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ARTICLE 1931

METROPOLITAN FABRICS, INC., ET AL. V. PROSPERITY CREDIT RESOURCES, INC. ET AL.,

FACTS:
Metropolitan Fabrics, Incorporated (MFI), a family corporation, owned a 5.8hectare industrial compound at No. 685 Tandang Sora Avenue, Novaliches,
Quezon City which was covered by TCT No. 241597.Pursuant to a P2 million, 10-year 14% per annum loan agreement with Manphil Investment Corporation
(Manphil) dated April 6, 1983, the said lot was subdivided into11 lots, with Manphil retaining four lots as mortgage security.

The other seven lots, now covered by TCT Nos. 317699 and 317702 to 317707, were released to MFI. In July 1984, MFI sought from PCRI a loan in the
amount of P3,443,330.52, the balance of the cost of its boiler machine, to prevent its repossession by the seller. PCRI, also family-owned corporation licensed
since 1980 to engage in money lending, was represented by Domingo Ang (Domingo) its president, and his son Caleb, vice-president. The parties knew each
other because they belonged to the same familyassociation, the Lioc Kui Tong Fraternity.

On the basis only of his interview with Enrique, feedback from the stockholders and the Chinese community, as well as information given by his own
father Domingo, and without further checking on the background of Enrique and his business and requiring him to submit a company profile and a feasibility study
of MFI, Caleb recommended the approval of the P3.44 million with an interest ranging from 24% to 26% per annum and a term of between five and ten years
(Decision, p. 5).
According to the court, it sufficed for Caleb that Enrique was a well-respected Chinese businessman, that he was the presidentof their Chinese family
association, and that he had other personal businesses aside fromMFI, such as the Africa Trading.However, in September 1984, the first amortization check
bounced for insufficient fund due to MFIs continuing business losses. It was then that the appellees allegedly learnedthat PCRI had filled up the 24 blank checks
with dates and amounts that reflected a 35%interest rate per annum, instead of just 24%, and a two year repayment period, instead of10 years.

On September 4, 1986, Enrique received a Notice of Sheriffs Sale dated August 29, 1986, announcing the auction of the seven lots on September 24, 1986
due to unpaid indebtedness of P10.5 million. Vicky (daughter of owner of MFI, because their father went into a coma because of intense pressure from the
foreclosure) insisted that prior to the auction notice, they never received any statement or demand letter from the defendants to pay P10.5 million, nor did the
defendants inform them of the intended foreclosure.

ISSUES: Was the Mortgage Contract VOID?

HELD:
No. As the records show, petitioners really agreed to mortgage their properties as security for their loan, and signed the deed of mortgage for the purpose.
Thereafter, they delivered the TCTs of the properties subject of the mortgage to respondents. Consequently, petitioners contention of absence of consent had no
firm moorings. It remained unproved. To begin with, they neither alleged nor established that they had been forced or coerced to enter into the mortgage. Also,
they had freely and voluntarily applied for the loan, executed the mortgage contract and turned over the TCTs of their properties. And, lastly, contrary to their
modified defense of absence of consent, Vicky Angs testimony tended at best to prove the vitiation of their consent through insidious words, machinations
or misrepresentations amounting to fraud, which showed that the contract was voidable.
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Where the consent was given through fraud, the contract was voidable, not void ab initio. This is because a voidable or annullable contract is existent,
valid and binding, although it can be annulled due to want of capacity or because of the vitiated consent of one of the parties. Article 1390, in relation to Article
1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled
within four years from the time of the discovery of the fraud.

According to Article 1338 of the Civil Code, there is fraud when one of the contracting parties, through insidious words or machinations, induces
the other to enter into the contract that, without the inducement, he would not have agreed to. Yet, fraud, to vitiate consent, must be the causal (dolo
causante), not merely the incidental (dolo incidente), inducement to the making of the contract. In Samson v. Court of Appeals, causal fraud is defined as a
deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other.

ARTICLE 1393
ECE REALTY VS. MANDAP

Doctrine: In order to constitute fraud that provides basis to annul contracts, it must fulfill two conditions: First, the fraud must be dolo causante or it must be fraud
in obtaining the consent of the party. This is referred to as causal fraud. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead
an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case should be
considered, taking into account the personal conditions of the victim. Second, the fraud must be proven by clear and convincing evidence and not merely by a
preponderance thereof.

FACTS:
1. Petitioner ECE Realty is a corporation engaged in the building and development of condominium units. Sometime in 1995, it started the construction of a
condominium project called Central Park Condominium Building located along Jorge St., Pasay City. However, printed advertisements were made indicating
therein that the said project was to be built in Makati City.

2. December 1995: respondent Mandap, agreed to buy a unit from the above project by paying a reservation fee and, thereafter, downpayment and monthly
installments. On June 18, 1996, respondent and the representatives of petitioner executed a Contract to Sell. In the said Contract, it was indicated that the
condominium project is located in Pasay City.

3. More than two years after the execution of the Contract to Sell, respondent Mandap, through her counsel, wrote petitioner a letter demanding the return of
P422,500.00, representing the payments she made, on the ground that she subsequently discovered that the condominium project was being built in Pasay City and
not in Makati City as indicated in its printed advertisements. Instead on answering the letter, petitioner ECE Realty sent a letter informing her that her unit is
already ready for inspection and occupancy should she decide to move in.

4. Treating the letter as a form of denial of her demand for the return of the sum she had paid to petitioner ECE Realty, respondent Mandap filed a complaint with
the Expanded National Capital Region Field Office (ENCRFO) of the HLURB seeking the annulment of her contract with petitioner, the return of her payments,
and damages.
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5. Sept. 30, 2005: ENCRFO dismissed the complaint and directed the parties to resume the fulfillment of the terms and conditions of their sales contract. ENCRFO
held that the respondent failed to show or substantiate the legal grounds that consist of a fraudulent or malicious dealing with her by the [petitioner], such as,
the latter's employment of insidious words or machinations which induced or entrapped her into the contract and which, without them, would not have encouraged
her to buy the unit.

6. The HLURB Board of Commissioner and the Office of the President affirmed the decision of the ENCRFO.

7. CA reverses the decision. It annulled the contract between the parties. ECE ordered to return the payments made with legal interest. It held that petitioner
employed fraud and machinations to induce respondent Mandap to enter into a contract with it. It also expressed doubt on the due execution of the Contract to Sell
between the parties.

ISSUE: Whether or not ECE Realty was guilty of fraud and if so, whether such fraud is sufficient ground to nullify its contract with Mandap.

