ObliCon Case Digests – Unenforceable Contracts

Regal Films Vs. Concepcion

FACTS: 1991 - R entered into a contract with P for services to be rendered by R

in P’s movie. P undertook to give two parcels of land to R on top of the "talent
fees" it had agreed to pay.

1993 - the parties renewed the contract, incorporating the same undertaking
with respect to P giving 2 lands to R. however, P failed to comply with its
promise w/ respect to the 2 lots.

R filed an action against P for rescission of contract with damages. R

contended that he was entitled to rescind the contract, plus damages, and to
be released from further commitment to work exclusively for petitioner owing
to the latter's failure to honor the agreement.

P moved for its dismissal alleging that they had settled the problem. P averred
that they had executed an agreement which was to so operate as an
addendum to the 1991 and 1993 contracts between them. The agreement was
signed by a representative of petitioner and by Solis purportedly acting for and
in behalf of respondent Concepcion.

Solis filed a motion to dismiss the complaint stating that she, acting for herself
and for respondent Concepcion, had already settled the case amicably with P.
However, R opposed it contending that the addendum, containing provisions
grossly disadvantageous to him, was executed without his knowledge and
consent. R stated that Solis had since ceased to be his manager and had to
authority to sign the addendum for him.

During the preliminary conference, P intimated to R its willingness to allow R

to be released from his 1991 and 1993 contracts rather than to further pursue
the addendum. R thru a manifestation honored the addendum to the 1991 and
1993 contracts and to have it considered as CA. RTC: rendered judgment on
compromise; validated the addendum as a C.A. CA: affirmed the order of the
RTC; addendum- valid kc may consent lahat ng parties. The intrigue can’t affect
the obligations of the P and Solis.

ISSUES: WON the subject addendum could be the basis of the compromise
judgment.

WON the addendum is susceptible of ratification by a person on

whose behalf it was executed.

FIRST ISSUE: NO. A compromise is an agreement between two or more

persons who, for preventing or putting an end to a lawsuit, adjust their
respective positions by mutual consent in the way they feel they can live with.
Reciprocal concessions are the very heart and life of every compromise
agreement,3 where each party approximates and concedes in the hope of
gaining balanced by the danger of losing. It is, in essence, a contract.

In this instance, the addendum was flatly rejected by respondent on the theses
(a) that he did not give his consent thereto nor authorized anyone to enter
into the agreement, and (b) that it contained provisions grossly
disadvantageous to him. The outright rejection of the addendum made known
to the other ended the offer. When respondent later filed his Manifestation,
stating that he was, after all, willing to honor the addendum, there was
nothing to still accept.

Verily, consent could be given not only by the part himself but by anyone duly
authorized and acting for and in his behalf. But by R’s own admission, the
addendum was entered into without his knowledge and consent. A contract
entered into in the name of another by one who ostensibly might have but
who, in reality, had no real authority or legal representation, or who, having
such authority, acted beyond his powers, would be unenforceable.

SECOND ISSUE: YES. NO in this case. The answer would obviously be in the
affirmative; however, that ratification should be made before its revocation by
the other contracting party. The adamant refusal of respondent to accept the
terms of the addendum constrained petitioner, during the preliminary
conference held on 23 June 1995, to instead express its willingness to release
respondent from his contracts prayed for in his complaint and to thereby
forego the rejected addendum. Respondent's subsequent attempt to ratify the
addendum came much too late for, by then, the addendum had already been
deemed revoked by petitioner.

VALENCIA VS LOQUIAO

FACTS:

Sps. Locquiao (6 children) executed a deed of donation propter nuptias in favor

of their son, R Benito Locquiao bride, R Tomasa Mara. R were gifted with 4
parcels of land, as well as a male cow and 1/3 portion of the conjugal house of
the Sps. Locquiao. Later, the R got married. The donees took their marriage
vows on June 4, 1944 and the fact of their marriage was inscribed at the back
of O.C.T. No. 18383.

The Sps. Locquiao died. With the permission of R Sps, P Romana took
possession and cultivated the subject land. When P’s husband got sick, her
daughter P Constancia took over and has been in possession of the land.
Meanwhile, R Sps. registered the deed with the Office of the Register of Deeds.
A new TCT was issued under the R sps’ names.

