RIDGEWOOD ESTATE, INC.

G.R. No. 166751

(Erroneously sued as Camella

Homes),

Present:
Petitioner,
PUNO, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,

- versus -

AZCUNA, and
GARCIA, JJ.

Promulgated:
EXPEDITO BELAOS,
Respondent.

June 8, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

PUNO, J.:

This is a petition for review of the decision of the Court of Appeals dated July 28, 2004 and its
resolution dated January 19, 2005 in CA-G.R. SP No. 77836. The Court of Appeals affirmed the order of
the Regional Trial Court of Manila in Civil Case No. 02-103764 denying the motion to dismiss filed by
herein petitioner Ridgewood Estate, Inc.

Petitioner is a subdivision developer that sells properties under the trade name Camella Homes.
Respondent Expedito Belaos entered into a contract to sell with petitioner for the purchase of a house
and lot at Tierra Nevada, Gen. Trias, Cavite. Pursuant thereto, respondent issued several postdated
checks in favor of petitioner as amortization for the property. Petitioner, however, failed to construct
the house. Thus, respondent, in a letter dated April 16, 2000, rescinded the contract to sell and
demanded the return of the amounts he had paid to petitioner, as well as the postdated checks.

Petitioner remitted to respondent the sum of P299,908.00, equivalent to the down payment and six
monthly amortizations previously paid by respondent, but it nonetheless continued to encash the other
postdated checks, to the prejudice of respondent.

Respondent filed before the Regional Trial Court of Manila a complaint for damages against
Camella Homes for encashing the postdated checks despite repeated demands to return them and
refrain from encashing them in view of the recission of the contract to sell.

Petitioner filed a motion to dismiss. It argued that Camella Homes is not a real party-in-interest
and the complaint states no cause of action as the contract to sell was entered into by and between
Expedito L. Belaos and Ridgewood Estate, Inc. It further argued that the complaint was defective since
Camella Homes is not a natural or juridical person, hence, it is not an entity authorized by law to be a
party to a civil suit.

The trial court denied the motion to dismiss. It applied the doctrine on corporation by estoppel
under Section 21 of the Corporation Code which states:
Section 21. Corporation by estoppel.All persons who assume to act as a corporation knowing it
to be without authority to do so shall be liable as general partners for all debts, liabilities and damages
incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation is
sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not
be allowed to use as a defense its lack of corporate personality.

One who assumes an obligation to an ostensible corporation as such, cannot resist performance
thereof on the ground that there was in fact no corporation.

Petitioner filed a petition for certiorari before the Court of Appeals. In addition to its contention that
Camella Homes was not a real
party-in-interest, petitioner also raised the argument that the trial
court had no jurisdiction over the suit, as the subject matter of the complaint was within the exclusive
jurisdiction of the Housing and Land Use Regulatory Board (HLURB).

In its decision dated July 28, 2004, the Court of Appeals dismissed the petition. It held:
Private respondents complaint contains allegations that Ridgewood Estates (sic) deliberately and
intentionally encashed the postdated checks despite knowledge of the contracts recission. Respondent
prayed for the award of actual, moral and exemplary damages due to his humiliation and loss of
credibility with the banking community and among his colleagues caused by petitioners alleged
malicious acts.

Respondent Belaos is not claiming refund or any other claim from a subdivision developer. He does not
demand for specific performance of contractual and statutory obligations of delivering the property to
him. In the cases that reached the Supreme Court, the ruling has consistently been that the NHA or the
HLURB has jurisdiction over complaints arising from contracts between the subdivision developer and
the lot buyer or those aimed at compelling the subdivision developer to comply with its contractual and
statutory obligations to make the subdivision a better place to live in. It has already been admitted by
both parties that the contract has already been rescinded and that Ridgewood returned the
downpayment [sic] and some of the postdated checks. Hence, the Court a quo has jurisdiction over the
action for damages.[1]

Petitioner filed a motion for reconsideration which was denied by the Court of Appeals in its resolution
dated January 19, 2005.

