Iñigo vs. Estate of Adriana Maloto

The Statute of Frauds applies only to executory contracts, not to contracts that have been totally or partially performed; where a complaint alleges that a sale was perfected, the purchase price was paid, and the buyer exercised acts of ownership over the property, the contract is consummated and oral evidence of the sale is admissible.

Margarita Iñigo was the niece of the deceased husband of Adriana Maloto, a relationship described in the complaint as "almost filial." Adriana Maloto owned a house and lot of 453 square meters in Iloilo City. After Adriana's death on October 20, 1963, the Torrens title to the property was transferred to her nephews and niece — Panfilo Maloto, Constancio Maloto, and Aldina Casiano — following settlement of her estate. Gregorio L. Lira was appointed special administrator. The dispute arose when these heirs refused to execute a deed of sale covering the property despite plaintiff's claim that she had already purchased it from Adriana during the latter's lifetime.

On March 29, 1963, pursuant to a previous verbal understanding, Margarita Iñigo paid Adriana Maloto ₱10,000.00 as the purchase price for a house and lot of 453 square meters located in Iloilo City. The deed of sale was to be executed later. Iñigo did not press Adriana for a receipt for the money paid, given the "almost filial relationship" between them — Iñigo being the niece of Adriana's deceased husband — and because Adriana told her that the preparation of the receipt and the deed of sale would be referred to her lawyer, Atty. Sulpicio Palma.

Meanwhile, Iñigo began to exercise ownership and dominion over the property by improving it and constructing a retail store in front thereof. On two occasions, in September and October 1963, on Adriana's instructions, Iñigo went to see Atty. Palma for the preparation of a deed of sale, but was unsuccessful because Palma was then on the campaign trail as a candidate for councilor of Iloilo City.

On October 20, 1963, Adriana died. Thereafter, the Torrens title to the property was transferred in the name of the present defendants — nephews and niece of Adriana Maloto — after settlement of her estate. Formal demand for the execution of a deed of sale by said defendants was rejected, prompting Iñigo to file suit to compel them to execute the deed.

The Court of First Instance of Iloilo dismissed the complaint on January 18, 1965, ruling that the claim was unenforceable under the Statute of Frauds. Separately, the defendants had filed an ejectment case against Iñigo covering the same property, in which the Municipal Court of Iloilo ruled in their favor on January 4, 1966, ordering Iñigo to vacate the premises and pay rentals, attorney's fees, and costs. That judgment became final and a writ of execution issued on February 15, 1966. Defendants submitted that the ejectment judgment warranted dismissal of the ownership case.

• Statute of Frauds Inapplicability: Plaintiff-appellant maintained that the complaint alleged a consummated contract of sale — with payment of the full purchase price and exercise of acts of ownership over the property — and therefore the Statute of Frauds, which applies only to executory contracts, did not bar her action.
• Ejectment Not a Bar to Ownership: Plaintiff contended that the Municipal Court of Iloilo lacked jurisdiction over the ejectment case because the issue of ownership was seriously raised during trial, and that the ejectment judgment could not decide the question of ownership properly belonging to the Court of First Instance.

• Statute of Frauds: Defendants-appellees argued that the claim was unenforceable under the Statute of Frauds because no written document was executed to record either the deed of sale or the payment of the purchase price.
• Ejectment Judgment as Bar: Defendants averred that the decision in the ejectment case was in their favor, had become final, and resulted in a writ of execution, and that dismissal of the ownership case was therefore proper.

• Statute of Frauds: Whether an oral contract for the sale of real property, where the purchase price has been paid and acts of ownership exercised, is unenforceable under the Statute of Frauds.
• Ejectment as Bar: Whether a final judgment in an ejectment case constitutes a bar to a separate action contesting ownership of the same property.

• Statute of Frauds: No. The Statute of Frauds applies only to executory contracts, not to those totally or partially performed; the complaint's allegations of a perfected sale, payment of consideration, and exercise of ownership constituted a consummated contract outside the Statute's reach.
• Ejectment as Bar: No. An action for ejectment is no bar to another contesting ownership; where the issue of ownership became apparent during the ejectment trial, the municipal court lost jurisdiction to proceed further.