Subsequently, the heirs of the Sps. Loq., including R Benito and P Valencia,
executed a Deed of Partition with Recognition of Rights, wherein they
distributed among only 3 of them, the 12 parcels of land left by parents,
excluding the land in question and other lots disposed of by the Locquiao
spouses earlier. 

The Deed contained a statement that R Benito and Marciano Locquiao, along
with the heirs of Lucio Locquiao, have already received our shares in the
estates of our parents, and because of that the heirs of Lucio Locquaio were
not made parties to the deed.  All the living children of the Locquaio spouses
at the time, including P Valencia, confirmed the previous dispositions and
waived their rights to whomsoever the properties covered by the deed of
partition were adjudicated.
Later, P Romana disagreed the distribution of the 2 lots covered by the deed of
partition. So they again executed a Deed of Compromise Agreement which
redistributed the land. Benito also signed the CA. all of them confirmed the
stipulations etc in the CA.

Sometime in 1983, P Constancia filed an action for annulment of title against

the R Sps. R then filed a Complaint seeking the ejectment of P Constancia from
the subject property. MTC: P Constancia – vacate the land.

Ps Romana and Constancia filed a Complaint for the annulment of TCT No.
84897 against R Sps. They alleged that the issuance of the transfer certificate
of title was fraudulent; that the Inventario Ti Sagut is spurious; that the notary
public who notarized the document had no authority to do so, and; that the
donation did not observe the form required by law as there was no written
acceptance on the document itself or in a separate public instrument.

Meanwhile, the decision in the ejectment case was appealed to the same RTC,
the court issued an Order suspending the proceedings in the ejectment case
until it shall have decided the ownership issue in the title annulment case. RTC:
Inventario- valid, complaint dismissed. CA: affirmed RTC’s decision, action-
prescribed; it was filed beyond the 10yr prescriptive period for actions for
reconveyance (>15 yrs). The donation was valid kc nagpakasal tlaga sila. 

ISSUED: (1) WON the donation propter nuptias is authentic;

(2) W/ respect on the formal requirements of donation propter

nuptias, which one should be followed? OLD OR NCC?

HELD: FIRST ISSUE: YES. The certification is not sufficient to prove the alleged
inexistence or spuriousness of the challenged document.  The appellate court
is correct in pointing out that the mere absence of the notarial record does not
prove that the notary public does not have a valid notarial commission and
neither does the absence of a file copy of the document with the archives
effect evidence of the falsification of the document. the failure of the notary
public to furnish a copy of the deed to the appropriate office is a ground for
disciplining him, but certainly not for invalidating the document or for setting
aside the transaction therein involved.

Similarly, Marciano Locquiao and the heirs of Lucio Locquiao were not
allocated any more share in the deed of partition since they received theirs by
virtue of prior donations or conveyances.

SECOND ISSUE: Under the New Civil Code, the rules are different.  Article 127
thereof provides that the form of donations propter nuptias are regulated by
the Statute of Frauds. Article 1403, paragraph 2, which contains the Statute of
Frauds requires that the contracts mentioned thereunder need be in writing
only to be enforceable. However, as provided in Article 129, express
acceptance “is not necessary for the validity of these donations.”  Thus,
implied acceptance is sufficient. (OLD CC – marriage between the beneficiary
couple, in tandem with compliance with the prescribed form => VALID
donation propter nuptias.).

Since the donation propter nuptias was executed  in  1944 and  the New Civil
Code took effect only on August 30, 1950. As a consequence, applying Article
1330 of the Old Civil Code in the determination of the validity of the
questioned donation, it does not matter whether or not the donees had
accepted the donation.  The validity of the donation is unaffected in either
case.

Even if the provisions of the New Civil Code were to be applied, still even the
implied acceptance of a donation propter nuptias suffices under the NCC.

LITONJUA VA FERNANDEZ

FACTS:

Mrs. Lourdes Alimario and Agapito Fisico (brokers), offered to sell to the P the
parcels of land covered by TCT Nos. 36754 and 36766.  P were shown a locator
plan and copies of the titles showing that the owners of the properties were
represented by Mary Mediatrix Fernandez and Gregorio T. Eleosida,
respectively.  The brokers told the P that they were authorized by R Fernandez
to offer the property for sale. 

