G.R. No. 159310 February 24, 2009
CAMILO F. BORROMEO, Petitioner, vs. ANTONIETTA O. DESCALLAR, Respondent.

FACTS

Wilhelm Jambrich, an Austrian national, cohabited with respondent Antonietta Opalla-Descallar, a Filipina. During their relationship, they acquired three parcels of land and a house in Mandaue City. The Contracts to Sell and the Deed of Absolute Sale identified both Jambrich and respondent as buyers. However, upon presentation for registration, the Register of Deeds refused to include Jambrich’s name on the title because, as an alien, he was prohibited from acquiring alienable lands of the public domain. Consequently, Transfer Certificate of Title (TCT) Nos. 24790, 24791, and 24792 were issued solely in respondent’s name. Jambrich’s signatures remained on the documents. Jambrich also formally adopted respondent’s two sons. The relationship ended in April 1991. Jambrich subsequently sold his rights and interests in the properties to petitioner Camilo F. Borromeo through a “Deed of Absolute Sale/Assignment” to settle a debt. Upon discovering the titles were in respondent’s name and the property mortgaged, petitioner filed a complaint for recovery of real property. The Regional Trial Court ruled in favor of petitioner, finding that Jambrich alone provided the funds for the purchase, and declared petitioner the owner. The Court of Appeals reversed this decision, holding that Jambrich had no title to transfer since the properties were registered solely in respondent’s name.

ISSUE

Whether an alien (Jambrich) who provided the purchase money for properties registered in the name of his Filipina cohabiting partner, due to constitutional prohibition, retains equitable or beneficial ownership rights that can be validly assigned to a third party (petitioner Borromeo).

RULING

The Supreme Court REVERSED the Court of Appeals and REINSTATED the decision of the Regional Trial Court with MODIFICATION.
1. On Ownership: The Court found that Jambrich solely provided the funds for the purchase of the properties. Respondent’s claim of financial capacity was contradicted by evidence of her modest income and living conditions prior to cohabitation. The inclusion of her name in the deeds was a scheme to circumvent the constitutional prohibition against aliens acquiring land. Thus, Jambrich was the true and absolute owner, and respondent merely held the title in trust for him.
2. On the Validity of the Assignment: The Court held that Jambrich, as the beneficial owner, retained the right to dispose of his interest in the properties. The constitutional prohibition (Article XII, Section 7 of the 1987 Constitution and its predecessors) applies to the ownership of the land itself, not to the money used to purchase it. An alien may recover the property if it is proved that the title was placed in the name of a Filipino citizen merely as a trustee. Therefore, the Deed of Absolute Sale/Assignment executed by Jambrich in favor of petitioner was valid.
3. On the Torrens Title: The Court ruled that the Torrens system cannot be used to shield fraud or protect a person who secures registration through misrepresentation. Respondent, who did not contribute to the purchase price, could not claim superior rights over the real owner, Jambrich, and his assignee, petitioner.
4. Disposition: Petitioner was declared the owner. The TCTs in respondent’s name were declared void. The Register of Deeds was ordered to cancel them and issue new ones in petitioner’s name, subject to the existing mortgage which petitioner assumed. The award of attorney’s fees and litigation expenses was deleted.