HELD: NO. Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfill two conditions. First, the fraud must be
dolo causante or it must be fraud in obtaining the consent of the party. This is referred to as causal fraud. The deceit must be serious. The fraud is serious when it is
sufficient to impress, or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The
circumstances of each case should be considered, taking into account the personal conditions of the victim. Second, the fraud must be proven by clear and
convincing evidence and not merely by a preponderance thereof. In the present case, this Court finds that petitioner is guilty of false representation of a fact. This
is evidenced by its printed advertisements indicating that its subject condominium project is located in Makati City when, in fact, it is in Pasay City. However,
insofar as the present case is concerned, that the misrepresentation made by petitioner in its advertisements does not constitute causal fraud which would have been
a valid basis in annulling the Contract to Sell between petitioner and respondent. The Housing and Land Use Arbiter found that respondent failed to show that
the essential and/or moving factor that led the [respondent] to give her consent and agree to buy the unit was precisely the project's advantageous or unique
location in Makati [City] to the exclusion of other places or city x x x.

Both the HLURB Board of Commissioners and the Office of the President affirmed the finding of the Arbiter and unanimously held that respondent failed to prove
that the location of the said project was the causal consideration or the principal inducement which led her into buying her unit in the said condominium project.
The Court finds no cogent reason to depart from the foregoing findings and conclusion of the above agencies. Indeed, evidence shows that respondent proceeded to
sign the Contract to Sell despite information contained therein that the condominium is located in Pasay City. This only means that she still agreed to buy the
subject property regardless of the fact that it is located in a place different from what she was originally informed. If she had a problem with the property's location,
she should not have signed the Contract to Sell and, instead, immediately raised this issue with petitioner. But she did not. It took respondent more than two years
from the execution of the Contract to Sell to demand the return of the amount she paid on the ground that she was misled into believing that the subject property is
located in Makati City. In the meantime, she continued to make payments. The Court is not persuaded by the ruling of the CA which expresses doubt on the due
execution of the Contract to Sell. The fact remains that the said Contract to Sell was notarized. It is settled that absent any clear and convincing proof to the
contrary, a notarized document enjoys the presumption of regularity and is conclusive as to the truthfulness of its contents. Neither does the Court agree that the
presumption of regularity accorded to the notarized Contract to Sell was overcome by evidence to the contrary. Respondent's allegation that she signed the said
Contract to Sell with several blank spaces, and which allegedly did not indicate the location of the condominium, was not supported by proof.

The basic rule is that mere allegation is not evidence and is not equivalent to proof. In addition, the fact that respondent made several payments prior to the
execution of the subject Contract to Sell is not the kind of evidence needed to overcome such presumption of regularity. In any case, even assuming that
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petitioners misrepresentation consists of fraud which could be a ground for annulling their Contract to Sell, respondent's act of affixing her signature to the said
Contract, after having acquired knowledge of the property's actual location, can be construed as an implied ratification thereof. Ratification of a voidable contract
is defined under Article 1393 of the Civil Code as follows: Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit
ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should
execute an act which necessarily implies an intention to waive his right. Implied ratification may take diverse forms, such as by silence or acquiescence; by acts
showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.

Under Article 1392 of the Civil Code, ratification extinguishes the action to annul a voidable contract. In addition, Article 1396 of the same Code provides that
ratification cleanses the contract from all its defects from the moment it was constituted. Hence, based on the foregoing, the findings and conclusions of the
Housing and Land Use Arbiter, the HLURB Board of Commissioners and the Office of the President, should be sustained.

ARTICLE 1398
VILLANUEVA V. CHIONG

FACTS :
Florentino and Elisera Chiong were married sometime in January 1960 but have been separated in fact since 1975. During their marriage, they acquired Lot No.
997-D-1 situated at Poblacion, Dipolog City and covered by Transfer Certificate of Title (TCT) No. (T-19393)-2325, 3 issued by the Registry of Deeds of
Zamboanga del Norte. Sometime in 1985, Florentino sold the one-half western portion of the lot to petitioners forP8,000, payable in installments. Thereafter,
Florentino allowed petitioners to occupy4 the lot and build a store, a shop, and a house thereon. Shortly after their last installment payment on December 13,
1986,5 petitioners demanded from respondents the execution of a deed of sale in their favor. Elisera, however, refused to sign a deed of sale.

ISSUES:

(1) Is the subject lot an exclusive property of Florentino or a conjugal property of respondents?

(2) Was its sale by Florentino without Elisera's consent valid?

RULING:

1. That the lot belongs exclusively to Florentino because of his separation in fact from his wife, Elisera, at the time of sale dissolved their property relations, is bereft
of merit. Respondents' separation in fact neither affected the conjugal nature of the lot nor prejudiced Elisera's interest over it. Under Article 178 of the Civil Code,
the separation in fact between husband and wife without judicial approval shall not affect the conjugal partnership. The lot retains its conjugal nature. All property
acquired by the spouses during the marriage is presumed to belong to the conjugal partnership of gains, unless it is proved that it pertains exclusively to the
husband or to the wife. Petitioners' mere insistence as to the lot's supposed exclusive nature is insufficient to overcome such presumption when taken against all the
evidence for respondents.
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2. The sale by Florentino without Elisera's consent is not, however, void. We held that without the wifes consent, the husbands alienation or encumbrance of conjugal
property prior to the effectivity of the Family Code on August 3, 1988 is not void, but merely voidable Articles 166 and 173 of the Civil Code. Therefore, the effect
of annulment of the contract is to wipe it out of existence, and to restore the parties, insofar as legally and equitably possible, to their original situation before the
contract was entered into. Strictly applying Article 1398 to the instant case, petitioners should return to respondents the land with its fruits and respondent
Florentino should return to petitioners the sum ofP8,000, which he received as the price of the land, together with interest thereon.On the matter of fruits and
interests, we take into consideration that petitioners have been using the land and have derived benefit from it just as respondent Florentino has used the price of
the land in the sum of P8,000. Hence, if, as ordered by the lower court, Florentino is to pay a reasonable amount or legal interest for the use of the money then
petitioners should also be required to pay a reasonable amount for the use of the land. Under the particular circumstances of this case, however, it would be
equitable to consider the two amounts as offsetting each other.

ARTICLE 1399

KATIPUNAN VS. KATIPUNAN, JR.

FACTS:
Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door apartment constructed thereon, which were occupied by lessees.
Respondent assisted by his brother petitioner Miguel entered into a Deed of Absolute Sale with brothers Edardo Balguma and Leopoldo Balguma, Jr. ( co-
petitioners), represented by their lawyer-father involving the subject property for a consideration of P187,000.00. So, the title was registered in the names of the
Balguma brothers and they started collecting rentals thereon.
Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending that his brother Miguel, Atty. Balguma and Inocencio Valdez ( one
of the petitioners) convinced him to work abroad. Through insidious words and machinations, they made him sign a document purportedly a contract of
employment, which document turned out to be a Deed of Absolute Sale. He further alleged that he did not receive the consideration stated in the contract. He
claimed that there was evident bad faith and conspiracy in taking advantage of his ignorance, he being only a third grader.
The RTC dismissed the complaint because Braulio failed to prove his cause of action since he admitted that he obtained loans from the Balgumas, he
signed the Deed of Absolute Sale, and he acknowledged selling the property and stopped collecting the rentals. But when the case was elevated, the decision of
RTC was reversed and it was held that Braulio was incompetent, has very low I.Q., illiterate and has a slow comprehension. The CA based its decision on
Arts.1332 and 1390 of NCC and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a party in contract.

