Sps Torcuator v. Sps. Bernabe & Sps.
Salvador (1) that the lot buyer shall deposit with Ayala Corp a cash
Topic: Unenforceable Contracts
DOCTRINE:
1403 (2). ** The relevant part is at the ratio section **
1405. Contracts infringing the Statute of Frauds, referred to in
No. 2 of Article 1403, are ratified by the failure to object to the
presentation of oral evidence to prove the same, or by the
acceptance of benefit under them
1406. When a contract is enforceable under the Statute of
Frauds, and a public document is necessary for its registration
in the Registry of Deeds, the parties may avail themselves of
the right under Article 1357
Short Answers:
Who was chasing who: Sps. Torcuator was chasing Sps.
Bernabe & Sps. Salvador
When did the problem arise: W hen the petitioners had the
plans of their house prepared and offered to pay the Bernabes
for the land upon delivery of the sale contract
What kind of contract was in question: Contract to sell
Facts:
The subject of this action is a lot in Ayala Alabang Village in
muntinlupa which was purchased by the Sps. Diosdado and
Sps. Salvador (Respondents) from the developers of Ayala
alabang. This sale was subject to the following conditions:
bond (around P17K for the salvadors) which shall be refunded
to him if he builds a residence thereon within 2 years of
purchase, otherwise the deposit shall be forfeited.
(2) Architectural plans for any improvement shall be approved
by the Ayala corporation
(3) No lot may be resold by the buyer unless a residential
house has been constructed thereon (Ayala Corp keeps the
Torrens Title in their possession)
Consequently, the Salvadors sold the parcel of land to Sps.
Bernabe. Given the above restrictions, the Salvadors
concomitantly executed a special power of attorney which
authorized the Bernabes to construct a residential house on
the lot as well as to transfer the title of the property in their
names.
On the other hand, Sps. Bernabe contracted to sell the land to
Sps. Torcuator (Petitioners) without making any improvement
on the land. Confronted by the Ayala Alabang Restrictions, the
parties agreed to cause the sale between the Salvadors and
Bernabes cancelled in favor of (a) a new deed of sale from the
Salvadors directly to the Torcuators; (b) a new irrevocable SPA
executed by the Salvadors to the Petitioners in order for the
latter to build a house on the land; and an Irrevocable SPA
from the Salvadors to the Bernabes, authorizing them to sell,
transfer and convey, with power of substitution the said lot.
The problem arose when the petitioners had the plans of their
house prepared and offered to pay the Bernabes for the land
upon delivery of the sale contract but the deed of sale was
never consummated nor was the payment ever effected.
Subsequently, the Bernabes sold the subject land to
ANGELES (a brother in law) but the document was not
notarized. This prompted the petitioners to file this action for
Specific Performance or Rescission with damages.
RTC: In favor of Respondents ((1) the alleged nullity of the
contract between the parties as it violated Ayala Corporation's
condition that the construction of a house is a prerequisite to
any sale of lots in Ayala Alabang Village; (2) non-payment of
the purchase price; and (3) the nullity of the contract as it
called for payment in United States Dollars.
CA: Affirmed RTC. Added a 4th reason: Alleged nullity of the
agreement because it deprived the government of taxes.
(There was supposed to be two sales but the transfer made it
only one)
Petitioners contend that it is a contract of sale and it is
enforceable.
Issue: WON the agreement is a contract to sell or a contract
of sale, subsequently, is it enforceable
Held/Ratio: It was a contract to sell and is unenforceable.
The agreement imposed upon petitioners the obligation to fully
pay the agreed purchase price for the property and that the
ownership shall not pass to petitioners until they have fully
paid the price is IMPLICIT in the agreement. Respondent
Bernabe specifically informed the petitioners that he should
receive the full payment before he left for the US.
Furthermore, Sps Salvadors did not execute a deed of sale in
favor of petitioners and instead executed a SPA which
authorized Sps. Bernabes to sell the property on their behalf.
Also, there were no records that the petitioners attempted to
tender payment or consign the purchase price.
Furthermore, the parties clearly intended the construction of a
residential house on the property as another suspensive
condition which has yet to be fulfilled (Ayala Corp retained title
to the property until Sps Salvador were precluded from selling
it unless a residence had been constructed thereon). The
parties understood the conditions of Ayala which is why they
resorted to the execution of the SPA to construct a residential
building. If it was indeed a contract of sale, there would be no
need for the SPA as the petitioners can already compel the
respondents to transfer ownership to them. Also. there was no
public document evidencing the sale which was executed
(constructive delivery) in favor of the petitioners. They did not
take actual or physical possession of the property.
Art. 1403. The following contracts are unenforceable unless
they are ratified:
xxx xxx xxx
(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:
xxx xxx xxx
(e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or an interest therein;
Statute of Frauds is descriptive of statutes which require
certain classes of contracts to be in writing (i.e agreements for
the sale of real property.) It does not deprive the parties the
right to contract but merely regulates the formalities of the
contract necessary to render it enforceable. Its purpose is to
prevent fraud and perjury in the enforcement of obligations
depending for their evidence 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 written note or memorandum, as
contemplated in Art 1403, should embody the essentials of the
contract.
In the case at bar, the petitioners presented the SPA and the
summary agreement as the agreement that there was indeed
a deed of sale but (1) the SPA does not suffice as notes or
memoranda as contemplated by Art 1403 because it does not
contain the essential elements of the purported contract and it
does not even refer to any agreement for the sale of the
property -- making it inoperable. (2) the summary of
agreement is fatally deficient in the fundamentals and
ambiguous in the rest of its terms. It does not mention when
the alleged consideration should be paid and transfer of
ownership affected. It doesnt even refer to any particular
property as the object.
In relation to Art 1405, respondents acceptance of the
agreement by the petitioners on them is deemed to have
arisen from their failure to object to the testimony of petitioner
on the matter.
Since the agreement was a contract to sell, the respondents
were not obliged to convey title to the property before the
happening of 2 suspensive conditions (Full payment and
construction of a residence on the property), the respondents
were acting within their right when they considered the
agreement cancelled after unsuccessfully demanding payment
from petitioner.
Petition denied.