Petitioner raises the following arguments in the case at bar:

1. That the honorable court failed to consider that the lower court acted with grave abuse of discretion
when the latter assumed jurisdiction over a matter which the law already vests with the Housing and
Land Use Regulatory Board.

2. That a perusal of the order of the lower court reveals that it committed grave abuse of discretion
when it anchored itself on an erroneous finding that Camella Homes allegedly is a corporation by
estoppel.

3. That the Honorable Court of Appeals failed to consider that the lower court committed grave abuse
of discretion when it failed to consider that the complaint filed by private respondent has no cause of
action for failure to implead the real party in interest.

4. That the Honorable Court of Appeals failed to consider that the lower court committed grave abuse
of discretion when it ordered Camella Homes, which has no legal capacity to be sued[,] to submit an
answer.[2]

We affirm the decision of the Court of Appeals.

First, the trial court correctly assumed jurisdiction over the complaint filed by respondent against
petitioner.

Section 1 of Presidential Decree No. 1344 provides for the jurisdiction of HLURB (then National Housing
Authority), thus:
Sec. 1. In the exercise of its function to regulate the real estate trade and business and in addition to its
powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive
jurisdiction to hear and decide the cases of the following nature:

a. Unsound real estate business practices;

b. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer
against the project owner, developer, dealer, broker or salesman; and

c. Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.

The Court held in Roxas v. Court of Appeals[3] that the mere relationship between the parties, i.e., that
of being subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction
in the HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is
the nature of the action as enumerated in Section 1 of P.D. No. 1344. The HLURB has jurisdiction over
complaints aimed at compelling the subdivision developer to comply with its contractual and statutory
obligations.

The complaint filed by respondent against petitioner was one for damages. It prayed for the payment of
moral, actual and exemplary damages by reason of petitioners malicious encashment of the checks
even after the rescission of the contract to sell between them. Respondent claimed that because of
petitioners malicious and fraudulent acts, he suffered humiliation and embarrassment in several banks,
causing him to lose his credibility and good standing among his colleagues.[4] Such action falls within
the jurisdiction of regular courts, not the HLURB.

Second, we observe that respondents complaint was actually directed against herein petitioner,
Ridgewood Estate, Inc., although it named Camella Homes as respondent therein. The complaint itself
referred to Ridgewood Estate, Inc. as the authorized representative of Camella Homes. Petitioner
cannot use the lack of juridical personality by Camella Homes as reason to evade its liability, if any, to
petitioner. Petitioner admittedly uses the name Camella Homes as its business name. Hence, to the
buyers, Camella Homes and Ridgewood Estate, Inc. are one and the same. A reading of the complaint
would show that respondent was essentially suing petitioner, it being the seller of the house and lot he

intended to purchase. We agree with the Court of Appeals ruling that the remedy in this case is not the
dismissal of the case but the joinder of the proper party.[5] The appellate court correctly explained:
Dismissal of the complaint is not the remedy since the Court a quo properly acquired jurisdiction [over]
the action for damages. In its pleadings before the trial court, defendant Camella Homes alleges that it
is not a juridical entity, not the real party in interest and pointed to Ridgewood Estates [sic], Inc. as the
party liable to Belaos. In its petition before *u+s, Ridgewood Estates *sic+, Inc. erroneously sued as
Camella Homes presented itself as one of the developers of Camella Homes, specifically that of Tierra
Nevada Subdivision of which respondent Belaos is a buyer, then it claims to be the real party in interest
in the controversy by admitting it entered into a Contract to Sell with Belaos, [then] tries to exculpate
Camella Homes by alleging that the latter is not a juridical entity and alleges that it is the HLURB which
has jurisdiction over the controversy.