ISSUE:
Whether there was a valid contract of sale between the parties.
HELD:
The Supreme Court found the petition devoid of merit. There was a vitiated consent on the part of the respondent as he signed the Deed of Absolute Sale
without the remotest idea of what it was and received no consideration thereof. The contract entered into by the parties being voidable contract, was correctly
annulled on appeal.
A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting
of minds speaks of the intent of the parties in entering the contract respecting the subject matter and the consideration thereof. Thus, the elements of a contract of a
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sale are consent, object, and price in money or its equivalent. Under Art. 1330 of NCC, consent may be vitiated by any of the following: mistake, violence,
intimidation, undue influence, and fraud. The presence of any of these vices renders the contract voidable.
A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but
only voidable and is binding upon the parties unless annulled proper court action. The effect of annulment is to restore the parties to the status quo ante insofar as
legally and equitably possible---this much is dictated by Art. 1398 provides that when the defect of the contract consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any restitution, except when he has been benefited by the things or price received by him. Thus, since the Deed of
Absolute Sale between respondent and Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and
proper.

ARTICLE 1403

VIEWMASTER CONSTRUCTION CORPORATION vs. ROXAS et al.

FACTS:

On September 8, 1995 Viewmaster Construction Corporation (Viewmaster, for brevity) filed with the Regional Trial Court at Pasig City, a complaint for specific
performance, enforcement of implied trust and damages against State Investment Trust, Inc., Northeast Land Development, Inc., State Properties Corporation and
Allen C. Roxas.

Roxas, one of the stockholders of State Investment Trust, Inc. applied for a loan with First Metro Investments, Inc. (FMIC) in order to obtain funds to be used by
him or his agents/privies to bid for the control and ownership of State Investment Trust, Inc. (State Investment, for brevity) which will be held among the members
of the Chiong/Roxas family, as he had no funds of his own at the time to satisfy the required bid deposit and/or down payment.

FMIC agreed to grant Allen Roxas the loan he requested without any collateral, i.e., a clean loan, provided that he procures a guarantor/surety/solidary co-debtor to
secure the payment for the said loan.

Viewmaster agreed to act as guarantor for the loan conditioned upon the following:

a) Allen Roxas shall sell and Viewmaster shall purchase fifty percent (50%) of the total eventual acquisitions of Roxas of the shares of stock in
State Investment and that the purchase price to be paid by Viewmaster for the said shares shall be equivalent to the successful bid price per
share plus an additional ten percent (10%) per share.
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b) Viewmaster shall undertake to develop the parcels of land in Balintawak, Quezon City and Las Pias consisting of twenty thousand (20,000)
square meters and seven hundred eighty-six thousand one hundred sixty-seven (786,167) square meters, respectively, for the property
owners.

In consideration of the guaranty of Viewmaster, FMIC delivered to Allen Roxas the aggregate principal amount of P36.5 Million. Consequently, Viewmaster
executed a Continuing Guaranty with FMIC to secure the payment of the said loans.

As a result of the loans granted by FMIC in consideration of, and upon the guaranty of Viewmaster, Allen Roxas eventually gained control and ownership of State
Investment.

Despite demand, Allen Roxas failed and refused to sell 50% of his shareholdings in State Investment and to enter into a joint venture project with Viewmaster for
the purpose of developing the two aforementioned real properties, resulting in the institution by Viewmaster of a civil action.

On October 25, 1995, the defendants namely filed a motion to dismiss the complaint on the following grounds:

a) the claim on which the action is founded is unenforceable under the provisions of the Statute of Frauds; and

b) the complaint states no cause of action.

An Opposition to Defendants "Motion to Dismiss was filed by Viewmaster. The trial court conducted a hearing of Viewmasters application for the issuance of a
TRO/writ of preliminary injunction. An order was issued dismissing the complaint and denying Viewmasters application for a TRO/writ of preliminary injunction.
A motion for reconsideration was filed by Viewmaster to which an opposition was filed.

In its order the trial court reconsidered and set aside the order and accordingly, reinstated the complaint and granted Viewmasters application for a writ of
preliminary injunction on a One Million (P1,000,000.00) Pesos injunction bond.

Respondents herein filed a motion for reconsideration to which Viewmaster filed its opposition. However, the motion was denied for lack of sufficient merit in the
order dated January 30, 1997. [7]On March 5, 1997, the respondents filed a motion for inhibition [8] of the presiding judge but the same was denied for lack of
sufficient merit in the order of April 11, 1997.[9]

Thereafter, CA-GR SP No. 44000,[10] a petition for certiorari and prohibition with application for a temporary restraining order and/or writ of preliminary
injunction was filed with the Court of Appeals.On November 28, 1997, a decision was rendered by the Court of Appeals denying petitioners motion to dismiss the
complaint.A motion for reconsideration was filed by Viewmaster but it was denied.Hence, this petition.

ISSUE: W/N THE AGREEMENT SOUGHT TO BE ENFORCED BY PETITIONER IS UNENFORCEABLE.

The court a quo did not err in finding that the Statute of Frauds covers the foregoing agreements.
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Article 1403 of the New Civil Code provides:

"Art. 1403. The following contracts are unenforceable, unless they are ratified:

"(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

"(a) An agreement that by its terms is not to be performed within a year from the making thereof;

"(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of
such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money; but when a sale is
made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price,
names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;"

The verbal agreement entered into between petitioner Viewmaster and respondent Allen Roxas was an agreement that by its terms is not to be performed within a
year from the making thereof.

To be taken out of the operation of the Statute of Frauds, the agreement must be fully performed on one side within one year from the making thereof.

"Contracts which by their terms are not to be performed within one year may be taken out of the Statute of Frauds through performance by one party
thereto. In order, however, that a partial performance of the contract may take the case out of the operation of the statute, it must appear clear that the full
performance has been made by one party within one year, as otherwise the statute would apply." [14]

In the case at bar, since neither of the parties has fully performed their obligations within the one-year period, i.e., Allen Roxas has not sold fifty percent (50%) of
his shareholdings in State Investment to Viewmaster and Viewmaster has not paid the purchase price for the aforesaid shares of stock, nor began the co-
development of the two subject real properties, then it behooves this Court to declare that the case falls within the coverage of the Statute of Frauds.

