Quiz No.

19 (April 24, 2018)

Coverage: Unenforceable Contracts [Art. 1403-1408]) and
(Void or Inexistent Contracts (Art. 1409-1422]
Cases:
1. Hernandez vs. CA, 160 SCRA 821
De Leon 1403
An agreement creating an easement of right-of-way is
not also covered by the Statute of Frauds since it is not a
sale of real property or of an interest therein. (Western
Mindanao Lumber Co., Inc. vs. Medalle, 79 SCRA 703
[1977].) Neither is an agreement between adjoining owners
as to their estates’ boundaries. (Hernandez vs. Court of
Appeals, 160 SCRA 821 [1988].)
Albano
A and B entered into an oral agreement defining the
boundary of their two (2) parcels of land which are adjacent
to one another. A applied for registration of his land but did
not follow the oral agreement. B objected on the ground
that the oral agreement must be followed. A contended that
such agreement is unenforceable. Is A’s contention valid?
Why?

Ans: No, because there is no need to put the agreement

defining the boundary of their two (2) parcels of land to
writing because the requirement that contracts pertaining
to land must be in writing does not apply in an agreement
on the boundary of the same. The Statute of Frauds applies
only to leases and conveyances of land. (Hernandez vs. CA,
160 SCRA 821)
 2. Asia Foundation Co. vs. Paño, G.R. No. 51058, Jan. 27,
1992
De Leon 1403
An action by a withdrawing party to recover his partial
payment of the consideration of an oral contract to sell a
building with an oral promise by the other contracting
party to assign the contract of lease on the lot where the
building is constructed, which contract is unenforceable
under the Statue of Frauds, by reason of the failure of the
latter to comply with his obligation to execute the deed of
sale and assign the contract of lease, is not covered by the
Statute. The action is not for specifi c performance and
there is partial execution. (Asia Production Co., Inc. vs.
Paño, 205 SCRA 458 [1992].)

Albano
A bought a building together with the land upon which
it is built from B. One of the conditions is that upon the
payment of ½ of its value, B would assign his rights over the
leases to which B did not comply. A demanded the refund
of his money, and since B filed a motion to dismiss on the
ground that the contract is unenforceable since it is only an
oral one. Is the contention correct? Why?
Ans: No, because the contract no longer falls under the
Statute of Frauds, the same having been partly executed as a
result of the payment of ½ of the value of the land and the
building. To allow B to interpose the rule in the Statute of
Frauds would be to allow him to perpetrate fraud. The
Statute of Frauds was designed to prevent fraud, not to
perpetrate and promote fraud and perjury. Furthermore, A
here is not enforcing the contract but backing out from it
because of B’s violation. (Asia Production Co. vs. Paño, G.R.
No. 51058, January 27, 1992, Arrogante, et al. vs. Deliarte, et
al., G.R. No. 152132, July 24, 2007).
 3. Victoriano vs. CA, 194 SCRA 19
De Leon 1403
Where the facts alleged in the complaint are
constitutive of a consummated contract of sale, oral
evidence is not forbidden by the statute and may not be
excluded in court. (Inigo vs. Estate of Maloto, 21 SCRA 246
[1967]; Victoriano vs. Court of Appeals, 194 SCRA 19
[1913].)

