DIONISIO RELLOSA, Petitioner, vs. GAW CHEE HUN, Respondent.

FACTS:

Justina Santos and her sister Lorenzo were the owners in common of a land in Manila. In it are
2 residential houses with the Restaurant. The sisters lived in one of the houses, while Wong
Heng, a Chinese, lived with his family in the restaurant.

On February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of land, together with
the house erected thereon, situated in Manila for P25K.

Wong had been a long-time lessee of a portion of the property.

Rellosa remained in possession of the property under a contract of lease entered into between
the same parties.

On September 22, 1957 Justina Santos became the owner of the entire property as her sister
died with no other heir.

Alleging that the sale was executed subject to the condition that Gaw Chee Hun , being a
Chinese citizen, would obtain the approval of the Japanese Military Administration in
accordance with (seirei) No. 6, by the Japanese authorities, and said approval has not been
obtained, and that, even if said requirement were met, the sale would at all events be void
under article XIII, section 5, of our Constitution, Rellosa instituted the present action in the
CFI of Manila seeking the annulment of the sale as well as the lease covering the land and
the house, and praying that, once the sale and the lease are declared null and void, Gaw Chee
Hun be ordered to return to Rellosa the duplicate of the title covering the property, and be
restrained from in any way dispossessing the latter of said property.

Then being at the time 90 years old, blind, crippled and an invalid, Justina was left with no other
relative to live with. Her only companions in the house were her 17 dogs and 8 maids.

Gaw Chee Hun's answer : sale was absolute and unconditional and was valid and binding
between the parties, it being not contrary to law, morals and public order, and that Rellosa is
guilty of estoppel in that, by having executed a deed of lease over the property, he thereby
recognized the title of defendant to that property.

Wong himself was the trusted man to whom she delivered various amounts for safekeeping,
including rentals from her property and the rentals which Wong himself paid as lessee of a part
of the Rizal Avenue property.
Wong also took care of the payment; in her behalf, of taxes, lawyers' fees, funeral expenses,
masses, salaries of maids and security guard, and her household expenses.
Justina Santos executed a

contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then already
leased to him and another portio. The lease was for 50 years.

the contract was amended (Plff Exh. 4) so as to make it cover the entire property.

another contract (Plff Exh. 7) giving Wong the option to buy the leased premises
for P120,000, payable within ten years at a monthly installment of P1,000. The
option, written in Tagalog, imposed on him the obligation to pay for the food of the
dogs and the salaries of the maids in her household, the charge not to exceed
P1,800 a month.

The sale in question having been entered into in violation of the Constitution, the next question
to be determined is,
ISSUE:
Can petitioner Rellosa have the sale declared null and void and recover the property
considering the effect of the law governing rescission of contracts?
HELD:
NO. Although the sale in question is null and void, plaintiff Rellosa is barred from taking
the present action under the principle of pari delicto.
A party to an illegal contract cannot come into court to have his illegal objects carried out. This
is the doctrine of In Pari Delicto. Rellosas sale of the land to Gaw Chee, an alien is against the
Constitution and is thus illegal. The Commonwealth Act provided that such sale is not only
unlawful but also null and void ab initio, that such will effect the annulling and cancelling of the
title originally issued, andreverting the property and its improvements to the State.

The option was conditioned on his obtaining Philippine citizenship, a petition for which
was then pending in Court. It appears, however, that this application for naturalization
was withdrawn when it was discovered that he was not a resident of Rizal.
On October 28, 1958 Justina filed a petition to adopt him and his children on belief that
adoption would confer on them Philippine citizenship. The error was discovered and the
proceedings were abandoned.
On November 18, 1958 she executed two other contracts,

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y

CANON FAUSTINO vs.
LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng

(Plff Exh. 5) extending the term of the lease to 99 years, and another

FACTS:

(Plff Exh. 6) fixing the term of the option of 50 years.

In two wills executed she bade her legatees to respect the contracts she had entered into
with Wong, but later she appears to have a change of heart, Claiming that the various
contracts were made by her because of machinations and inducements practiced by
him, she now directed her executor to secure the annulment of the contracts.

