Case Summary (G.R. No. 205705)
Factual Background
Respondents averred that they and petitioners entered a verbal contract of sale (origins traced to 1995) for two titled lots, and on various dates paid a total of P252,379.27. A handwritten acknowledgment dated November 9, 1998 (the "Agreement") recorded the partial payments and the remaining balance of P47,621.00; the document bore petitioners’ signatures and that of a witness, Nelson Cordero. Respondents alleged that when they tendered the balance, petitioners refused to accept it and sought to sell the lots to other buyers at a higher price. Petitioners admitted a prior agreement to sell but claimed respondents abandoned it by failing to pay the remaining balance on agreed dates and maintained that the transaction was conditional upon full payment.
Procedural History — Trial and First Instance Judgment
After trial, the RTC (April 4, 2014) found in favor of respondents, ruling that the parties’ transaction was a contract of sale (not merely a contract to sell), that ownership passed to respondents upon the partial performance and delivery/possession, and that petitioners acted in bad faith by refusing tender of the balance and seeking other buyers. The RTC ordered petitioners to accept the P47,621.00 balance, execute a Deed of Absolute Sale, and awarded P20,000.00 moral damages, P10,000.00 exemplary damages, and P10,000.00 attorney’s fees and costs.
Procedural History — Court of Appeals
The CA affirmed the RTC decision in toto (July 18, 2017), holding that: (a) the Agreement’s genuineness and due execution could no longer be challenged because of petitioners’ judicial admission and witness testimony; (b) the transaction was partially executed and therefore not barred by the Statute of Frauds; and (c) damages and attorney’s fees were properly awarded for petitioners’ bad faith. The CA denied petitioners’ motion for reconsideration (January 29, 2018).
Issues Presented to the Supreme Court
- Whether the genuineness and due execution of the November 9, 1998 Agreement was established.
- Whether the verbal contract of sale is unenforceable under the Statute of Frauds (Arts. 1356, 1358, 1403 of the Civil Code).
Petitioners’ Arguments on Review
Petitioners contended that: (1) the private Agreement’s genuineness and due execution were not established because they denied signing it; (2) their intention was that ownership pass only on full payment (and absence of a deed indicates that); (3) respondents’ possession was not in the concept of an owner but as mortgagees or permissive occupants; (4) the Agreement is unenforceable under the Statute of Frauds because sale of real property must be evidenced by a public document; and (5) bad faith and damages were not proven.
Respondents’ Position on Review
Respondents argued that the petition improperly raised factual issues (beyond Rule 45’s scope); that both lower courts correctly found the Agreement genuine and the transaction a contract of sale; and that partial performance (substantial payments and possession) removed the case from the Statute of Frauds.
Standard of Review and Evidentiary Threshold
The Supreme Court reiterated that a Rule 45 petition is limited to questions of law; findings of fact by trial and appellate courts are final and binding when supported by substantial evidence, and this rule is especially stringent where the RTC’s findings were affirmed by the CA. The Court therefore examined whether the factual findings had substantial evidence support.
Judicial Admissions and Proof of the Private Document
The Court emphasized petitioners’ judicial admission in their Answer (admitting paragraph 6 of the Complaint describing the Agreement), citing Rule 129 Sec. 4 that judicial admissions need no proof and are binding unless shown to be a palpable mistake. Petitioners made no credible attempt to overcome that admission at trial. Moreover, the private Agreement’s due execution was proven under Rule 132 Sec. 20(a) by testimony of a witness who saw it executed (Nelson Cordero) and by other witnesses. Given the admission plus witness testimony, the Court concluded that genuineness and due execution were established and could not be retracted.
Statute of Frauds, Partial Performance, and Ratification
The Court analyzed Article 1403 (Statute of Frauds) and related Civil Code provisions (Arts. 1356, 1358, and 1405). It reaffirmed the established rule that the Statute of Frauds is an evidentiary rule applicable to executory contracts and does not render oral contracts invalid per se. A verbal sale of real property may be enforced when it has been totally or partially performed. Citing Swedish Match AB and related authorities, the Court explained that partial performance (substantial payments and acceptance of benefits) removes the contract from the Statute’s protection lest a party retain benefits while evading obligations. Article 1405 further supports ratification by acceptance of benefits. Here, petitioners received P252,379.27 of the P300,000.00 purchase price and respondents possessed and exploited the lots; these acts constituted partial performance and ratification sufficient to take the verbal sale out of the Statute of Frauds.
Ownership, Possession, and Effect of Partial Performance
The RTC and CA had concluded, and the Supreme Court agreed, that the transaction was a contract of sale such that ownership passed upon the parties’ agreement and partial performance. The Court relied on the parties’ admissions, documentary acknowledgment, and testimonial evidence that respondents were in possession and collected produce. It also invoked Article 1592: even if payment was delinquent, the vendee may still pay after the agreed time unless rescission was demanded by the seller; petitioners neither filed for rescission nor made a notarial demand. Thus respondents retained the right to tender the balance and enforce the sale.
Bad Faith, Damages, and Attorney’s Fees
The Court upheld the lower courts’ findings of bad faith based on petitioners’ unjustified
Case Syllabus (G.R. No. 205705)
Procedural Posture
- Petition for Review on Certiorari under Rule 45 challenging the Court of Appeals (CA) Decision dated July 18, 2017 and Resolution dated January 29, 2018 in CA-G.R. CV No. 102763.
