Averia vs. Averia

Verbal contracts for the sale of real property, which are otherwise unenforceable under the Statute of Frauds, are ratified by the failure to object to the presentation of oral evidence proving them, and are enforceable when they have been partially or totally performed, as evidenced by full payment and continued possession.

Macaria Francisco had six children with her first husband, Marcos Averia: Gregorio, Teresa, Domingo, Angel, Felipe, and Felimon. After Marcos died, she married Roberto Romero, who left three adjoining lots in Sampaloc, Manila, upon his death in 1968. In an extrajudicial partition of Romero’s estate, Macaria received the residential house and lot at 725 Extremadura Street. She subsequently filed an action to annul the partition, claiming fraud, which resulted in an award of an additional 30 square meters in her favor after about ten years of litigation. Throughout the case, her son Gregorio and his wife Agripina allegedly shouldered the attorney’s fees and other expenses. Macaria lived with Gregorio’s family and her daughter Teresa’s family until her death in 1983.

• Nature: Action for judicial partition of the residential property at 725 Extremadura Street, Sampaloc, Manila, originally owned by the deceased Macaria Francisco.
• Macaria’s Title: The property was adjudicated to Macaria as her share in the estate of her second husband Roberto Romero, later augmented by an additional 30 square meters after a decade-long litigation against her co-heirs.
• The Alleged Verbal Sale by Macaria: On February 28, 1972, during the death anniversary gathering of Roberto Romero, a call was received from the secretary of Macaria’s lawyer demanding payment for litigation expenses in Civil Case No. 79955. Macaria stated she had no money, and Gregorio’s wife Agripina relayed that Gregorio would cover the expenses. Embarrassed, Macaria verbally offered one-half of the house and lot to Gregorio and Agripina as reimbursement; Gregorio agreed and was instructed to prepare the documents. The attorney, Atty. Mario C.R. Domingo, later testified that Gregorio and his wife paid attorney’s fees amounting to P16,000.00.
• The Alleged Sale by Domingo: In July 1983, respondent Domingo Averia, needing money, verbally sold his 1/6 share of the remaining half of the property to Gregorio for P10,000.00. Agripina paid P5,000.00 on July 10, 1983, and Gregorio paid the balance three days later at the Makati Police Department. Domingo did not deny receiving the total amount but claimed it was not a sale.
• Performance and Possession: Gregorio and his family occupied the property from Macaria’s lifetime, continued doing so after her death in 1983, and remained in possession at the time the complaint was filed in 1989 and throughout the litigation.
• Waiver by Felipe: During the pendency of the case, respondent Felipe executed a Waiver-Affidavit renouncing his share in favor of his co-heirs.
• Trial Court Ruling: The RTC declared that Gregorio was awarded one-half of the property by Macaria and that Domingo had sold his 1/6 share of the remaining half to Gregorio. Partition was ordered for the remaining 5/6 of the undivided half among the other heirs.
• Court of Appeals Reversal: The CA held the verbal sales unenforceable under Article 1403(2)(e) for lack of any written memorandum, ruled that the parol evidence was inadmissible, and found that petitioners failed to prove partial or total performance. It remanded the case for partition after payment of Macaria’s debts.
• Objection to Parol Evidence: With the exception of Gregorio’s own testimony regarding the sale from Macaria, the testimonies of petitioners’ other witnesses concerning both transactions were not objected to by respondents at trial.

• Enforceability of Verbal Sales: Petitioners contended that they had amply established, through credible testimonial evidence, the verbal conveyances of Macaria’s one-half interest and Domingo’s 1/6 share to Gregorio.
• Statute of Frauds Inapplicable: They argued that Article 1403(2)(e) applies only to executory contracts and not to partially or completely executed ones, and that in this case full payment and continuous possession constituted total performance.
• Waiver of Objection and Ratification: Petitioners maintained that respondents failed to object to the presentation of parol evidence—except for Gregorio’s testimony—thereby waiving any objection and ratifying the contracts under Article 1405 of the Civil Code.

• Unenforceability under Statute of Frauds: Respondents asserted that the verbal agreements for the sale of real property or an interest therein were unenforceable under Article 1403(2)(e) of the Civil Code because no written memorandum existed.
• Inadmissibility of Parol Evidence: They argued that the testimonies of petitioners’ witnesses were inadmissible for violating the Statute of Frauds and that timely objections had been made to such evidence.
• Failure to Prove Performance: Respondents contended that petitioners failed to demonstrate how the alleged transfers were executed, as respondents had vigorously opposed the claims of ownership.

