ACQUISITION is the act of procuring or getting hold of a piece of real estate, and DISPOSITION is the manner of alienation, and transfer of possession and ownership thereof as prescribed by law. The acquisition and disposition of real estate is embodied in certain written agreements or contracts voluntarily entered into and subscribed by the parties thereof, before a public officer designated as the Notary Public of the City or Province where the subject property is situated. Thereafter, the instrument embodying the particular real estate transaction is required by law to be recorded in the registry of deed of the City or Province where the real estate involved is situated.

I. THE REAL ESTATE TRANSACTION

In any, or all real estate transactions, the law prescribes certain requirements that are essential to its validity and effectivity. These are:

A. Competence of the Parties

1. Citizenship. - Only Filipino citizens and associations or corporations, sixty (60%) percent of the capital of which belong to Filipino citizens can acquire: (1) private lands, and (2) lands of the public domain.

The Philippine Constitution of 1987 prohibits the transfer or conveyance of private lands to aliens. Thus, Section 7, Article XII provides:

Sec. 7. 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 word "private lands" in this Section connotes "private property" which is defined in Article 425 of the New Civil Code, thus:

Art. 425. Property of private ownership, besides the patrimonial property of the State, provinces, cities, and municipalities, consists of all property belonging to private persons, either individually or collectively.

Property of private ownership means "private property" which constitutes things movable or immovable, that are possessed by, or belong to persons, natural or judicial The word "private lands" are those that are possessed by, or belong to natural persons, or corporations and associations "at least sixty per centum of whose capital is owned by Filipino citizens.

Note that "private lands" is derived from "private agricultural lands" in Section 5, Article XII of the 1935 Philippine Constitution which is identical to both Section 14, Article XIV of the 1973 Philippine Constitution, and Section 7, Article XII of the 1987 Philippine Constitution. And that, "private agricultural lands" was interpreted to include "residential lands" in Krivenko v. Register of Deeds of Manila where the Supreme Court held that under the Philippine Constitution of 1935, aliens may not acquire private or public agricultural lands, including "residential lands." For this reason, the word "agricultural" was written off in Section 14, Article XIV of the 1973 Philippine Constitution.

a. Americans as aliens. -- During the American Occupation (1898-1935), the citizens of the United States could acquire agricultural lands (public and private) including residential lands without legal restraints.

(1) At the advent of the Philippine Commonwealth status, the United States of America sought to maintain the same rights that Americans then enjoyed by enacting the Tydings-McDuffie Act. This law outlined the steps to be undertaken by the Philippine Government towards the adoption of a Constitution preparatory to the recognition of Philippine independence, and the withdrawal of American sovereignty. Among the provisions enacted into the 1935 Philippine Constitution is embodied under Article XVII as follows:

Section 1. Notwithstanding the provisions of foregoing Constitution, pending the final and complete withdrawal of the sovereignty of the United States over the Philippines.

(17) Citizens and corporations of the United States shall enjoy in the Commonwealth of the Philippines all the civil rights of the citizens and corporations, respectively, thereof.

This is the first Ordinance Appended to the 1935 Philippine Constitution that was ratified by the people in a plebiscite held on May 24, 1935.

Thus, in Moss v. Director of Lands, Eugene Moss, an American national, acquired a coconut land in Leyte on January 20, 1945 He applied for registration of the land, but the trial court denied the application because he was an alien. On appeal, the Supreme Court held that Moss validly acquired the land under Section 1, Subsection 17 of the Ordinance Appended to the 1935 Philippine Constitution. And, that, upon proclamation of Philippine Independence on July 4, 1946, the 1935 Constitution provides that "all existing property rights of citizens or corporations of the United States shall be acknowledged, respected, and safeguarded to the same extent as property right of citizens of the Philippines. "Further, the Court noted that "the instant case is not covered by Section 11 of Article XVII of the 1973 Constitution and by Presidential Decree NO. 713, dated May 27, 1976, 71 Off Gaz 4173, re residential lands of American citizens."