BUT Despite the parties are in Pari delicto there is an exception. The land/ property
should be returned to the heirs of Justina for Public Policy to conserve land for Filipinos
would be defeated or violated if General Rule of Pari Delicto is applied.
ALFRED FRITZ FRENZEL vs. EDERLINA CATITO, CA

SUIT= CFI Manila

Justina alleged that:

the contracts were obtained by Wong "through fraud, misrepresentation,

inequitable conduct, undue influence and abuse of confidence and trust of and
(by) taking advantage of the helplessness of the plaintiff and were made to
circumvent the constitutional provision prohibiting aliens from acquiring lands
in the Philippines and also of the Philippine Naturalization Laws."

In his answer, Wong:

insisted that the contracts were freely and voluntarily entered into by the parties.

After the case was submitted for decision on Appeal, both parties died, Wong was substituted
by his wife, Lui She, the other defendant in this case, while Justina Santos was substituted by
the Philippine Banking Corporation.
Justina maintained that the contracts should have been annulled because

it lacks mutuality;

because her consent was obtained through undue influence, fraud and
misrepresentation; and because the lease contract, like the rest of the
contracts, is absolutely simulated.

FACTS:
Petitioner Alfred Fritz Frenzel, an Australian citizen of German descent was married to Teresita
Santos, a Filipino citizen. They met when Frenzel arrived in Philippines who was at that time
working as a pilot.
Alfred and Teresita later on separated without obtaining a divorce.
As when Alfred returned to Sydney, Australia, he met Ederlina Catito, a Filipina who was
working as masseuse in the King's Cross nightclub. Unknown to Alfred, Ederlina resided for a
time in Germany and was married to Klaus Muller, a German national. She left Germany and
tried her luck in Sydney, Australia.
She was fluent in German, and Alfred enjoyed talking with her. Because of this Alfred liked
Ederlina so much that he persuaded her to stop working at King's Cross and return to the
Philippines, and engage in a wholesome business of her own. Ederlina agreed to Alfred's
proposal.
As when they arrived in the Philippines, Alfred financed Ederlina to put up her parlor business
and that during their relationship, the two acquired different properties. However, these
properties where under the name of Ederlina since Alfred was an alien and was disqualified
from owning lands in the Philippines.
Despite of it, Alfred was inclined to buy those properties since he was planning to marry
Ederlina and he believed that after their marriage, the two of them would jointly own the
property.
As when Alfred decided to stay in the Philippines for good and live with Ederlina, he sold all his
properties in Australia and Papua Guinea and the proceeds of the sale were deposited in
Alfred's account with the HSBC Kowloon Branch under Bank Account No. 018-2-807016.

HELD:

As Alfred and Ederlina were in Hong Kong, they opened another account with HSBC, Kowloon,
this time in the name of Ederlina, under Savings Account No. 018-0-807950. Alfred transferred
his deposits in Savings Account No. 018-2-807016 with the said bank to this new account.
Ederlina also opened a savings account with the Bank of America Kowloon Main Office under
Account No. 30069016.

YES. Contracts are contrary to the Constitution as both parties intended to circumvent
the Constitutional prohibition against the transfer of lands to aliens.

Later on, Alfred was able to receive a letter from Ederlina's husband, Klaus, stating that he
knew of their amorous relationship, and that he is begging him to leave Ederlina alone and to
return her to him.

Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively,
they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits.

When Alfred confronted Ederlina, she admitted that she and Klaus were, indeed, married. But
she assured Alfred that she would divorce Klaus. Alfred was appeased. He agreed to continue
the amorous relationship and wait for the outcome of Ederlina's petition for divorce.

ISSUE: WON the contracts executed by Justina are considered VOID?

Wong was given not only a Lease BUT also an option to buy, by virtue of w/c Justina
cannot sell or dispose said property for 50 years. This is a CLEAR arrangement of a
virtual transfer of OWNERSHIP.

Subsequently, Alfred continued to buy different properties under Ederlina's name.

At some point, Ederlina deposited the total amount of US$250,000 with the HSBC Kowloon
under Joint Deposit Account No. 018-462341-145.

In the meantime, Ederlina's petition for divorce was denied because Klaus opposed the same.
Klaus wanted half of all the properties owned by Ederlina in the Philippines before he would
agree to a divorce. Worse, Klaus threatened to file a bigamy case against Ederlina.
Alfred proposed the creation of a partnership to Ederlina, or as an alternative, the
establishment of a corporation, with Ederlina owning 30% of the equity thereof. She initially
agreed to put up a corporation and contacted Atty. Armando Dominguez to prepare the
necessary documents. However, she changed her mind at the last minute when she was
advised to insist on claiming ownership over the properties acquired by them during their
coverture.
Alfred and Ederlina's relationship started deteriorating. Ederlina had not been able to secure a
divorce from Klaus. To avoid complications, Alfred decided to live separately from Ederlina and
cut off all contacts with her.

