CHARRY LISING, PLAINTIFF-APPELLANT, VS. SPS. BERNARDO MANANSALA, JR., AND OFELIA MANANSALA, DEFENDANTS-APPELLEES.

Lising versus Manansala

The Case

This is a squabble among family relatives that became a question of constitutional law. Charry Lising, the niece of Ofelia Manansala, lent money to the spouses Bernardo and Ofelia Manansala, and the loans were secured by a real estate mortgage over two parcels of land. When the spouses failed to pay, Lising sued to foreclose. The spouses struck back with a defense that went to the root of the transaction: Lising, they said, had become an American citizen by her marriage to an American, and an alien cannot own Philippine land. The case matters because the Supreme Court uses it to fix two rules every reviewee must carry: the constitutional ban on alien land ownership is cured once the land passes into the hands of a qualified Filipino, and a mortgagor's equity of redemption is not a reason to refuse foreclosure.

Procedural History

Lising filed a complaint for foreclosure of real estate mortgage before the Regional Trial Court of San Jose, Occidental Mindoro, Branch 46. The trial court rendered judgment declaring the deed of mortgage null and void for being contrary to law and public policy, ordering Lising to return the titles to the spouses, and ordering the spouses to return the amount they borrowed, with legal interest. Both parties moved for reconsideration. The trial court denied Lising's motion and modified its decision, ordering the Register of Deeds to cancel the title issued in Lising's name and to reinstate and register the title in the name of the spouses, and ordering the spouses to return the amount borrowed less the partial payments, with twelve percent interest. Lising then appealed to the Supreme Court, assigning as errors the nullification of the mortgage, the cancellation and reinstatement of the titles, and the trial court's computation of what remained owed.

Facts

Lising extended a loan of twenty three thousand six hundred United States dollars to the spouses Manansala. The obligation was secured by a mortgage agreement over two parcels of land, covered by two transfer certificates of title. One of those titles, however, was registered not in the name of the spouses but in the name of Josefina Casao, the sister of Ofelia. When the spouses failed to pay the balance of twenty thousand six hundred dollars, Lising sought to foreclose the mortgage on the parcel whose title stood in the spouses' name.

The spouses resisted. They disclosed that Lising had become an American citizen upon her marriage to an American citizen, and they theorized that as an alien and permanent resident of the United States she had no right to own land in the Philippines. They narrated that their first loan was fifteen thousand dollars, secured by the parcel previously sold by Josefina to Ofelia but still titled in Josefina's name; that financial difficulties led them to request a further five thousand dollars, which Lising granted on condition that the other parcel be made additional collateral; and that the obligation then stood at twenty three thousand six hundred dollars inclusive of interests. They claimed that the land under the first title was later sold to Lising through fraud and machination, that the transfer obliterated the fifteen thousand dollar obligation, and that they had paid three thousand dollars and consigned a check for fifty eight thousand pesos, fully paying the mortgage debt.

The trial court held that Lising, an American citizen, was disqualified to acquire the realty, on account of the proscription against alien ownership of private lands. On reconsideration, Lising produced her Citizenship Retention and Re-Acquisition dated 11 February 2005 and her Philippine passport issued in November 2000. The trial court denied her motion and modified its judgment as described above, and she appealed.

Issues

• Whether or not Lising, a former Filipino citizen who later re-acquired her Filipino citizenship, is disqualified from owning private lands in the Philippines, and whether or not the mortgage in her favor is therefore null and void.
• Whether or not the trial court erred in ordering the cancellation of the title issued in Lising's name and the reinstatement and registration of the title in the name of the spouses.
• Whether or not the trial court erred in ruling that the spouses owed only five thousand five hundred dollars, arrived at by deducting fourteen thousand five hundred dollars from the twenty thousand six hundred dollars claimed by Lising.

Applicable Provisions

Section 7 of Article Twelve of the 1987 Constitution provides:

Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

This is the general disqualification the trial court invoked against Lising as an alien.

Section 8 of Article Twelve of the 1987 Constitution provides:

Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.

This is the exception that saves the transaction, because Lising is a natural-born citizen who lost and then re-acquired her citizenship.

Ruling

On the first issue, the Court held that the appeal carries weight and conviction. It conceded that at the time the mortgage was executed Lising was already an alien, having lost her citizenship upon her marriage. But it held that the flaw was cured. The Court adopted the doctrinal principle laid down in United Church Board for World Ministries versus Sebastian:

If land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.

Since Lising re-acquired her Filipino citizenship, there lies no prohibition for her to acquire the realty, and her Torrens title must be upheld as indefeasible and incontrovertible unless cancelled in a proper proceeding directly attacking its validity. The Court explained that the constitutional proscription was intended to protect lands from falling into the hands of non-Filipinos, and that no public policy is violated where the land is in the hands of a Filipino qualified to acquire and own it: the objective of keeping our lands in Filipino hands has been achieved.

On the second issue, the Court held that Lising's plea to foreclose the mortgage on the other parcel was well taken. It discerned no compelling reason for the trial court's refusal, because the question whether Lising would acquire ownership of that property is premature. The spouses have an equity of redemption, which is their right as mortgagors to extinguish the mortgage and retain ownership by paying the secured debt prior to the confirmation of the foreclosure sale. Lising is not disqualified to acquire ownership of the lot should the spouses fail to redeem.

On the third issue, the Court held that the obligation stands at twenty thousand six hundred dollars, from which the fifteen thousand dollars must be deducted because that first loan is deemed paid upon the issuance of the title in Lising's name, and from which the fifty eight thousand pesos must likewise be subtracted as the value of the consigned check. The aggregate difference is the mortgage debt that remains unpaid and becomes the subject of foreclosure. The spouses' bare allegation of a three thousand dollar payment is devoid of credence.

Doctrine

First, the constitutional disqualification of aliens from acquiring private lands is not absolute in its effects over time. Under Section 8 of Article Twelve, a natural-born citizen who lost Philippine citizenship may be a transferee of private lands, and where land is invalidly transferred to an alien who subsequently becomes a citizen, the flaw in the original transaction is cured and the transferee's title is rendered valid. Second, a Torrens title is indefeasible and incontrovertible unless cancelled in a proper proceeding directly attacking its validity. Third, the pendency of the question whether the mortgagee will ultimately acquire the mortgaged land is premature where the mortgagor still holds the equity of redemption, the right to extinguish the mortgage and retain ownership by paying the secured debt before confirmation of the foreclosure sale. Fourth, in computing the mortgage debt, prior loans deemed paid by a subsequent transfer and amounts validly consigned must be deducted, while bare and unproven claims of payment are rejected.

Disposition

The appeal was granted; the trial court's decision and order were reversed and set aside, a new judgment was entered granting the complaint for foreclosure of real estate mortgage, and the trial court was ordered to commence foreclosure proceedings pursuant to Rule 68 of the Rules of Court.

Remember This

Memorize the curative line: if land is invalidly transferred to an alien who subsequently becomes a citizen, the flaw is cured and the title is valid. Examiners use this case to test Section 8 of Article Twelve of the Constitution, the indefeasibility of Torrens titles, and the nature of the mortgagor's equity of redemption as a reason foreclosure may proceed.