1381- Lilia Ada v. Baylon, G.R. No.
182435, August 13, 2012 Issue:
Facts:
This case involves the estate of spouses FlorentinoBaylon
and MaximinaElnasBaylon.At the time of their death, Spouses
Baylon were survived by their legitimate children, namely, Rita,
Victoria, Dolores, Panfila, Ramon and herein petitioner Lilia.
Ramon died intestate and was survived by herein
respondent Florante, his child from his first marriage, as well as by
petitioner Flora, his second wife, and their legitimate children. The
petitioners filed with the RTC a Complaint partition, accounting and
damages against Florante, Rita and Panfila. They alleged therein
that after the death of Spouses Baylon, they claimed that Rita took
possession of the said parcels of land and appropriated for herself
the income from the same. The petitioners averred that Rita refused
to effect a partition of the said parcels of land.
During the pendency of the case, Rita, through a Deed of
Donation conveyed lots to Florante. Rita died intestate and without
any issue. Thereafter, learning of the said donation inter vivos, the
petitioners prayed that the said donation in favor of the respondent
be rescinded. They further alleged that Rita was already sick and
very weak when the said Deed of Donation was supposedly
executed and, thus, could not have validly given her consent
thereto.
Florante and Panfila opposed the rescission of the said
donation, asserting that Article 1381(4) of the Civil Code applies
only when there is already a prior judicial decree on who between
the contending parties actually owned the properties under
litigation.
Whether or not the donation inter vivos in favor of Florante may only
be rescinded if there is already a judicial determination that the
same actually belonged to the estate of Spouses Baylon.
Ruling:
The rescission of a contract under Article 1381(4) of the Civil
Code only requires the concurrence of the following: first, the
defendant, during the pendency of the case, enters into a contract
which refers to the thing subject of litigation; and second, the said
contract was entered into without the knowledge and approval of
the litigants or of a competent judicial authority. As long as the
foregoing requisites concur, it becomes the duty of the court to
order the rescission of the said contract.
Rescission of the donation inter vivos in favor of Florante is
proper in this case. The petitioners had sufficiently established the
presence of the requisites for the rescission of a contract pursuant
to Article 1381(4) of the Civil Code. It is undisputed that, at the time
they were gratuitously conveyed by Rita, the subject lots were
among the properties that were the subject of the partition case
then pending with the RTC. It is also undisputed that Rita, then one
of the defendants in the partition case with the RTC, did not inform
nor sought the approval from the petitioners or of the RTC with
regard to the donation inter vivos of the said parcels of land to
Florante. Accordingly, rescission under Article 1381(4) of the Civil
Code is not preconditioned upon the judicial determination as to the
ownership of the thing subject of litigation
1389- Anchor Savings Bank v. Furigay, G.R. No. 191178,
March 13, 2013
Facts:
ASB filed a verified complaint for sum of money and
damages against Ciudad Transport Services, Inc. (CTS, its
president, respondent Henry Furigay and his wife, respondent
Gelinda C. Furigay and a “John Doe.”) While that case was
pending, respondent spouses donated their registered properties to
their minor children, respondents HegemFurigay and Herriette C.
Furigay.
Claiming that the donation of these properties was made in
fraud of creditors, ASB filed a Complaint for Rescission of Deed of
Donation, Title and Damages against the respondent spouses and
their children.
The RTC ruled that the action for rescission had already
prescribed. The CA found that the action of ASB had not yet
prescribed, but was premature and dismissed the case.
action for rescission, if it is alleged that the following successive
measures have already been taken: 1) exhaust the properties of the
debtor through levying by attachment and execution upon all the
property of the debtor, except such as are exempt by law from
execution; 2) exercise all the rights and actions of the debtor, save
those personal to him (accionsubrogatoria); and 3) seek rescission
of the contracts executed by the debtor in fraud of their rights
(accionpauliana).
ASB, without availing of the first and second remedies, that
is, exhausting the properties of CTS, Henry Furigay and Genilda C.
Furigay or their transmissible rights and actions, simply undertook
the third measure and filed an action for annulment of the donation.
This cannot be done.

Issue:

Whether or not the action of ASB of filing a complaint for

rescission of Deed of Donation is premature that warrant dismissal.

