The Supreme Court has ruled that a foreigner who knowingly violates the constitutional prohibition against land ownership in the Philippines cannot seek reimbursement for the purchase price, even on the grounds of equity or unjust enrichment. This decision reinforces the principle that individuals cannot circumvent constitutional restrictions through indirect means and that the courts will not assist those who enter into illegal transactions.

When Love and Land Collide: Can a Foreigner Recover Funds from an Illegal Property Purchase?

Willem Beumer, a Dutch national, and Avelina Amores, a Filipina, were married on March 29, 1980. Their marriage was later annulled due to Beumer’s psychological incapacity. Following the annulment, Beumer filed a petition to dissolve their conjugal partnership, seeking the distribution of several properties acquired during their marriage. These properties included land registered in Amores’ name, which Beumer claimed were purchased with his disability benefits. Amores contested this, asserting that she used her personal funds for the purchases and that Beumer, as a foreigner, was constitutionally barred from owning land in the Philippines.

The Regional Trial Court (RTC) dissolved the conjugal partnership but declared the lands as Amores’ paraphernal properties due to Beumer’s foreign citizenship, citing the constitutional prohibition against foreign land ownership. The RTC declared the two houses standing on the lots as co-owned by the parties. Beumer appealed, seeking reimbursement for half the value of the land purchases, arguing that the properties were registered in his wife’s name solely to comply with the constitutional restriction. The Court of Appeals (CA) affirmed the RTC’s decision. The Supreme Court was then asked to resolve whether Beumer was entitled to reimbursement of the purchase price used for the real properties, despite his knowledge of the constitutional limitations.

The Supreme Court denied Beumer’s petition, citing the constitutional prohibition against foreign land ownership enshrined in Section 7, Article XII of the 1987 Philippine Constitution: “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 Court emphasized that Beumer was aware of this prohibition and even admitted that the properties were registered in Amores’ name to circumvent it. This acknowledgement was critical to the Court’s ruling, as it highlighted Beumer’s intent to bypass constitutional restrictions.

Building on this principle, the Court invoked the equitable maxim that “he who seeks equity must do equity, and he who comes into equity must come with clean hands.” This principle essentially means that a party seeking fairness from the court must have acted fairly themselves. The Court found that Beumer’s inconsistent statements regarding the source of funds used to purchase the land demonstrated a lack of honesty and fairness, thus precluding him from seeking equitable relief. The Court pointed out that Beumer had previously executed a joint affidavit stating that Amores’ personal funds were used for the purchase, contradicting his later claim that his disability funds were used.

Even if equity were to be considered, the Court stated that it could not grant reimbursement because Beumer never acquired any legal right to the properties due to the unconstitutional purchase. As the Court stated in Frenzel v. Catito, G.R. No. 143958, July 11, 2003, 406 SCRA 55, 70:

Equity as a rule will follow the law and will not permit that to be done indirectly which, because of public policy, cannot be done directly.

The Court further reasoned that contracts violating the Constitution are void, create no rights, and produce no legal effect. Article 1412 of the Civil Code reinforces this, stating that neither party can recover what they have given or demand performance when both parties are at fault in an illegal contract. The Supreme Court noted that the law will not aid either party to an illegal agreement, leaving them where it finds them. It emphasized that no rights can be salvaged from a transaction knowingly entered into in violation of the Constitution.

Finally, the Court rejected Beumer’s claim for reimbursement based on unjust enrichment. Unjust enrichment occurs when someone benefits at another’s expense without just cause. However, the Court, again citing Frenzel v. Catito, clarified that the principle of unjust enrichment does not apply when the action is prohibited by the Constitution or the principle of pari delicto (equal fault). To further elaborate on this point, the Supreme Court quoted Lord Mansfield, in the early case of Holman v. Johnson:

The objection that a contract is immoral or illegal as between the plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff.

The Court clarified that the denial of Beumer’s claim was not an injustice based on his foreign citizenship. The constitutional ban applies only to land ownership, not to improvements like the houses on the land, which were correctly declared co-owned. The prohibition’s purpose is to protect national patrimony, a policy the Court is bound to uphold. This decision underscores the judiciary’s commitment to upholding the constitutional restrictions on foreign land ownership and preventing attempts to circumvent these restrictions through legal maneuvering.

FAQs

What was the key issue in this case?	The key issue was whether a foreigner, aware of the constitutional prohibition against land ownership, could seek reimbursement for funds used to purchase land registered in his Filipina spouse’s name. The Supreme Court ruled against reimbursement, upholding the constitutional restriction.
Why was the petitioner’s claim for reimbursement denied?	The claim was denied because the petitioner knowingly violated the constitutional prohibition, and the court invoked the principle that one cannot seek equity with unclean hands. Additionally, the contract was deemed void due to its unconstitutional nature.
What is the constitutional prohibition against foreign land ownership in the Philippines?	Section 7, Article XII of the 1987 Philippine Constitution states that only Filipino citizens or corporations/associations qualified to acquire or hold lands of the public domain can own private lands, except in cases of hereditary succession.
What does “unjust enrichment” mean in this context?	Unjust enrichment refers to someone benefiting at another’s expense without just cause. However, the Supreme Court clarified that the principle of unjust enrichment does not apply when the action is prohibited by the Constitution.
Did the petitioner have any rights to the properties in question?	The petitioner did not have any rights to the land itself due to the constitutional prohibition. However, the houses built on the land were declared co-owned by the parties, as the prohibition does not extend to improvements on the land.
What is the significance of the “clean hands” doctrine in this case?	The “clean hands” doctrine means that a party seeking fairness from the court must have acted fairly themselves. Since the petitioner attempted to circumvent the Constitution, the court found that he did not come with clean hands and was not entitled to equitable relief.
What happens when a contract violates the Philippine Constitution?	A contract that violates the Constitution is considered null and void. It does not create any rights or obligations and has no legal effect.
Can a foreigner recover money spent on purchasing land in the Philippines if the purchase is unconstitutional?	No, a foreigner cannot recover money spent on purchasing land in the Philippines if the purchase is unconstitutional. The law leaves the parties where it finds them, and no rights can be salvaged from such a transaction.

This case serves as a crucial reminder of the strict adherence to constitutional principles regarding land ownership in the Philippines. It reinforces the idea that attempts to circumvent these regulations will not be supported by the courts, even under the guise of equity or unjust enrichment. The decision is a strong deterrent against similar attempts and protects the national patrimony by preventing indirect foreign control over Philippine lands.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Willem Beumer v. Avelina Amores, G.R. No. 195670, December 03, 2012