(2) On September 18, 1946, the First Congress of the Philippines adopted a Resolution of both Houses of Congress an amendment to the 1935 Philippine Constitution known as the Parity Rights Amendment It was approved by the people at the elections held on March 11, 1947. The Second Ordinance Appended the Constitution reads as follows:

Notwithstanding the provisions of section one, Article Thirteen and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four. the disposition, exploitation, development, and utilization of all agricultural, timber. and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all forms of business enterprises owned or controlled directly or indirectly by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

William R. Quasha, an American citizen, acquired, by purchase, a Parcel of land with residential improvements thereon in Forbes Park, Makati, Rizal, on November 16, 1954. Due to the uncertainty as to the status of his property under the Parity Amendment after July 3, 1974, Quasha sought a judicial declaration of his rights (Republic v. Quasha, Aug. 17, 1972, 46 SCRA (1972).)

The Supreme Court, in this case, remarked that Sections I and 4, Article XIII of the Constitution reveals the intention of the framers to reserve to Filipinos the disposition, exploitation, development or utilization of agricultural lands, public (Section I), or private (Section 5), as well as all other natural resources;" and that "the Parity Amendment was intended to secure parity for United States citizens only in two matters: (1) exploitation, development and utilization of public lands, and other natural resources of the Philippines; and (2) the operation of public utilities but not the acquisition or exploitation of private agricultural lands, about which not a word is found in the Parity Amendment."

Finally, the Court held that:

Under the "Parity Amendment" to our Constitution, citizens of the United States and corporations and business enterprises owned or controlled by them can not acquire and own, save in case of hereditary succession, private agricultural lands in the Philippines and that all other rights acquired by them under said Amendment will expire on 3 July 1974.

Quasha's right to hold the property, therefore, should cease as of July 3, 1974.

Prior to the expiration date, the then President Ferdinand E. Marcos declared that, as a matter of national policy and amity with the United States, American citizens and corporations owned and controlled by them shall continue holding those private lands acquired by them until July 4, 1975, provided that, during the intervening period they divest themselves thereof by transferring their ownership to qualified persons and entities. For this purpose, the President authorized the National Development Corporation to acquire, hold, develop, and dispose of these lands."

(3) The validity of the titles to those private lands acquired by Americans under the Parity Amendment is recognized in Article XVII, Transitory Provisions, of the 1973 Philippine Constitution, thus:

Sec. 11. The rights and privileges granted to citizens of the United States or to corporations or associations owned or controlled by such citizens under the Ordinance appended to the nineteen hundred and thirty-five Constitution shall automatically terminate on the third day of July nineteen hundred and seventy four. Titles to private lands acquired by such persons before such date shall be valid as against other private persons only.

These titles are valid only against private persons. The State is not bound to respect these titles. In fact, the State may institute escheat proceedings against the title holders under Section 5, Rule 1 of the Rules of Court.

The American vendee and holders of private lands are. therefore, required to divest themselves of ownership thereof, and transfer the same to qualified persons and entities.

b. On Resident Americans -United States citizens (1) who were formerly Filipino citizens, or who have continuously resided in the Philippines for twenty (20) years, as of May 27.1975 (the date of the Decree), and (2) had acquired private residential lands. Not exceeding 5,000 square meters for family dwelling before the Parity Amendment, was allowed to continue holding such lands. and to transfer ownership thereof to qualified persons and entities. The same right was granted to American citizens who had become permanent residents of the Philippines and had acquired 5,000 square meters of residential lands for a family dwelling.

c. Other aliens - (1) The sale of residential land with improvements thereon in the City of Manila to Dee Chian Hong & Sons, Inc. on September 10, 1936, was declared void in view of Section 6, Article XIII of the 1935 Philippine Constitution, the vendee being a Chinese entity. The owner, however. has no right to recover the property because both (vendor and vendee) were declared in pari delicto, i.e. both parties knew that what they did was in violation of the Constitution.