He also said that he had no intention of owning the properties permanently. His principal
intention therein was to be declared the transient owner for the purpose of selling the properties
at public auction, ultimately enabling him to recover the money he had spent for the purchase
thereof.
CA rendered affirming the decision of the RTC. It ruled that the petitioner knowingly violated the
Constitution; hence, was barred from recovering the money used in the purchase of the three
parcels of land. It held that to allow the petitioner to recover the money used for the purchase of
the properties would embolden aliens to violate the Constitution, and defeat, rather than
enhance, the public policy.
ISSUE:
WON ALFRED CAN RECOVER HIS MONEY AND PROPERTIES FROM ERDILINA.

The last straw for Alfred came when someone smashed the front and rear windshields of
Alfred's car and damaged the windows. Alfred thereafter executed an affidavit-complaint
charging Ederlina and her friend with malicious mischief.
Shortly thereafter, Alfred file a complaint against Ederlina, with the RTC of Quezon City, for
recovery of real and personal properties located in Quezon City and Manila. In his complaint,
Alfred alleged, Ederlina, without his knowledge and consent, managed to transfer funds from
their joint account in HSBC Hong Kong, to her own account with the same bank. Using the said
funds, Ederlina was able to purchase the properties subject of the complaints. He also alleged
that the beauty parlor in Ermita was established with his own funds, and that the Quezon City
property was likewise acquired by him with his personal funds.

HELD:
A contract that violates the Constitution and the law, is null and void and vests no rights and
creates no obligations. It produces no legal effect at all. The petitioner, being a party to an
illegal contract, cannot come into a court of law and ask to have his illegal objective carried out.
The law will not aid either party to an illegal contract or agreement; it leaves the parties where it
finds them. 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.

Another case was then filed by Alfred against HSBC in the RTC of Davao City for the recovery
of bank deposits and damages.

Based on his testimonies in the court during the cross examination it is evident that the plaintiff
was fully aware that as a non-citizen of the Philippines, he was disqualified from validly
purchasing any land within the country.

Ederlina denied all the material allegations in the complaint, insisting that she acquired the said
properties with her personal funds, and as such, Alfred had no right to the same. She alleged
that the deeds of sale, the receipts, and certificates of titles of the subject properties were all
made out in her name. Therefore, she Alfred had no cause of action against herand she
interposed counterclaims against the petitioner.

The evidence on record also shows that the petitioner in fact knew of the respondent's marriage
to another man, but nonetheless purchased the subject properties under the name of the
respondent and paid the purchase prices therefor. Even if it is assumed gratia arguendi that the
respondent and the petitioner were capacitated to marry, the petitioner is still disqualified to own
the properties in tandem with the respondent.

RTC of Quezon City rendered its decision in favor of Alfred

However in the RTC of Davao City rendered judgment in favor of Ederlina.

The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal per se.
The transactions are void ab initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the properties or the money used in the
purchase of the parcels of land would be subversive of public policy.

RTC ruled that based on documentary evidence, the purchaser of the three parcels of land
subject of the complaint was Ederlina and it further stated that even if Alfred was the buyer of
the properties; he had no cause of action against Ederlina for the recovery of the same
because as an alien, he was disqualified from acquiring and owning lands in the Philippines.
The sale of the three parcels of land to the petitioner was null and void ab initio. Applying the
pari delicto doctrine, the petitioner was precluded from recovering the properties from the
respondent.
Alfred appealed in which the petitioner posited the view that although he prayed in his
complaint in the court a quo that he be declared the owner of the three parcels of land, he had
no intention of owning the same permanently. His principal intention therein was to be declared
the transient owner for the purpose of selling the properties at public auction, ultimately
enabling him to recover the money he had spent for the purchase thereof.
On appeal, The petitioner contends that he purchased the three parcels of land subject of his
complaint because of his desire to marry the respondent, and not to violate the Philippine
Constitution. He was, however, deceived by the respondent when the latter failed to disclose
her previous marriage to Klaus Muller. It cannot, thus, be said that he and the respondent are
"equally guilty;" as such, the pari delicto doctrine is not applicable to him.

