**Facts**:
1. **Property Background**: Felix Ting Ho, a Chinese citizen, occupied a 774 sqm parcel of land in Olongapo City through permission from the U.S. Naval Reservation Office. Felix Ting Ho built a commercial and residential building and operated businesses on the property with his Filipino wife, Leonila Cabasal.
2. **Property Transfers**:
– **1958 Transactions**: Felix Ting Ho allegedly sold the commercial and residential buildings to his sister-in-law, Victoria Cabasal, and a bakery to his brother-in-law, Gregorio Fontela.
– **1961 Sale**: Victoria and Gregorio sold these properties to Felix’s oldest son, Vicente Teng Gui.
– **1978 Patent and Title**: Miscellaneous Sales Patent No. 7457 and Original Certificate of Title No. P-1064 were issued to Vicente Teng Gui.
3. **Ownership Dispute**:
– Petitioners (Felix Ting Ho’s children) argued that the properties were held in trust by Vicente for their father’s estate and should be partitioned amongst them.
– Vicente countered claiming ownership from transactions in 1958 and 1961.
4. **Procedural History**:
– **RTC Ruling**: The trial court found the property transactions simulated, recognizing Vicente’s ownership as a donations but partitioned only Leonila Cabasal’s share among the siblings.
– **CA Ruling**: The appellate court reversed, stating Felix never owned the lot, which legally belonged to Vicente from the sales patent, but the buildings should be included in the estate.
– **Supreme Court**: Petitioners sought review; respondent wanted affirmation of sole ownership of both land and structures.
**Issues**:
1. Whether Lot No. 418, Ts-308 should form part of Felix Ting Ho’s estate.
2. Whether the improvements (residential and commercial buildings) on the lot are part of Felix Ting Ho’s estate.
**Court’s Decision**:
1. **Land Ownership**:
– **Legal Basis**: The 1935 Constitution prohibits aliens from owning public lands.
– **Findings**: Felix Ting Ho, a Chinese citizen, was barred from owning the land despite possessing it via US Naval Reservation Office permission. Meanwhile, Vicente, a naturalized Filipino citizen, legally acquired the land through Miscellaneous Sales Patent No. 7457 and Original Certificate of Title No. P-1064.
– **Conclusion**: The land is excluded from Felix’s estate and belongs solely to Vicente.
2. **Ownership of Structures**:
– **Simulated Transactions**: The Deeds of Sale in favor of Victoria Cabasal and Gregorio Fontela, and subsequent sale to Vicente, were simulated to preserve family possession.
– **Error in Lower Court**: The RTC erred assuming these were donations under Article 1471 without proof of intent.
– **Final Decision**: The two-storey commercial and residential buildings and the sari-sari store are parts of Felix’s estate. The CA decision awarding 4/5 to petitioners and 1/5 to respondent was upheld.
**Doctrine**:
1. **Constitutional Ownership Limits**: Non-Filipinos cannot own public lands; alienation/ownership must follow constitutional provisions.
2. **Simulated Transactions**: Sales lacking true consideration may be void, potentially recharacterized as donations if proven intent exists (Article 1471, Civil Code).
3. **Trusts in Property Law**: Implied trusts related to avoiding constitutional prohibitions (e.g., aliens owning land) cannot be upheld.
**Class Notes**:
– **Ownership Prohibition**: Non-Filipino citizens cannot own public lands (1935 Constitution, Article XIII, Section 1).
– **Simulated Sales**: If simulated without consideration, sales are void but may be shown to have intended to be a donation (Civil Code, Article 1471).
– **Effect of Registration**: Registration of patents and titles makes land ownership conclusive (Property Registration Decree, P.D. No. 1529, Section 103).
**Historical Background**:
The case reflects the historical restriction under the 1935 Constitution on alien land ownership, stemming from a policy to limit land ownership to Filipino citizens to preserve national interests and sovereignty over territorial lands. This prohibition continues to influence property disputes involving foreign nationals in the Philippines.
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