The Regional Trial Court did not commit grave abuse of discretion in denying the motion to dismiss and
ordering defendant Camella Homes to file an answer. Assuming arguendo that petitioner Ridgewood is
a separate entity from Camella Homes, defendant Camella Homes may implead the former. Private
respondent Belaos may file a motion to amend his complaint so as to implead the real party in interest.
Parties may be dropped or added by order of the court on motion of any party or on its own initiative at
any stage of the action and on such terms as are just. (Sec. 11, Rule 3 of the 1997 Rules of Civil
Procedure)[6]

We, therefore, find that the trial court did not err in denying petitioners motion to dismiss.

IN VIEW WHEREOF, the petition is DENIED.

IN RE: PETITION FOR

G.R. No. 149615

SEPARATION OF PROPERTY

ELENA BUENAVENTURA MULLER,

Petitioner,

Present:

Panganiban, C.J. (Chairperson),

- versus -

Ynares-Santiago,
Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ.

HELMUT MULLER,
Respondent.

Promulgated:

August 29, 2006

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari[1] assails the February 26, 2001 Decision[2] of the Court of
Appeals in CA-G.R. CV No. 59321 affirming with modification the August 12, 1996 Decision[3] of the
Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-94-21862, which terminated the
regime of absolute community of property between petitioner and respondent, as well as the
Resolution[4] dated August 13, 2001 denying the motion for reconsideration.

The facts are as follows:

Petitioner Elena Buenaventura Muller and respondent Helmut Muller were married in Hamburg,
Germany on September 22, 1989. The couple resided in Germany at a house owned by respondents
parents but decided to move and reside permanently in the Philippines in 1992. By this time,
respondent had inherited the house in Germany from his parents which he sold and used the proceeds
for the purchase of a parcel of land in Antipolo, Rizal at the cost of P528,000.00 and the construction of
a house amounting to P2,300,000.00. The Antipolo property was registered in the name of petitioner
under Transfer Certificate of Title No. 219438[5] of the Register of Deeds of Marikina, Metro Manila.

Due to incompatibilities and respondents alleged womanizing, drinking, and maltreatment, the
spouses eventually separated. On September 26, 1994, respondent filed a petition[6] for separation of
properties before the Regional Trial Court of Quezon City.

On August 12, 1996, the trial court rendered a decision which terminated the regime of absolute
community of property between the petitioner and respondent. It also decreed the separation of
properties between them and ordered the equal partition of personal properties located within the
country, excluding those acquired by gratuitous title during the marriage. With regard to the Antipolo
property, the court held that it was acquired using paraphernal funds of the respondent. However, it
ruled that respondent cannot recover his funds because the property was purchased in violation of
Section 7, Article XII of the Constitution. Thus

However, pursuant to Article 92 of the Family Code, properties acquired by gratuitous title by either
spouse during the marriage shall be excluded from the community property. The real property,
therefore, inherited by petitioner in Germany is excluded from the absolute community of property of
the herein spouses. Necessarily, the proceeds of the sale of said real property as well as the personal
properties purchased thereby, belong exclusively to the petitioner. However, the part of that
inheritance used by the petitioner for acquiring the house and lot in this country cannot be recovered by
the petitioner, its acquisition being a violation of Section 7, Article XII of the Constitution which provides
that 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
law will leave the parties in the situation where they are in without prejudice to a voluntary partition by
the parties of the said real property. x x x

xxxx

As regards the property covered by Transfer Certificate of Title No. 219438 of the Registry of Deeds of
Marikina, Metro Manila, situated in Antipolo, Rizal and the improvements thereon, the Court shall not
make any pronouncement on constitutional grounds.[7]

Respondent appealed to the Court of Appeals which rendered the assailed decision modifying the trial
courts Decision. It held that respondent merely prayed for reimbursement for the purchase of the
Antipolo property, and not acquisition or transfer of ownership to him. It also considered petitioners
ownership over the property in trust for the respondent. As regards the house, the Court of Appeals
ruled that there is nothing in the Constitution which prohibits respondent from acquiring the same. The
dispositive portion of the assailed decision reads:

