BIENVENIDO BABAO, ETC., PLAINTIFF AND APPELLEE, VS. FLORENCIO PEREZ, ETC., ET AL., DEFENDANTS AND APPELLANTS.

Babao versus Perez

The Case

This is an action by Bienvenido Babao, as judicial administrator of the estate of the late Santiago Babao, against Florencio Perez, as judicial administrator of the estate of the late Celestina Perez, and against the purchasers and actual owners of portions of a large parcel of unregistered land in San Juan, Batangas. The plaintiff seeks to recover one half of that land, the value of its produce, and in the alternative reimbursement of the expenses allegedly spent in clearing and improving it. The case matters because it is the Supreme Court's clean statement of when the Statute of Frauds bars an oral agreement over land, and of the exact limits of the part performance exception that the trial court had stretched too far.

Procedural History

The defendants moved to dismiss before trial on the ground that the alleged verbal agreement was unenforceable under the Statute of Frauds. The trial court denied the motion, holding that Santiago Babao had fully complied with his part of the oral contract and that performance by one party takes the case out of the statute. At the trial on the merits the court overruled every objection to oral testimony proving the verbal agreement, and it rendered judgment for the plaintiff. It declared the sales of the land fraudulent and fictitious and null and void, ordered the administrator of Celestina Perez's estate to pay an annual sum from August 1947 until delivery of the land, divested the defendants of title over one half of the property and vested it in the plaintiff, and ordered surrender of possession.

The defendants appealed in due time to the Court of Appeals, which reversed the trial court in toto and dismissed the case. On a proper motion pointing out that the Court of Appeals had acted without jurisdiction because the amount involved exceeded 50,000 pesos, that court set aside its own decision and forwarded the case to the Supreme Court. The case thus reached the Supreme Court on appeal from the trial court's judgment.

Facts

Celestina Perez owned a parcel of unregistered land of about 156 hectares in San Juan, Batangas. In 1924, when Santiago Babao married Celestina's niece Maria Cleofe Perez, Celestina and Santiago allegedly entered into a verbal agreement. Santiago bound himself to level and clear the forest land, to plant coconuts, rice, corn, bananas and bamboo, and to serve as administrator during Celestina's lifetime, all at his own expense. In return, Celestina allegedly bound herself to convey to Santiago or his wife one half of the land, with all improvements, upon her death.

Santiago allegedly left his job as administrator of the Liana Estate, where he earned 150 pesos a month, cleared and planted part of the land, and administered it for years. He claimed expenses of 7,400 pesos for clearing and improving, which added to his foregone salary of 39,600 pesos made a total of 47,000 pesos. Shortly before her death, Celestina, through her attorney-in-fact Leovigildo Perez, sold about 127 and one half hectares of the land. Celestina died in August 1947 and Santiago died in January 1948, and separate intestate proceedings were opened for each estate.

The defendants denied any verbal agreement. They alleged that the land had long been cleared and cultivated by Celestina's husband Esteban de Villa, by overseers and tenants, and under the trusco system, and that Santiago administered the land only from 1930 to 1935, after which Celestina barred him. They alleged the sales were real and valid, made under a power of attorney executed in Santiago's presence without objection.

Issues

• Whether or not the alleged verbal agreement falls within the prohibition of the Statute of Frauds, as an agreement not to be performed within one year from its making or as an agreement for the sale of real property or an interest therein.
• Whether or not the trial court erred in admitting oral testimony to prove the verbal agreement over the defendants' objection.
• Whether or not the doctrine of part performance takes the agreement out of the operation of the Statute of Frauds.

Applicable Provisions

Article 1403 of the new Civil Code provides, in the portions pertinent to this case:

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: (a) An agreement that by its terms is not to be performed within a year from the making thereof. (e) An agreement for the sale of real property or of an interest therein.

These are the two paragraphs on which the defendants relied, and the Court measured the verbal agreement against both of them.

Ruling

On the first issue, the Court held that the agreement by its terms could not be performed within one year. Santiago undertook to clear, level and plant 156 hectares of forest land, work that could not be accomplished in a year, and to administer the land during Celestina's lifetime, which lasted 23 years after the agreement. The promise to convey one half of the land was to take effect only upon her death. The agreement therefore fell under paragraph (a).

On the second issue, the Court held that the trial court erred in admitting the oral testimony. The trial court's premise, that performance by one party takes the case out of the statute, was flawed. The Court quoted the rule:

Contracts which by their terms are not to be performed within one year, may be taken out of the statute through performance by one party thereto. All that is required in such case is complete performance within the 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 party will suffice, and it has been held that, if anything remains to be done after the expiration of the year besides the mere payment of money, the statute will apply.

Santiago had not fully performed within the year, so the statute applied.

On the third issue, the Court held that part performance could not save the agreement even if it fell under paragraph (e). The statute is based on equity, on equitable estoppel or estoppel by conduct, and one requisite is that the agreement be certain, definite, clear, unambiguous and unequivocal in its terms. The alleged agreement failed that test. It did not specify how many hectares were to be planted to coconuts, to rice and corn, or to bananas and bamboo, so that a token planting could claim one half of 156 hectares. Celestina's promise was likewise incapable of execution. The testimony of Carlos Orense, allegedly present at the making of the agreement, did not even run along the same line as the plaintiff's claim. The Court quoted the governing rule:

Obviously, there can be no part performance until there is a definite and complete agreement between the parties. In order to warrant the specific enforcement of a parol contract for the sale of land, on the ground of part performance, all the essential terms of the contract must be established by competent proof, and shown to be definite, certain, clear, and unambiguous.

Doctrine

An oral agreement that by its terms is not to be performed within one year from its making, or that is for the sale of real property or an interest therein, is unenforceable by action under Article 1403 of the new Civil Code unless it or some note or memorandum is in writing and subscribed by the party charged or his agent. The part performance exception requires complete performance by one party within the year; nothing less will do, and if anything remains to be done after the year besides the mere payment of money, the statute applies. Part performance rests on equitable estoppel, and it cannot be invoked unless the oral agreement is certain, definite, clear, unambiguous and unequivocal in both its terms and its subject matter, established by competent proof. A vague oral contract over land is therefore unenforceable and cannot be proved by parol evidence.

Disposition

The Supreme Court reversed the judgment of the trial court and dismissed the complaint, without pronouncement as to costs.

Remember This

Memorize the line: part performance takes an oral contract out of the Statute of Frauds only if one party has completely performed within the year, and only if the agreement is definite, certain, clear and unambiguous. Examiners use this case to test Article 1403 of the Civil Code, the one-year and sale-of-real-property clauses, and the requisites of the part performance exception.