The provision is expressed in the maxim: "No person should unjustly enrich himself at the
expense of another.
An action for recovery of what has been paid without just cause has been designated as an
accion in rem verso. This provision does not apply if, as in this case, the action is proscribed by
the Constitution or by the application of the pari delicto doctrine. It may be unfair and unjust to
bar the petitioner from filing an accion in rem verso over the subject properties, or from
recovering the money he paid for the said properties, but, as Lord Mansfield stated in the early
case of Holman vs. Johnson:69 "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."
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. The decision of the Court of
Appeals is AFFIRMED in toto.

F. VILLARROEL, appellant-appellant,vs.. BERNARDINO ESTRADA, turnedappellee.

In Shanghai, the Robb stayed at the American Club where he became acquainted with Fisher,
through their mutual friends.

FACTS:

In the course of a conversation, the Robb came to know that the Fisher was the manager of a
dog racing course.

Alejandro F. Callao, mother of defendant John F. Villarroel, obtained from the

spouses Mariano Estrada and Severina a loan of P1, 000 payable after seven years.
Alejandra died, leaving as sole heir to the defendant. Spouses Mariano Estrada and
Severina also died, leaving as sole heir to the plaintiff Bernardino Estrada.

Upon knowing the purpose of the Robb strip, the Fisher showed great interest and invited him
to his establishment and for several days gave him information about the business.
It seems that the Fisher became interested in the Philippine Greyhound Club, Inc., and asked
the Robb if he could have a part therein as a stockholder.

Later on, John Villaroel signed a document by which the applicant must declare in
the amount of P1, 000, with an interest of 12 percent per year. This action relates to
the recovery of this amount. The Court of First Instance of Laguna, which was filed
in this action, condemn the Villaroel to pay the claimed amount of P1, 000 with
legal interest of 12 percent per year since the August 9, 1930 until full pay. He
appealed the sentence.
ISSUE: Won action will prosper despite original has already prescribe?
HELD:
Although the action to recover the original debt has prescribed and when the
lawsuit was filed in this case, the question raised in this appeal is primarily
whether, notwithstanding such requirement, the action taken is appropriate.
However, this action is based on the original obligation contracted by the mother of
the defendant, who has already prescribed, but in which the defendant contracted
the August 9, 1930 by assuming the fulfillment of that obligation, as prescribed.
Being the only defendant in the original herdero debtor eligible successor into his
inheritance, that debt brought by his mother in law, although it lost its
effectiveness by prescription, is now, however, for a moral obligation, that
is consideration enough to create and make effective and enforceable
obligation voluntarily contracted. The rule that a new promise to pay a debt
prrescrita must be made by the same person obligated or otherwise legally
authorized by it, is not applicable to the present case is not required in compliance
with the mandatory obligation orignalmente but which would give it voluntarily
assumed this obligation. It confirms the judgment appealed from, with costs against
the appellant.
A.O. FISHER
vs.
JOHN C. ROBB
FACTS:
In September, 1935, the board of directors of the Philippine Greyhound Club, Inc., told John C.
Robb, to make a business trip to Shanghai to study the operation of a dog racing course.

As Robb answered in the affirmative, the Fisher thereupon filled a subscription blank and,
through his bank in Shanghai, sent to the Philippine Greyhound Club, Inc., in Manila telegraphic
transfer for P3,000 in payment of the first installment of his subscription. Later on Robb
returned to Manila from Shanghai.
Some months thereafter, when the board of directors of the Philippine Greyhound Club, Inc.,
issued a call for the payment of the second installment of the subscriptions, the Robb sent a
radiogram to Fisher did so and sent P2,000 directly to the Philippine Greyhound Club, Inc., in
payment of the said installment.
Due to the manipulations of those who controlled the Philippine Greyhound Club, Inc., during
the absence of the Robb undertook the organization of a company called The Philippine Racing
Club, which now manages the race track of the Santa Ana park.
The Robb immediately endeavored to save the investment of those who had subscribed to the
Philippine Greyhound Club, Inc., by having the Philippine Racing Club acquire the remaining
assets of the Philippine Greyhound Club, Inc.
The Robb wrote a letter to Fisher in Shanghai explaining in detail the critical condition of the
Philippine Greyhound Club, Inc., and outlining his plans to save the properties and assets of
the plaintiff-appellee that he felt morally responsible to the stockholders who had paid their
second installment (Exh. C).
In answer to said letter, Fisher wrote the Robb requiring him to return the entire amount paid by
him to the Philippine Greyhound Club, Inc., (exhibit E).
Upon receiving this letter, the Robb answered Fisher for any loss which he might have suffered
in connection with the Philippine Greyhound Club, Inc., in the same way that he could not
expect anyone to reimburse him for his own losses which were much more than those of the
Fisher (Exh. B).
The principal question to be decided in this appeal is whether or not the trial court erred in
holding that there was sufficient consideration to justify the promise made by Robb in his letters
Exhibits B and C.