WHEREFORE, in view of the foregoing, the Decision of the lower court dated August 12, 1996 is hereby
MODIFIED. Respondent Elena Buenaventura Muller is hereby ordered to REIMBURSE the petitioner the
amount of P528,000.00 for the acquisition of the land and the amount of P2,300,000.00 for the
construction of the house situated in Atnipolo, Rizal, deducting therefrom the amount respondent spent
for the preservation, maintenance and development of the aforesaid real property including the
depreciation cost of the house or in the alternative to SELL the house and lot in the event respondent

does not have the means to reimburse the petitioner out of her own money and from the proceeds
thereof, reimburse the petitioner of the cost of the land and the house deducting the expenses for its
maintenance and preservation spent by the respondent. Should there be profit, the same shall be
divided in proportion to the equity each has over the property. The case is REMANDED to the lower
court for reception of evidence as to the amount claimed by the respondents for the preservation and
maintenance of the property.

SO ORDERED.[8]

Hence, the instant petition for review raising the following issues:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RESPONDENT HEREIN IS
ENTITLED TO REIMBURSEMENT OF THE AMOUNT USED TO PURCHASE THE LAND AS WELL AS THE COSTS
FOR THE CONSTRUCTION OF THE HOUSE, FOR IN SO RULING, IT INDIRECTLY ALLOWED AN ACT DONE
WHICH OTHERWISE COULD NOT BE DIRECTLY x x x DONE, WITHOUT DOING VIOLENCE TO THE
CONSTITUTIONAL PROSCRIPTION THAT AN ALIEN IS PROHIBITED FROM ACQUIRING OWNERSHIP OF
REAL PROPERTIES LOCATED IN THE PHILIPPINES.

II

THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING RESPONDENTS CAUSE OF ACTION WHICH IS
ACTUALLY A DESPERATE ATTEMPT TO OBTAIN OWNERSHIP OVER THE LOT IN QUESTION, CLOTHED
UNDER THE GUISE OF CLAIMING REIMBURSEMENT.

Petitioner contends that respondent, being an alien, is disqualified to own private lands in the
Philippines; that respondent was aware of the constitutional prohibition but circumvented the same;
and that respondents purpose for filing an action for separation of property is to obtain exclusive
possession, control and disposition of the Antipolo property.

Respondent claims that he is not praying for transfer of ownership of the Antipolo property but merely
reimbursement; that the funds paid by him for the said property were in consideration of his marriage
to petitioner; that the funds were given to petitioner in trust; and that equity demands that respondent
should be reimbursed of his personal funds.

The issue for resolution is whether respondent is entitled to reimbursement of the funds used for the
acquisition of the Antipolo property.

The petition has merit.

Section 7, Article XII of the 1987 Constitution states:

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.

Aliens, whether individuals or corporations, are disqualified from acquiring lands of the public domain.
Hence, they are also disqualified from acquiring private lands.[9] The primary purpose of the
constitutional provision is the conservation of the national patrimony. In the case of Krivenko v.
Register of Deeds,[10] the Court held:

Under section 1 of Article XIII of the Constitution, natural resources, with the exception of public
agricultural land, shall not be alienated, and with respect to public agricultural lands, their alienation is
limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands
of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their
agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is included in Article
XIII, and it reads as follows:

Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain in the Philippines.

This constitutional provision closes the only remaining avenue through which agricultural resources may
leak into aliens hands. It would certainly be futile to prohibit the alienation of public agricultural lands
to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in
the hands of Filipino citizens. x x x

xxxx

If the term private agricultural lands is to be construed as not including residential lots or lands not
strictly agricultural, the result would be that aliens may freely acquire and possess not only residential
lots and houses for themselves but entire subdivisions, and whole towns and cities, and that they may
validly buy and hold in their names lands of any area for building homes, factories, industrial plants,
fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses, playgrounds, airfields,
and a host of other uses and purposes that are not, in appellants words, strictly agricultural. (Solicitor
Generals Brief, p. 6.) That this is obnoxious to the conservative spirit of the Constitution is beyond
question.

