G.R. No. 185917 - Fredco Manufacturing Corp. vs. President and Fellows of Harvard College

Private respondent Eusebio C. Encarnacion owned a 160-square-meter residential lot located in Iriga St., La Loma, Quezon City.
In the 1950s, a house was constructed on a 100-square-meter portion of the lot by Deogracia la Torre, with Encarnacion’s consent.
The property was later occupied by petitioners Gloria A. S. Lacanilao and her common-law husband Pablo after purchasing the house.
Separate arrangements existed:

On 12 September 1963, Pablo Lacanilao and Encarnacion entered into a contract of lease covering the 100-square-meter portion where the house stood, fixing the monthly rental at P24.00.
Earlier, Encarnacion had leased a 60-square-meter portion to petitioner Plutarco Cadurnigara.

For decades, petitioners maintained possession and diligently paid rentals under respective lease agreements.

In November 1987, Encarnacion offered to sell the entire lot to petitioners Lacanilao and Cadurnigara.
After months of negotiation, Encarnacion agreed, by mid-May 1988, to sell the property to petitioners for P120,000.00.
Petitioners requested an extension of one month (up to 15 June 1988) to pay the contract price and to have Encarnacion execute a Deed of Absolute Sale in their favor.
Encarnacion consented to the extension, thereby forming a verbal contract to sell based on the agreed terms.

On 11 June 1988, a fire at the Quezon City hall severely damaged the Register of Deeds, resulting in the loss of thousands of original copies of certificates of title, including Encarnacion’s title.
Petitioners failed to pay the full purchase price on the agreed date, 15 June 1988.
Following this, Encarnacion’s representatives proceeded to offer the property to private respondents Ramon and Teresita Acebo.

The Acebos purchased the property for P145,000.00, paying an earnest money of P20,000.00 on 18 August 1988 and settling the remainder by 15 November 1988.
Encarnacion executed a Deed of Absolute Sale in favor of the Acebos, which was provisionally recorded on 25 November 1988 in the Register of Deeds and inscribed on the Transfer Certificate of Title No. 204536.
On 19 November 1988, the Acebos, through counsel, sent petitioners a notice to vacate, effectively informing them of the sale of the entire lot in favor of the Acebos.

Aggrieved by the sale, petitioners initially filed a complaint with the barangay alleging a violation of their tenant’s right to purchase the lot under Section 6, P.D. 1517.
After settlement efforts failed, petitioners filed a complaint before the Regional Trial Court Branch 66 in Quezon City to annul the deed of sale executed in favor of the Acebos and to compel Encarnacion to execute a deed of sale in their favor.
The trial court dismissed petitioners’ complaint, also awarding damages and attorney’s fees against petitioners on a counterclaim.
The Court of Appeals affirmed the trial court’s decision but deleted the award of damages and attorney’s fees for the Acebos.

The evidence indicated that Encarnacion denied any agreement to sell his property to petitioners beyond the lease agreements.
Petitioners relied solely on parole evidence to claim that Encarnacion “verbally agreed to sell” the lot to them.
The trial court, applying Articles 1358 and 1403 No. 2(e) of the Civil Code, held that even if a verbal contract existed, it was unenforceable, thereby nullifying the basis for annulling the deed of sale to the Acebos.

Whether a verbal contract to sell real property, based on an agreement reached by Encarnacion and petitioners, can be enforced despite the statutory requirements for written contracts in real property transactions.
Whether petitioners could obtain specific performance to compel Encarnacion to formalize the sale to their benefit.

Whether the condition of full payment, which was positively suspensive in nature, was met by petitioners as required under the agreed terms of the contract to sell.
Whether petitioners’ failure to complete the payment on the stipulated date (15 June 1988) justified the termination of the contract by Encarnacion.

Whether petitioners’ long-term possession as lessees provided them any superior right or remedy against the subsequent sale to the Acebos.
Whether petitioners’ alleged substantial interest in the property could override the rights of the Acebos who acquired the property under a duly executed and recorded deed of sale.

Whether the petition for review under Rule 45 was limited to questions of law, considering that petitioners raised issues of fact in their appeal.