Subsequently, P met with R and the two brokers. They agreed that P would but
the property (36,742 sqm.) for the total sum of P5,098,500. On Dec. 1995, they
met again to finalize the contract. It was agreed that on that date, R would
present a SPA executed by the owners of the prop authorizing her to sell the
prop. However, only Agapito Fisico attended the meeting. He said that R Fern
was some problems with the tenants and was trying to work out a settlement
with them. After a few weeks of waiting, P wrote R Fernandez demanding that
their transaction be finalized by January 30, 1996.

P sent R another letter demanding that the Deed of Absolute Sale be executed
according to their agreement and that the properties should be given to them.
In her response, R that they did not assure P that they will meet her on Dec 8.
What was demanded by P in the mtg is that to assure if there were really no
tenants on the property. R also emphasized that they have not demanded and
received from you any earnest money, thereby, no obligations exist. 

P filed a complaint for specific performance with damages against R and the
registered owners of the property. 

R’s CONTENTIONS: Although P offered to buy the property, R did not accept it,
thus, no verbal contract to sell was ever perfected.  The COS was
unenforceable for failure to comply with the statute of frauds. 

On September 24, 1997, the trial court, upon motion of the petitioners,
declared the other respondents in default for failure to file their responsive
pleading within the reglementary period. At the pre-trial conference held on
March 2, 1998, the parties agreed that the following issues were to be
resolved by the trial court: (1) whether or not there was a perfected contract
to sell; (2) in the event that there was, indeed, a perfected contract to sell,
whether or not the respondents breached the said contract to sell; and (3) the
corollary issue of damages.
Respondent Fernandez testified that she requested Lourdes Alimario to look
for a buyer of the properties in San Pablo City “on a best offer basis.” She was
later informed by Alimario that the petitioners were interested to buy the
properties.  On November 27, 1995, along with Alimario and another person,
she met with the petitioners in the latter’s office and told them that she was at
the conference merely to hear their offer, that she could not bind the owners
of the properties as she had no written authority to sell the same.  The
petitioners offered to buy the property at P150 per square meter.  After the
meeting, respondent Fernandez requested Joy Marquez to secure a barangay
clearance stating that the property was free of any tenants.  She was surprised
to learn that the clearance could not be secured.  She contacted a cousin of
hers, also one of the owners of the property, and informed him that there was
a prospective buyer of the property but that there were tenants thereon.  Her
cousin told her that he was not selling his share of the property and that he
was not agreeable to the price of P150 per square meter.  She no longer
informed the other owners of the petitioners’ offer.  Respondent Fernandez
then asked Alimario to apprise the petitioners of the foregoing developments,
through their agent, Agapito Fisico.  She was surprised to receive a letter from
the petitioners dated January 5, 1996.  Nonetheless, she informed the
petitioners that she had changed her mind in pursuing the negotiations in a
Letter dated January 18, 1996.  When she received petitioners’ February 1,
1996 Letter, she sent a Reply-Letter dated February 14, 1996.

After trial on the merits, the trial court rendered judgment in favor of the
petitioners on June 23, 1999, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in

favor of plaintiffs ANTONIO K. LITONJUA and AURELIO K. LITONJUA and against
defendants MARY MEDIATRIX T. FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA,
represented by GREGORIO T. ELEOSIDA, JOHN DOES and JANE DOES; HEIRS OF
DOMINGO B. TICZON, represented by MARY MEDIATRIX T. FERNANDEZ,
CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ, DOMINIC
TICZON, JOSEFINA LUISA PIAMONTE, JOHN DOES and JANE DOES, ordering
defendants to:
 1.            execute a Contract of Sale and/or Absolute Deed of Sale
with the terms agreed upon by the parties and to secure all
clearances from the concerned government agencies and
removal of any tenants from the subject property at their
expense to enable defendants to comply with their
obligations under the perfected agreement to sell; and

2.            pay to plaintiffs the sum of Two Hundred Thousand

(P200,000.00) Pesos as and by way of attorney’s fees.

On appeal to the Court of Appeals, the respondents ascribed the following

errors to the court a quo:

I.   THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A PERFECTED
CONTRACT OF SALE OF THE TWO LOTS ON NOVEMBER 27, 1995.

