UNENFORCEABLE CONTRACTS

102 Phil 756

Babao v. Perez
BAUTISTA ANGELO, J.

FACTS
1. Celestina Perez was the owner of a parcel of land.
2. In 1924, when Santiago Babao married her niece Maria Cleofe, Babao and Celestina
Perez entered into a verbal agreement where Santiago bound himself to (1) improve the
land by levelling and clearing all forest trees and planting coconuts, rice, corn and other
crops and (2) act as the administrator thereof during the lifetime of Perez.
3. In consideration of which, Perez bound herself to convey to Babao or his wife ½ of the
land together with all of its improvements upon her death.
4. In violation of the said verbal agreement, Perez sold, a few days before she died, 127 ½
hectares of the land depriving Babao of its possession and administration.
5. When Santiago Babao died in 1948, Bienvenido Babao was appointed the judicial
administrator of his estate. He filed a case for the conveyance of the ½ portion of the
land and for the annulment of the sales of the portion having been made fictitiously and
in the alternative, for judgment in favor of Babao for P47,000, the useful and necessary
expenses he incurred in improving the land.
6. While the case was pending in the lower court, counsel for Perez filed a motion to
dismiss on the grounds that the alleged verbal agreement was unenforceable under the
Statute of Frauds. However, the trial court denied the motion because it appeared that
Babao fully complied with his part of the oral contract. The court held that the Statute of
Frauds cannot be invoked because the performance by one party of his part of the
contract takes the case out of the statute.

ISSUE with HOLDING

1. W/N the verbal agreement falls within the prohibition of the Statute of Frauds, and
is therefore, unenforceable - YES
a. Art. 1403 NCC (formerly Sec. 21 of Rule 123, Rules of Court) provides as
follows:
i. 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;

(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;
 b. The alleged verbal agreement is one which by its terms is not to be
performed within one year.
i. The undertaking assumed by Babao which was to clear, level and plant
to coconut trees and other plants 156 hectares of forest land could not
be accomplished in one year.
ii. In fact, the alleged improvements were supposedly accomplished during
the lifetime of Perez, over a period of 23 years and even then not all was
cleared and planted but only a portion thereof.
c. RTC: Statute does not apply because Babao fully complied with his part of the
contract.
i. SC: Contracts which by their terms are not to be performed within one
year, may be taken out of the statute through the performance by one
party. All that is required in such case is complete performance
within one year by one party, however many years may have to elapse
before the agreement is performed by the other party. But nothing less
than full performance by one part will suffice and if anything remains
to be done after the expiration of the year besides mere payment of
money, the statute will apply. (Corpus Juris)
ii. It is therefore not correct to state that Babao has fully complied with his
part within the year from the alleged contract.
d. Even assuming that the agreement is one of sale of real property of interest
therein, it cannot also be contended that the provision does not apply
because there was part performance.
i. It must be noted that the statute is one based on equity and operates only
under certain specified conditions and when adequate relief at law is
unavailable.
ii. One requisite is that the agreement relied upon must be certain, definite,
clear, unambiguous and unequivocal in its terms before the statute
may operate.
iii. The verbal agreement is indeed vague and ambiguous for it does not
specify how many hectares was to be planted with coconuts, how many
to rice and corn, etc. It is important to specify because the costs would
depend on what is being planted (planting coconuts cost more than
planting bananas, bamboos, converting forest land to rice and corn).
iv. On the part of Perez, her promise is also incapable of execution. How
could she give and deliver ½ of the land upon her death?
v. The agreement being vague and ambiguous, the doctrine of part
performance cannot be invoked to take the case out of the operation of
the statute.

DISPOSITIVE PORTION
Wherefore, the decision appealed from is reversed, and the case is dismissed, with
costs against appellee.