It will not take a mathematical genius to figure out that the sale of fifty percent (50%) of Allen Roxass shareholdings in State Investment would amount to more
than five hundred pesos (P500.00). Thus, to be enforceable, the contract must be in writing.

It is contended that an implied trust exists between petitioner and Allen Roxas. The implied trust was allegedly created by operation of law in accordance with
Article 1448 of the New Civil Code.
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Quoted below is the provision referred to:

"Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of
having the beneficial interest of the property.The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is
a gift in favor of the child." (Emphasis Ours)

From the above, it is quite clear that in order for the provisions of Article 1448 to apply in the case at bar "the price is paid by another for the purpose of having the
beneficial interest of the property."

It bears stressing that respondent Allen Roxas obtained a loan from First Metro Investments, Inc. not from petitioner Viewmaster. It was FMIC that provided the
funds with which Allen Roxas acquired the controlling interest in State Investment Trust, Inc. FMIC lent the money to Roxas because the latter needed the money
and not to obtain any beneficial interest in the shares of stock in State Investment. Viewmaster merely facilitated the loan by acting as guarantor of the loan and
nothing more.

We quote with approval the finding of the court a quo:

"In the case at bench, the money which Allen Roxas used to bid for the purchase of the shares of stock in State Investment does not belong to Viewmaster.
In fact, the complaint clearly states that the funds were borrowed by Allen Roxas from FMIC (which were already fully paid). Thus, we cannot conclude
that Allen Roxas holds in trust for Viewmaster 50% of his controlling interest in State Investment and the two parcels of land owned by State Investments
subsidiaries.

"As correctly pointed out by petitioners, an implied trust cannot arise if the funds used by the alleged trustee in acquiring the alleged trust property
originated from a loan. The following citations contained in the petition are well-taken:

`Another exception is that in which an actual contrary intention is proved. Thus, where a transfer of property is made to one person and the purchase price
is advanced by another as a loan to the transferee, a resulting trust does not arise. xxx (IV Tolentino, Civil Code of the Philippines [1991], p. 679)

`The general rule is that the use of borrowed money in making a purchase does not raise a resulting trust in favor of the lender, even where the money is
loaned to enable the borrower to purchase the property in question and the borrower promises, but fails, to execute a mortgage on the property after it is
purchased, to secure the loan. Nor does the use of money given to one for the purchase of the property raises a resulting trust in the property in favor of the
donor (76 AmJur 2d. pp. 440-441).

"If an implied trust cannot exist in favor of a lender, We cannot see our way clear how a mere guarantor, like Viewmaster, can claim a resulting implied
trust when it issued to Allen Roxas a Continuing Guaranty.
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"But Viewmaster insists that its having acted as guarantor of Allen Roxas is the equitable consideration of the transaction which is the foundation of the
resulting trust, citing American Jurisprudence. For had Viewmaster not issued the Continuing Guaranty, FMIC would not have extended any loan to Allen
Roxas. In fact, Viewmaster placed itself at risk in securing the loan and in `inducing FMIC to grant the said loan to Allen Roxas.

"We cannot go along with Viewmasters theory. The `consideration referred to in its citation of American Jurisprudence, as well as the `price specified in
Article 1448 of the Civil Code, pertain to the funds, goods or services, in consideration of which the trust property is conveyed to the trustee. In the present
case, the `consideration or `price refers to the money which came from a loan granted to Allen Roxas by FMIC, not to the Continuing Guaranty executed
by Viewmaster. The Continuing Guaranty, therefore, is not the consideration which Allen Roxas used in acquiring said shares of stock. Consequently, no
implied trust could have arisen in favor of Viewmaster over the shares of stock in State Investment or over the two subject lots.

"In the light of Our finding that the allegations in the complaint fail to show the existence of an implied trust, a `valid judgment cannot be rendered thereon
in accordance with the prayer in the complaint. Obviously, Viewmasters demand for specific performance on the part of Allen Roxas or his compliance
with his obligation as a supposed trustee has no legal basis." [15]

We have carefully scrutinized the allegations in the complaint and we arrived at one conclusion: the complaint does not state a cause of action. The facts as given
are not sufficient enough for the court to arrive at an equitable judgment.

_________________________________________________________________________________________________________________________________
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ARTICLE 1403

LITONJUA V. FERNANDEZ

The heirs of Domingo B. Ticzon[3] are the owners of a parcel of land located in San Pablo City. On the other hand, the heirs of Paz Ticzon Eleosida, represented by
Gregorio T. Eleosida, are the owners of a parcel of land located in San Pablo City.

On 27 November 1995, defendants offered to sell to plaintiffs two (2) parcels of land covered by Transfer Certificates of Title Nos. 36766 and 36754 measuring a
total of 36,742 square meters in Barrio Concepcion, San Pablo City. After a brief negotiation, defendants committed and specifically agreed to sell to plaintiffs
33,990 square meters of the two (2) aforementioned parcels of land at P150.00 per square meter.

The parties also unequivocally agreed to the following:

a. The transfer tax and all the other fees and expenses for the titling of the subject property in plaintiffs names would be for defendants account.

b. The plaintiffs would pay the entire price of P5,098,500.00 for the aforementioned 33,990 square meters of land in plaintiffs office on 8 December 1995.

Defendants repeatedly assured plaintiffs that the two (2) subject parcels of land were free from all liens and encumbrances and that no squatters or tenants occupied
them.

Plaintiffs, true to their word, and relying in good faith on the commitment of defendants, pursued the purchase of the subject parcels of lands. On 5 January 1996,
plaintiffs sent a letter of even date to defendants, setting the date of sale and payment on 30 January 1996.

Defendants received the letter on 12 January 1996 but did not reply to it.

On 1 February 1996, plaintiffs again sent a letter of even date to defendants demanding execution of the Deed of Sale. Defendants received the same on 6 February
1996. Again, there was no reply. Defendants thus reneged on their commitment a second time.

On 14 February 1996, defendant Fernandez sent a written communication of the same date to plaintiffs enclosing therein a copy of her 16 January 1996 letter to
plaintiffs which plaintiffs never received before. Defendant Fernandez stated in her 16 January 1996 letter that despite the meeting of minds among the parties over
the 33,990 square meters of land for P150.00 per square meter on 27 November 1995, defendants suddenly had a change of heart and no longer wished to sell the
same. Paragraph 6 thereof unquestionably shows defendants previous agreement as above-mentioned and their unjustified breach of their obligations under it.