II.  THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL CONTRACT
OF SALE AS CLAIMED BY PLAINTIFFS-APPELLEES ANTONIO LITONJUA AND
AURELIO LITONJUA WAS UNENFORCEABLE.

III.  THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF DEFENDANT-
APPELLANT FERNANDEZ DATED JANUARY 16, 1996 WAS A CONFIRMATION OF
THE PERFECTED SALE AND CONSTITUTED AS WRITTEN EVIDENCE THEREOF.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL POWER OF
ATTORNEY WAS REQUIRED IN ORDER THAT DEFENDANT-APPELLANT
FERNANDEZ COULD NEGOTIATE THE SALE ON BEHALF OF THE OTHER
REGISTERED CO-OWNERS OF THE TWO LOTS.

V.  THE LOWER COURT ERRED IN AWARDING ATTORNEY’S FEES IN THE

DISPOSITIVE PORTION OF THE DECISION WITHOUT STATING THE BASIS IN THE
TEXT OF SAID DECISION.

On February 28, 2001, the appellate court promulgated its decision reversing
and setting aside the judgment of the trial court and dismissing the petitioners’
complaint, as well as the respondents’ counterclaim. The appellate court ruled
that the petitioners failed to prove that a sale or a contract to sell over the
property between the petitioners and the private respondent had been
perfected.

Hence, the instant petition for review on certiorari under Rule 45 of the
Revised Rules of Court.

The petitioners submit the following issues for the Court’s resolution:

A. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN

THE PARTIES.

B. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE

STATUTE OF FRAUDS.

C. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE

BENEFITED BY THE ASSAILED DECISION OF THE COURT OF APPEALS.

The petition has no merit.

The general rule is that the Court’s 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. 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. 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. 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…

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.  According to the petitioners, the respondents-owners, in their answer to
the complaint, as well as respondent Fernandez when she testified, admitted
the authenticity and due execution of the said letter.  Besides, when the
petitioner Antonio Litonjua testified on the contract of sale entered into
between themselves and the respondents-owners, the latter did not object
thereto.  Consequently, the respondents-owners thereby ratified the said
contract of sale.  The petitioners thus contend that the appellate court’s
declaration that there was no perfected contract of sale between the
petitioners and the respondents-owners is belied by the evidence, the
pleadings of the parties, and the law.

The petitioners’ contention is bereft of merit.  In its decision, the appellate

court ruled that the Letter of respondent Fernandez dated January 16, 1996 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.

The appellate court based its ruling on the following disquisitions:

In the case at bar, the letter dated January 16, 1996 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 or backed out of her previous commitment.  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, 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. 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.

In City of Cebu v. Heirs of Rubi, 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, 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. In this case, the only evidence adduced by the
petitioners to prove that respondent Fernandez was authorized by the
respondents-owners is the testimony of petitioner Antonio Litonjua that
respondent Fernandez openly represented herself to be the representative of
the respondents-owners, and that she promised to present to the petitioners
on December 8, 1996 a written authority to sell the properties. However, the
petitioners’ claim was belied by respondent Fernandez when she testified,
thus:

Q    Madam Witness, what else did you tell to the plaintiffs?

A     I told them that I was there representing myself as one of the owners of
the properties, and I was just there to listen to his proposal because that time,
we were just looking for the best offer and I did not have yet any written
authorities from my brother and sisters and relatives.  I cannot agree on
anything yet since it is just a preliminary meeting, and so, I have to secure
authorities and relate the matters to my relatives, brother and sisters, sir.

Q    And what else was taken up?

A     Mr. Antonio Litonjua told me that they will be leaving for another country
and he requested me to come back on the first week of December and in the
meantime, I should make an assurance that there are no tenants in our
properties, sir.

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. 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 January 16, 1996 is 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.  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. 
MUNICIPALITY VS DUMDUM

FACTS: In the middle of the year 2000, R, doing business as KD Surplus and as
such engaged in buying and selling surplus trucks etc., was contacted by P
Ople. R had entered into an agreement with P municipality through Ople for
the delivery of motor vehicles, which were needed to carry out certain
developmental undertakings in the municipality.