Ruling:

No. The remedy of rescission is subsidiary in nature and it

cannot be instituted except when the party suffering damage has no
other legal means to obtain reparation for the same.
Consequently, following the subsidiary nature of the remedy
of rescission, a creditor would have a cause of action to bring an
1391- Metropolitan Fabrics, Inc. v. Prosperity Credit Resources, Inc.
Facts:
In July 1984, MFI sought from PCRI a loan. PCRI was
represented by Domingo Ang (“Domingo”) and his son Caleb. The
parties knew each other because they belonged to the same family
association, the LiocKui 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.
The blankloan forms had no entries
specifying the rate of interest and schedules of amortization. In
order to return the trust
and gesture of early release of the loan by the respondents, herein
petitioner Enrique
Ang, together with his daughter Vicky Ang, entrusted to the
respondents their seven (7)
titles covering an aggregate area of 3.36 ha and left it to said
respondents to choose
from among the 7 titles those which would be sufficient to secure
the P3.5M loan. An
appraisal report put the value of four(4) of the said properties at
P6.8M. Vicky also
stated that it was agreed that once PCRI had chosen the lots to be
covered by the
mortaged,therespondentswouldreturntheremainingtitlestothepetition
ers.
Thereafter, twenty-four(24) checks, bearning no dates and amounts
and signed in blank
by Enrique and Natividad, were deliverd to PCRI to cover the
amortization payments.
The blank loan forms had no entries specifying the rate of
interest and schedules of amortization. In order to return the trust
and gesture of early release of the loan by the respondents, herein
petitioner Enrique Ang, together with his daughter Vicky Ang,
entrusted to the respondents their seven (7)titles of lot and left it to
said respondents to choose from among the 7 titles those which
would be sufficient to secure the loan. Vicky also stated that it was
agreed that once PCRI had chosen the lots to be covered by the
mortaged, the respondents would return the remaining
titles to the petitioners. Thereafter, twenty-four(24) checks,
bearning no dates and amounts and signed in blankby Enrique and
Natividad, were deliverd to PCRI to cover the amortization
payments.
However, in September 1984, the first amortization check
bounced for insufficient fund. It was then that the petitioners
allegedly learned that 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
Sheriff’s Sale dated August 29, 1986, announcing the auction of the
seven lots on September 24, 1986 due to unpaid indebtedness.
Petitioner now assails the validity of the mortgage and the
foreclosure of the properties.
Issue:
Whether or not the action to assail the mortgage contract has
already prescribed.
Ruling:

Yes. In order to resolve the issue of prescription, it is important to

first determine if the mortgage was void or merely voidable. The
records show that 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 is
untenable.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 defense of absence of consent, Vicky
Ang’s 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.
Where the consent was given through fraud, the contract was
voidable, not void ab initio.

With the contract being voidable, petitioners’ action to annul the real
estate mortgage already prescribed. 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. The discovery of fraud is
reckoned from the time the document was registered in the Register
of Deeds in view of the rule that registration was notice to the whole
world. Thus, because the mortgage involving the seven lots was
registered on September 5, 1984, they had until September 5, 1988
within which to assail the validity of the mortgage. But their
complaint was instituted in the RTC only on October 10,
1991. Hence, the action, being by then already prescribed, should
be dismissed.

