PHILIPPINE BANKING CORPORATION, REPRESENTING THE ESTATE OF JUSTINA SANTOS Y CANON FAUSTINO DECEASED, PLAINTIFF-APPELLANT, VS. LUI SHE, IN HER OWN BEHALF AND AS ADMINISTRATRIX OF…

Philippine Banking Corporation versus Lui She

The Case

This is the Philippine Banking Corporation, representing the estate of Justina Santos y Canon Faustino, deceased, against Lui She, in her own behalf and as administratrix of the estate of the late Wong Heng. The action was brought to invalidate a series of contracts by which Justina Santos, a Filipino landowner, sought to place her Manila property in the hands of Wong Heng, a Chinese national. The case matters because it shows how the Supreme Court looks past the form of separate agreements to the single scheme behind them, and because the resolution reproduced here, denying a second motion for new trial, teaches the strict standards for newly discovered evidence and the constitutional barrier against alien ownership of land.

Procedural History

The case was tried in the Court of First Instance of Manila, which rendered its decision in September 1960, and the records show that the lease contract and the other agreements were placed in issue there. The matter reached the Supreme Court on appeal, and on September 12, 1967 the Court rendered its decision holding the contracts void. Lui She filed a motion for reconsideration, which the Court denied on October 5, 1967, rejecting her argument that the lease contract was separable from the rest. She then filed a second motion, this time for a new trial, anchored on three documents said to be newly discovered. The resolution now before us disposes of that second motion.

Facts

Justina Santos owned real property in Manila. On November 15, 1957, she entered into a lease contract with Wong Heng for fifty years. Ten days later, on November 25, the parties amended the contract so that it covered her entire property. On December 21, less than a month after, they entered into another contract giving Wong Heng the option to buy the leased premises should his pending petition for naturalization be granted.

Wong Heng failed to secure naturalization, and the parties then discovered that adoption does not confer the citizenship of the adopting parent on the adopted. On November 18, 1958, they entered into two more contracts extending the lease to ninety-nine years and fixing the period of the option to buy at fifty years. The Supreme Court later found that each contract was designed to carry out Justina Santos' wish to give the land to Wong Heng and thereby place its ownership in alien hands.

Justina Santos died on December 28, 1964. In her second motion for new trial, Lui She relied on a codicil dated November 11, 1957, and two wills executed on August 24 and August 29, 1959. The codicil named Tita Yaptinchay Lao as administratrix with the right to buy the estate properties, and provided that if she were legally disqualified from buying, she would be the sole heir. In both 1959 wills, Justina Santos enjoined her heirs to respect the lease contract and the conditional option given in favor of Wong Heng.

Issues

• Whether or not the codicil and the two wills are newly discovered material evidence that warrants a reopening of the case.
• Whether or not the documents are of such character as would probably alter the result already reached.
• Whether or not the lease contract can be saved from invalidity as separable from the other contracts.

Applicable Provisions

The Court refers to the constitutional prohibition against alien ownership of land, which underlies the whole scheme and which the contracts were designed to circumvent. The decision states the principle in these terms:

As the lease contract was part of a scheme to violate the Constitution it suffers from the same infirmity that renders the other contracts void and can no more be saved from illegality than the rest of the contracts.

The Court also invokes the Civil Code provisions on the revocation of wills, which bear on whether the later lease contract displaced the earlier codicil:

Civil Code articles 830(1) and 957.

These provisions supply the rule that a subsequent conveyance may amount to an implied revocation of a prior testamentary disposition of the same property.

Ruling

On the first issue, the Court held that the documents are not newly discovered evidence. The claim that they could not have been produced at the trial because they were presented in the probate court only after Justina Santos died in 1964 is, in the Court's words, a misrepresentation of the grossest sort. The two wills of August 1959 were in fact presented in this very case as Exhibits 285 and 279 for the defendant-appellant, and were considered and expressly referred to in the decision of the lower court and in the Supreme Court's decision. As for the codicil of November 1957, the defendant-appellant could hardly feign ignorance of its existence, since its provisions were substantially adverted to in the testimony of one of her own witnesses and were recited in the decision below. By no means can the documents be considered newly discovered evidence so as to warrant a reopening.

On the second issue, the Court held that nothing in the documents is likely to alter the result. As to the codicil, even granting that Justina Santos had devised the land to Lao, she was not thereby barred or precluded from subsequently giving the land to Wong Heng. The execution of the lease contract, which together with the other contracts amounted to a transfer of ownership to Wong Heng, constituted an implied revocation of the codicil at least insofar as the disposition of the land is concerned. As to the 1959 wills, the statement that Wong Heng's right to buy be allowed anytime he or his children should be entitled to buy lands in the Philippines is nothing but a reiteration of the lease contract and the conditional option, which in combination amount to a conveyance, the protestation of compliance with the law notwithstanding. The Court observed that motives are seldom avowed and avowals are not always candid, and it relied on the testimony of the defendant-appellant's own witnesses, who recounted that Justina Santos had said she was the owner and the only one who could question any illegality, and that her ambition was to see the properties enjoyed and even owned by Wong Heng, whom she considered a son.

On the third issue, the Court adhered to its earlier ruling that the lease contract was part of a scheme to violate the Constitution and suffers from the same infirmity that renders the other contracts void. The other points raised in the motion were either already disposed of or too insubstantial to merit attention.

Doctrine

First, a lease contract that is part of a scheme to place land in alien hands is void, because it suffers from the same infirmity as the other contracts in the scheme and cannot be saved from illegality by treating it as separable. Second, documents already presented in evidence, or whose existence and contents were known to the movant and adverted to at trial, are not newly discovered evidence and cannot justify a new trial. Third, a subsequent conveyance of property may operate as an implied revocation of a prior testamentary disposition of the same property, under the Civil Code provisions on revocation. Fourth, the Court looks to the substance of the transaction and the proven intent of the parties, not to protestations of compliance with the law, in determining whether a conveyance to an alien has been effected.

Disposition

The motion for new trial was denied, and the earlier decision holding the contracts void stood.

Remember This

The single line worth memorizing is that a lease contract that is part of a scheme to violate the Constitution suffers the same infirmity as the other contracts and cannot be saved from illegality. Examiners use this case to test the rule against alien ownership of land, the doctrine of implied revocation of wills, and the strict requirements for newly discovered evidence.