Case Digest:
Relevant Facts:
Victoriano was filing a case against the son of Masigla
when she discovered that Lot No. 897 possessed by Masigla
was registered under the name of her grandfather, Cirilo
Tamio. She secured an extrajudicial partition from all the
heirs of her grandfather who waived their shares in her
favor. She, then, secured a title in her name.
The heirs of Crispin Arcilla, represented by Masigla,
filed for the reconveyance of the said lot, claiming that
their father had bought it from Cirilo Tamio, and that they
had been in possession thereof since 1927. However, no
deed of sale could be presented to evidence the transfer of
the property. All they could present were a "Sinumpaang
Salaysay" dated January 20, 1927, wherein the children of
Cirilo Tamio authorized their mother to sell the lot to
Crispin Arcilla; the owner's duplicate of the title to the
property in the name of Cirilo Tamio; and real property tax
receipts and tax declarations, the earliest of which is 1944,
those prior were claimed to be lost or destroyed.
 Victoriano, on the other hand, presented the TCT in
her name, a tax declaration and receipt dated March 30,
1983.
The trial court ruled in favor of Victoriano but was
reversed by CA because of the lower court’s reliance on the
Statutes of Fraud on the account of Masigla’s failure to
prove the transfer of property with the absence of deed of
sale, and that Victoriano is barred from recovery of
possession by laches.
Issue:
1. Whether or not the Statutes of Fraud applies.
2. Whether or not Victoriano is barred from
recovering possession of the lot based on the principle
of laches.
Ruling:
The petition is denied and the decision of the Court of
Appeals as well as its resolution are affirmed. Masigla and
her co-heirs are declared as true owners of the property.
Ration Decidendi:
1. The Statute of Frauds is applicable only to
executory contracts, not to contracts either totally or
partially performed. Performance of the contract,
whether total or partial, takes it out of the operation of
the statute, and this performance must be duly proved.
Masigla pointed out the circumstances to show
performance on the contract or transfer of ownership,
and they are:
○ The possession of the owner's copy of the title;
○ Their undisturbed possession of the land for more
than fifty years;
○ The possession of "Sinumpaang Salaysay;"
○ The introduction of improvements on the land;
○ The incurring of expenses for the resurvey of the
land when they had the title in the name of Cirilo
Tamio reconstituted;
○ The tax declarations over the property in the name
of Crispin Arcilla;
○ The religious payment of taxes over the property;
and
○ The lack of contest from the immediate heirs of
Cirilo Tamio, his wife and children, on possession of
the land and lack of claim over the property, which
negate any pretense that there was no sale in favor of
Crispin Arcilla.

2. Titled lands cannot be acquired by prescription,

however, Victoriano’s inaction for more than 50 years
bars her from acquiring possession of the land on the
ground of laches. While the Public Land Act provides
that "no title to registered land in derogation to that of
the registered owner shall be acquired by prescription
or adverse possession,” the heir, however, may lose his
right to recover back the possession of such property
and the title thereto, by reason of laches.
 4. PNB vs. Phil. Vegetable Oil, Co., 40 Phil. 857
De Leon 1403
The broad view is that the Statute of Frauds applies
only to agreements not to be performed on either side
within a year from the making thereof.
According to this view, agreements to be fully
performed on one side within the year are taken out of the
operation of the Statute. (Phil. National Bank vs. Phil.
Vegetable Oil Co., 49 Phil. 857 [1927]; see Babao vs. Perez,
102 Phil. 757 [1957]; Asturias Sugar Central, Inc. vs.
Montinola, 69 Phil. 725 [1940].)

De Leon 1403
Since the Statute of Frauds was enacted for the purpose
of preventing frauds, it should not be made the instrument
to further them. (Phil. National Bank vs. Phil. Vegetable Oil
Co., supra; Cuyugan vs. Santos, 34 Phil. 100 [1916].) Thus,
where a party has entirely complied with his obligations
under an oral contract, the other cannot avoid the
fulfillment of those incumbent upon him under the same
contract by invoking the Statute of Frauds. Equity demands
that oral evidence be admitted to prove the contract
because the statute aims to prevent and not to protect fraud.
(Shoemaker vs. La Tondeña, supra.)

Paras 1403
First Country to Enact Statute
England was the first country to adopt a Statute of
Frauds. In 1676, the English Parliament passed a law or
statute requiring certain agreements to be in writing. Since
that time, the statute has been called Statute of Frauds.
(National Bank v. Philippine Vegetable Oil Co., 49 Phil.
857).