• Statute of Frauds: Article 1403(2)(e) of the Civil Code provides that a verbal contract for the sale of real property is unenforceable unless ratified, because it offends the Statute of Frauds. However, the well-settled rule — supported by a long line of authorities — is that the Statute of Frauds applies only to executory contracts, not to contracts either totally or partially performed. The complaint alleged that Adriana Maloto sold the disputed house and land to plaintiff, that the consideration was paid, and that plaintiff performed acts of ownership thereon. These facts are constitutive of a consummated contract. It matters not that neither the receipt for the consideration nor the sale itself was in writing, because oral evidence of a consummated sale of land is not forbidden by the Statute of Frauds and may not be excluded in court.

• Ejectment as Bar: The decision in the ejectment case was not decisive of the question of ownership raised in the complaint before the Court of First Instance. An action of ejectment is no bar to another contesting ownership. Moreover, the Municipal Court's own decision stated it was "of the opinion that the defendant Margarita Iñigo is only a lessee of the properties," which implicitly acknowledged that the question of ownership was seriously presented before it. Since the issue of ownership became apparent in the course of the ejectment trial, the municipal court lost jurisdiction to proceed further with the trial, and the possession question could not have been properly resolved without first settling ownership. The ejectment judgment accordingly could not bar the ownership action.

• Statute of Frauds Applies Only to Executory Contracts — The Statute of Frauds, codified in Article 1403(2)(e) of the Civil Code, renders verbal contracts for the sale of real property unenforceable unless ratified. However, the doctrine is well settled that the Statute of Frauds applies only to executory contracts — not to contracts either totally or partially performed. Where the complaint alleges a perfected sale, payment of the purchase price, and acts of ownership by the buyer, the contract is consummated and oral evidence of the sale is admissible. The Court applied this doctrine by examining the complaint's averments and concluding that they described a consummated contract, not merely an executory one.

• Ejectment Does Not Bar an Action for Ownership — An action for ejectment is no bar to a separate action contesting ownership of the same property. Furthermore, when the issue of ownership becomes apparent during the trial of an ejectment case, the inferior court loses jurisdiction to proceed further, as possession cannot be properly resolved without first settling the question of ownership. The Court applied this doctrine by holding that the Municipal Court's ejectment judgment — which itself acknowledged the ownership dispute — could not bar the plaintiff's ownership action before the Court of First Instance.

• "But long accepted and well settled is the rule that the Statute of Frauds is applicable only to executory contracts — not to contracts either totally or partially performed." — This passage states the controlling ratio decidendi on the scope of the Statute of Frauds, distinguishing executory from consummated contracts and establishing the foundation for the reversal of the dismissal.

• "The facts thus alleged are constitutive of a consummated contract. It matters not that neither the receipt for the consideration nor the sale itself was in writing." — This passage applies the Statute of Frauds doctrine to the complaint's allegations, confirming that oral evidence of a consummated sale of land is admissible and not barred by the Statute.

• "The simple reason is that an action of ejectment is no bar to another contesting ownership." — This passage articulates the principle that ejectment judgments do not preclude separate ownership actions, a rule frequently cited in subsequent jurisprudence on the relationship between ejectment and ownership proceedings.

• Almirol vs. Monserrat, 48 Phil. 67 — Cited as authority for the rule that the Statute of Frauds applies only to executory contracts, not to those totally or partially performed; followed.
• Robles vs. Lizarraga Hermanos, 50 Phil. 387 — Cited in support of the same rule regarding the limited application of the Statute of Frauds; followed.
• Diama vs. Macalibo, 74 Phil. 70 — Cited both for the Statute of Frauds rule and for the proposition that oral evidence of a consummated sale of land is not forbidden by the Statute; followed.
• Torres vs. Peña, 78 Phil. 231 — Cited as authority for the rule that an ejectment action does not bar a separate action contesting ownership, and that the inferior court loses jurisdiction when ownership becomes apparent during the ejectment trial; followed.

• Article 1403(2)(e), Civil Code — Provides that a verbal contract for the sale of real property is unenforceable unless ratified, embodying the Statute of Frauds. The Court held that this provision applies only to executory contracts and not to consummated ones, as the complaint's allegations described a fully performed sale.
• Section 1(i), Rule 16, Rules of Court — Referenced in the footnote as the procedural basis for the motion to dismiss in the court below, pertaining to claims that are unenforceable under the Statute of Frauds.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Angeles, and Fernando, JJ., concurred. Bengzon, J.P., J., took no part.