[ G.R. No. L-1411. September 29, 1953 ] 93 Phil. 827
[ G.R. No. L-1411. September 29, 1953 ]
DIONISIO RELLOSA, PETITIONER, VS. GAW CHEE HUN, RESPONDENT. D E C I S I O N
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the Court of Appeals holding that the sale in question is valid and, even if it were invalid, plaintiff cannot maintain the action under the principle of pari delicto.
On February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of land, together with the house erected thereon, situated in the City of Manila, Philippines, for the sum of P25,000. The vendor remained in possession of the property under a contract of lease entered into on the same date between the same parties. Alleging that the sale was executed subject to the condition that the vendee, being a Chinese citizen, would obtain the approval of the Japanese Military Administration in accordance with (seirei) No. 6 issued on April 2, 1943, by the Japanese authorities, and said approval has not been obtained, and that, even if said requirement were met, the sale would at all events be void under article XIII, Section 5, of our Constitution, the vendor instituted the present action in the Court of First Instance of Manila seeking the annulment of the sale as well as the lease covering the land and the house above 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 answered the complaint setting up as special defense that the sale referred to in the complaint was absolute and unconditional and was in every respect valid and binding between the parties, it being not contrary to law, morals and public order, and that plaintiff is guilty of estoppel in that, by having executed a deed of lease over the property, he thereby recognized the title of defendant to that property.
Issues having been joined, and the requisite evidence presented by both parties, the court 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. As this decision was affirmed in toto by the Court of Appeals, plaintiff sued out the present petition for review.
One of the issues raised by petitioner refers to the validity of Seirei No. 6 issued on April 2, 1943 by the Japanese authorities which 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. Petitioner contends that the sale in question cannot have any validity under the above military directive in view of the failure of respondent to obtain the requisite approval and it was error for the Court of Appeals to declare said directive without any binding effect because the occupation government could not have issued it under article 43 of the Hague Regulations which command that laws that are municipal in character of an occupied territory should be respected and cannot be ignored unless prevented by military necessity.
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. Said Constitution, in its article VIII, section 5, provides that “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”, which provisions are similar to those contained in our present Constitution. As to whether the phrase “private agricultural land” employed in said Constitution includes residential lands, as the one involved herein, there can be no doubt because said phrase has already been interpreted in the affirmative sense by this court in the recent case of Krivenko vs. Register of Deeds, 79 Phil., 41, wherein this court held that “under the Constitution aliens may not acquire private or public agricultural lands, including residential lands.” This ruling fully disposes of the question touching on the validity of the sale of the property herein involved.
The sale in question having been entered into in violation of the. Constitution, the next question to be determined is, can petitioner have the sale declared null and void and recover the property considering the effect of the law governing rescission of contracts? Our answer must of necessity be in the negative following the doctrine laid down in the case of Trinidad Gonzaga de Cabauatan, et al. vs. Uy Hoo, et al., 88 Phil., 103, wherein we made the following pronouncement: “We can, therefore, say that even if the plaintiffs can still invoke the Constitution, or the doctrine in the Krivenko Case, to set aside the sale in question, they are now prevented from doing so if their purpose is to recover the lands that they have voluntarily parted with, because of their guilty knowledge that what they were doing was in violation of the Constitution. They cannot escape this conclusion because they are presumed to know the law. As this court well said: ‘A party to an illegal contract cannot come into a court of law and ask to have his illegal objects carried out. The law will not aid either party to an illegal agreement; it leaves the parties where it finds them.’ The rule is expressed in the maxims: ‘Ex dolo malo non oritur actio,’ and ‘In pari delicto potior est conditio defendentis.’ (Bough and Bough vs. Cantiveros and Hanopol, 40 Phil.210, 216.)”
The doctrine above adverted to is the one known as In Pari Delicto. This is well known not only in this jurisdiction but also in the United States where common law prevails. In the latter jurisdiction, the doctrine is stated thus: “The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation. The rule has sometime been laid down as though it were equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.” (Pomeroy’s Equity Jurisprudence, Vol. 3, 5th ed., p. 728.)
It is true that this doctrine is subject to one important limitation, namely, “whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction” (idem, p. 733). But not all contracts which are illegal because opposed to public policy come under this limitation. The cases in which this limitation may apply only “include the class of contracts which are intrinsically contrary to public policy,—contracts in which the illegality itself consists in their opposition to public policy, and any other species of illegal contracts in which, from their particular circumstances, incidental and collateral motives of public policy require relief.” Examples of this class of contracts are usurious contracts, marriage-brokerage contracts and gambling contracts. (Idem. pp. 735-737.)
In our opinion, the contract in question does not come under this exception because it is not intrinsically contrary to public policy, nor one where the illegality itself consists in its opposition to public policy. It is illegal not because it is against public policy but because it is against the Constitution. Nor may it be contended that to apply the doctrine of pari delicto would be tantamount to contravening the fundamental policy embodied in the constitutional prohibition in that it would allow an alien to remain in the illegal possession of the land, because in this case the remedy is lodged elsewhere. To adopt the contrary view would be merely to benefit petitioner and not to enhance public interest.