Jurado
Suppose that in an oral contract, which by its terms is
not to be performed within one year from the execution
thereof, one of the contracting parties has already complied
within the year with the obligations imposed him by said
contract, can the other party avoid the fulfillment of those
incumbent upon him by invoking the Statute of Frauds
(Art. 1403, No. 2, NCC)?
ANS: No, he cannot. This is so, because the Statute of Frauds
aims to prevent and not to protect fraud. It is well-settled
that when the law declares that an agreement which by its
terms is not to be performed within a year from the making
thereof is unenforceable by action, unless the same, or some
note or memorandum thereof, be in writing, and subscribed
by the party charged, or by his agent, it refers only to an
agreement which by its terms is not to be performed on
either side within a year from the execution thereof. Hence,
one which has already been fully performed on one side
within a year is taken out of the operation of the statute.
(PNB vs. Phil. Vegetable " Oil Co., 49 Phil. 857; Shoemaker
vs. La Tondena, 68 Phil. 24.)

ULEP
FACTS: A mortgage was executed on February 20, 1922,
before the termination of the receivership of corporation V,
by its secretary-treasurer and by N Bank by its general
manager. However this was not ratified before a notary
public until March 8, 1922, and was not recorded in the
registry of property until March 21, 1922, after the
termination of the receivership on February 28, 1922.
HELD: On these and other facts which are set forth in the
decision, that the N Bank Corporation V mortgage has not
been legally executed by V Corporation, and consequently
cannot be given effect.
 5. Mactan Cebu International Airport Authority vs. CA,
et. al., G.R. No. 121506, October 30, 1996, 75 SCAD 722
Albano
A and B entered into a contract of sale whereby the
parties verbally agreed that A would be allowed to
repurchase the property. Can A enforce the verbal
agreement? Explain.
Ans: Yes, under Art. 1403 of the Civil Code, a contract for
the sale of real property shall be unenforceable unless the
same or some note or memorandum thereof be in writing
and subscribed by the party charged or his agent. Evidence
of the agreement cannot be received without the writing or
a secondary evidence of its contents. In the case at bench,
the deed of sale and the verbal agreement allowing the right
to repurchase should be considered as an integral whole.
The deed of sale relied upon by the petitioners is in itself
the note or memorandum evidencing the contract. Thus,
the requirement of the Statute of Frauds only applies to
executory contracts, and not to contracts either partially or
totally performed (citing Victoriano vs CA, 194 SCRA 19), as
in this case where the sale has been consummated, hence,
the same is taken out of the scope of the Statute of Frauds.
(PNB vs Phil. Vegetable Oil, Co., 40 Phil. 857; Mactan Cebu
Int’l. Airport Authority vs. CA, et al., G.R. No. 121506,
October 30, 1996, 75 SCAD 722).

Aquino
Purpose of Statute of Frauds
The Statute of frauds was enacted for the purpose of
preventing fraud.
 An agreement allowing the right of repurchase of a
parcel of land if there is a written deed of sale; the deed of
sale and the verbal agreement allowing the right of
repurchase are considered integral parts of the whole.

