Inequitable conduct

Can a foreigner who marries a Filipina recover the money he invested in purchasing a real property here in the Philippines? This is the question answered in this case of Nena and Conrad.

Nena and Conrad were married in Hamburg, Germany on September 22, 1989. The couple resided in Germany at a house owned by Conrad’s parents. Eventually this house was inherited by Conrad from his parents and sold when the couple decided to move and reside permanently in the Philippines sometime in 1992. The couple then purchased a parcel of land in Antipolo, Rizal at the cost of P528,000 and constructed a house thereon worth P2.3 million using the proceeds of the sale of said house in Germany inherited by Conrad. Since Conrad knew that under the Constitution he was prohibited from acquiring the Antipolo property he had it registered in the name of Nena under TCT No. 219438.

Due to incompatibilities and Conrad’s alleged womanizing, drinking and maltreatment, the spouses eventually separated. On September 26, 1994, Conrad filed a petition for separation of properties before the Regional Trial Court.

On August 12, 1996, the RTC rendered a decision decreeing the separation of properties of Conrad and Nena by ordering the equal partition of personal properties between them located within the country excluding those acquired by gratuitous title during the marriage. With regard to the Antipolo property, the RTC held that it was acquired using the funds of Conrad consisting of the proceeds of sale of the house in Germany which he inherited from his parents. However it ruled that Conrad cannot recover his funds because the property was purchased in violation of Section 7, Article XII of the Constitution prohibiting foreigners from acquiring private land save in cases of hereditary succession.

On appeal by Conrad, the Court of Appeals (CA) modified the RTC decision. It ordered Nena to reimburse Conrad the amount of P528,000 for the acquisition of the land and P2.3 million for the construction of the house, deducting the amount she spent for preservation, maintenance and development including depreciation cost. Or in the alternative, if Nena has no means to reimburse Conrad, she should sell the property and reimburse Conrad the said amounts less expenses for its maintenance, preservation and improvement. The rest if any shall be divided equally between them. The CA held that Conrad merely prayed for reimbursement and not acquisition or transfer of ownership to him of said house and lot. It considered Nena’s ownership over the property in trust for Conrad. As regards the house the CA ruled that there is nothing in the Constitution prohibiting Conrad from acquiring the same. Besides, equity demands that Conrad be reimbursed of the funds he gave in trust to Nena to acquire the property. Was the CA correct?

No. As held in Krivenko vs. Register of Deeds (79, Phil. 461) the Constitution prohibits aliens, whether individuals or corporations, to acquire private lands save in cases of hereditary succession. The primary purpose of this prohibition is the conservation of the national patrimony. Conrad was aware of this constitutional prohibition. His attempt at subsequently asserting or claiming a right on said property cannot be sustained.

The CA erred in holding that an implied trust was created and resulted by operation of law in view of Nena’s marriage to Conrad. Save in cases of hereditary succession Conrad’s disqualification from owning lands in the Philippines is absolute. Not even an ownership in trust is allowed. Besides where the purchase is made in violation of an existing statute and in evasion of its express prohibition, no trust can result in favor the party who is guilty of such violation or fraud. To hold otherwise would allow circumvention of the constitutional prohibition.

Invoking the principle of equity is likewise misplaced. Equity as rule will follow the law, and will not permit to be done indirectly, that which cannot be done indirectly because of public policy. He who seeks equity must be equitable and must come to court with clean hands. A litigant may be denied relief by a court of equity on the ground that his conduct is inequitable, unfair, dishonest, or fraudulent or deceitful as to the controversy in issue.

Thus Conrad cannot seek reimbursement on the ground of equity where it is clear that he willingly and knowingly bought the property despite constitutional problems. To allow reimbursement would in effect permit him to enjoy the fruits of a property he is not allowed to own (Muller vs. Muller, G.R. 149615, August 29, 2006).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call Tel. 7249445.

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