G.R. No. 129103 - Spouses Delos Reyes vs. Court of Appeals

The subject property is a 5,010-square‐meter parcel of land located in Barrio Magugpo, Tagum, Davao del Norte, registered under Transfer Certificate of Title No. T-17932.
Daluyong Gabriel acquired the property through hereditary succession in 1974 as one of the heirs of the late Maximo Gabriel.
Although Daluyong Gabriel was the registered owner, he resided in Mandaluyong, Metro Manila, and his sister, Maria Rita Gabriel de Rey, acted as the administratrix to manage the property.

On June 21, 1985, Maria Rita G. de Rey executed a Contract of Lease with Lydia de los Reyes, leasing a portion of 176 square meters on a one-year term at a monthly rental rate of P200.00.
Shortly thereafter, in 1985, Daluyong Gabriel sent his son Renato Gabriel to Tagum to assume administrative functions.
By mutual agreement, the original lease was novated on September 26, 1985 so that Renato Gabriel became the lessor with the lease term extended to six years (June 15, 1985, to June 15, 1991) with an advance rental fee of P14,400.00 duly acknowledged by him.

In November 1987, during the term of the lease, Lydia de los Reyes verbally agreed to purchase an additional portion of the property.
The agreed sale covered 250 square meters (which included the leased 176 square meters), later increased by an additional 50 square meters, totaling 300 square meters, at a price of P300.00 per square meter (totaling P90,000.00).
Payment of the purchase price was made in installments, and official receipts bearing the “Gabriel Building” letterhead were issued and signed by Renato Gabriel.
Although a deed of sale was never executed, Lydia proceeded with constructing a two-storey commercial building after securing the necessary building permit.

Upon learning of the construction, Daluyong Gabriel (acting through his lawyer) sent a cease-and-desist letter on August 30, 1989, demanding that the Delos Reyes couple vacate the property, claiming unauthorized construction and the absence of a valid lease covering the area.
The petitioners (spouses Claudio and Lydia Delos Reyes) replied on September 20, 1989, asserting they were innocent parties who entered the lease and subsequent sale in good faith, having received assurances from representatives of the Gabriel family (including Renato Gabriel) regarding the authority to transact concerning the property.

Daluyong Gabriel initiated legal action on November 14, 1989, in the Regional Trial Court (RTC), Branch I, Tagum, filing Civil Case No. 2326 for the recovery of the subject portion of land.
The Delos Reyes couple countered by filing a complaint for specific performance (Civil Case No. 2329) seeking the execution of a deed of conveyance to transfer the 300-square-meter portion they allegedly purchased.
On September 10, 1991, the RTC rendered a consolidated decision ordering Daluyong Gabriel, Renato Gabriel, and other heirs to execute a deed of conveyance in favor of the petitioners for the 300-square-meter portion.
On appeal, the Court of Appeals reversed the RTC decision by ordering the Delos Reyes couple to vacate the disputed area and to turn over possession to the appellants, holding that Renato Gabriel did not have the authority to sell the property.
Petitioners then filed a petition for review on certiorari before the Supreme Court, contesting the Court of Appeals’ findings and arguing that the evidence demonstrated valid ratification and good faith reliance on the oral contract.

Petitioners argued that the oral contract was either valid or should be ratified based on Daluyong Gabriel’s conduct, including his delegation of administrative duties to Renato Gabriel, and that payment for the sale and lease was duly acknowledged by him.
They contended that even if Renato Gabriel was not the owner at the time of the sale, his subsequent acquisition of title through hereditary succession (or ratification) validated the sale.
On the other hand, private respondents maintained that Renato Gabriel lacked the legal capacity to sell the property because he was neither the owner nor a duly authorized agent.
Evidence such as several official receipts and oral testimonies was scrutinized, with petitioners alleging that the Court of Appeals erred by giving weight to inconsistent testimonies while overlooking documentary evidence.

Whether the verbal agreement for the sale of a 300-square-meter portion of the property constitutes a valid and enforceable contract of sale under the essential requisites of consent and capacity.
Whether the absence of a deed of sale and the fact that the vendor, Renato Gabriel, was not the registered owner affect the validity of the contract.

Whether Renato Gabriel had the requisite authority to sell or to represent Daluyong Gabriel in executing the sale, considering he was acting merely as an administrator and not a designated agent with written authorization.
Whether subsequent conduct of Daluyong Gabriel or his family (including ratification) can validate the sale despite the absence of written consent as required by law (Article 1874).

Whether, in light of the void contract, petitioners are entitled to restitution in the form of a refund of the P90,000.00 purchase price, based on the principle that a performed void contract should be unwound to prevent unjust enrichment.
Additionally, whether the petitioners’ claim for the value of improvements (the two-storey commercial building) can be sustained without sufficient evidentiary support.

The contrasting positions between the petitioners’ claim that the sale was valid or validated by ratification and the private respondents’ argument that Renato Gabriel was not authorized to sell what did not belong to him.
How the multiple legal theories advanced (acting as agent, sale of his share, inheritance) can be reconciled or whether they inherently conflict under established principles of contract and property law.