1393- ECE Realty v. Mandap
Facts:
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 in Pasay City. However, printed
advertisements were made indicating therein that the said project
was to be built in Makati City. In December 1995, respondent,
agreed to buy a unit from the above project by paying a reservation
fee and, thereafter, downpayment and monthly installments. On
June 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.
More than two years after, respondent demanded the return of 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.
However, instead of answering respondent's letter, petitioner
informed her that her unit is ready for inspection and occupancy
should she decide to move in.
Treating the letter as a form of denial of her demand, respondent
filed a complaint seeking then the annulment of her contract with
petitioner, the return of her payments, and damages.
Issue:
Whether or not petitioner is guilty of fraud and if so, whether such
fraud is sufficient ground to nullify its contract with respondent.
Ruling:
Petitioner is guilty of false representation of a fact. However, such
misrepresentation does not constitute causal fraud which would
have been a valid basis in annulling the Contract to Sell between
petitioner and respondent.
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.
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.
1398- Villanueva v. Chiong
Facts:
Respondents Florentino and EliseraChiong were married
sometime in January 1960 but have been separated in fact since
1975. During their marriage, they acquired a lot. Sometime in 1985,
Florentino sold the one-half western portion of the lot to petitioners
payable in installments. Thereafter, Florentino allowed petitioners to
occupy the lot and build a store, a shop, and a house thereon.
Shortly after their last installment payment, petitioners demanded
from respondents the execution of a deed of sale in their favor.
Elisera, however, refused to sign a deed of sale.
Elisera then filed a Complaintfor Quieting of Title with
Damages. Petitioners on the other hand filed a Complaint for
Specific Performance with Damages. On, Florentino executed the
questioned Deed of Absolute Sale in favor of petitioners.
Issue: Was its sale by Florentino without Elisera's consent valid?
Ruling:
The sale by Florentino without Elisera's consent is not
void ab initio. Citing Villaranda v. Villaranda,the Court held that
without the wife's consent, the husband's alienation or
encumbrance of conjugal property prior to the effectivity of the
Family Code on August 3, 1988 is not void, but merely voidable. 
Now, if a voidable contract is annulled, the restoration of
what has been given is proper.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 fruitsand respondent
Florentino should return to petitioners the sum which he received as
the price of the land, together with interest thereon.
On the matter of fruits and interests, however, in the light of
equity the Court considered the two amounts as offsetting each
other.

1399- Katipunan v. Katipunan
Facts:
Respondent Braulio Katipunan, Jr. is the owner of a lot and
a five-door apartment constructed thereon at San Miguel, Manila.
The apartment units are occupied by lessees.
On December 1985, respondent, assisted by his brother, petitioner
Miguel Katipunan, entered into a Deed of Absolute Sale4 with
brothers Edgardo Balguma and LeopoldoBalguma, Jr. (co-
petitioners), represented by their father Atty. LeopoldoBalguma, Sr.,
involving the subject property. Consequently, respondent’s title to
the property was cancelled and was registered and issued in the
names of the Balguma brothers. In January, 1986, Atty. Balguma,
then still alive, started collecting rentals from the lessees of the
apartments.
Subsequently, respondent filed a complaint for annulment of
the Deed of Absolute Sale. He averred that his brother Miguel, Atty.
Balguma and Inocencio Valdez, 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 claimed that the defendants, now petitioners,
with evident bad faith, conspired with one another in taking
advantage of his ignorance, he being only a third grader.
Issue:
Whether or not the contract is voidable by reason of a
vice of consent.
Ruling:
The circumstances surrounding the execution of the contract
manifest a vitiated consent on the part of respondent. Undue
influence was exerted upon him by his brother Miguel and
Inocencio Valdez (petitioners) and Atty. Balguma.Dr. Revilla