6. Maneclang vs. Buan, 208 SCRA 179

De Leon 1410
The rule in Article 1410 has been applied even before
the effectivity of the new Civil Code. (Maneclang vs. Baun,
208 SCRA 179 [1992].)
7. Santos vs. Santos, et. al., G.R. No. 133895, October 2,
2001
 8. Renato Cenido, etc. vs. Sps. Sta. Ana, G.R. No. 132474,
November 19, 1999
Albano
A and B entered into an oral contract of sale of a parcel
of land agreeing on the price, date of payment and delivery
of the title on August 30, 1993. Suppose on August 30, 1993,
A will go to B’s house and deliver the money, but B would
refuse to convey the land.
a. Can A sue B to enforce the oral contract? Why?
b. What is the defense of B, if any? Will it prosper? Why?
c. Will your answers in nos. 1 and 2 be the same if B
accepted a downpayment? Explain.
d. Suppose A has already delibered the consideration, but
B refuses to execute the deed of conveyance, what
would be the remedy of the aggrieved party?
ANS:
a. No, because the oral contract of sale over real property
is unenforceable if not in writing. (Hernandez vs. CA,
160 SCRA 821; Renato Cenido, etc. vs. Sps. Sta. Ana,
G.R. No. 132474, November 19, 1999).
b. The defense of B is that the oral contract is not
enforceable, and it would prosper because the
requirement is that, to be enforceable, such contract
must be in writing.
c. No more the defense in nos. 1 and 2 would no longer
prosper because if a downpayment was accepted it
would mean that the contract is no longer executory
but partly executed. A partly executed contract does
not fall under the Statute of Frauds.
d. The aggrieved party can file an action for specific
performance or rescission, and in both cases, with
damages. (Art. 1191(2), NCC)
 9. Vda. de Reyes vs. CA, 199 SCRA 646 [1991]
10. Gavina Gaglucot-aw, et. al. vs. Leopoldo Maglucot,
et. al., G.R. No. 132518, March 28, 2000
Albano
A, B, and C entered into a contract of oral partition of a
real property they inherited from their parents. Is the
contract enforceable? Why?
Ans: Yes, because it is not conveyance of land. Article 1403,
NCC which requires that conveyances involving land must
be put into writing, does not apply as it applies only to
leases and conveyances. Partition is not a lease or
conveyance, but a mere division of the property. (Vda. De
Reyes vs. CA, 199 SCRA 646 [1991]; Gavina Gaglucot –aw,
et al. vs. Leopoldo Maglucot, et al., G.R. No. 132518, March
28, 2000).

Aquino
Partition of real estate is NOT covered by Statute of
Frauds since this is not a sale or lease of property; it is
merely a division of property.
 11. Almirol and Cariño vs. Monserrat, 48 Phil. 67
[1925]
De Leon 1403
Verbal contract of sale of land is adduced to show the
lawful possession of applicants entitling them to have their
title thereto registered.
Facts: X, etc., presented evidence that they have been in
possession of the parcel of land in question since the year
1912 when Y, before his death, delivered to them said land
pursuant to a verbal contract of sale for the price of
P1,500.00 payable by installments, of which X, etc., had
then paid to Y P500.00 and the latter delivered to them the
documents pertaining to the land; and that since their
possession and before them, that of Y, under a claim of
ownership, had been exclusive and continuous, they were
entitled to have their title over said parcel of land
registered, as applied for in the registration proceeding.
Issue: May X, etc., introduce evidence of the alleged verbal
contract of sale?
Held: Yes. The contract was not covered by the Statute of
Frauds because the contract was partially executed.
Furthermore, the verbal contract was adduced not for the
purpose of enforcing performance thereof, but as the basis
of the lawful possession of the applicants (X, etc.) entitling
them to have the land thereby sold registered in their own
names. (Almirol and Cariño vs. Monserrat, 48 Phil. 67
[1925].)
Paras 1403
(a) A sold to B real estate for a stipulated price. The
agreement was oral. A has not yet delivered the real estate.
B has not yet paid the price. B offered to buy, but A refused
to go ahead with the agreement. Under the Statute of
Frauds, to be enforceable, an agreement for the sale of real
estate must be in writing (Art. 1403, [2e]); B sued for
specific performance. A’s attorney objected, setting up the
Statute of Frauds as the reason for the objection. May the
contract be proved by oral evidence?
ANS.: No. The agreement being merely executory, the
agreement cannot be proved. Therefore also, A cannot be
compelled to deliver. (See Santos v. Rivera, 33 Phil. 1).
[NOTE: Had A’s attorney not objected, the defense would
have been waived, and specifi c performance could have
been ordered. (Art. 1405, Civil Code and Conlu v. Araneta
& Guanko, 15 Phil. 387).]
(b) Suppose in problem (a), the price had already been paid,
would your answer be the same?
ANS.: No, the answer would not be the same. Here the
objection of A’s lawyer will not prosper. The Statute of
Frauds will not apply because the contract has already been
executed or performed, at least on the side of B. (See
Almirol, et al. v. Monserrat, 48 Phil. 67; Robles v. Lizarraga
Ramos, 50 Phil. 387; see also Art. 1405 of the Civil Code
which says that “contracts infringing the Statute of Frauds .
. . are ratifi ed . . . by the acceptance of benefits under
them.)
 By virtue of an oral contract of sale, seller delivered to
buyer a piece of land which was partially paid. May seller
recover balance of price?
ANS.: Yes, since the contract has already been partially
executed. (Almirol & Carino v. Monserrat, 48 Phil. 67).