Respondent was aware of the constitutional prohibition and expressly admitted his knowledge thereof
to this Court.[11] He declared that he had the Antipolo property titled in the name of petitioner
because of the said prohibition.[12] His attempt at subsequently asserting or claiming a right on the said
property cannot be sustained.

The Court of Appeals erred in holding that an implied trust was created and resulted by operation of law
in view of petitioners marriage to respondent. Save for the exception provided in cases of hereditary
succession, respondents 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 provision, no trust can result in favor of the party who is guilty of the
fraud.[13] To hold otherwise would allow circumvention of the constitutional prohibition.

Invoking the principle that a court is not only a court of law but also a court of equity, is likewise
misplaced. It has been held that 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.[14] He who seeks equity must do
equity, and he who comes into equity must come with clean hands. The latter is a frequently stated
maxim which is also expressed in the principle that he who has done inequity shall not have equity. It
signifies that a litigant may be denied relief by a court of equity on the ground that his conduct has been
inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy in issue.[15]

Thus, in the instant case, respondent cannot seek reimbursement on the ground of equity where it is
clear that he willingly and knowingly bought the property despite the constitutional prohibition.

Further, the distinction made between transfer of ownership as opposed to recovery of funds is a futile
exercise on respondents part. To allow reimbursement would in effect permit respondent to enjoy the
fruits of a property which he is not allowed to own. Thus, it is likewise proscribed by law. As expressly
held in Cheesman v. Intermediate Appellate Court:[16]

Finally, the fundamental law prohibits the sale to aliens of residential land. Section 14, Article XIV of the
1973 Constitution ordains that, Save in cases of hereditary succession, no private land shall be
transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain. Petitioner Thomas Cheesman was, of course, charged with knowledge of
this prohibition. Thus, assuming that it was his intention that the lot in question be purchased by him
and his wife, he acquired no right whatever over the property by virtue of that purchase; and in
attempting to acquire a right or interest in land, vicariously and clandestinely, he knowingly violated the
Constitution; the sale as to him was null and void. In any event, he had and has no capacity or
personality to question the subsequent sale of the same property by his wife on the theory that in so
doing he is merely exercising the prerogative of a husband in respect of conjugal property. To sustain
such a theory would permit indirect controversion of the constitutional prohibition. If the property were
to be declared conjugal, this would accord to the alien husband a not insubstantial interest and right
over land, as he would then have a decisive vote as to its transfer or disposition. This is a right that the
Constitution does not permit him to have.

As already observed, the finding that his wife had used her own money to purchase the property
cannot, and will not, at this stage of the proceedings be reviewed and overturned. But even if it were a
fact that said wife had used conjugal funds to make the acquisition, the considerations just set out to
militate, on high constitutional grounds, against his recovering and holding the property so acquired, or
any part thereof. And whether in such an event, he may recover from his wife any share of the money
used for the purchase or charge her with unauthorized disposition or expenditure of conjugal funds is
not now inquired into; that would be, in the premises, a purely academic exercise. (Emphasis added)

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated February 26,
2001 of the Court of Appeals in CA-G.R. CV No. 59321 ordering petitioner Elena Buenaventura Muller to
reimburse respondent Helmut Muller the amount of P528,000 for the acquisition of the land and the
amount of P2,300,000 for the construction of the house in Antipolo City, and the Resolution dated
August 13, 2001 denying reconsideration thereof, are REVERSED and SET ASIDE. The August 12, 1996
Decision of the Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-94-21862 terminating
the regime of absolute community between the petitioner and respondent, decreeing a separation of
property between them and ordering the partition of the personal properties located in the Philippines
equally, is REINSTATED.

SO ORDERED.