G.R. No. 199582 , July 7, 2020
JULIE PARCON-SONG, PETITIONER, VS. LILIA B. PARCON, JOINED BY HER HUSBAND JOAQUIN A. PARCON, MAYBANK PHILIPPINES, INC. (FORMERLY PNB REPUBLIC BANK), AND THE REGISTER OF DEEDS OF QUEZON CITY, RESPONDENTS.

FACTS

The case involves a concurring opinion by Justice Hernando. The established facts show that Maybank Philippines, Inc., a foreign corporation 98%-owned by a Malaysian entity, acquired a subject real property by bidding and taking part in its foreclosure sale in 2001. Maybank relied on Republic Act No. 10641 (RA 10641), which allows foreign banks to foreclose and acquire mortgaged real properties, albeit with restrictions. The petitioner, Julie Parcon-Song, contested this sale.

ISSUE

Whether the sale of the subject real property to Maybank is void ab initio.

RULING

Yes, the sale is void ab initio. The prevailing law at the time of the sale in 2001 was Republic Act No. 133 , as amended, not RA 10641 which was enacted in 2014. Section 1 of RA 133 explicitly prohibits a mortgagee disqualified from holding lands of the public domain (such as a foreign corporation) from bidding or taking part in any foreclosure sale of the mortgaged real property. Furthermore, Section 7, Article XII of the 1987 Constitution allows the transfer of private lands only to individuals or entities qualified to acquire lands of the public domain, with hereditary succession as the sole exception. As a foreign corporation, Maybank is constitutionally disqualified from acquiring Philippine land. The transaction, being in violation of the Constitution and a statutory prohibition, is contrary to law and public policy. Contracts that violate the Constitution, law, or public policy are inexistent and void from the beginning under Article 1409(1) of the Civil Code. The public bidding was also tainted as Maybank’s participation, despite its disqualification, gave it an undue advantage and contravened the public interest inherent in such biddings. Therefore, the sale is void ab initio.