BAR
In a certain registration proceedings, the applicant A
testified that he had been in the possession of the land
sought to be registered since the year 1912, when B,
oppositor’s predecessor in interest, sold the same to him
under a verbal contract for P1,000. The oppositor asked for
the striking off of the statement of A regarding the alleged
verbal contract of sale of the property on the ground that
the same cannot be proved under the Statute of Frauds. Is
the oppositor’s petition tenable? Reason out your answer
briefly.
ANS.: If A’s possession was because the land had been
delivered to him by the seller B, then the contract is already
executed, at least on B’s part, and not merely executory;
hence, the Statute of Frauds is not applicable. The verbal
contract of sale can thus be proved, and the oppositor’s
contention is not tenable. (See Almirol, et al. v. Monserrat,
46 Phil. 67 and Diama v. Macalibo, 74 Phil. 70).

Jurado
B purchased from A, a parcel of land, paying a part of
the agreed price with the understanding that he will pay
the balance upon the execution of the deed of conveyance.
 Subsequently, A sold the same land to C, who knew of
the first sale. As a result B brought this action against both
A and C to enforce the contract. Defendants contend that
the contract is unenforceable under the Statute of Frauds as
enunciated in No. 2 of Art. 1403 of the NCC. Decide the
case, stating your reasons. *
ANS: This is the case of Carbonell vs. Pomiq (103 Phil. 655).
According to the Supreme Court:
“It is well-settled in this jurisdiction that the Statute of
Frauds is applicable only to executory contracts (Facturan
vs. Sabanal, 81 Phil. 512.), not to contracts that are totally
or partially performed. (Almirol vs. Monserrat, 48 Phil. 67,
70; Robles vs. Lizarraga Hermanos, 50 Phil. 387; Diana vs.
Macalibo, 75 Phil. 71.) The reason is simple. In executory
contracts, there is a wide field for fraud because unless they
be in writing there is no palpable evidence of the intention
of the contracting parties.
The statute has precisely been enacted to prevent fraud.
(Moran, Comments on the Rules of Court, Vol. Ill, 1956 Ed.,
p. 178.) However, if a contract has been totally or partially
performed, the exclusion of parol evidence would promote
fraud or bad faith for it would enable the defendant to keep
the benefits already derived by him from the transaction in
litigation, and, at the same time, evade the obligations,
responsibilities or liabilities assumed or contracted by him
thereby. So that when the party concerned has pleaded
partial performance, such party is entitled to a reasonable
chance to establish by parol evidence the truth of his
allegation, as well as the contract itself.”
Albano
A bought a building together with the land upon which
it is built from B. One of the conditions is that upon the
payment of ½ of its value, B would assign his rights over the
leases to which B did not comply. A demanded the refund
of his money, and since B filed a motion to dismiss on the
ground that the contract is unenforceable since it is only an
oral one.
Can B in the case above object to the proof of payment
of ½ of the value of the land and building on the ground
that there was no receipt at all, hence, falling under the
Statute of Frauds? Why?
Ans: No, because that would result in unfairness. B would
then be enriching himself at A’s expense. (PNB vs. Phil.
Veg. Oil Co., 49 Phil. 857) Oral evidence is allowed.
Further, the contract has already been partly executed. The
Statute of Frauds covers only those contracts that are
executory, not those that have been already executed or
partly executed. (Almirol and Cariño vs. Monserrat, 48 Phil.
67)
 12. Reiss vs. Memije, supra; see Colbert vs. Bachrach,
12 Phil. 83 [1929]
De Leon 1403
Supplier of lumber extended credit to building
contractor without commercial standing in the community
solely on the promise of owner of house to be repaired to
stand good for the purchase price.
Facts: X entered into a contract with Y (contractor) for the
repair of a house. Y undertook to furnish the necessary
materials. Having no money and no credit, Y was unable to
continue the purchase of the necessary lumber from T who
refused to sell without payment in advance. X told T he
would stand good for the amount of lumber needed in the
repair of his house.
T brought action to recover the unpaid balance of the
purchase price of lumber delivered.
Issue: Was the promise of X unenforceable not being in
writing?
Held: No. The promise of X was not collateral but an
original one and, therefore, did not have to be in writing.
The circumstances disclosed that the credit for the lumber
was extended by T solely and exclusively to X under a
verbal agreement he had with him.
X admitted on the stand that Y had no commercial
credit or standing in the community and it appeared that T,
after investigation, absolutely refused to extend Y any credit
whatsoever and that X was well aware of the fact and that X
examined every invoice which by agreement was submitted
to him, and that no lumber was delivered without his
approval.
(Reiss vs. Memije, supra; see Colbert vs. Bachrach, 12 Phil.
83 [1929].)

