Hulst vs. PR Builders, Inc.

The constitutional restriction on foreign ownership of land does not apply to the purchase of condominium units by aliens under the Condominium Act (Republic Act No. 4726), where ownership of the land is legally separated from the unit and vested in a Condominium Corporation, provided that Filipino citizens own at least sixty percent (60%) of the corporation's capital stock and alien ownership does not exceed forty percent (40%).

The case originated from a dispute between Jacobus Bernhard Hulst, a foreign national, and PR Builders, Inc. regarding a Contract to Sell for a condominium unit. The case previously reached the Supreme Court which, in a Decision dated September 3, 2007, ordered the petitioner to return excess proceeds from an auction sale to the respondent, apparently on the basis that the contract violated the constitutional prohibition against alien land ownership. The instant Resolution addresses the petitioner's motion for reconsideration challenging that order and the underlying declaration of contractual invalidity.

• Petitioner Jacobus Bernhard Hulst, a foreign national, entered into a Contract to Sell with respondent PR Builders, Inc. for a condominium unit.
• The Contract to Sell stipulated that upon full payment, the seller would deliver a Deed of Absolute Sale conveying rights, interests, and title to the unit and common areas, together with a Condominium Certificate of Title in the seller's name.
• The contract explicitly provided that all title, rights, and interests conveyed shall be subject to Republic Act No. 4726 (The Condominium Act), Presidential Decree No. 957, the Master Deed, and the Condominium Corporation's Articles of Incorporation and By-Laws.
• In its Decision dated September 3, 2007, the Supreme Court ordered petitioner to return to respondent the amount of P2,125,540.00, representing excess proceeds from an auction sale delivered to petitioner.
• Petitioner filed a Motion for Partial Reconsideration specifically contesting the order to return the excess proceeds, arguing that the Contract to Sell was valid and did not violate constitutional prohibitions against alien land ownership.
• Despite receipt of the Court's Resolution dated February 6, 2008, respondent failed to file a comment on the motion.

• The Contract to Sell involved a condominium unit and did not violate the Constitutional proscription against ownership of land by aliens.
• The contract would not transfer ownership of the land to the buyer; instead, the buyer would merely acquire a Condominium Certificate of Title as evidence of ownership, not a Transfer Certificate of Title for the land.
• The buyer acquires only the seller's title, rights, and interests in the unit and the common areas, not ownership of the land itself.
• Therefore, the constitutional prohibition does not apply, and the Court's order to return the excess proceeds of P2,125,540.00 should be set aside.

• N/A (Respondent failed to file a comment despite receipt of the Court's Resolution).

• Procedural: N/A
• Substantive Issues:
  • Whether the constitutional prohibition against foreign ownership of land applies to the acquisition of condominium units by aliens under the Condominium Act.
  • Whether the Contract to Sell between the foreign petitioner and the respondent corporation is valid despite the foreign nationality of the prospective buyer.

• Procedural: N/A
• Substantive: The Motion for Partial Reconsideration is granted. The Court modified its Decision dated September 3, 2007 by deleting the order directing petitioner to return P2,125,540.00 to respondent. The Court held that under Republic Act No. 4726 (the Condominium Act), foreign nationals may own condominium units and shares in condominium corporations up to forty percent (40%) of the total outstanding capital stock, provided Filipino citizens own at least sixty percent (60%). Under this statutory framework, ownership of the land is legally separated from the unit, with the land owned by the Condominium Corporation and the unit owner being merely a member thereof. Since the rights and liabilities of the parties are governed by the Condominium Act, and the petitioner was to be simply a member of the Condominium Corporation while the land remained owned by the corporation, the constitutional proscription against aliens owning real property does not apply. There being no circumvention of the constitutional prohibition, the pronouncements on the invalidity of the Contract of Sale are set aside.

• Separation of Land and Unit Ownership under the Condominium Act — Under Republic Act No. 4726, ownership of the land is legally separated from ownership of condominium units. The land is owned by a Condominium Corporation while unit owners are members thereof. As long as sixty percent (60%) of the members are Filipino citizens, the remaining forty percent (40%) may be foreigners.
• Exception to Alien Land Ownership Prohibition — The constitutional prohibition against foreign ownership of land (Article XII, Section 7 of the 1987 Constitution) does not apply to the acquisition of condominium units by aliens under the Condominium Act, provided the foreign ownership limitations in the corporation holding the common areas are observed.

• "Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, foreign nationals can own Philippine real estate through the purchase of condominium units or townhouses constituted under the Condominium principle with Condominium Certificates of Title."
• "It expressly allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or controlled corporation."
• "Under this set up, the ownership of the land is legally separated from the unit itself. The land is owned by a Condominium Corporation and the unit owner is simply a member in this Condominium Corporation."
• "As long as 60% of the members of this Condominium Corporation are Filipino, the remaining members can be foreigners."
• "Considering that the rights and liabilities of the parties under the Contract to Sell is covered by the Condominium Act wherein petitioner as unit owner was simply a member of the Condominium Corporation and the land remained owned by respondent, then the constitutional proscription against aliens owning real property does not apply to the present case."

• City Treasurer of Makati v. BA Lepanto Condominium Corporation, G.R. No. 154993, October 25, 2005 — Cited as authority for the principle that under the Condominium Act, the ownership of the land is legally separated from the unit itself, with the land owned by the Condominium Corporation and the unit owner being a member thereof.

• Republic Act No. 4726 (The Condominium Act), Section 5 — Provides that no condominium unit shall be conveyed or transferred to persons other than Filipino citizens or corporations at least sixty percent (60%) of the capital stock of which belong to Filipino citizens, except where the common areas are held by a corporation and the transfer of a unit would not cause the alien interest in such corporation to exceed the limits imposed by existing laws (i.e., 40%).
• Presidential Decree No. 957 — Regulating the Sale of Subdivision Lots and Condominiums; cited as governing law applicable to the Contract to Sell.