G.R. No. L-1183 October 19, 1953
NICOLAS C. MERCADO and SINFOROSO MERCADO, plaintiffs-appellants, vs. BENITO GO BIO, defendant-appellee.

FACTS

The plaintiffs, Nicolas C. Mercado and Sinforoso Mercado, filed a suit in the Court of First Instance of Manila (Civil Case No. 55449) to annul a contract of sale and a contract of lease concerning two parcels of land and improvements, alleging the deed of sale executed by Nicolas C. Mercado in favor of Benito Go Bio was not a sale with the right to repurchase but a mortgage to secure a loan. The defendant claimed ownership evidenced by Transfer Certificate of Title No. 53004. On February 13, 1940, judgment was rendered based on a stipulation (convenio) wherein Benito Go Bio agreed to execute an absolute deed of sale in favor of Nicolas C. Mercado upon payment of specified sums, including P26,618.54, monthly payments of P200 from May 1 to February 29, 1940 (totaling P2,000), real estate taxes and insurance premiums from 1939, and amounts adjudicated in related civil cases (Nos. 55010 and 55011). Nicolas C. Mercado was granted an option to repurchase within five years from February 21, 1938, conditioned on monthly payments of P200 starting March 1940; failure to pay would rescind the option. In related cases (Nos. 55010 and 55011), a judgment on June 24, 1940, based on a stipulation, required Nicolas C. Mercado to pay Benito Go Bio P30,000 within 90 days to settle obligations, including those in Case No. 55449. On January 15, 1943, the defendant moved for execution of the February 13, 1940 judgment, citing failure to pay monthly rentals from December 1941. Plaintiffs objected, citing defendant’s failure to collect, office closure, and a claim that the repurchase period was extended to June 24, 1945, by the June 24, 1940 judgment. Plaintiffs attempted to tender payment of P33,274.66 for repurchase in February 1943, but defendant refused, arguing the option had lapsed due to non-payment of rentals. On March 15, 1946, plaintiffs moved for a statement of liability and to repurchase, but the court denied it on June 13, 1946, holding the June 24, 1940 judgment annulled or reformed the February 13, 1940 judgment. Plaintiffs appealed, and the case was certified by the Court of Appeals as involving only questions of law.

ISSUE

Whether the sale of the parcels of land to Benito Go Bio, an alien, is null and void under the constitutional prohibition against aliens acquiring urban lands, and if so, whether relief can be granted to the parties.

RULING

The Supreme Court affirmed the orders of June 13 and July 31, 1946. The sale of the lots to Benito Go Bio, a Chinese citizen, on February 21, 1938, is null and void under Section 5, Article XIII of the 1935 Constitution, which prohibits aliens from acquiring urban lands, as construed in Krivenko vs. Register of Deeds. However, the majority held that both parties being in pari delicto (in equal fault), no remedy may be afforded to them, following precedents such as Rellosa vs. Gaw Chee. Justices Pablo and Padilla dissented in opinion, believing that both parties acting in good faith should restore what they received. The appeal was dismissed without costs.