TOPIC Condominium Act

CASE NO. G.R. No. 156364

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 Court's pronouncements on the invalidity of the Contract of Sale should be set 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, 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 ownership of the land on which the unit is situated; thus, the buyer will not get a
transfer certificate of title but merely a 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. 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
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 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 Court's pronouncements
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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 o Hulst contends 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.
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, the buyer will not get a transfer certificate of title but merely
a Condominium Certificate of Title as evidence of ownership
o A 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.
 Despite receipt of this Court’s Feb. 6, 2008 Resolution, PR Builders failed to file a comment on the
subject motion.

ISSUE/S and HELD

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; 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.
 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 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.

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.
 Meanwhile, Spouses Hulst divorced. Ida assigned her rights over the purchased property to
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: The Sheriff levied on PR Builders’ 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 per sqm. Is P83,616 based on the Appraisal report of Henry Hunter Bayne 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
judgment award after deducting the 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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 o The HLURB did not rule that the fair market value is 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.
o 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.
o 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 auction 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.
o The difference between P83.6M and P6M is P77.6M; there was only one bidder, HOLLY PROPERTIES and the auction
sale proceedings was timely objected by PR Builders’
o What is at issue is 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, no private lands shall be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands of the public domain.
 The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands
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 in the disposition, exploitation, development and 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
petitioner together with his wife and respondent is 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
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 "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 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; 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 se but merely
prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil 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
of the question on whether the constitutional proscription has been breached.
 In a contract of sale, the title passes to the buyer upon the 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 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
petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional
proscription on aliens owning real property was evident by virtue of the execution of the 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 under the Philippine Constitution. But petitioner is entitled to the 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. Nothing is more settled in the law than that a decision that has acquired
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 that rendered it or by the highest court of the land. The only recognized exceptions 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.