THE HEIRS OF ANSELMA GODINES, NAMELY: MARLON, FRANCISCO, ROQUE, ROSA AND ALMA, ALL SURNAMED GODINES, PETITIONERS, VS. PLATON DEMAYMAY AND MATILDE DEMAYMAY, RESPONDENTS.

Heirs of Godines versus Demaymay

The Case

This is a petition for review on certiorari brought by the Heirs of Anselma Godines against the spouses Platon and Matilde Demaymay, arising from a complaint for recovery of ownership and possession and for the declaration of a Deed of Confirmation of Sale as null and void. The case matters because it settles a question every Bar candidate must be able to answer cold: is an oral sale of real property valid, and may the heirs of the seller be bound by it? The Supreme Court answers yes on both counts, and in doing so separates the validity of a contract from the form the law prescribes for its enforcement.

Procedural History

The petitioners filed their complaint before the Regional Trial Court of Cataingan, Masbate, Branch 49. Before pre-trial, the Regional Trial Court ordered the transfer of the case to the Municipal Circuit Trial Court of Placer, Masbate, because the assessed value of the property was below twenty thousand pesos. The Municipal Circuit Trial Court first dismissed the case on the ground that the cause of action was the annulment of the Deed of Confirmation of Sale, over which the Regional Trial Court had jurisdiction. On appeal, the Regional Trial Court reversed and remanded the case. The Municipal Circuit Trial Court then rendered judgment in favor of the petitioners, declaring them owners, cancelling the tax declaration in Matilde's name, ordering the spouses Demaymay to vacate, and awarding litigation expenses. On appeal, the Regional Trial Court denied due course and remanded for further hearing. After further proceedings, the Municipal Circuit Trial Court again ruled for the petitioners. The Regional Trial Court dismissed the appeal for lack of merit and affirmed with modification. The spouses Demaymay then filed a petition for review under Rule 42 with the Court of Appeals, which reversed the lower courts and recognized the spouses Demaymay as owners. The petitioners' motion for reconsideration was denied, hence this petition for review on certiorari before the Supreme Court.

Facts

Anselma Yuson Godines died in August 1968, leaving a residential lot in Divisoria, Cawayan, Masbate, declared for taxation purposes in her name. During her lifetime she obtained a loan from Matilde Demaymay, and in consideration the spouses Demaymay were allowed to use the land for fifteen years. That agreement was never reduced to writing.

In August 1987 the petitioners inquired with the Provincial Assessor and discovered that Anselma's tax declaration had been cancelled and a new one issued in Matilde's name, by virtue of a Deed of Confirmation of Sale supposedly executed by petitioner Alma in 1970. They also learned that the true area of the land was three hundred thirty-two square meters, not sixty-eight. The petitioners filed suit, arguing that Alma could not have executed the deed because she was in Bogo, Cebu from 1969 to 1975, and was only fourteen years old in 1970. The spouses Demaymay countered that they had acquired the land by sale, and that Alma was estopped from questioning the conveyance.

At trial, the daughter of the spouses Demaymay testified that Anselma had sold the property to them for one thousand four hundred sixty pesos in January 1967. The initial payment of one thousand ten pesos was received by Alma and by Anselma's uncle, evidenced by a receipt in the local vernacular. Anselma and her husband died before any contract of sale could be executed, and the Deed of Confirmation of Sale was executed by Alma in October 1970 upon full payment of the purchase price.

Issues

• Whether or not the Court of Appeals gravely erred in ruling that the heirs of Anselma are bound by the oral contract of sale allegedly executed in favor of the spouses Demaymay.
• Whether or not the oral sale of real property is valid, and whether the Statute of Frauds bars its enforcement.

Applicable Provisions

Article 1305 of the Civil Code defines a contract:

Article 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

This establishes that a sale is perfected by consent, regardless of the form in which it is clothed.

Article 1356 of the Civil Code provides:

Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.

This is the general rule that form is not essential to validity, subject only to the exception where the law imposes a form for enforceability.

Article 1358 of the Civil Code requires certain acts and contracts to appear in a public instrument, including sales of real property. The Court explains that this form is not essential to validity but merely for convenience, and does not affect the validity of the conveyance.

Article 1403, paragraph 2, of the Civil Code, the Statute of Frauds, requires covered transactions to be in writing, otherwise they are unenforceable by action. The Court holds that this provision regulates proof and enforceability only, and does not declare the contract invalid.

Ruling

On the first issue, the Court denied the petition. It emphasized that the main issue is the validity of the oral sale between Anselma and the spouses Demaymay, not the validity of the Deed of Confirmation of Sale, which merely documents the sale. The lower courts had been fixated on the deed, when the primary question was the validity of the sale itself.

On the second issue, the Court held that oral contracts of sale are valid. Contracts with all the essential requisites are obligatory regardless of form, except when the law requires a form for validity or enforceability. The Court quoted its ruling that the form required under Article 1358 is not essential to validity but merely for convenience, and that even a verbal contract of sale of real estate produces legal effects between the parties.

The Court further held that the Statute of Frauds applies only to executory contracts, not to those fully or partially executed. The verbal sale had been partially consummated when Anselma received the initial payment, and totally executed upon receipt of the balance. Possession of the property and payment of real property taxes served as indicators that the oral sale had been performed. Since the oral sale was valid and enforceable by virtue of consummation, the petitioners, as heirs of Anselma, are legally bound by it. The land no longer formed part of Anselma's estate that they could have inherited.

Doctrine

An oral sale of real property is valid and binding between the parties. The requirement under Article 1358 that certain contracts appear in a public instrument is not essential to validity but merely for convenience. The Statute of Frauds under Article 1403, paragraph 2, applies only to executory contracts and regulates only the method of proof and enforceability; non-compliance does not render the contract void or voidable but only unenforceable by action. Contracts that have been fully or partially executed are removed from the operation of the Statute of Frauds, because excluding parol evidence would promote fraud by allowing a party to keep the benefits and evade the obligations. The heirs of the seller are bound by a valid oral sale, and the property sold no longer forms part of the seller's estate.

Disposition

The petition was denied, and the Decision and Resolution of the Court of Appeals were affirmed, recognizing the spouses Demaymay as owners entitled to possession and ordering the heirs of Anselma to execute a Deed of Absolute Sale in their favor.

Remember This

The single line to memorize: an oral sale of real property is valid and binding, and the Statute of Frauds bars only its enforcement by action, not its intrinsic validity, especially where the contract has been partially or fully executed. Examiners use this case to test the distinction between validity and enforceability, and the rule that the Statute of Frauds does not apply to executed contracts.