The danger foreseen by counsel in the application of the doctrine above adverted to is more apparent than real. If we go deeper in the analysis of our situation we would not fail to see that the best policy would be for Congress to approve a law laying down the policy and the procedure to be followed in connection with transactions affected by our doctrine in the Krivenko case. We hope that this should be done without much delay. And even if this legislation be not forthcoming in the near future, we do not believe that public interest would suffer thereby if only our executive department would follow a more militant policy in the conservation of our natural resources as ordained by our Constitution. And we say so because there are at present two ways by which this situation may be remedied, to wit, (1) action for reversion, and (2) escheat to the state. An action for reversion is slightly different from escheat proceeding, but in its effects they are the same. They only differ in procedure. Escheat proceedings may be instituted as a consequence of a violation of article XIII, section 5 of our Constitution, which prohibits transfers of private agricultural lands to aliens, whereas an action for reversion is expressly authorized by the Public Land Act (sections 122, 123 and 124 of Commonwealth Act No. 141).
In the United States, as almost everywhere else, the doctrine which imputes to the sovereign or to the government the ownership of all lands and makes such sovereign or government the original source of private titles, is well recognized (42 Am. Jur., 785). This doctrine, which was expressly affirmed in Lawrence vs. Garduño, G. R. No. 16542, and which underlies all titles in the Philippines, (See Ventura, Land Registration and Mortgages, 2nd ed., pp.2-3) has been enshrined in our Constitution (article XIII). The doctrine regarding the course of all titles being the same here as in the United States, it would seem that if escheat lies against aliens holding lands in those states of the Union where common law prevails or where similar constitutional or statutory prohibitions exist, no cogent reason is perceived why similar proceedings may not be instituted in this jurisdiction.
“Escheat is an incident or attribute of sovereignty, and rests on the principle of the ultimate ownership by the state of all property within its jurisdiction.” (30 C.J.S., 1164)
“* * * In America escheats belong universally to the state or some corporation thereof as the ultimate proprietor of land within its Jurisdiction,” (19 Am. Jur., 382.)
“An escheat is nothing more or less than the reversion of property to the stae, which takes place when the title fails.” (Delany vs. State, 42 N. D., 630, 174 N. W., 290, quoted in footnote 6, 19 Am. Jr., 381.)
“As applied to the right of the state to lands purchased by an alien, it would more properly be termed a ‘forfeiture’ at common law.” (19 Am. Jur., 381.)
“In modern law escheat denotes a falling of the estate into the general property of the state because the tenant is an alien or because he has died intestate without lawful heirs to take his estate by succession, or because of some other disability to take or hold property imposed by law.” (19 Am. Jur., 381.)
With regard to an action for reversion, the following sections of Commonwealth Act No. 141 are pertinent:
“SEC. 122. No land originally acquired in any manner under the provisions of this Act, nor any permanent improvement on such land, shall be encumbered, alienated, or transferred, except to persons, corporations, associations, or partnerships who may acquire lands of the public domain under this Act or to corporations organized in the Philippines authorized therefor by their charters.”
“SEC. 123. No land originally acquired in any manner under the provisions of any previous Act, ordinance, royal decree, royal order, or any other provision of law formerly in force in the Philippines with regard to public lands, terrenos baldios y realengos, or lands of any other denomination that were actually or presumptively of the public domain or by royal grant or in any other form, nor any permanent improvement on such land, shall be encumbered, alienated, or conveyed, except to persons, corporations or associations who may acquire land of the public domain under this Act or to corporate bodies organized in the Philippines whose charters authorize them to do so: Provided, however, That this prohibition shall not be applicable to the conveyance or acquisition by reason of hereditary succession duly acknowledged and legalized by competent courts; Provide, further, That in the event of the ownership of the lands and improvements mentioned in this section and in the last preceding section being transferred by judicial decree to persons, corporations or associations not legally capacitated to acquire the same under the provisions of this Act, such persons, corporations, or associations shall be obliged to alienate said lands or improvements to others so capacitated within the precise period of five years; otherwise, such property shall revert to the Government.”
“SEC. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of any of the provisions of sections one hundred and eighteen, one hundred and twenty, one hundred and twenty-one, one hundred and twenty-two, and one hundred and twenty-three of this Act shall be unlawful and null and void from its execution and shall produce the effect of annulling and cancelling the grant, title, patent, or permit originally issued, recognized or confirmed, actually or presumptively, and cause the reversion of the property and its improvements to the State.”
Note that the last quoted provision declared any prohibited conveyance not only unlawful but null and void ab initio. More important yet, it expressly provides that such conveyances will produce “the effect of annulling and cancelling the grant, title, patent, or permit, originally issued, recognized of confirmed, actually or presumptively”, and of causing “the reversion of the property and its improvements to the State.” The reversion would seem to be but a consequence of the annulment and cancellation of the original grant or title, and this is so for in the event of such annulment or cancellation no one else could legitimately claim the property except its original owner or grantor—the state.
We repeat. There are two ways now open to our government whereby it could implement the doctrine of this Court in the Krivenko case thereby putting in force and carrying to its logical conclusion the mandate of our Constitution. By following either of these remedies, or by approving an implementary law as above suggested, we can enforce the fundamental policy of our Constitution regarding our natural resources without doing violence to the principle of pari delicto. With these remedies open to us, we see no justifiable reason for pursuing the extreme unusual remedy now vehemently urged by the amici curiae.
In view of the foregoing, we hold that the sale in question is null and void, but plaintiff is barred from taking the present action under the principle of pari delicto.
The decision appealed from is hereby affirmed without pronouncement as to costs.
Labrador, J., concurs. Paras, C. J., Tuason and Montemayor, JJ., concur in the result.