vendee “Who is
in- capable of holding title to the real estate sold and conveyed to him.^[5]

However, if the State does not commence such proceedings and in the meantime
the alien becomes naturalized citizen, the State is deemed to have waived its
right to escheat the real property and the title of the alien thereto becomes
lawful and valid as of the date of its conveyance or transfer to him.^[6] The rule in the United States that in a
sale of real estate to an alien disqualified to hold title thereto, the vendor
divests himself of the title to such real estate and is not permitted to sue-for
the annulment of his contract, is also the rule under the Civil Code. * * *
Article 1302 of the old Civil Code provides: * * * Persons sui juris
cannot, however, avail themselves of the incapacity of those with whom they
contracted; * * *.”

Manresa’s comment on this clause of article 1302 of the Civil Code is as
follows:

Irresponsabilidad del defecto alegada.—Es la segunda de las
condiciones necesarias para el ejercicio de la accidn. Algunos la expresan
diciendo que solo puede intentar aquella el perjudicado, pero esta
expresion puede conducir a ideas equivocadas, ya que la nulidad es independiente
de la lesion, como declara el art. 1.300, y es licito al favorecido
economicamente por el contrato pedir la nulidad basandose en causas a el no
imputables, y en cambio no autoriza in ley el caso inverso.

Sencilla la regla contenida en el parrafo segundo de este articulo, puede
complicarse cuando coexisten dos defectos del contrato, como puede suceder,
derivandose a veces de un mismo hecho, verbigracia, el contrato celebrado con un
incapaz por quien ignora que lo es: eneste ejemplo es indudable que la persona
capaz no podra pedir la nulidad fundado en la incapacidad de la otra, pero si
alegar el error o el dolo que padecieze si las circunstancias del sujeto eran de
decisiva infiuencia en el contrato. (Supra, pp.
708-709.)

Appellant argues that if at the time of the conveyance of the real property
the appellee was incapable of holding title to such real estate, the contract of
sale was null or void and may be annulled, and his subsequent naturalization as
a Filipino citizen cannot retroact to the date of the convey ance to make it
lawful and valid. However, if the ban on aliens from acquiring not only
agricultural but also urban lands, as construed by this Court in the Krivenko
case, is to preserve the nation’s lands for future generations of Filipinos,
that aim or purpose would not be thwarted but achieved by making lawful the
acquisition of real estate by aliens who became Filipino citizens by
naturalization. The title to the parcel of land of the vendee, a naturalized
Filipino citizen, being valid that of the domestic corporation to which the
parcel of land has been transferred, must also be valid, 96.67 per cent of its
capital stock being owned by Filipinos.

The judgment appealed from is affirmed, without costs.

Paras, C.J., Pablo, Bengzon, Montemayor, Reyes, A., Jugo, Bantista
Angelo, and Labrador, JJ., concur.

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^[1] Section 5, Article XIII; Krivenko
vs. Register of Deeds, 44 Off. Gaz., 471.

^[2] Article 1305, old Civil Code;
Article 1411, new Civil Code.

^[3] Mr. Justice Pablo, Mr. Justice
Alex. Reyes and the writer. See Caoile vs. Yu Chiao, Talento
vs. Makiki, Bautista vs. Uy, Rellosa vs. Gaw Chee and
Mercado vs. Go Bio, supra.

^[4] Manresa, Commentaries al Codigo
Civil Espafiol, Vol. VIII, p. 698, 4th ed.

^[5] Abrams vs. State, 88 Pac.
327; Craig vs. Leslie et al., 4 Law, Ed. 460; 3 Wheat, 563, 589-590; Cross
vs. Del Valle, 1 Wall, (U. S.) 513; 17 Law. Ed., 515; Governeur
vs. Robertson, 11 Wheat, 332, C Law. Ed., 488.

^[6] Osterman vs. Baldwin, 6
Wall, 116, 18 Law. ed. 730; Manuel vs. Wulff, 152 U. S. 505, 38 Law.
ed. 532; Pembroke vs. Houston, 79 SW 470; Fieorella vs. Jones,
259 SW 782.

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CONCURRING OPINION

 

REYES, J.B.L., J.:

I fully concur with the opinion of Justice Padilla, but wish to stress, as an
additional reason for the decision in the present case, that when this action
was instituted in 1948, the disability of the original vendee had been already
removed, since he was naturalized in 1941; and that the stockholders of the
second transferee, Li Seng Giap & Sons, Inc., who hold more than 60 per cent
of its capital stock, had likewise become Filipino citizens before, and not
after, the action to annul was filed.

Judgment affirmed.