Hulst v. PR Builders

 

TOPIC CASE NO.

Condominium Act G.R. No. 156364

CASE NAME

Hulst v. PR Builders

MEMBER

Antonio Alejandro T. Rebosa, Jr.

 Note: This 2008 case that Sir Gulapa assigned is a MR of a previous case from the year before. Kaya it’s just 3 pages lang sa CDAsia.. I’m willing to bet P .500 that Sir Gulapa will ask to go back to the 2007 case. Kaya I included nalang a digest I made of CDAsia the 2007 case as well but only on ly to the relevant issue. See other notes  

DOCTRINE Considering that the rights and liabilities of the parties under the Contract to Sell is covered by the Condominium Act wherein Hulst as unit owner was simply a member of the Condominium Corporation and the land remained owned by PR Builders, then the constitutional proscription against aliens owning real property does not apply to the present case. There being no circumvention of the constitutional  prohibition, the the Court's pronouncements pronouncements on the the invalidity invalidity of the Contract Contract of Sale should should be se sett aside. RECIT-READY DIGEST  This resolves Hulst’s Motion for Partial Consideration, assailing the SC’s 2007 Decision, which rendered that he was to return to PR Builders the amount of P2,125,540 P2,125,540,, in excess of the proceeds of the auction sale delivered to Hulst. Hulst filed the present Motion insofar as he was ordered to return such amount. He contended that the Contract to Sell between Hulst and PR Builders involved a condominium unit and did not violate the Constitutional Proscription against ownership of land by aliens; such contract will not

transfer to the buyer of thea land on which the unit is situated; thus, the buyer will not get a transfer certificate of ownership title but merely Condominium Certificate of Title as evidence of ownership; and that perusal of the contract will show that what the buyer acquires is the seller’s title and rights to and interests in the unit and the common areas. The Court granted the Motion for Partial Reconsideration. Reconsideration . Under the Condominium Act, foreign nationals can own Philippine real estate through the purchase of condominium units or townhouses constituted under the Condominium principle with Condominium Certificates of Title. The law provides that no condominium unit can be sold without at the same time selling the corresponding amount of rights, shares or other interests in the condominium management body, the Condominium Corporation; and no one can buy shares in a Condominium Corporation without at the same time buying a condominium unit. It expressly allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or controlled corporation. Under this set up, the ownership of the land is legally separated from the unit itself. The land is owned by a Condominium Corporation and the unit owner is simply a member in this Condominium Corporation. 5 As long as 60% of the members of this Condominium   Considering that the rights and Corporation are parties Filipino, the the remaining be foreigners. liabilities of the under Contractmembers to Sell is can covered by the Condominium Act wherein Hulst as unit owner was simply a member of the Condominium Corporation and the land remained owned by PR Builders, then the constitutional proscription against aliens owning real property does not apply to the  present case. There being no circumvention circumvention of the constitutional prohibition, prohibition, the Court's pronouncem pronouncements ents on the invalidity of the Contract of Sale should be set aside. FACTS This resolves Hulst’s Motion for Partial Consideration, assailing the SC’s 2007 Decision, which   rendered that: o  Hulst was ordered to return to PR Builders the amount of P2,125,540, without interest, in excess of the proceeds of the auction sale delivered to Hulst. Hulst filed the present Motion insofar as he was ordered to return the amount of P2,125,540 in   excess of the proceeds of the auction sale delivered to Hulst.

 

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Hulst contends that the Contract to Sell between Hulst and PR Builders involved a condominium unit and did not violate the Constitutional Constitutional Proscription against ownership of land by aliens. o  He argues that the Contract to Sell will not transfer to the buyer ownership of the land on which the unit is situated; thus, thus , the buyer will not get a transfer certif certificate icate of title but merely a Condominium Certificate of Title as evidence of ownership o  A perusal of the the contract will show that what the buyer acquires is the seller’s title and rights to and interests in the unit and the common areas.   Despite receipt of this Court’s Feb. 6, 2008 Resolution, PR Builders failed to file a comment on the subject motion. o

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ISSUE/S and HELD 1.  W/N the constitutional proscription against ownership of land by aliens was violated?  –  NO RATIO 1.  The Motion for Partial Reconsideration is impressed with merit. Under the Condominium Act, foreign nationals can own Philippine real estate through the purchase   of condominium units or townhouses constituted under the Condominium principle with Condominium Certificates of Title. Sec. 5 of RA No. 4726 states:   o  SEC. 5. Any transfer or conveyance of a unit or an apartment, office or store or other space

therein, shall include the transfer or conveyance of the undivided interest in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation; corporatio n; Provided, however, That where the common areas in the condominium project are held by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.     The law provides that no condominium unit can be sold without at the same time selling the corresponding amount of rights, shares or other interests in the condominium management body, the Condominium Corporation; and no one can buy shares in a Condominium Corporation without at the same time buying a condominium unit.