In the fifth paragraph of the letter Exhibit B, dated March 16, 1936, addressed by the
defendant-appellant to Fisher, the former said:

and, as such, is not demandable in law but only in conscience, over which human
judges have no jurisdiction.1awphi1.n

"I feel a moral responsibility for these second payments, which were made in order to carry out
my plan (not the first payments, as you have it in your letter), and Mr. Hilscher and I will see to it
that stockholders who made second payments receive these amounts back as soon as
possible, out of our own personal funds. " As it is, I have had to take my loss along with
everyone else here, and so far as I can see that is what all of us must do. The corporation is
finally flat, so it is out of the question to receive back any of your investment from that source;
the only salvage will be the second payment that you made, and that will come from Hilscher
and me personally, as I say, not because of any obligation, but simply because we have taken it
on ourselves to do that. (And I wish I could find someone who would undertake to repay a part
of my own losses in the enterprise!)" And in the seventh paragraph of the letter Exhibit C, dated
February 21, 1936, addressed by the same defendant-appellant to Fisher the former said the
following:

ISSUE: WON DEFENDANT ROBBs moral obligation is a sufficient consideration?

However, Mr. Fischer and I feel a personal responsibility to those few stockholders who made
their second payments, including yourself, and it is our intention to personally repay the
amounts of the second payments made by those few.
. . . And, finally, paragraph 8 of the same letter Exhibit C states: "We are to receive a
certain share of the new Philippine Racing Club for our services as promoters of that
organization, and as soon as this is received by us, we will be in a position to
compensate you and the few others who made the second payments. That, as T
have said, will come from us personally, in an effort to make things easier for those
who were sportsmen enough to try to save the Greyhound organization by making
second payments.
In the present case, while Robb told Fisher that he felt morally responsible for the second
payments which had been made to carry out his plan, and that Mr. Hilscher and he would
do everything possible so that the stockholders who had made second payments may
receive the amount paid by them from their personal funds because they voluntarily
assumed the responsibility to make such payment as soon as they receive from the
Philippine racing Club certain shares for their services as promoters of said
organization, it does not appear Fisher had consented to said form of reimbursement of
the P2,000 which he had directly paid to the Philippine Greyhound Club, Inc., in
satisfaction of the second installment.
The promise which Robb has made to the plaintiff-appellee to return to him P2,000 which he
had paid to the Philippine Greyhound Club, Inc., as second installment of the payment of the
amount of the shares for which he has subscribed, was prompted by a feeling of pity which
said defendant-appellant had for the plaintiff-appellee as a result of the loss which the
latter had suffered because of the failure of the enterprise. The obligation which the said
defendant-appellant had contracted with the plaintiff-appellee is, therefore, purely moral

HELD: NO.
As to whether a moral obligation is a sufficient consideration,
SEC. 96. Moral obligation. Although there is authority in support of the board
proposition that a moral obligation is sufficient consideration, such proposition is
usually denied. . . . .
SEC. 97. Moral obligation unconnected with legal liability or legal benefit.
Although, as subsequently shown was formerly some doubt as to the point, it is now
well established that a mere moral obligation or conscience duty arising wholly from
ethical motives or a mere conscientious duty unconnected with any legal obligation,
perfect or imperfect, or with the receipt of benefit by the promisor of a material or
pecuniary nature will not furnish a consideration for an executory promise. . . .
. !!!!!
In view of the foregoing considerations, we are of the opinion and so hold, that the promise
made by an organizer of a dog racing course to a stockholder to return to him certain amounts
paid by the latter in satisfaction of his subscription upon the belief of said organizer that he was
morally responsible because of the failure of the enterprise, is not the consideration rquired
by article 1261 of the Civil Code as an essential element for the legal existence of an
onerous contract which would bind the promisor to comply with his promise.