*The plaintiffs are also praying for payment of damages caused by the failed transaction.*

By reason of defendants above-described fraudulent actuations, plaintiffs, despite their willingness and ability to pay the agreed purchase price, have to date been
unable to take delivery of the title to the subject property. Defendants acted in a wanton, fraudulent and malevolent manner in violating the contract to sell. By way
of example or correction for the public good, defendants are liable to plaintiff for exemplary damages in the amount of P500,000.00.
 P a g e | 12

Defendants bad faith and refusal to honor their just obligations to plaintiffs constrained the latter to litigate and to engage the services of undersigned counsel for a
fee in the amount of at least P250,000.00.

The petitioners prayed that, after due hearing, judgment be rendered in their favor ordering the respondents to Secure at defendants expense all clearances from the
appropriate government agencies that will enable defendants to comply with their obligations under the Contract to Sell; Execute a Contract to Sell with terms
agreed upon by the parties; Solidarily pay the plaintiffs for damages & Atty.s fees.

On July 5, 1996, respondent Fernandez filed her Answer to the complaint. [16] She claimed that while the petitioners offered to buy the property during the
meeting of November 27, 1995, she did not accept the offer; thus, no verbal contract to sell was ever perfected. She specifically alleged that the said contract to sell
was unenforceable for failure to comply with the statute of frauds. She also maintained that even assuming arguendothat she had, indeed, made a commitment or
promise to sell the property to the petitioners, the same was not binding upon her in the absence of any consideration distinct and separate from the price. She,
thus, prayed that judgment be rendered as follows:

ISSUE:
1. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES.
2. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE STATUTE OF FRAUDS.

HELD: The petition has no merit.

The general rule is that the Courts jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed by the appellate court. As the
findings of fact of the appellate court are deemed continued, this Court is not duty-bound to analyze and calibrate all over again the evidence adduced by the
parties in the court a quo.[25] This rule, however, is not without exceptions, such as where the factual findings of the Court of Appeals and the trial court are
conflicting or contradictory.[26] Indeed, in this case, the findings of the trial court and its conclusion based on the said findings contradict those of the appellate
court. However, upon careful review of the records of this case, we find no justification to grant the petition. We, thus, affirm the decision of the appellate court.

On the first and second assignment of errors, the petitioners assert that there was a perfected contract of sale between the petitioners as buyers and the respondents-
owners, through respondent Fernandez, as sellers.The petitioners contend that the perfection of the said contract is evidenced by the January 16, 1996 Letter of
respondent Fernandez.[27] The pertinent portions of the said letter are as follows:

[M]y cousin and I have thereby changed our mind and that the sale will no longer push through. I specifically instructed her to inform you thru your broker that
we will not be attending the meeting to be held sometime first week of December.

In view thereof, I regret to formally inform you now that we are no longer selling the property until all problems are fully settled. We have not demanded and
received from you any earnest money, thereby, no obligations exist [28]

The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract, thus, removing it from the coverage of the statute of frauds. The
letter specifically makes reference to a sale which respondent Fernandez agreed to initially, but which the latter withdrew because of the emergence of some people
who claimed to be tenants on both parcels of land.
 P a g e | 13

The petitioners contention is bereft of merit. In its decision, the appellate court ruled that the Letter of respondent Fernandez is hardly the note or
memorandum contemplated under Article 1403(2)(e) of the New Civil Code, which reads:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing, or secondary evidence of its contents:

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein.[29]

In the case at bar, the letter of defendant-appellant can hardly be said to constitute the note or memorandum evidencing the agreement of the parties to enter into a
contract of sale as it is very clear that defendant-appellant as seller did not accept the condition that she will be the one to pay the registration fees and
miscellaneous expenses and therein also categorically denied she had already committed to execute the deed of sale as claimed by the plaintiffs-appellees. The
letter, in fact, stated the reasons beyond the control of the defendant-appellant, why the sale could no longer push through because of the problem with tenants. The
trial court zeroed in on the statement of the defendant-appellant that she and her cousin changed their minds, thereby concluding that defendant-appellant had
unilaterally cancelled the sale .However, the tenor of the letter actually reveals a consistent denial that there was any such commitment on the part of
defendant-appellant to sell the subject lands to plaintiffs-appellees. When defendant-appellant used the words changed our mind, she was clearly referring to
the decision to sell the property at all (not necessarily to plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as defendant-appellant
had not yet made the final decision to sell the property to said plaintiffs-appellees. This conclusion is buttressed by the last paragraph of the subject letter
stating that we are no longer selling the property until all problems are fully settled. To read a definite previous agreement for the sale of the property in
favor of plaintiffs-appellees into the contents of this letter is to unduly restrict the freedom of the contracting parties to negotiate and prejudice the right of every
property owner to secure the best possible offer and terms in such sale transactions. We believe, therefore, that the trial court committed a reversible error in
finding that there was a perfected contract of sale or contract to sell under the foregoing circumstances. Hence, the defendant-appellant may not be held liable in
this action for specific performance with damages.

In Rosencor Development Corporation vs. Court of Appeals,[31] the term statute of frauds is descriptive of statutes which require certain classes of contracts to
be in writing. The statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable. The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations,
depending for their existence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a
writing signed by the party to be charged. The statute is satisfied or, as it is often stated, a contract or bargain is taken within the statute by making and
executing a note or memorandum of the contract which is sufficient to state the requirements of the statute. The application of such statute presupposes the
existence of a perfected contract. However, for a note or memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and
partly in parol.The note or memorandum must contain the names of the parties, the terms and conditions of the contract and a description of the property sufficient
to render it capable of identification. [33] Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be
ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence . To
be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent duly authorized in writing .
 P a g e | 14

In City of Cebu v. Heirs of Rubi,[36] we held that the exchange of written correspondence between the parties may constitute sufficient writing to evidence the
agreement for purposes of complying with the statute of frauds.

In this case, we agree with the findings of the appellate court that there was no perfected contract of sale between the respondents-owners, as sellers, and the
petitioners, as buyers.

There is no documentary evidence on record that the respondents-owners specifically authorized respondent Fernandez to sell their properties to
another, including the petitioners. Article 1878 of the New Civil Code provides that a special power of attorney is necessary to enter into any contract by which
the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration,[37] or to create or convey real rights over immovable
property, or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefor
in writing from the said owner is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority.

The petitioners cannot feign ignorance of respondent Fernandez lack of authority to sell the properties for the respondents-owners. It must be stressed that the
petitioners are noted businessmen who ought to be very familiar with the intricacies of business transactions, such as the sale of real property.

The settled rule is that persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it. [45] In this case, respondent
Fernandez specifically denied that she was authorized by the respondents-owners to sell the properties, both in her answer to the complaint and when she
testified. The Letter dated January 16, 1996 relied upon by the petitioners was signed by respondent Fernandez alone, without any authority from the respondents-
owners. There is no evidence on record that the respondents-owners ratified all the actuations of respondent Fernandez in connection with her dealings with the
petitioners. As such, said letter is not binding on the respondents as owners of the subject properties.

