G. R. No. L-11231. May 12, 1958

The issue in this case is whether the Statute of Frauds is applicable
thereto.

Plaintiff Rosario Carbonnel alleges, in her second amended complaint, filed
with the Court of First Instance of Rizal, that, on January 27, 1955, she
purchased from defendant Jose Poncio, at P9.50 a square meter, a parcel of land
of about 195 square meters, more or less, located in San Juan del Monte, Rizal,
known as Lot No. 13-B of subdivision plan Psd-19567, and more particularly
described in Transfer Certificate of Title No. 5040 (now No. 37842), excluding
the improvements thereon; that plaintiff paid P247.26 on account of the price
and assumed Poncio’s obligation with the Republic Savings Bank amounting to
P1,177.48, with the understanding that the. balance would be payable upon
execution of the corresponding deed of conveyance; that one of the conditions of
the sale was that Poncio would continue staying in said land for one year, as
stated in a document signed by him (and later marked as Exhibit A), a
translation of which was attached to the said complaint; that Poncio refuses to
execute the corresponding deed of sale, despite repeated demands; that plaintiff
has thereby suffered damages in the sum of P5,000, aside from attorney’s fees
amounting to P1.000; that Poncio has conveyed the same property to defendants
Ramon R. Infante and Emma L. Infante, who knew of the first sale to plaintiff;
and that the Infantes had thereby caused damages to plaintiff in the sum of
P5,000.

Plaintiff prayed, therefore, that she be declared owner of the land in.
question; that the sale to the Intfantes be annulled; that Poncio be required to
execute the corresponding deed of conveyance in plaintiff’s favor; that the
Register of Deeds of Rizal be directed to issue the corresponding title in
plaintiff’s name; and that defendants be sentenced to pay damages.

Defendants moved to dismiss said complaint upon the ground that plaintiff’s
claim is unenforceable under the Statute of Frauds, and that said pleading does
not state facts sufficient to constitute a cause of action. The motion was
denied, “without prejudice to considering, when this case is decided on the
merits, whether the same falls under the Statute of Frauds.”

Thereafter, the Infantes filed an answer denying most of the allegations of
said complaint and alleged, by way of special defense, that they purchased the
land in question in good faith, for value, and without knowledge of the alleged
sale to plaintiff; and that plaintiff’s claim is unenforceable under the Statute
of Frauds. They, likewise, set up counterclaims for damages.

In his answer, Poncio denied specifically some allegations of said complaint
and alleged that he had no knowledge sufficient to form a belief as to the truth
of the other averments therein. By way of special defenses, he alleged that he
had consistently turned down several offers, made by plaintiff, to buy the land
in question, at P15 a square meter, for he believes that it is worth not
less than P20 a square meter; that Mrs. Infante, likewise, tried to buy the land
at P15 a square meter; that, on or about January 27, 1955, Poncio was advised by
plaintiff that should she decide to buy the property at P20 a square meter, she
would allow him to remain in the property for one year; that plaintiff then
induced Poncio to sign a document, copy of which is probably the one appended to
the second amended complaint; that Poncio signed it “relying upon the statement
of the plaintiff that the document was a permit for him to remain in the
premises in the event that defendant decided to sell the property to the
plaintiff at P20 a square meter”; that on January 30, 1955, Mrs. Infante
improved her offer and he agreed to sell the land and its improvements to her
for P3,535; that Poncio has not lost “his mind,” to sell his property, worth at
least P4,000, for the paltry sum of P1,177.48, the amount of his obligation to
the Republic Savings Bank; and that plaintiff’s action is barred by the Statute
of Frauds. Poncio similarly set up a counterclaim for damages.

As the case came up for trial, on February 23, 1956, plaintiff introduced the
testimony of one Constancio Meonada, who said that he is janitor of the Sto.
Domingo Church and a high school, as well as auto-mechanic, graduate; that he
has been and still is a paying boarder in plaintiff’s house; that Poncio is his
townmate, both being from Mahatao, Batanes; that, after making a rough draft,
based upon data furnished by plaintiff, he typed Exhibit A, which is in the
Batanes dialect; that, thereafter, Poncio came to plaintiff’s house, where he
was shown Exhibit A; that after the witness had read its contents to Poncio and
given him a copy thereof, Poncio signed Exhibit A and so did the plaintiff; that
Meonada likewise signed at the foot of Exhibit A, as attesting witness; and that
translated freely into English, Exhibit A, reads as follows:

“From this date, January 27, Jose Poncio may stay in this lot that I bought
from him until one year without payment. After that one year and he cannot find
any place where to transfer his house, he can also stay in this lot and he will
pay according to agreement.” (t.s.n., p. 4.)