Ople assured R that the funds had already been allocated for the project, thus
she agreed to deliver 24 motor vehicles valuing P5,820,000.00. However,
despite having made several deliveries, Ople allegedly did not heed R’s claim
for payment. R filed a complaint for collection of a sum of money and
damages. The total obligation of petitioner had already totaled P10,026,060.13
exclusive of penalties and damages. RTC: issued a Writ of Preliminary
Attachment directing the sheriff "to attach the estate, real and personal
properties" of P.

P filed a Motion to Dismiss on the ground that the claim was unenforceable
under the statute of frauds, pointing out that there was no written contract or
document that would evince the supposed agreement they entered into with
R. RTC: denied the 2 motions of P. CA: affirmed the decision

HELD: Petitioners have not expressly denied this allegation. In other words,
since there exists an indication by way of allegation that there has been
performance of the obligation on the part of respondent, the case is excluded
from the coverage of the rule on dismissals based on unenforceability under
the statute of frauds, and either party may then enforce its claims against the
other.

P theorize that there could not have been a contract by which the municipality
agreed to be bound, because it was not shown that there had been
compliance with the required bidding or that the municipal council had
approved the contract. The argument is flawed. By invoking unenforceability
under the Statute of Frauds, petitioners are in effect acknowledging the
existence of a contract between them and private respondent — only, the said
contract cannot be enforced by action for being non-compliant with the legal
requisite that it be reduced into writing. Suffice it to say that while this
assertion might be a viable defense against respondent’s claim, it is principally
a matter of evidence that may be properly ventilated at the trial of the case on
the merits.

VOID CONTRACTS

MODINA VS CA

FACTS: The parcels of land in question are those under the name of Ramon
Chiang (hereinafter referred to as CHIANG ) covered by TCT Nos. T-86912, T-
86913, and T-86914.  Chiang contended that the parcels of land were sold to
him by his wife, Merlinda, as evidenced by a DOAS. The land were
subsequently sold to P Modina. P brought a Complaint for Recovery of
Possession with Damages against the R Ernesto Hontarciego, Paul Figueroa
and Teodoro Hipalla.

Upon learning of the said case, MERLINDA presented a Complaint-in-

intervention, seeking the declaration of nullity of the Deed of Sale between
her husband and MODINA on the ground that the titles of the parcels of land
in dispute were never legally transferred to her husband.  Fraudulent acts
were allegedly employed by him to obtain a Torrens Title in his favor. 
However, she confirmed the validity of the lease contracts with the other
private respondents. RTC: in favor of Merlinda; sale betw Merlinda and Chiang,
Chiang and Modina = void. CA: affirmed the decision

ISSUES: 1. WON the sale should be nullified.

2. WON P was a purchaser in good faith.

FIRST ISSUE: YES. In the petition under consideration, the Trial Court found
that subject Deed of Sale was a nullity for lack of any consideration.

It bears emphasizing that as the contracts under controversy are inexistent

contracts within legal contemplation, Articles 1411 and 1412 of the New Civil
Code are inapplicable. Records show that in the complaint-in-intervention of
MERLINDA, she did not aver the same as a ground to nullify subject Deed of
Sale.  In fact, she denied the existence of the Deed of Sale in favor of her
husband.  In the said Complaint, her allegations referred to the want of
consideration of such Deed of Sale.  She did not put up the defense under
Article 1490, to nullify her sale to her husband CHIANG because such a defense
would be inconsistent with her claim that the same sale was inexistent. Since
one of the characteristics of a void or inexistent contract is that it does not
produce any effect, MERLINDA can recover the property from petitioner who
never acquired title thereover.

SECOND ISSUE: NO. A purchaser in good faith is one who buys the property of
another without notice that some other person has a right to or interest in
such property and pays a full and fair price at the time of the purchase or
before he has notice of the claim or interest of some other person in the
property.

In the case under scrutiny, P cannot claim that he was a purchaser in good
faith.  There are circumstances which are indicia of bad faith on his part, to
wit:  (1)  He asked his nephew, Placido Matta, to investigate the origin of the
property and the latter learned that the same formed part of the properties of
MERLINDA’s first husband; (2)  that the said sale was between the spouses; (3)
that when the property was inspected, MODINA met all the lessees who
informed that subject lands belong to MERLINDA and they had no knowledge
that the same lots were sold to the husband.