G.R. No. 137845 - Clemeno, Jr. vs. Lobregat

The Spouses Nilus and Teresita Sacramento were the registered owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 158728, along with the house constructed thereon at No. 68 Madaling Araw Street, Teresa Heights Subdivision, Novaliches, Quezon City.
The Sacramentos had mortgaged the property with the Social Security System (SSS) as security for a housing loan and had surrendered both the original and duplicate copies of the title.
On September 2, 1980, the Sacramentos executed a Deed of Sale with Assumption of Mortgage in favor of Maria Linda Clemeno and her husband, Angel C. Clemeno, Jr., with the conformity of the SSS.
On March 6, 1981, the Register of Deeds issued TCT No. 277244 under the names of the vendees (the Clemenos).

Following the transfer of title, the petitioners executed a Real Estate Mortgage Contract with the SSS to secure the remaining balance of their loan, even though SSS records still showed the Sacramentos as debtors.
Separate disputes soon arose from the conflicting interests and responsibilities arising from the previous mortgage, the transfer of possession, and the handling of the property title.

On July 1, 1992, respondent Romeo R. Lobregat, who was a lawyer and Election Registrar, filed a complaint against the petitioners (the Clemenos and Nilus Sacramento) for breach of contract, specific performance, and damages (Civil Case No. 92-12620).
Although the trial court initially dismissed Lobregat’s case for lack of prosecution, it later reinstated the action and consolidated it with a separate complaint filed by the petitioners for recovery of possession (Civil Case No. 93-17268).

On June 4, 1987, respondent Lobregat and petitioner Angel Clemeno, Jr.—who were relatives by consanguinity—entered into a verbal contract for the sale of the property covered by TCT No. 277244.
The terms of the agreement included:

A purchase price of P270,000.00 which was to be paid in installments within two years, inclusive of the balance of the petitioners’ housing loan with the SSS.
The respondent’s obligation to pay a portion of the monthly amortizations of the vendor’s (petitioners’) SSS loan.
Upon full payment of the purchase price, the petitioners would execute a deed of absolute sale and transfer the title to the respondent.

Payments made by the respondent under this arrangement included a down payment of P25,000.00 (with an issued receipt dated June 4, 1987), as well as several subsequent partial payments on predetermined dates.
The respondent also remitted monthly amortization payments to the SSS for the petitioners’ loan, with receipts reflecting the names of petitioners along with the respondent’s involvement.

A dispute arose when petitioner Clemeno, Jr. later refused to execute the deed of sale despite the respondent’s readiness to pay the balance of the purchase price.
Petitioner Clemeno, Jr. contended that no sale had taken place, asserting instead that he had merely tolerated the respondent’s possession or entered into a lease-purchase agreement, not a perfected contract of sale.
Correspondence between the parties revealed that Clemeno, Jr. intended to reprice the property at its 1992 market value, thereby repudiating the original contractual terms.

Ordering the respondent to vacate the premises.
Directing the respondent to pay for use and occupancy, attorney’s fees, and the costs of suit.
Relying on the notion that both the sale and lease agreements were unenforceable under Article 1403(2) of the New Civil Code due to the lack of written documentation.

The parties had indeed entered into a verbal contract of sale evidenced by partial performance, including the issuance of receipts and the transfer of possession.
Article 1403(2) did not apply to the partially performed contract, making the verbal agreement binding.

The petitioners argued that the contract was a mere contract to sell, not a perfected contract of sale, emphasizing non-compliance with the Statute of Frauds and Articles 1358 and 1403 of the Civil Code.
They asserted that the absence of a written instrument evidenced an unenforceable agreement.
The respondent, however, maintained that the partial performance (i.e., payments and transfer of possession) clearly established a perfected contract of sale.

Whether the contract entered into by the parties was a perfected contract of sale or merely a contract to sell pending the full payment of the purchase price.
Whether the partial performance—manifested by the delivery of possession and the issuance of receipts for payment—satisfied the requirements under the Civil Code to perfect a contract of sale despite the absence of a written contract.
Whether the petitioners’ refusal to execute the deed of sale, thereby attempting to recharacterize the agreement as a lease-purchase arrangement, was legally permissible in light of the respondent’s performance.
How statutory provisions, specifically Articles 1356, 1358, and 1403 of the New Civil Code, should be applied in determining the validity and enforceability of a verbal contract of sale.