Contrary to the petitioners contention, the letter of is not a note or memorandum within the context of Article 1403(2) because it does not contain the following:

1. All the essential terms and conditions of the sale of the properties;

2. An accurate description of the property subject of the sale; and, (c) the names of the respondents-owners of the properties. Furthermore, the
letter made reference to only one property that covered by TCT No. T-36755.

We note that the petitioners themselves were uncertain as to the specific area of the properties they were seeking to buy. In their complaint, they alleged to
have agreed to buy from the respondents-owners 33,990 square meters of the total acreage of the two lots consisting of 36,742 square meters. In their Letter to
respondent Fernandez dated January 5, 1996, the petitioners stated that they agreed to buy the two lots, with a total area of 36,742 square meters. [47] However, in
their Letter dated February 1, 1996, the petitioners declared that they agreed to buy a portion of the properties consisting of 33,990 square meters. [48] When he
testified, petitioner Antonio Litonjua declared that the petitioners agreed to buy from the respondents-owners 36,742 square meters at P150 per square meter or for
the total price of P5,098,500.[49]
 P a g e | 15

The failure of respondent Fernandez to object to parol evidence to prove (a) the essential terms and conditions of the contract asserted by the petitioners and,
(b) her authority to sell the properties for the respondents-registered owners did not and should not prejudice the respondents-owners who had been declared in
default.[50]

ARTICLE 1403

CLEMENO V. LOBREGAT

FACTS:
Spouses Nilus and Teresita Sacramento were the owner of the parcel of land and house constructed at Madaling Araw St., Teresita Heights Subd., Novaliches,
Quezon City. Spouses Sacramento mortgaged the property with the SSS as security for their housing loan and likewise surrendered the owners and duplicate
copies of the certificate of title. A Deed of Absolute Sale with Assumption of Mortgage in favor of Spouses Maria Linda Clemeno and Angel C. Clemeno, Jr. was
entered into by Spouses Sacramental with conformity of the SSS. 5 years after, Romeo Lobregat and Angel, who were relatives by consanguinity, entered into a
verbal contract of sale over the property with the following terms, among others, that the former would pay the purchase price of the property in the amount
of P270,000.00 inclusive of the balance. When Lobregats counsel wrote to Angel that he had already paid the purchase price and was ready to pay the balance, he
demanded that petitioner execute a deed of absolute sale over the property and deliver the title. In reply, Angel stated that he ever sold the property but instead
consented to lease the property. Also, that even if Lobregat wanted to buy the property, the same was unenforceable, as no document was executed by them to
evince the sale. CA ruled that the contract entered into was a contract of sale since partial payments had been made, thus, contract is partly performed.

ISSUE: Are the essential elements of a contract of sale present?

 P a g e | 16

HELD:
Yes. The Court held that the contract between the parties is a perfected verbal contract of sale, not a contract to sell over the subject property with the petitioner as
vendor and respondent as vendee. Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and
acceptance thereof on three elements: subject matter, price, and terms of payment of the price. The evidence shows that upon the payment made by the respondent
of the amount of P27,000.00, the petitioners vacated their house and delivered possession. The petitioners cannot re-acquire ownership and recover possession
thereof unless the contract is rescinded in accordance with law. The contract of sale of the parties is enforceable notwithstanding the fact that it was an oral
agreement and not reduced in writing.

* The contract of sale of the parties is enforceable notwithstanding the fact that it was an oral agreement and not reduced in writing as required by Article
1403(2) of the New Civil Code, which reads:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the parties charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accepts and receives part of
such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money: but when a sale is
made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price,
names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

This is so because the provision applies only to executory, and not to completed, executed or partially executed contracts. In this case, the contract of sale had been
partially executed by the parties, with the transfer of the possession of the property to the respondent and the partial payments made by the latter of the purchase
price thereof.

We agree with the petitioners contention that the respondent did not pay the total purchase price of the property within the stipulated period. Moreover, the
respondent did not pay the balance of the purchase price of the property. However, such failure to pay on the part of the respondent was not because he could not
pay, but because petitioner Angel Clemeno, Jr. told him not to do so. The latter instructed the respondent to continue paying the monthly amortizations due to the
SSS on the loan. Unknown to the respondent, petitioner Angel Clemeno, Jr. wanted to increase the purchase price of the property at the prevailing market value in
1992, and not its value in 1987 when the contract of sale was perfected.

The petitioners failed to prove their claim that a lease purchase agreement over the property was entered into. Except for their bare claim, they failed to adduce a
morsel of documentary evidence to prove the same. On the other hand, all the receipts issued by them on the partial payments made by the respondent were for the
purchase price of the property, and not as rentals thereof.
 P a g e | 17

DAO HENG BANK VS BANCO de ORO UNIVERSAL BANK

The Spouses Laigo (respondents) obtained loans from Dao Heng Bank, Inc. (Dao Heng) in the total amount of P11 Million, to secure the payment of
which they forged on October 28, 1996, November 18, 1996 and April 18, 1997 three Real Estate Mortgages covering two parcels of land registered in the name of
respondent Lilia D. Laigo. The mortgages were duly registered in the Registry of Deeds of QC. The loans were payable within 12 months from the execution of
the promissory notes covering the loans. Respondents failed to settle their outstanding obligation, drawing them to verbally offer to cede to Dao Heng one of the
two mortgaged lots by way of dacion en pago. To appraise the value of the mortgaged lands, Dao Heng in fact commissioned an appraiser whose fees were
shouldered by it and respondents.
There appears to have been no further action taken by the parties after the appraisal of the properties.Dao Heng was later to demand the settlement of
respondents obligation by letter of August 18, 2000[1] wherein it indicated that they had an outstanding obligation of P10,385,109.92 inclusive of interests and
other charges. Respondents failed to heed the demand, however. Dao Heng thereupon filed in September 2000 an application to foreclose the real estate mortgages
executed by respondents. The properties subject of the mortgage were sold for P10,776,242 at a public auction conducted on December 20, 2000 to Banco de Oro
Universal Bank (hereafter petitioner) which was the highest bidder.
It appears that respondents negotiated for the redemption of the mortgages for by a June 29, 2001 letter to them, petitioner, to which Dao Heng had been
merged, through its Vice President on Property Management & Credit Services Department, advised respondent Lilia Laigo as follows:
If you are agreeable to the foregoing terms and conditions, please affix your signature showing your conformity thereto at the space provided
below.
Nothing was heard from respondents, hence, petitioner by its Manager, Property Management & Credit Services Department, advised her by letter of
December 26, 2001[3] that in view of their failure to conform to the conditions set by it for the redemption of the properties, it would proceed to consolidate the
titles immediately after the expiration of the redemption period on January 2, 2002.
Six days before the expiration of the redemption period, respondents filed a complaint before the RTC Quezon City, for Annulment, Injunction with Prayer
for TRO, praying for the annulment of the foreclosure of the properties subject of the real estate mortgages and for them to be allowed to deliver by way of dacion
en pago one of the mortgaged properties as full payment of [their] mortgaged obligation and to, in the meantime, issue a TRO directing the defendant-herein
petitioner to desist from consolidating ownership over their properties.
By respondents claim, Dao Heng verbally agreed to enter into a dacion en pago. In its Opposition to respondents Application for a TRO, [4] petitioner claimed that
there was no meeting of the minds between the parties on the settlement of respondents loan via dacion en pago.
 P a g e | 18

