Title
Samedra vs. Court of Appeals
Case
G.R. No. 121200
Decision Date
Sep 26, 1996
A dispute over a Quezon City property arose after a failed verbal sale agreement; the Supreme Court ruled the unenforceable contract favored the new buyers, upholding legal provisions over equity.
dismissal of complaint
oral contract
purchase price

Case Summary (G.R. No. 121200)

Factual Background

Encarnacion owned a residential parcel of land in Quezon City with an area of 160 square meters. 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 house was later acquired by petitioner Gloria Lacanilao and her common-law husband, Pablo, who established their residence there. On 12 September 1963, Pablo Lacanilao and Encarnacion entered into a contract of lease over the 100 square meter portion occupied by Pablo’s house, stipulating a monthly rental of P24.00. Encarnacion likewise leased the remaining 60 square meter portion to petitioner Cadurnigara. Petitioners remained in possession under their respective lease contracts and “religiously” paid rentals up to November 1988.

In November 1987, Encarnacion offered to sell the lot to petitioners. After months of negotiation, Encarnacion agreed in mid-May 1988 to sell the property to petitioners for P120,000.00. Petitioners requested an extension of one (1) month—until 15 June 1988—to pay the full contract price and for Encarnacion to execute a Deed of Absolute Sale. Encarnacion agreed to that arrangement. However, on 11 June 1988, a fire struck the Quezon City hall, and the Register of Deeds office was badly burned; thousands of original title documents, including Encarnacion’s title, were destroyed.

Petitioners failed to pay the P120,000.00 by 15 June 1988. Thereafter, Encarnacion’s representatives offered the property for sale to private respondents Ramon and Teresita Acebo, who agreed to buy for P145,000.00. The Acebos paid P20,000.00 as earnest money on 18 August 1988, and paid the balance on 15 November 1988. Encarnacion executed a Deed of Absolute Sale in favor of the Acebos. The deed was provisionally recorded in the Register of Deeds Entry Book as P.E. Nos. 526-527 dated 25 November 1988 and inscribed on the dorsal part of the owners’ duplicate of Transfer Certificate of Title No. 204536.

On 19 November 1988, the Acebos’ counsel sent petitioners a notice to vacate, informing them of the sale of the entire property to the Acebos. Petitioners then filed a complaint with the barangay for alleged violation of Sec. 6, P.D. 1517. After the parties failed to settle, petitioners stopped paying rentals and brought an action in the Regional Trial Court, Branch 66, Quezon City to annul the deed of sale executed by Encarnacion in favor of the Acebos and to compel Encarnacion to execute a deed of sale in petitioners’ favor.

Trial Court Proceedings

After trial, the trial court dismissed petitioners’ complaint for lack of merit. It later awarded damages and attorney’s fees on the counterclaim. In disposing of the complaint, the trial court found that Encarnacion denied having agreed to sell the property to petitioners. Petitioners, in turn, offered only parole evidence to establish that Encarnacion “verbally agreed to sell the lot in question.” Applying Articles 1358 and 1403 No. 2(e) of the Civil Code, the trial court ruled that even assuming a verbal agreement existed, the contract was unenforceable. Accordingly, there was no legal basis to annul the deed of sale between Encarnacion and the Acebos.

Appellate Review and the Petition’s Assigned Errors

On appeal, the Court of Appeals affirmed the trial court’s dismissal but deleted the award of damages and attorney’s fees in favor of private respondents. Petitioners then elevated the matter to the Supreme Court, assigning two main errors: first, that the Court of Appeals allegedly failed to hold the Acebos were not in good faith when they bought the property despite alleged awareness of petitioners’ “substantial interest” and alleged irreparable prejudice; and second, that the Court of Appeals allegedly erred in holding that petitioners failed to pay the purchase price to Encarnacion, which petitioners argued meant Encarnacion did not agree to the sale.

The Supreme Court’s Treatment of Issues and Rule 45 Limits

The Court held that petitioners’ submissions essentially raised issues of fact, and that under Rule 45 only questions of law may be raised. It reiterated the rule that the factual findings of the lower courts—including the Court of Appeals—are final and conclusive, and are not reviewed on appeal except in limited recognized instances. Finding no such exceptions, the Court treated the controlling matter as one of law: whether petitioners, relying on an alleged verbal contract to sell, obtained a right to purchase the property superior to the Acebos, who acquired the same property through an absolute deed of sale executed by Encarnacion.

Legal Framework on Contracts to Sell and Conditions

The Court explained that where a seller promises to execute a deed of absolute sale upon completion of payment of the purchase price, the agreement constitutes a contract to sell. In such contracts, where the seller retains ownership until full payment, the payment is treated as a positive suspensive condition. Failure to pay in full does not operate as a typical breach, but rather as an event that prevents the seller’s obligation to convey title under Article 1184 of the Civil Code. The Court further invoked Article 1545, which provides that where the obligation of either party in a sale is subject to a condition not performed, the party may refuse to proceed with the contract or may waive performance of the condition.

Disposition of the Alleged Verbal Contract and Burden of Proof

The Court upheld the Court of Appeals’ finding that Encarnacion verbally agreed to sell the lot for P120,000.00, payable on 15 June 1988, and that petitioners failed to pay on that date. The Court noted that it did not attribute this failure to fault on Encarnacion’s part. It further stated that the trial court’s and appellate court’s treatment acknowledged that petitioners’ contract proof was tied to a verbal agreement, which under Article 1403(2)(e) would render the contract unenforceable absent compliance with the statute of frauds.

Still, the Court observed that the Court of Appeals allowed petitioners to prove the existence of the oral agreement and to seek specific performance because private respondents did not invoke the statute of frauds in their pleadings and even cross-examined petitioners on the alleged verbal contract. Yet, even assuming the statute of frauds had been waived, petitioners failed to discharge the burden of proof. The Court held that petitioners did not present sufficient evidence to show they were ready to fulfill the suspensive condition of full payment by the agreed date. This factual matter was already resolved by the Court of Appeals in favor of private respondents and could not be disturbed on further appeal.

Equity Considerations and the Primacy of Positive Law

The Court recognized petitioners had occupied the property as lessees for almost three (3) decades. It reasoned that equity might appear to favor petitioners, but equitable considerations could not override positive provisions of law. The Court also pointed out that petitioners could have protected themselves in legally recognized ways, such as securing a right of first refusal in their lease contracts, or consigning the purchase price in court when Encarnacion allegedly ref

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