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It expressly allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or controlled corporation. corporation. Under this set up, the ownership of the land is legally separated separated from the unit itself.   The land is owned by a Condominium Corporation and the unit owner is simply a member in this Condominium Corporation. 5 As long as 60% of the members of this Condominium Corporation are Filipino, the remaining members can be foreigners.   Considering that the rights and liabilities of the parties under the Contract to Sell is covered by the Condominium Act wherein Hulst has unit owner was simply a member of the Condominium Corporation and the land remained owned by PR Builders, then the constitutional proscription against aliens owning real property does not apply to the present case. There being no circumvention of the constitutional prohibition, the Court's pronouncements on the invalidity of the Contract of Sale should be set aside.  

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DISPOSTIVE PORTION

 

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WHEREFORE, the Motion for Partial Reconsideration is GRANTED. Accordingly, the Decision dated September 3, 2007 of the Court is MODIFIED by deleting the order to petitioner to return to respondent the amount of P2,125,540.00 in excess of the proceeds of the auction sale delivered to petitioner. SO ORDERED. Other notes: 2007 Digest FACTS: Jacobus Bernhard Hulst and his spouse Johanna Hulst-Van Ijzeren (Ida), Dutch Nationals, entered   into a Contract to Sell with PR Builders for the purchase of a 210-sqm. Residential until in PR Builder’s townhouse project in Barangay Niyugan, Laurel, Batangas. When PR Builders failed to comply with its verbal promise to complete the project by June 1995,   the spouses Hulst filed before the HLURB a complaint for rescission of contract with interest, damages and attorney’s fees. APRIL 22, 1997: HLURB Arbiter Aquino rendered a decision in favor of Spouses Hulst for PR   Builders to reimburse Spouses Hulst the sum of P3,187 representing the purchase price by the Spouses to PR Builders, with 12% interest per annum from the time complaint was filed, with actual, moral and exemplary damages and attorney’s fees as well as costs of  suit.   suit. Meanwhile, Spouses Hulst divorced. Ida assigned her rights over the purchased property to    

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Jacobus. From there on, Jacobus alone pursued the case. AUGUST 21, 1997: The HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the RTC of Tanauan, Batangas directing the Sheriff to execute its judgment. APRIL 13, 1998: The Sheriff proceeded to implement the Writ of Execution. However, upon complaint of PR Builders with the CA on petition for certiorari and prohibition, the levy made by the Sheriff was set aside, requiring the Sheriff to levy first on PR Builders’ personal properties. Sheriff Ozaeta tried to implement the writ as directed but the writ was returned unsatisfied. MARCH 23, 1999: 1999: The Sheriff levied on PR Builders’ 15 parcels 15  parcels of land covered by 13 TCTs in Barangay Niyugan, Laurel, Batangas. MARCH 27, 2000: The Sheriff set the public auction of the levied properties on April 28, 2000 at 10:00am. APRIL 26, 2000: PR Builders filed an Urgent Motion to Quash Writ of Levy with the HLUTB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied  properties at P6,500 P6,500 per sqm. Is P83,616 P83,616 based based on the the Appraisal Appraisal report of Henry Hunter Bayne Bayne Co, Co, Inc. which is over and above the judgment award. APRIL 29, 2000: At 10:15am, PR Builders’ counsel objected to the conduct of the public auction on the ground that the Urgent Motion to Quash was pending resolution; absent any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels of land of the total amount of P5.45Million. The sum of P5.313M was turned over to Jacobus in satisfaction of the  judgmentt award after  judgmen after deducting deducting the legal legal fees. At 4:15PM of the same day, while the Sheriff was at the HLURB Office to remit the legal fees relative to the auction sale and to submit the Certificates of Sale for the signature of HLURB Director Ceniza, he received an Order by the HLURB Arbiter to suspend the proceedings on the matter. AUGUST 28, 2000: 4 months later, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff’s levy on PR Builders’ real properties. SUMMARY OF THE ORDER:

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The HLURB did not rule that the fair market value i s P6.5K per meter as indicated in the Baynes Appraisal report, however, it does not agree with the position of the Sheriff that the aggregate value of the properties is only around P6M. The disparity between the 2 valuations are so egregious that the Sheriff should have looked into the matter first before  proceeding with the execution sale of the said properties, especially when the auction sale proceedings was seasonably objected by PR Builders’ counsel, Atty. Mingoa. However, instead of resolving first the objection timely posted by Atty. Mingoa, Sheriff totally disregarded the objection raised and issued the Certificate of Sale even prior to the payment of legal fees. The HLURB agrees with the Spouses that what is material in an execution sale proceeding is the amount for which the  properties were bidden and sold during the public auct ion and that, mere inadequacy of the price is not a sufficient ground to annul the sale, the Court is justified to intervene where the inadequacy of the price shocks the conscience of man. The difference between P83.6M and P6M is P77.6M; there was only one bidder, HOLLY PROPERTIES and the auction sale proceedings was timely object ed by PR Builders’ What is at issue i s not the value of the subject properties as determined during the auction sale, but the determination of the value of the properties levied upon by the Sheriff taking into consideration Sec. 9(b) of the 1997 Rules of Civil Procedure.

OCTOBER 30, 2002: CA dismissed the Motion for Reconsideration of Hulst.

ISSUE: Did the CA err in affirming the HLURB Order setting aside the levy by the sheriff?  YES  Only included the ownership issue

RATIO: The Court addressed a matter of public and national importance which completely escaped the   attention of the HLURB Arbiter and the CA: Hulst and his wife are foreign nationals who are disqualified under the Constitution from owning real properties in their names. Section 7 of Article XII of the 1987 Constitution provides: Sec. 7. Save in cases of hereditary    succession,  successio n, no private lands shall be transferred or conveyed except to individuals , corporations, corporations,

or associations .  to acquire or hold lands to acquire of theupon public The capacity to qualified acquire private land or is hold madelands dependent thedomain capacity of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to  participate  participa te in the disposition, exploitation, exploitation, development development and utilization utilization of lands of the public domain for Filipino citizens or corporations at least 60 percent of the capital of which is owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.   Since Hulst and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by  petitionerr together with  petitione with his wife wife and respo respondent ndent is void. void.   Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action or  

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defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify or extinguish a juridical relation.   Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or delicto or "in equal fault." In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can  be maintained maintained for for its specific performance, performance, or to recover the property agreed to be sold or delivered, delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.   This rule, however, is subject to exceptions that permit the return of that which may have been given under a void contract to: (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

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whose protection the prohibition by law is intended if the agreement is not illegal per illegal per se but se but merely  prohibited and if public public policy policy would be enhanced enhanced by by permitting permitting recovery recovery (Art. 1416, Civil Civil Code); Code); and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code) and labor laws (Arts. 1418-1419, Civil Code).   It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution

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of athe question whether thepasses constitutional proscription been breached. In contract ofon sale, the title to the buyer upon thehas 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 akin 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. In other words, in a contract to sell, the prospective seller seller agrees to transfer ownership of the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by executing a contract of absolute sale.   Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the  petitionerr when he filed the suit for rescission. While the intent to circumvent the constitutional  petitione constitutional

 

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 proscription on aliens aliens owning real property was was evident by virtue of the execution execution of the Contract 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) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire  private land land under the Philippine Philippine Constitution. Constitution. B But ut petitioner petitioner is entitled entitled to the recovery recovery only of the amount of P3,187,500.00, representing 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. Further, petitioner is not entitled to actual as well as interests thereon, moral and exemplary damages and attorney's fees.   The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long  been final and executory. executory. Nothing Nothing is more settled settled in the law than than that a decision decision that has acquired acquired

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finality becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it was made  by the court court that rendered rendered it or by the highest court court of the land. land. The only recognized recognized exception exceptionss to the general rule are the correction of clerical errors, the so-called  nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable. None of the exceptions is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with jurisdiction over the subject matter of the complaint.   Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent. Petitioner received more than what he is entitled to recover under the circumstances.

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