Paras 1403
A was having his house repaired by B, who needed
certain materials. So A told storeowner (of materials), “Give
B the materials. I shall be responsible. I shall stand good.”
This was orally made. Is this a special promise? Is this oral
agreement enforceable?
ANS.: This is not a special promise. This is not a guaranty.
Only A obligated himself. Since this is not a guaranty, the
contract is enforceable, so that the seller can properly sue A
and prove the oral agreement by parol evidence, over and
above A’s objection. (See Reiss v. Memije, 15 Phil. 350).

Jurado
In 1968, D borrowed P5,000 from C. This debt is
evidenced by a promissory note wherein D promised to pay
the obligation within two years. In 1970, when the note
matured, A, a friend of D, assumed orally, without the
knowledge of D, but with the consent of C, the payment of
the debt within six (6) months. Because of A’s failure to pay
within the period agreed upon, C finally decided to bring an
action against him.
Will such an action prosper, assuming that the oral
contract can be proved by testimonial evidence?
ANS: Yes, the action will prosper. It is well-settled that a
special promise to answer for the debt, default or
miscarriage of another in order to fall within the operation
of the Statute of Frauds should be collateral not
independent or original. (Reiss vs. Memije, 15 Phil. 350.)
Example of this would be the undertaking of a guarantor or
a surety. In the instant case, the promise of A is
independent or original.
 13. Ruiz vs. Court of Appeals, 79 SCRA 525 [1977]
De Leon 1409
Property in litigation was purchased by a person at an
inadequate price in collusion with the seller’s counsel to
whom the property was subsequently transferred by the
vendee.
Facts: According to the complaint fi led by H and I, as heirs
of the deceased D, they were able to recover in a civil case,
a parcel of land belonging to D. They were assisted by their
lawyer L. The complaint alleged that L, taking advantage of
the ignorance of his clients, succeeded in getting them to
sell the land at an inadequate price to B a few days after the
decision became final and executory. It alleged that the sale
was fictitious and that eight months later, another fictitious
sale was made transferring the land to L himself.
In his motion to dismiss, L argued that since the sale
were executed after the decision in the civil case became
final and executory, they were not void ab initio but merely
voidable at the instance of the vendor under the rule laid
down in Wolfson vs. Estate of Enriquez. (20 Phil. 340
[1911].)
Issue: Is the sale to L void ab initio or merely voidable?
Held: “The argument stressed by L x x x is of no
consequence to the case at bar not only because the
environmental milieu in the cited case is not entirely
identical and similar to the facts and motivations sought to
be proved by H and I in their complaint, but also because
the averments contained in the said complaint will
sufficiently permit adducement of facts not only that the
sale of the land in question to L, as counsel for H and I in
the civil case, was actually perfected while the land in
dispute was still in litigation, but also that there was
collusion [between] B and L to bring about the assailed
transaction, induced primarily by the ascendancy exercised
by L over his ‘uncouth’ clients in order to make it appear
that the said land was purchased by a buyer in good faith
thereby precluding its legitimate owners from recovering
the same in view of the protective provisions of the Land
Registration Act towards purchasers in good faith and for
value.
Evidently, a contract entered into under such
circumstances, to the extent that it prejudices third persons
with legitimate claims, is null and void ab initio.” (Ruiz vs.