ISSUE: THAT THE ALLEGED DACION EN PAGO IS NOT UNENFORCEABLE UNDER THE STATUTE OF FRAUDS, DESPITE THE ABSENCE OF A
WRITTEN & BINDING CONTRACT;
HELD: Dacion en pago as a mode of extinguishing an existing obligation partakes of the nature of sale whereby property is alienated to the creditor in satisfaction
of a debt in money. It is an objective novation of the obligation, hence, common consent of the parties is required in order to extinguish the obligation.
. . . In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an
outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the
debtor, payment for which is to be charged against the debtors debt. As such the elements of a contract of sale, namely, consent, object certain, and
cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale,
while the debt is considered the purchase price. In any case, common
consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation. (Emphasis, italics and
underscoring supplied; citation omitted)

Being likened to that of a contract of sale, dacion en pago is governed by the law on sales. The partial execution of a contract of sale takes the transaction out of
the provisions of the Statute of Frauds so long as the essential requisites of consent of the contracting parties, object and cause of the obligation concur and are
clearly established to be present. Respondents claim that petitioners commissioning of an appraiser to appraise the value of the mortgaged properties, his services
for which they and petitioner paid, and their delivery to petitioner of the titles to the properties constitute partial performance of their agreement to take the case
out of the provisions on the Statute of Frauds.There is no concrete showing, however, that after the appraisal of the properties, petitioner approved
respondents proposal to settle their obligation via dacion en pago. The delivery to petitioner of the titles to the properties is a usual condition sine qua non to the
execution of the mortgage, both for security and registration purposes. For if the title to a property is not delivered to the mortgagee, what will prevent the
mortgagor from again encumbering it also by mortgage or even by sale to a third party. Finally, that respondents did not deny proposing to redeem the mortgages,
as reflected in petitioners June 29, 2001 letter to them, dooms their claim of the existence of a perfected dacion en pago.

ARTICLE 1403

ESTATE OF ORLANDO LLENADO AND WENIFREDA T. LLENADO V. LLENADO

FACTS:Romeo assigned all his rights to Orlando over the unexpired portion of the aforesaid lease contract. The parties further agreed that Orlando shall have the
option to renew the lease contract for another three years commencing from December 3, 1980, up to December 2, 1983, renewable for another four years or up to
1987, and that during the period that this agreement is enforced, the property cannot be sold, transferred, alienated or conveyed in whatever manner to any third
party.
 P a g e | 19

Shortly thereafter or on June 24, 1978, Cornelio and Orlando entered into a Supplementary Agreement amending the March 31, 1978 Agreement. Under
the Supplementary Agreement, Orlando was given an additional option to renew the lease contract for an aggregate period of 10 years at five-year intervals, that is,
from December 3, 1987 to December 2, 1992 and from December 3, 1992 to December 2, 1997. The said provision was inserted in order to comply with
the requirements of Mobil Philippines, Inc. for the operation of a gasoline station which was subsequently built on the subject lot.

Upon the death of Orlando on November 7, 1983, his wife, Wenifreda Llenado (Wenifreda), took over the operation of the gasoline station. Meanwhile, onJanuary
29, 1987, Cornelio sold the to his children, namely, Eduardo, Jorge, Virginia and Cornelio, Jr., through a deed of sale. Several months thereafter or on September 7,
1987, Cornelio passed away. Sometime in 1993, Eduardo informed Wenifreda of his desire to take over the subject lot. However, the latter refused to vacate the
premises despite repeated demands. Thus, on September 24, 1993, Eduardo filed a complaint for unlawful detainer

ISSUE: Are rights arising from lease contract transmissible?

Yes. Under Article 1311 of the Civil Code, the heirs are bound by the contracts entered into by their predecessors-in-interest except when the rights and obligations
therein are not transmissible by their nature, by stipulation or by provision of law. A contract of lease is, therefore, generally transmissible to the heirs of the lessor
or lessee. It involves a property right and, as such, the death of a party does not excuse non-performance of the contract. The rights and obligations pass to the heirs
of the deceased and the heir of the deceased lessor is bound to respect the period of the lease. The same principle applies to the option to renew the lease. As a
general rule, covenants to renew a lease are not personal but will run with the land.[ Consequently, the successors-in-interest of the lessee are entitled to the
benefits, while that of the lessor are burdened with the duties and obligations, which said covenants conferred and imposed on the original parties.

** Petitioner also anchors its claim over the subject lot on the alleged verbal promise of Cornelio to Orlando that should he (Cornelio) sell the
same, Orlando would be given the first opportunity to purchase said property. According to petitioner, this amounted to a right of first refusal in favor
of Orlando which may be proved by parole evidence because it is not one of the contracts covered by the statute of frauds. Considering that Cornelio sold the
subject lot to respondents Eduardo and Jorge without first offering the same to Orlandos heirs, petitioner argues that the sale is in violation of the latters right of
first refusal and is, thus, rescissible.

The question as to whether a right of first refusal may be proved by parole evidence has been answered in the affirmative by this Court in Rosencor Development
Corporation v. Inquing:

We have previously held that not all agreements affecting land must be put into writing to attain enforceability. Thus, we have held that the setting up of
boundaries, the oral partition of real property, and an agreement creating a right of way are not covered by the provisions of the statute of frauds. The
reason simply is that these agreements are not among those enumerated in Article 1403 of the New Civil Code.

A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the
New Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one involved in the instant
case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involved, but of
the right of first refusal over the property sought to be sold.
 P a g e | 20

It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As such, a right of first refusal need not be written to
be enforceable and may be proven by oral evidence. [

In the instant case, no testimonial evidence was presented to prove the existence of said right. The testimony of petitioner Wenifreda made no mention of the
alleged verbal promise given by Cornelio to Orlando. The two remaining witnesses for the plaintiff, Michael Goco and Renato Malindog, were representatives
from the Register of Deeds of Caloocan City who naturally were not privy to this alleged promise. Neither was it established that respondents Eduardo and Jorge
were aware of said promise prior to or at the time of the sale of the subject lot. On the contrary, in their answer to the Complaint, respondents denied the existence
of said promise for lack of knowledge thereof. [38] Within these parameters, petitioners allegations in its Complaint cannot substitute for competent proof on such a
crucial factual issue. Necessarily, petitioners claims based on this alleged right of first refusal cannot be sustained for its existence has not been duly established.

