Facts:

The case of Philippine Banking Corporation, representing the estate of Justina Santos y Canon Faustino, deceased, versus Lui She, in her own behalf and as administratrix of the intestate of Wong Heng, deceased (G.R. No. L-17587) took place in the Supreme Court of the Philippines, with a decision rendered on September 12, 1967. Justina Santos and her sister Lorenza were co-owners of a 2,582.30 square meter parcel of land located in Manila. After Lorenza passed away on September 22, 1957 without any heirs, Justina became the sole owner. At 90 years of age and suffering from blindness and frailty, Justina had limited companionship and relied on Wong Heng, a Chinese national, who had various personal and financial dealings with her, including handling her property rentals and household expenses.

On November 15, 1957, Justina executed a lease contract with Wong, granting him the right to lease the property for 50 years, with an option for him to purchase the property for PHP 120,000,

...

Facts:

Property and Parties Background

• Justina Santos y Canon Faustino and her sister Lorenza were the co-owners of a 2,582.30‑square‑meter parcel of land in Manila, located on Rizal Avenue with access to Florentino Torres and Katubusan streets.
• The property contained two residential houses and the Hen Wah Restaurant. One house was occupied by the sisters, while Wong Heng, a Chinese national, lived with his family in the restaurant.

Change in Ownership and Personal Circumstances

• On September 22, 1957, Justina Santos became the sole owner of the property after her sister died intestate.
• At the time, Justina Santos was 90 years old, blind, crippled, and an invalid, living alone with her 17 dogs and 8 maids.
• Wong Heng had long served as a trusted lessee and custodian for various funds including rental incomes and payments for her household expenses, taxes, and legal fees.

Series of Contracts Entered Into

• On November 15, 1957, Justina Santos executed a lease contract (Plff Exh. 3) in favor of Wong Heng covering a part of the property with:
• A lease term of 50 years, subject to a unilateral option allowing the lessee to withdraw at any time.
• A monthly rental of P3,120.
• On November 25, 1957, an amendment (Plff Exh. 4) expanded the lease to cover the entire property, including the house where Justina resided, with an additional monthly rental of P360.
• On December 21, 1957, a contract (Plff Exh. 7) was executed granting Wong Heng an option to purchase the leased premises for P120,000; this option was payable within ten years on installments of P1,000 and conditioned on Wong obtaining Philippine citizenship.
• On November 18, 1958, two additional contracts were executed:
• One extending the lease term to 99 years (Plff Exh. 5).
• Another fixing the term of the purchase option at 50 years (Plff Exh. 6).
• On October 28, 1958, Justina Santos filed a petition to adopt Wong Heng and his children under the mistaken belief that adoption would confer Philippine citizenship, although the process was soon abandoned upon the discovery of factual errors.

Dispute and Litigation Arising from the Contracts

• In a petition filed on November 18, 1958 in the Court of First Instance of Manila, Justina Santos alleged that the contracts were procured by Wong Heng through fraud, misrepresentation, inequitable conduct, undue influence, and abuse of confidence.
• The complaint sought:
• Annulment of the registration of the contracts.
• Recovery of alleged additional rentals, claiming a reasonable rental value of P6,240 against the contracted P3,120.
• Wong Heng, in his answer, admitted receiving certain sums for safekeeping (including P3,000 and P22,000 deposited in a joint account) but denied using his position to improperly secure the contracts.
• Subsequent amended pleadings detailed multiple cash transactions:
• P33,724.27 on November 4, 1957.
• P7,344.42 on December 1, 1957.
• P10,000 on December 6, 1957.
• The already admitted P22,000 and P3,000.
• Meanwhile, petitions for guardianship were filed; the Security Bank & Trust Co. was appointed guardian of Justina’s properties, and Ephraim G. Gochangco as guardian of her person.
• Later developments included the death of the original parties:
• Wong Heng died on October 21, 1962 and was substituted by his wife, Lui She.
• Justina Santos died on December 28, 1964 and was substituted by the Philippine Banking Corporation.

Evidence on Consent and Allegations of Undue Influence

• Testimonies, notably by Atty. Tomas S. Yumol and Atty. Benjamin C. Alonzo, indicated that despite objections, Justina Santos voluntarily approved the contracts, repeatedly asserting, “Whatever (Wong) wants must be followed.”
• Despite her vulnerable condition (illiteracy, blindness, and inability to read English), there was evidence that the contractual terms were fully explained to her by counsel and others present at the time of signing.

Lower Court Ruling on the Matter

• The trial court declared all documents except the original lease dated November 15, 1957, null and void.
• Wong Heng was condemned to pay Justina Santos, through her guardian, a sum (approximately P55,554.25) with legal interest from the amended complaint’s filing, along with monthly rental payments for his continued occupancy.
• The court disallowed claims for increased rentals and various other monetary demands.
• Wong Heng’s accounting for funds received and disbursed was scrutinized, resulting in an order for payment of a calculated balance (approximately P56,564) in favor of Justina’s estate.

Issue:

Validity of the Contracts

• Whether the lease contracts (and associated amendments and the option agreement) were validly executed given the alleged lack of mutuality in terms and the unilateral nature of withdrawal rights.
• Whether the contracts’ provisions, especially the clause allowing the lessee to withdraw at any time, violated Article 1308 of the Civil Code regarding binding obligations on both contracting parties.

Allegations of Fraud, Misrepresentation, and Undue Influence

• Whether Wong Heng exploited his fiduciary-like relationship with Justina Santos to secure the execution of the contracts.
• Whether the vulnerable condition of Justina (due to age, blindness, and illiteracy) rendered her consent invalid or a product of undue influence.

Circumvention of Constitutional Prohibitions

• Whether the collective arrangement of the contracts was designed as an insidious scheme to circumvent the constitutional prohibition against aliens acquiring or holding lands in the Philippines.
• Whether the option to buy combined with long-term lease elements constituted a “virtual transfer of ownership” to a foreign national, contravening established public policy.

Accounting and Settlement of Trust Funds

• The proper accounting and reconciliation of funds received and disbursed by Wong Heng in trust for Justina Santos.
• Whether the amounts held in separate accounts (one for safekeeping and one associated with rental proceeds) should be adjusted to reflect the true obligations of the parties.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)