Court of Appeals, 79 SCRA 525 [1977].)
 14. Menil and Nayve vs. Court of Appeals, 84 SCRA
453 [1978]; see also Arsenal vs. Intermediate Appellate
Court, 143 SCRA 40 [1986]
De Leon 1409
The second sale was entered into to ratify or confirm
the first sale which is void.
Facts: S obtained a homestead patent over a land. Within
the prohibitive five-year period, S sold the land to B. This
sale was evidenced by a deed of sale, but the deed was not
registered. About ten (10) years later, S executed another
deed of sale over the same parcel of land in favor of B for
the same price. This deed was registered and a new
certificate was issued in the name of B.
Subsequently, the ownership of the land was placed in
issue in various litigations between the vendor and the
vendee.
Issue: Was the first sale ratified by the second sale?
Held: No. “It cannot be claimed that there are two
contracts: one of which is undisputably null and void, and
another, having been executed after the lapse of the 5-year
prohibitory period, which is valid. The second contract of
sale is admittedly a confirmatory deed of sale. Inasmuch as
the first contract of sale is void for it is expressly prohibited
or declared void by law, it, therefore, cannot be confirmed
or ratified. x x x.” (Menil and Nayve vs. Court of Appeals, 84
SCRA 453 [1978]; see also Arsenal vs. Intermediate
Appellate Court, supra.)
Additional Questions: (Bar Questions)
Arlene owns a row of apartment houses in Kamuning,
Quezon City. She agreed to lease Apartment No. 1 to Janet
for a period of 18 months at the rate of P10,000 per month.
The lease was not covered by any contract. Janet promptly
gave Arlene two (2) months deposit and 18 checks covering
the rental payment for 18 months. This show of good faith
prompted Arlene to promise Janet that should Arlene
decide to sell the property, she would give Janet the right of
first refusal.
(2013 BAR)
(1) Not long after Janet moved in, she received news that
her application for a Master of Laws scholarship at King's
College in London had been approved.
Since her acceptance of the scholarship entailed a
transfer of residence, Janet asked Arlene to return the
advance rental payments she made. Arlene refused,
prompting Janet to file an action to recover the payments.
Arlene filed a motion to dismiss, claiming that the lease on
which the action is based, is unenforceable.
If you were the judge, would you grant Arlene's
motion? (1%)
ANS: No. I will not grant the motion because the cause of
action does not seek to enforce any right under the contract
of lease.
Recovery of advance rental payments made is not
covered by the statute of frauds because its purpose it not to
perpetrate fraud but to prevent fraud.
(2) Janet is not asking for the continued of the leased
premises. Moreover, the contract is outside use of the leased
premises. Moreover, the contract is outside the ambit of
Statute of Frauds as the same has been partly performed.
Assume that Janet decided not to accept the scholarship and
continued leasing Apartment No. 1. Midway through the
leased period, Arlene decided to sell Apartment No. 1to Jun
in breach of her promise to Janet to grant her the right of
first refusal. Thus, Janet filed an action seeking the
recognition of first refusal, the payment of the damages for
the violation of this right, and the rescission of the sale
between Arlene and Jun.
Is Janet's action meritorious? (1%)
ANS: No, a right of first refusal involves an interest over
real property that must be embodied in a written contract
to be enforceable.
Although the lease itself is valid even if verbal, the
right of first refusal is a different matter because a verbal
promise to grant a right of first refusal which in essence is a
promise to sell is unenforceable under the Statute of Frauds.