- Petitioners seek reversal and setting aside of: (i) the CA Decision affirming the Regional Trial Court (RTC) of Puerto Princesa City, Branch 95 Decision dated April 4, 2014 in Civil Case No. 3612; and (ii) the CA Resolution denying petitioners’ Motion for Reconsideration.
- Reliefs ordered below (and challenged): accept P47,621.00 balance, execute Deed of Absolute Sale, and payment of damages and attorney’s fees in favor of respondents.
Case Caption, Court and Date
- Third Division, Supreme Court of the Philippines, G.R. No. 237291, February 01, 2021.
- Parties: Marito (also referred to as Felix Morito Serna in some parts of the rollo) and Maria Fe Serna (petitioners) v. Tito and Iluminada Dela Cruz (respondents).
Summary of Facts
- Petitioners own two parcels of land in Aramaywan, Quezon, Palawan, registered under Original Certificate of Title Nos. E-6101 and E-6103 (subject properties).
- Respondents allege payment of various amounts totalling P252,379.27 as part of the purchase price for the subject properties.
- On November 9, 1998, respondents and petitioners allegedly executed a handwritten Agreement acknowledging receipt of partial payments and indicating a remaining balance of P47,621.00; the Agreement bears the signature of witness Nelson Cordero.
- Respondents allege that when they tendered the balance, petitioners refused to receive it and announced intent to sell the properties to other buyers for a higher price.
- Respondents sought specific performance and damages, including P300,000.00 as moral damages, P100,000.00 exemplary damages, P50,000.00 and P1,500.00 per court hearing as attorney’s fees, and P20,000.00 as litigation expenses.
- Petitioners admitted a prior agreement to sell but asserted respondents voluntarily abandoned the purchase and failed to pay the balance on agreed dates; petitioners allege they attempted to return respondents’ advances but respondents refused.
Pleadings and Pretrial
- Respondents filed Complaint for specific performance and damages (Complaint ¶6 reciting Agreement text and Annex D).
- Petitioners filed Answer admitting existence of a prior agreement but pleading failure of respondents to pay remaining balance and asserting abandonment.
- Pre-trial occurred, followed by trial on the merits.
Evidence Presented at Trial
- A handwritten Agreement dated November 9, 1998 was presented and attached as Annex D to respondents’ Complaint.
- Witness Nelson Cordero testified he was present at execution of the Agreement at petitioners’ house and signed it as witness; he was present because he was tasked by respondents to clean the subject properties.
- Respondents testified as to payments and execution of the Agreement.
- Petitioners made judicial admissions in their Answer admitting paragraph 6 of the Complaint (admission of the Agreement and partial payments).
RTC (Trial Court) Decision — Dispositive Portion
- RTC rendered Decision on April 4, 2014 ordering:
- Petitioners to accept final payment of P47,621.00 and execute the Deed of Absolute Sale over the purchased lots (OCT Nos. E-6103 and E-6101).
- Petitioners to pay plaintiffs P20,000.00 as moral damages, P10,000.00 as exemplary damages, and P10,000.00 as attorney’s fees and cost of litigation.
- RTC found the parties’ transaction to be a contract of sale (not a contract to sell) and that ownership had passed to respondents upon formation of the sale, despite unpaid balance.
- RTC noted respondents were in possession of the properties and had collected produce therefrom.
- RTC concluded petitioners acted in bad faith by unjustly refusing to accept respondents’ tender of the balance and attempting to sell the properties to a higher bidder; RTC reduced amounts of damages prayed for due to respondents’ delay in paying the balance.
Court of Appeals Ruling — Disposition and Reasoning
- CA rendered Decision on July 18, 2017 affirming the RTC Decision in toto and denied the appeal for being wanting in merit.
- CA held the genuineness and due execution of the Agreement (a private document) could no longer be challenged because:
- Petitioners’ judicial admissions as to execution of the Agreement; and
- Testimonies of respondent Tito and witness Cordero confirming execution in their presence.
- CA concluded the contract was partially executed and thus not subject to the Statute of Frauds.
- CA sustained awards for damages, attorney’s fees and costs in view of petitioners’ bad faith.
- CA denied petitioners’ Motion for Reconsideration on January 29, 2018 for being a rehash of earlier arguments.
Issues Raised in the Petition to the Supreme Court
- Whether the CA gravely erred in affirming the ruling against petitioners despite respondents’ failure to establish their cause of action through the purported Agreement dated November 9, 1998.
- Whether the CA gravely erred in affirming the ruling despite the unenforceability of the Agreement pursuant to Articles 1356 and 1358, in relation to Article 1403 of the New Civil Code (Statute of Frauds).
Petitioners’ Principal Arguments
- The genuineness and due execution of the Agreement (private document) was not established because petitioners denied having signed it.
- Although petitioners judicially admitted there was a verbal contract in 1995, they did not intend ownership to transfer until full payment of the purchase price; full payment was a sine qua non for transfer, otherwise a Deed of Sale would have been executed.
- Respondents’ possession was not in the concept of an owner; the agreement was, prior to sale, a mortgage due to a Php70,000.00 loan; respondents gathered coconuts because petitioners could not return the borrowed amount.
- Even if the Agreement were established, it would be unenforceable under the Statute of Frauds and should have been reduced to a publi