Foreigners, beware!

Joe Pallugna

THE latest ruling of the Supreme Court on the Feb. 29, 2016 case of Rebecca Fullido versus Gino Grilli (G.R. No. 215014), has to put all foreigners on the wary side, to be forewarned of their rights to lease lands.

It happened in Bohol when an Italian, Gino, entered into a romantic relationship with a local lass, Rebecca.

Gino then constructed a house on the land owned by Rebecca. They entered mutually and voluntarily into a contract of lease wherein Gino was to lease the land of Rebecca for period of 50 years and renewable automatically for another 50 years, for the price of P10,000. Gino had the right, through a special power of attorney and a Memorandum of Agreement (MOA), to transfer ownership of the land to anyone he chooses and Rebecca cannot sell or transfer the land during the term of the lease.

After 17 long years, their romantic relationship soured and Gino filed an action for ejectment against Rebecca after she became pregnant and sired a child of another man. Gino lost in the municipal court but won on appeal at the regional trial court which judgment was affirmed by the Court of Appeals. Rebecca raised the issue of validity of the lease contract and MOA as being contrary to the Constitution’s prohibition of foreigners owning lands. Gino contends that the lease contract remains valid unless declared void by a court in a case directly assailing its validity.

Clearly, there is no legal issue as to the prohibition of foreigners from acquiring lands in the Philippines.

The Supreme Court, in clarifying this prohibition, ruled: “The prohibition, however, is not limited to the sale of lands to foreigners. It also covers leases of lands amounting to the transfer of all or substantially all the rights of dominion. In the landmark case of Philippine Banking Corporation versus Lui She ((128 Phil. 53, 1967 case), the Court struck down a lease contract of a parcel of land in favor of a foreigner for a period of 99 years with an option to buy the land for 50 years. Where a scheme to circumvent the Constitutional prohibition against the transfer of lands to aliens is readily revealed as the purpose of the contracts, then the illicit purpose becomes the illegal cause of rendering the contracts void. Thus, 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 the right to dispose of it — rights which constitute ownership. If this can be done, then the Constitutional ban against alien landholding in the Philippines, indeed, is in grave peril.”

The High Court further defined: “Clearly, contracts may be declared void even in a summary action for unlawful detainer because, precisely, void contracts do not produce legal effect and cannot be the source of any rights. To emphasize, void contracts may be invoked as a valid action or defense in any court proceeding, including an ejectment suit.”

“And on the issue of in pari delicto where Gino claims that both he and Rebecca were guilty of circumventing the law and cannot get reliefs from the courts, the High Court said: “The application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when its application contravenes well-established public policy. In this jurisdiction, public policy has been defined as that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against public good. Thus, wherever public policy is advanced by either party, they may be allowed to sue relief against the transaction.

“In the present case, both Grilli and Fullido were undoubtedly parties to a void contract. Fullido, however, was not barred from filing the present petition before the court because the matters at hand involved an issue of public policy, specifically the Constitutional prohibition against land ownership by aliens.”

So all those foreigners who obtained legal advice that a 50 years contract of lease will secure their investments in lands in the Philippines, review those contracts and make new ones.

E-mail: ajpallugna@gmail.com