Unclean hands

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 Gina and Jim.

Gina and Jim were married in Hamburg, Germany on Sept. 22, 1989. The couple resided in Germany at a house owned by Jim’s parents. Eventually, this house was inherited by Jim 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 Jim. Since Jim knew that under the Constitution he was prohibited from acquiring the Antipolo property, he had it registered in the name of Gina under TCT No.219438.

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

On Aug. 12, 1996, the RTC rendered a decision decreeing the separation of properties of Jim and Gina 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 Jim consisting of the proceeds of sale of the house in Germany which he inherited from his parents. However, it ruled that Jim 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 Jim, the Court of Appeals (CA) modified the RTC decision. It ordered Gina to reimburse Jim 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 Gina has no means to reimburse Jim, she should sell the property and reimburse Jim 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 Jim merely prayed for reimbursement and not acquisition or transfer of ownership to him of said house and lot. It considered Gina’s ownership over the property in trust for Jim. As regards the house, the CA ruled that there is nothing in the Constitution prohibiting Jim from acquiring the same. Besides, equity demands that Jim be reimbursed of the funds he gave in trust to Gina for the acquisition of 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. Jim 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 Gina’s marriage to Jim. Save in cases of hereditary succession, Jim’s disqualification from owning lands in 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 of 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 a rule will follow the law, and will not permit to be done indirectly, that which cannot be done directly 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, Jim 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 which he is not allowed to own (Muller vs Muller, G.R. 149615, Aug. 29, 2006)