(presented by respondent’s counsel as expert witness) also found
that respondent has a very low IQ and a mind of a six-year old
child. Thus, his lack of education, coupled with his mental affliction
virtually rendered him incapable of giving rational consent.
Consequently, the contract is voidable and is binding upon
the parties unless annulled by proper Court action. The effect of
annulment is to restore the parties to the status quo ante insofar as
legally and equitably possible. As an exception however to the
principle of mutual restitution, Article 1399 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 the Balguma brothers is voidable and hereby annulled, then the
restitution of the property and its fruits to respondent is just and
proper. Petitioners Edgardo Balguma and LeopoldoBalguma, Jr.,
were ordered to turn over to respondent Braulio Katipunan, Jr. the
rentals they received for the apartment from January, 1986 up to
the time the property shall have been returned to him, with interest
at the legal rate.
1403- Viewmaster Construction v. Roxas
Facts:
Petitioner Viewmaster agreed to act as the guarantor of
Allen Roxas for the loan that the latter needs from FMIC under the
following conditions: 1) Allen Roxas shall sell and petitioner
Viewmaster shall purchase fifty percent (50%) of the latter’s total
eventual acquisitions of shares of stock in State Investment and 2)
shall undertake a joint venture project with Plaintiff Viewmaster to
co-develop the two real estate properties in Quezon City and Las
Pias, and if Roxas shall sell. These were not put into writing.
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. Hence, Viewmaster instituted a
civil case before the RTC.
Defendants moved to dismiss the complaint alleging that the
claim on which the action is founded is unenforceable under the
provisions of the Statute of Frauds.
Issue:
Whether or notthe Statute of Frauds covers the foregoing
agreements.
Ruling:
Yes. 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. 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.
Also, 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.
Litonjua v. Fernandez, G.R. No. 148116, April 14, 2004
Facts:
Sometime in September 1995, Alimario and Fisico who worked as
brokers, offered to sell to the petitioners,.Litonjua, Jr., parcels of
land. The petitioners were shown copies of the titles showing that
the owners of the properties were represented by Fernandez and
Eleosida, respectively. The brokers told the petitioners that they
were authorized by respondent Fernandez to offer the property for
sale.
Subsequently, the petitioners met with respondent Fernandez and
the two brokers. The petitioners and respondent Fernandez agreed
that the petitioners would buy the property. They also agreed that
the owners would shoulder the capital gains tax, transfer tax and
the expenses for the documentation of the sale. The petitioners and
respondent Fernandez also agreed to meet on December 8, 1995
to finalize the sale. However, only AgapitoFisico attended the
meeting. He informed the petitioners that respondent Fernandez
was encountering some problems with the tenants and was trying to
work out a settlement with them.After a few weeks of waiting, the
petitioners wrote respondent Fernandez on January 5, 1995,
demanding that their transaction be finalized by January 30, 1996.
When the petitioners received no response from respondent
Fernandez, the petitioners sent her another Letter asking that the
Deed of Absolute Sale covering the property be executed in
accordance with their verbal agreement dated November 27, 1995.
On April 12, 1996, the petitioners filed the instant Complaint
for specific performance with damagesagainst respondent
Fernandez and the registered owners of the property. In their
complaint, 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. 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.
In view thereof, I regret to formally inform you now
that we are no longer selling the property until all problems
are fully settled.
 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.
Respondent, on the other hand, claimed that while the
petitioners offered to buy the property, 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.
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." Thus, there was no
perfected contract of sale or contract to sell under the foregoing
circumstances.