ARTICLE 1405
AVERIA V. AVERIA
The Statute of Frauds applies only to executory contracts and not to contracts which are either partially or totally performed
FACTS;
Macaria Francisco (Macaria) was married to Marcos Averia in which they had six children namely: petitioners Gregorio and Teresa and respondents Domingo,
Angel, Felipe and Felimon. Upon the death of Marcos, Macaria contracted a second marriage with Roberto Romero in which they had no children. Upon the death
of Roberto, he left three adjoining residential lots. In a Deed of Extrajudicial Partition and Summary Settlement of the Estate of Romero, a house and lot
(Extremadura property) was apportioned to Macaria.

Macaria then filed an action for annulment of title and damages alleging that fraud was employed by her co-heirs in which she was represented by Atty. Mario C.R.
Domingo. The case lasted for 10 years until the Court of Appeals (CA) decided in favor of Macaria entitling her to an additional 30 square meters of the estate of
Romero. Her son Gregorio and his family and Teresas family lived with her in the Extremadura property until her death. After six years, respondents Domingo,
Angel, Felipe and Filemon filed an action for judicial partition against petitioners Gregorio and Teresa.
In their defense Gregorio contends that Macaria verbally sold of her Extramadura property to him and his wife Agripina because they were the ones who spent
for the litigation expenses in the former civil case and that Agripina took care of her. Gregorio and co-petitioner Sylvana claimed that Domingo sold to Gregorio
and Agripina his 1/6 share in the remaining portion of the property. Upon hearing, Gregorio presented oral evidence to establish their claim of the sale of the
property to them by Macaria and also the sale of Domingo of his share. The Regional Trial Court of (RTC) decided in favor of Gregorio. The CA however,
reversed the decision of the RTC on the ground that since the sale executed by Macaria in favor of Gregorio was in violation of the statute of frauds and it cannot
be proven by oral evidence.
 P a g e | 21

ISSUE: Whether or not parol evidence may be admitted in proving partial performance

HELD: With respect to the application by the appellate court of the Statute of Frauds, Gregorio contends that the same refers only to purely executory contracts
and not to partially or completely executed contracts as in the instant case. The finding of the CA that the testimonies of Gregorios witnesses were timely objected
to by Domingo is not, as Gregorio insist, borne out in the records of the case except with respect to his testimony.

Indeed, except for the testimony of petitioner Gregorio bearing on the verbal sale to him by Macaria of the property, the testimonies of Gregorios witnesses
Sylvanna Vergara Clutario and Flora Lazaro Rivera bearing on the same matter were not objected to by respondents. Just as the testimonies of Gregorio, Jr. and
Veronica Bautista bearing on the receipt by respondent Domingo on July 23, 1983 from Gregorios wife of P5,000.00 representing partial payment of the
P10,000.00 valuation of his (Domingos) 1/6 share in the property, and of the testimony of Felimon Dagondon bearing on the receipt by Domingo of P5,000.00
from Gregorio were not objected to. Following Article 1405 of the Civil Code, the contracts which infringed the Statute of Frauds were ratified by the failure to
object to the presentation of parol evidence, hence, enforceable.

Contrary then to the finding of the CA, the admission of parol evidence upon which the trial court anchored its decision in favor of respondents is not irregular and
is not foreclosed by Article 1405.

In any event, the Statute of Frauds applies only to executory contracts and not to contracts which are either partially or totally performed. In the case at bar,
petitioners claimed that there was total performance of the contracts, full payment of the objects thereof having already been made and the vendee Gregorio
having, even after Macarias death in 1983, continued to occupy the property until and after the filing on January 19, 1989 of the complaint subject of the case
at bar as in fact he is still occupying it.

However it is not enough for a party to allege partial performance in order to render the Statute of Frauds inapplicable; such partial performance must be duly
proved. But neither is such party required to establish such partial performance by documentary proof before he could have the opportunity to introduce oral
testimony on the transaction. The partial performance may be proved by either documentary or oral evidence.
**

Petitioners thus conclude that respondents waived any objection to the admission of parol evidence, hence, it is admissible and enforceable following Article
1405 of the Civil Code.

Indeed, except for the testimony of petitioner Gregorio bearing on the verbal sale to him by Macaria of the property, the testimonies of petitioners witnesses
Sylvanna Vergara Clutario and Flora Lazaro Rivera bearing on the same matter were not objected to by respondents. Just as the testimonies of Gregorio, Jr. and
Veronica Bautista bearing on the receipt by respondent Domingo on July 23, 1983 from Gregorios wife of P5,000.00 representing partial payment of
the P10,000.00 valuation of his (Domingos) 1/6 share in the property, and of the testimony of Felimon Dagondon bearing on the receipt by Domingo of P5,000.00
from Gregorio were not objected to. Following Article 1405 of the Civil Code, 17 the contracts which infringed the Statute of Frauds were ratified by the failure to
object to the presentation of parol evidence, hence, enforceable.

ARTICLE 1403. The following contracts are unenforceable, unless they are ratified:
xxx
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(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:
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(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;

Contrary then to the finding of the CA, the admission of parol evidence upon which the trial court anchored its decision in favor of respondents is not irregular and
is not foreclosed by Article 1405.

In any event, the Statute of Frauds applies only to executory contracts and not to contracts which are either partially or totally performed. 18 In the case at bar,
petitioners claimed that there was total performance of the contracts, full payment of the objects thereof having already been made and the vendee Gregorio
having, even after Macarias death in 1983, continued to occupy the property until and after the filing on January 19, 1989 of the complaint subject of the case at
bar as in fact he is still occupying it.

In proving the fact of partial or total performance, oral evidence may be received as what the trial court in the case at bar did. Noted civilist Arturo M. Tolentino
elucidates on the matter:

The statute of frauds is not applicable to contracts which are either totally or partially performed, on the theory that there is a wide field for the commission of
frauds in executory contracts which can only be prevented by requiring them to be in writing, a fact which is reduced to a minimum in executed contracts because
the intention of the parties becomes apparent by their execution, and execution concludes, in most cases, the rights of the parties. However it is not enough for a
party to allege partial performance in order to render the Statute of Frauds inapplicable; such partial performance must be duly proved. But neither is such party
required to establish such partial performance by documentary proof before he could have the opportunity to introduce oral testimony on the transaction. The
partial performance may be proved by either documentary or oral evidence.