Then, taking the witness stand, plaintiff testified that she has known Poncio
since childhood, he being related to her mother; that Poncio’s lot adjoins her
lot, in San Juan, Rizal; that one day Poncio told her that he wanted to sell his
property; that, after both had agreed on its price, he said that his lot is
mortgaged to the Republic Savings Bank; and that, at noon time, on the same day,
he came back stating that both would “go to the bank to pay the balance in
arrears,” At this juncture, defense counsel moved to strike out the statement of
the witness, invoking, in support of the motion, the Statute of Frauds. After an
extended discussion, the parties agreed, to submit memoranda and the hearing was
suspended. Later on, the lower court issued an order dismissing plaintiff’s
complaint, without costs, upon the ground that her cause of action is
unenforceable under the Statute of Frauds. The counterclaims were, also,
dismissed. Hence, this appeal by plaintiff.

We are of the opinion and so hold that the appeal is well taken. It is well
settled in this jurisdiction that the Statute of Frauds is applicable only to
executory contracts (Facturan vs. Sabanal, 81 Phil., 512), not to contracts that
are totally or partially performed (Almirol, et al., vs. Monserrat, 48 Phil.,
67, 70; Robles vs. Lizarraga Hermanos, 50 Phil., 387; Diana vs. Macalibo, 74
Phil., 70).

“Subject to a rule to the contrary followed in a few jurisdictions, it is the
accepted view that part performance of a parol contract for the sale of real
estate has the effect, subject to certain conditions concerning the nature and
extent of the acts constituting performance and the right to equitable relief
generally, of taking such contract from the operation of the statute of frauds,
so that chancery may decree its specific performance or grant other equitable
relief. It is well settled in Great Britain and in this country, with the
exception of a few states, that a sufficient part performance by the purchaser
under a parol contract for the sale of real estate removes the contract from the
operation of the statute of frauds.” (49 Am. Jur. 722-723.)

In the words of former Chief Justice Moran: “The reason is simple. In
executory contracts there is a wide field for fraud because unless they be in
writing there is no palpable evidence of the intention of the contracting”
parties. The statute has precisely been enacted to prevent fraud.” (Comments on
the Rules of Court, by Moran, Vol. III [1957 ed.], p. 178.) However, if a
contract has been totally or partially performed, the exclusion of parol
evidence would promote fraud or bad faith, for it would enable the defendant to
keep the benefits already derived by him from the transaction in litigation,
and, at the same time, evade the obligations, responsibilities or liabilities
assumed or contracted by him thereby.

For obvious reasons, it is not enough for a party to allege partial
performance in order to hold that there has been such performance and to render
a decision declaring that the Statute of Frauds is inapplicable. 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. Indeed, such oral testimony would usually be unnecessary if there
were documents proving partial performance. Thus, the rejection of any and all
testimonial evidence on partial performance, would nullify the rule that the
Statute of Frauds is inapplicable to contracts which have been partly executed,
and lead to the very evils that the statute seeks to prevent.

“The true basis of the doctrine of part performance according to the
overwhelming weight of authority, is that it would be a fraud upon the plaintiff
if the defendant were permitted to escape performance of his part of the oral
agreement after he has permitted the plaintiff to perform in reliance upon the
agreement. The oral contract is enforced in harmony with the principle that
courts of equity will not allow the statute of frauds to be used as an
instrument of fraud. In other words, the doctrine of part performance was
established for the same purpose for which the statute of frauds itself was
enacted, namely, for the prevention of fraud, and arose from the necessity of
preventing the statute from becoming an agent of fraud for it could not have
been the intention of the statute to enable any party to commit a fraud with
impunity.” (49 Am. Jur., 725-726; underscoring supplied.)