Issue:
Whether or not the verbal contract of sale as claimed by
Litonjua was unenforceable.

Ruling:
Yes. Contrary to the petitioners’ contention, the letter of
January 16, 1996is not a note or memorandum within the context of
Article 1403(2) because it does not contain the following: (a) all the
essential terms and conditions of the sale of the properties; (b) an
accurate description of the property subject of the sale; and, (c) the
names of the respondents-owners of the properties. The application
of such statute also presupposes the existence of a perfected
contract. In the case, the court ruled that there was no perfected
contract of sale. Furthermore, the letter made reference to only one
property when the parties verbally agreed to sell two parcels of lot.
In the letter, seller in fact categorically denied she had
already committed to execute the deed of sale as claimed by the
plaintiffs-appellees and further stated the reasons beyond the
control of the defendant-appellant, why the sale could no longer
push through. 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-

Estate of Llenado v. Llenado
Facts:
Cornelio leased a lot to his nephew, Romeo. Later, 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 and that "during
the period that [this agreement] is enforced, the x xx property
cannot be sold, transferred, alienated or conveyed in whatever
manner to any third party."
Orlando diedand his wife, Wenifreda took over the operation
of the gasoline station built on the subject lot. Meanwhile,
Corneliosold the lot to his children, namely, Eduardo, Jorge, Virginia
and Cornelio, Jr. Several months thereafter or on September 7,
1987, Cornelio passed away.Eduardo then informed Wenifreda of
his desire to take over the subject lot. However, the latter refused to
vacate the premises despite repeated demands.
Consequently, Wenifredaommenced the subject Complaint
for annulment of deed of conveyance, title and damages against
herein respondents. Petitioner alleged that the transfer and
conveyance of the subject lot by Cornelio in favor of respondents
was fraudulent and in bad faith Cornelio because among others,
Cornelio verbally promised Orlando that in case he (Cornelio)
decides to sell the subject lot, Orlando or his heirs shall have first
priority or option to buy the subject lot; and that this promise was
wantonly disregarded when Cornelio sold the said lot to
respondents Jorge and Eduardo.
Respondents countered that they were not aware of any
verbal promise to sell the subject lot granted by Cornelio to Orlando
and, even if there was, said option to buy is unenforceable under
the statute of frauds.
Issue:
Whether or not the allegedly granted right of first refusal is
unenforceable for not being reduced into writing.
Ruling:
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.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 this case, no testimonial evidence was presented to prove
the existence of said right. Necessarily, petitioner’s claims based on
this alleged right of first refusal cannot be sustained for its existence
has not been duly established.
Clemeno v. Lobregat.,G.R. No. 137845, September 9, 2004
Facts:
Spouses Sacramento were the owners of a parcel of land. They
mortgaged the property with the Social Security System (SSS) as
security for their housing loan. Later, the spouses executed a Deed
of Sale with Assumption of Mortgage in favorof Spouses Clemeno.
Subsequently, respondent Romeo R. Lobregat, a lawyer filed a
Complaint against the petitioners. He averred that the respondent
and petitioner Angel Clemeno, Jr., entered into a verbal contract of
sale over the property under the following terms and conditions: (a)
the respondent would pay the purchase price of the property within
two years (b) the respondent would pay the monthly amortizations
of the vendor’s loan with the SSS; and (c) upon the payment of the
purchase price of the property, the Spouses Clemeno would
execute a deed of sale in favor of the respondent. The respondent
made a down payment for which petitioner Clemeno, Jr. issued a
receipt. He also made partial payments and likewise paid the realty
taxes due on the property. Likewise, the respondent remitted to the
SSS the monthly amortization payments for the account of
petitioner Clemeno, Jr. as part of purchase price, as per additional
agreement upon restructuring of latter’s debt. However, the receipts
issued by the SSS were in the name of petitioners Nilus
Sacramento or Clemeno, Jr.
Later, the respondent’s counsel wrote petitioner Clemeno, Jr.,
informing the latter that he was ready to pay the balance thereof.
He demanded that petitioner Clemeno, Jr. execute a deed of
absolute sale over the property and deliver the title thereto in his
name upon his receipt of the balance.
In reply, petitioner Clemeno, Jr. stated that he never sold the
property to the respondent; that respondent offered to buy the
property, which offer was rejected. The petitioner also declared that
even if the respondent wanted to buy the property, the same was
unenforceable as there was no document executed by them to
evince the sale.
Issue: Whether or not the contract between the parties is
unenforceable.
Ruling:
No. Firstly, the contract entered into between the parties is a
contract of sale, not a contract to sell. Accordingly, Article 1403(2) is
not applicable because the contract was already partly performed,
since partial payments had been made by the respondent as
evidenced by receipts signed by the petitioners.
The contract entered into by the parties was not a contract
to sell because there was no agreement for the petitioners to retain
ownership over the property until after the respondent shall have
paid the purchase price in full, nor an agreement reserving to the
petitioners the right to unilaterally resolve the contract upon the
buyer’s failure to pay within a fixed period. Unlike in a contract of
sale, the payment of the price is a positive suspensive condition in a
contract to sell, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey the title from
becoming effective.
The contract of sale of the parties is enforceable
notwithstanding the fact that it was an oral agreement and not
reduced in writing. 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.
DaongHeng Bank, Inc. v. Laigo, G.R. No. 173856, November 20,
2008
Facts:
The Spouses Laigo (respondents) obtained loans from Dao Heng
Bank (Dao Heng), to secure the payment of which they executed
three Real Estate Mortgages covering two parcels of land. The
mortgages were duly registered.
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 Henglater demanded the settlement of respondents' obligation.
Respondents failed to heed the demand, however.Dao Heng
thereupon filed an application to foreclose the real estate
mortgages executed by respondents. The properties subject of the
mortgage were sold at a public to Banco de Oro Universal Bank
(hereafter petitioner).
Subsequently, respondents negotiated for the redemption of the
mortgages. Petitioner relayed conditions for the redemption of the
properties however nothing was heard from respondents, hence,
petitioner set to proceedto consolidate the titles immediately after
the expiration of the redemption period.
Six days before the expiration of the redemption period,
respondents filed a complaint for the annulment of the foreclosure
of the properties subject of the real estate mortgages. By
respondents' claim, Dao Hengverbally agreed to enter into a dacion
en pago. Petitioner moved to dismiss the complaint on the ground
that the claim on which respondents' action is founded is
unenforceable under the Statute of Frauds.
Issue:
Whether or not the alleged dation en pago is not
unenforceable under the Statute of Frauds despite the absence of a
written and binding contract.
Ruling:

No. 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 petitioner's 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
dooms their claim of the existence of a perfected dacion en pago.