RELLOSA vs. GAW CHEE HUN property considering the effect of the law governing rescission of contracts?

FACTS: RULING:

- February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of land, NO. While the sale of the land is void because it is done in contravention of the explicit
together with the house erected thereon, situated in Manila, for the sum of constitutional prohibition, they are now prevented from doing so if their purpose is to
P25,000 recover the lands that they have voluntarily parted with, because of their guilty
- The vendor remained in possession of the property under a contract of lease knowledge that what they were doing was in violation of the Constitution.
entered into on the same date between the same parties.
- Petitioner alleged that the sale was executed subject to the condition that the
vendee:
They cannot escape this conclusion because they are presumed to know the law. As
o being a Chinese citizen, would obtain the approval of the Japanese
this court well said: 'A party to an illegal contract cannot come into a court of law and
Military Administration in accordance with (seirei) No. 6 (which
ask to have his illegal objects carried out.
prohibits an alien from acquiring any private land not agricultural in
nature during the occupation unless the necessary approval is
obtained from the Director General of the Japanese Military
Administration)  approval has not been obtained The law will not aid either party to an illegal agreement; it leaves the parties where it
o and that, even if said requirement were met, the sale would at all finds them.' The rule is expressed in the maxims: 'Ex dolo malo non oritur actio,' and
events be void under article XIII, section 5, of our Constitution 'In pari delicto potior est conditio defendentis'
- the vendor instituted the present action in the CFI of Manila seeking the
annulment of the sale as well as the lease covering the land and the house
mentioned, and praying that, once the sale and the lease are declared null
and void, the vendee be ordered to return to vendor the duplicate of the title
covering the property, and be restrained from in any way dispossessing the
latter of said property.
- Defendant argued that the sale referred to was absolute and unconditional
and was in every respect valid and binding between the parties
- CFI: declared both the sale and the lease valid and binding and dismissed the
complaint. The court likewise ordered plaintiff to turn over the property to
defendant and to pay a rental of P50 a month from August 1, 1945 until the
property has been actually delivered.
- Affirmed in toto by the Court of Appeals
- petitioner: considered the Seirei. Court: we do not believe it necessary to
consider now the question relative to the validity of Seirei No. 6 of the
Japanese Military Administration for the simple reason that in our opinion the
law that should govern the particular transaction is not the above directive but
the Constitution adopted by the then Republic of the Philippines on September
4, 1943, it appearing that the aforesaid transaction was executed on February
2, 1944.
o article VIII, section 5, provides that "no private agricultural land shall
be transferred or assigned except to individuals, corporations, or
associations quali ed to acquire or hold lands of the public domain in
the Philippines"
o As to whether the phrase "private agricultural land” includes
residential lands, as the one involved, there can be no doubt because
of the decision in the case of Krivenko vs. Register of Deeds,

Issue: WON petitioner can have the sale declared null and void and recover the

PHILIPPINE BANKING CORPORATION VS. LUI SHE
FACTS:
Justina Santos and her sister own a piece of land in Manila, while Wong Heng is a long-
time lessee of the property. Eventually, Justina became the owner of the property.
Already in advanced age, Justina trusted various tasks to Wong including the delivery
of rental payments to her property.
In November 1957, in grateful acknowledgement of his personal services, Justina
executed a contract of lease in favor of Wong covering a portion property, and later,
the entire property for 50 years with right to withdraw at any time.
In December 1957, Justina executed a contract for option to buy the leased property
with a condition that Wong obtain Philippine Citizenship then pending before the
Court of First Instance of Rizal. However, the application was withdrawn because it was
discovered that he was not a resident of Rizal.
In October 1958, Justina filed a petition to adopt Wong and his children in the belief
that adoption would confer him Philippine Citizenship. Discovering there was error, the
proceedings were abandoned.
In November 1958, Justina executed two other contracts extending the lease to 99
years, and fixing the term of option to buy at 50 years. Both were written in Tagalog.
In two wills executed on August 1959, Justina bade her legatees to respect the
contracts entered into with Wong. However, Justina appeared to have a change of
heart, and claimed that the contracts were made through machinations and
inducements practiced by Wong. Thus, Justina directed her executor to secure the
annulment of the contracts.
In November 1959, a complaint was then filed before the Court of First Instance of
Manila on the said grounds, and asked the court to direct the Register of Deeds of
Manila to cancel the registration of the contracts. Wong denied having taken
advantage of the trust and confidence given to him by Justina.
The CFI rendered its decision annulling all the contracts, except the lease
contract, and condemned Wong to pay Justina the unpaid rentals.
Both parties filed an appeal before the Supreme Court. Justina (through Petitioner
Philippine Banking Corporation) maintained that the lease contract should have been
annulled as it lacks mutuality, that it was obtained in violation of the fiduciary relations
of the parties, and that her consent was obtained through undue influence, fraud and
misrepresentation.
ISSUE: WON the lease contract is valid
RULING:
The lease contract does not lack mutuality because Wong was never an agent of
Justina. The relationship between the parties were admittedly close, but did not amount
to an agency. Actually, it was cited that the lease contract was made on the basis of
the data of Wong given to the lawyer who prepared the contract, and that Justina told
him that whatever Wong wants must be followed. Despite the words supplied by
Wong, it was testified that Justina was unyielding and firm in her decision to follow
Wong. Undue influence cannot stand as well given that the contract was signed in the
presence of Justina’s close friend and maid, who could have testified against it.
Further, Justina’s consent was given freely and voluntarily as shown by her recited in
the Deed of Conditional Option and emphatic avowal gratitude in the lease contract
that Wong saved her and her sister from the fire that destroyed their house during the
liberation of Manila. All told, the lease contract stands to be valid.
HOWEVER even if the contracts show nothing that is necessarily illegal, but considered
collectively, they reveal an insidious pattern to subvert by indirection what the
Constitution directly prohibits. A lease to an alien for a reasonable period is valid. So is
an option giving an alien the right to buy real property on condition that he is granted
Philippine citizenship.
 But if an alien is given not only a lease of, but also an option to buy, a piece of
land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his
property, this to last for 50 years, then it becomes clear that the arrangement is a virtual
transfer of ownership whereby the owner divests himself in stages not only of the
right to enjoy the land but also of the right to dispose of it— rights the sum total of which
make up ownership. If this can be done, then the Constitutional ban against alien
landholding in the Philippines, is indeed in grave peril.

IMPORTANT NOTE:

It does not follow from what has been said, however, that because the parties are in
pari delicto they will be left where they are, without relief. For one thing, the original
parties who were guilty of a violation of the fundamental charter have died and have
since been substituted by their administrators to whom it would be unjust to impute
their guilt. For another thing, and this is not only cogent but also important, article 1416
of the Civil Code provides, as an exception to the rule on pari delicto, that "When the
agreement is not illegal per se but is merely prohibited, and the prohibition by
law is designed for the protection of the plaintiff, he may, if public policy is
thereby enhanced, recover what he has paid or delivered." The Constitutional
provision that "Save in cases of hereditary succession, no private agricultural land shall
be transferred or assigned except to individuals, corporations, or associations qualified
to acquire or hold lands of the public domain in the Philippines" is an expression of
public policy to conserve lands for the Filipinos.This policy would be defeated and its
continued violation sanctioned if, instead of setting the contracts aside and ordering the
restoration of the land to the estate of the deceased Justina Santos, this Court should
apply the general rule of pari delicto.