• Application of Statute of Frauds: Whether the verbal sales of real property are unenforceable under Article 1403(2)(e) of the Civil Code, or whether they fall outside the statute’s coverage due to partial or total performance.
• Ratification by Failure to Object: Whether the respondents’ failure to object to the presentation of parol evidence constituted ratification under Article 1405, rendering the contracts enforceable.
• Credibility and Weight of Evidence: Whether the trial court properly gave credence to petitioners’ witnesses in proving the existence and full execution of the verbal sales.

• Application of Statute of Frauds: The Statute of Frauds applies only to executory contracts, not to those partially or totally performed. The evidence established total performance: full payment of the purchase prices and Gregorio’s continued, exclusive possession of the property since Macaria’s lifetime. Because these executed contracts removed the risk of fraud that the statute aims to prevent, they were enforceable.
• Ratification by Failure to Object: Contracts that infringe the Statute of Frauds are ratified by the failure to object to the presentation of oral evidence to prove them. Respondents did not object to the testimonies of Sylvanna Vergara Clutario, Flora Lazaro Rivera, Gregorio Averia, Jr., Veronica Bautista, and Felimon Dagondon concerning the two verbal sales. Under Article 1405 of the Civil Code, such failure constituted ratification, thereby making the contracts enforceable.
• Credibility and Weight of Evidence: The trial court correctly accorded weight to petitioners’ evidence. Sylvanna’s testimony was against her own mother’s interest, which enhanced its credibility. The testimony of Atty. Mario C.R. Domingo corroborated Gregorio’s payment of litigation expenses. The positive, categorical statements of multiple witnesses regarding Domingo’s receipt of P10,000.00 as the sale price of his share prevailed over his bare denial.

• Statute of Frauds and Executed Contracts — Under Article 1403(2), the Statute of Frauds applies exclusively to executory contracts and does not bar enforcement of partially or totally performed agreements. The rationale is that the risk of fraud is substantially reduced in executed contracts because the parties’ overt acts manifest their intent, and execution typically concludes their rights. Partial or total performance may be proved by either documentary or oral evidence.
• Ratification by Failure to Object Under Article 1405 — A contract that infringes the Statute of Frauds is ratified, and thus becomes enforceable, when the adverse party fails to object to the presentation of parol evidence to prove the agreement. The silence or inaction of the objecting party amounts to a waiver of the protection of the statute. Ratification also arises from the acceptance of benefits under the contract.
• Admission Against Interest — The testimony of a witness that operates to reduce the share of the party they represent is deemed an admission against interest and is given significant probative weight.

• “The statute of frauds is not applicable to contracts which are either totally or partially performed, on the theory that there is a wide field for the commission of frauds in executory contracts which can only be prevented by requiring them to be in writing, a fact which is reduced to a minimum in executed contracts because the intention of the parties becomes apparent by their execution, and execution concludes, in most cases, the rights of the parties.” — Articulates the core rationale for excluding executed contracts from the Statute of Frauds.
• “Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.” — The Supreme Court’s direct application of Article 1405 to the undisputed trial record.
• “Her testimony was against the interest of her mother Teresa whom she represented, her mother being also an heir of Macaria. If the transfer by Macaria to Gregorio of ½ of the property is upheld as valid and enforceable, then the share of the other heirs including Sylvanna’s mother would considerably be reduced.” — Explains the heightened evidentiary value of the witness’s adverse statement.

• Alfredo v. Borras, 404 SCRA 145 (2003) — Followed for the settled rule that the Statute of Frauds applies only to executory contracts and not to those partially or totally performed.
• Cordial v. Miranda, 348 SCRA 158 (2000) — Followed for the same principle.

• Article 1403(2)(e), Civil Code — Statute of Frauds; renders unenforceable agreements for the sale of real property or an interest therein unless evidenced by a written memorandum. The verbal sales fell within its literal scope but were removed from its application because they were fully performed and because parol evidence was admitted without objection.
• Article 1405, Civil Code — Provides that contracts infringing the Statute of Frauds are ratified by the failure to object to the presentation of oral evidence to prove them, or by the acceptance of benefits thereunder. Applied to hold that respondents’ failure to object to the testimonies ratifying the verbal sales rendered them enforceable.
• Section 2, Rule 69, Rules of Civil Procedure — Referred to as the procedural rule governing further partition proceedings upon remand.

Panganiban (Chairman) and Corona, JJ., concurred. Sandoval-Gutierrez, J., was on leave.