When the party concerned has pleaded partial performance, such party is
entitled to a reasonable chance to establish by parol evidence the truth, of
this allegation, as well as the contract itself. “The recognition of the
exceptional effect of part performance in taking an oral contract out of the
statute of frauds, involves the principle that oral evidence is admissible in
such cases to prove both the contract and the part performance of the contract”
(49 Am. Jur., 927).

Upon submission of the case, for decision on the merits, the Court should
determine whether said allegation is true, bearing in mind that parol evidence
is easier to concoct and more likely to be colored or inaccurate than
documentary evidence. If the evidence of record fails to prove clearly that
there has been partial performance, then the Court should apply the Statute of
Frauds, if the cause of action involved falls within the purview thereof. If the
Court is, however, convinced that the obligation in question has been partly
executed and that the allegation of partial performance was not resorted to as a
devise to circumvent the Statute, then the same should not be applied.

Apart from the foregoing, there are in the case at bar several circumstances
indicating that plaintiff’s claim might not be entirely devoid of factual basis.
Thus, for instance, Poncio admitted in his answer that plaintiff had offered
several times to purchase his land.

Again, there is Exhibit A, as document signed by the defendant. It is in the
Batanes dialect, which, according to plaintiff’s uncontradicted evidence, is the
one spoken by Poncio, he being a native of said region. Exhibit A states that
Poncio would stay in the land sold by him to plaintiff for one year, from
January 27, 1955, free of charge, and that, if he cannot find a place where to
transfer his house thereon, he may remain in said lot under such terms as may be
agreed upon. Incidentally, the allegation in Poncio’s answer to the effect that
he signed Exhibit A under the belief that it “was a permit for him to remain in
the premises in the event” that “he decided to sell the property” to the
plaintiff at P20 a sq. m.” is, on its face, somewhat difficult to believe.
Indeed, if he had not decided as yet to sell the land to plaintiff, who, had
never increased her offer of P15 a square meter, there was no reason for Poncio
to get said permit from her. Upon the other hand, if plaintiff intended to
mislead Poncio, she would have caused Exhibit A to be drafted, probably in
English, instead of taking the trouble of seeing to it that it was written
precisely in his native dialect, the Batanes. Moreover, Poncio’s signature on
Exhibit A suggests that he is neither illiterate nor so ignorant as to sign a
document without reading its contents, apart from the fact that Meonada had read
Exhibit A to him and given him a copy thereof, before he signed thereon,
according to Meonada’s uncontradicted testimony.

Then, also, defendants say in their brief:

“The only allegation In plaintiff’s complaint that bears any relation to her
claim that there has been partial performance of the supposed contract of sale,
is the notation of the sum of P247.26 in the bank book of defendant Jose Poncio.
The noting or jotting down of the sum of P247.26 in the bank book of Jose Poncio
does not prove the fact that said amount was the purchase price of the property
in question. For all we knew, the sum of P247.26 which plaintiff claims to have
paid to the Republic Savings Bank for the account of the defendant, assuming
that the money paid to the Republic Sayings Bank came from the plaintiff, was
the result of some usurious loan or accommodation, rather than earnest money or
part payment of the land. Neither is a competent or satisfactory evidence to
prove the conveyance of the land in question the fact that the bank book account
of Jose Poncio happens to be in the possession of the plaintiff.”
(Defendants-Appellees’ brief, pp. 25-26.)

How shall we know why Poncio’s bank deposit book is in plaintiff’s
possession, or whether there is any relation between the P247.26 entry therein
and the partial payment of P247.26 allegedly made by plaintiff to Poncio on
account of the price of his land, if we do not allow the plaintiff to explain it
on the witness stand? Without expressing any opinion on the merits of
plaintiff’s claim, it is clear, therefore, that she is entitled, legally as well
as from the viewpoint of equity, to an opportunity to introduce parol evidence
in support of the allegations of her second amended complaint.

Wherefore, the
order appealed from is hereby set aside, and let this case be remanded to the
lower court for further proceedings not inconsistent with this decision, with
the costs of this instance against defendants-appellees.

It is so ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador,
Reyes, J.B.L., Endencia, and Felix, JJ., concur.