Hulst v. PR Builders Inc.

G.R. 156364 | September 3, 2007

AUSTRIA-MARTINEZ, J.

General rule (void agreement): parties to a 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.

Exceptions:
(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 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)38 and labor laws (Arts. 1418-1419, Civil Code).

Fs

This case involves a petition for review on certiorari seeking to reverse a CA decision.

Petitioner Hulst, Dutch national, entered into a Contract to Sell with PR Builders, Inc.
(respondent), for the purchase of a 210-sq m residential unit in respondent's townhouse
project.
When respondent failed to comply with its verbal promise to complete the project by June
1995, Hulst filed a complaint before the Housing and Land Use Regulatory Board
(HLURB) for rescission of contract which was granted.
A Writ of Execution was then addressed to the Ex-Officio Sheriff of the RTC of Tanauan,
Batangas, but upon the complaint of the respondent, the levy was set aside, leaving only the
respondents personal properties to be levied first.
The Sheriff set a public auction of the said levied properties, however, the respondent filed
a motion to quash Writ of levy on the ground that the sheriff made an over levy since the
aggregate appraised value of the properties at P6,500 per sq m is P83,616,000.
Instead of resolving the objection of the respondent's regarding the auction, the Sheriff
proceeded with the auction since there was no restraining order from the HLURB. The 15
parcels of land was then awarded to Holly Properties Realty at a bid of P5,450,653. On the
same day, the Sheriff remitted the legal fees and submitted to contracts of sale to HLURB,
However, he then received orders to suspend proceedings on the auction for the reason that
the market value of the properties was not fair.
There was disparity between the appraised value and the value made by the petitioner and
the Sheriff, which should've been looked into by the Sheriff before making the sale. While
an inadequacy in price is not a ground to annul such sale, the court is justified to such
intervention where the price shocks the conscience.
Isss H

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Whether Hulst's request for damages is actionable. YES.

It behooves this Court to address a matter of public and national importance which
completely escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife
are foreign nationals who are disqualified under the Constitution from owning real property
in their names.
Since petitioner, being Dutch, is proscribed under the Constitution from acquiring and
owning real property, it is unequivocal that the Contract to Sell entered into by petitioner
and respondent is void. (The agreement executed by the parties in this case is a Contract to
Sell and not a contract of sale.)
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.
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 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)38 and labor laws (Arts. 1418-1419, Civil Code).
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. 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.

Whether the Sheriff erred in the value that was attached to the propertiesduring the
auction and as well as disregarding the objection made by Hulst. NO.

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 According to the Rules of Court, the value of the property levied is not required to be
exactly the same as the judgment debt. In the levy of property, the Sheriff doesnot
determine the exact valuation of the levied property.
The Sheriff is left to his own judgment. He should be allowed a reasonable margin between
the value of theproperty levied upon and the amount of the execution; the fact that the
Sheriff leviesupon a little more than is necessary to satisfy the execution does not render
hisactions improper.
In the absence of a restraining order, no error can be imputed to the Sheriff inproceeding
with the auction sale despite the pending motion to quash the levy filed bythe respondents
with the HLURB.
Sheriffs, as officers charged with the task of theenforcement and/or implementation of
judgments, must act with considerable dispatchso as not to unduly delay the administration
of justice. It is not within the jurisdiction of the Sheriff to consider and resolve respondent's
objection to the continuation of theconduct of the auction sale.
The Sheriff has no authority, on his own, to suspend theauction sale. His duty being
ministerial, he has no discretion to postpone the conductof the auction sale

CA DECISION REVERSED AND SET ASIDE.

Hulst v. PR Builders Inc.

G.R. 156364 | September 25, 2008
AUSTRIA-MARTINEZ, J.

Fs
Petitioner filed a Motion for Partial Reconsideration insofar as he was ordered to return to
respondent the amount of P2,125,540.00 in excess of the proceeds of the auction sale
delivered to petitioner.

Petitioner contends that the Contract to Sell between petitioner and respondent involved a
condominium unit and did not violate the Constitutional proscription against ownership of
land by aliens.
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; 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.

Whether the Motion for Partial Reconsideration is impressed with merit. YES.

Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, foreign
nationals can own Philippine real estate through the purchase of condominium units or

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 townhouses constituted under the Condominium principle with Condominium Certificates
of Title. Section 5 of R.A. No. 4726 states:
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. 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 petitioner as unit owner was simply a member of the
Condominium Corporation and the land remained owned by respondent, 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.

Motion for Partial Reconsideration is GRANTED. Accordingly, previous decision is

MODIFIED by deleting the order to petitioner to return to respondent the amount of
P2,125,540.

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