(2) In another case, a Filipino owner sold four (4) parcels of land with improvements thereon at the City of Manila to a Filipino woman married to a Chinese citizen on August 16, 1943. The vendor sought for the annulment of the sale on the ground that, both vendees, husband and wife, were Chinese citizens and, therefore disqualified to acquire real properties in this country. The Court sustained the sale, nevertheless, because (1) the 1935 Philippine Constitution was not in force during the Japanese Occupation (1942-1945), and, further the "buyer of the property though married to a Chinese citizen at the time of the sale, consequently recovered her Filipino citizenship after the death of her husband in 1948 during the pendency of the case. However, her repatriation to Filipino citizenship should be accomplished by executing the oath of allegiance to the Republic of the Philippines, and by registering the said oath in the proper civil registry pursuant to Sections 2 and 4 of Commonwealth Act NO. 33.

(3) An alien may be a lessee for 30 years, renewable for not more than 25 years. He may also grant loans and become a mortgagee in certain cases specified by law. He is allowed to purchase a condominium unit, or set up a condominium project on a leased land.

d. Juridical entities. - (1) Foreign embassies may acquire or lease private lands for their official use pursuant to the Vienna Convention on Diplomatic Relations, effective August 24, 1964, ratified by the Philippines, re Articles 21, 23 and 30, on October 11, 1965.

(2) Private corporations with sixty (60%) per cent equity for Filipino citizens and forty (40%) per cent for aliens may acquire private lands, or lease lands of public domain for twenty-five (25) years, containing an area of 1,000 square meters.

(3) Private corporations can acquire private lands as may be reasonably necessary to enable it to carry out the purposes for which they are created."

(4) Alien corporations may lease private lands.

(5) A corporation sole with an alien as administrator may acquire private land which is held in trust for the benefit of the faithful residing within its territorial jurisdiction.

e. Natural-born citizens. - An exception to the constitutional inhibition against the acquisition of private lads by aliens is the Amendment to the 1973 Philippine Constitution that was ratified by plebiscite on April 1, 1981. The Amendment, designated as Section 15, Article XIV, recites:

Sec. 15. Notwithstanding the provisions of Section 14 of Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private land, for use by him as his residence, as the National Assembly shall provide.

Who is a natural-born citizen? Section 4, Article III provides:

Sec. 4. A natural-born citizen is one who is a citizen of the Philippines from birth without having to perform any act to acquire or perfect his Philippine citizenship.

And, how does a natural-born citizen lose his Philippine citizenship? Commonwealth Act No. 63, provides that Philippine citizenship may be lost by (1) naturalization in a foreign country, (2) subscribing to an oath of allegiance to a foreign country, upon attaining the age of 21 years, or more, (3) rendering service to, or accepting commission in the armed forces of a foreign country, (4) cancellation of the certification of naturalization, and (5) deserting the Philippine armed forces in time of war.

The 1987 Philippine Constitution restates similar provision as Section 4, Article III of the 1973 Philippine Constitution in Section 2, Article IV, thus:

Sec. 2. Natural-born citizens are those who are citizens of the Philippines from birth without having to perform any act to acquire or perfect their Philippine citizenship. Those who elect Philippine citizenship in accordance with paragraph (3), Section 1 hereof shall be deemed natural-born citizens.

The last sentence in this Section refers to those "born before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority." The definition of "natural-born citizen" has been restricted, according to a noted constitutionalist, Jose N. Nolledo, in that he is still a natural born citizen although his election has been made after the effectivity of the 1987 Philippine Constitution.

The natural-born citizen, under the 1987 Philippine Constitution, may be "a transferee of private lands. subject to the limitations provided by law." The law. Batas Pambansa No. 18529 provides, among others:

1. A transferee may acquire 1,999 square meters of urban land, OR one (1) hectare of rural land for residence ONLY by way of -

2. Voluntary or involuntary sale, devise or donation. The involuntary sale includes that of tax delinquency foreclosure, and execution of judgment.

3. Failure to reside permanently in the land acquired within two (2) years from acquisition, except by force majeure, is penalized by (a) forfeiture of the land including the improvements, and (b) deportation.

Excerpts from the book Philippine Real Estate Law & Jurisprudence by Alberto E. Filamor