UY SOO LIM vs.

BENITO TAN UNCHUAN

This is an appeal by plaintiff upon the law and the facts, from a judgment of the Court of First
Instance of Cebu, dismissing on the merits his action for the annulment of a contract by the terms of
which he sold to the defendant Francisca Pastrano all his interest in the estate of the late Santiago
Pastrano Uy Toco.

The material facts as found by the trial court, whose findings are fully supported by the evidence, are
that at the age of about thirteen Santiago Pastrano Uy Toco, a Chinese, came from China to reside
in the Philippine Islands. He was then unmarried. On August 2, 1882, he married Candida Vivares, a
Filipina woman, at Mambajao, in the province of Cagayan de Misamis. Of this marriage there were
born two daughters, Francisca and Concepcion. Francisca is a defendant in this suit and is the wife
of the co-defendant, Benito Tan Unchuan. At the time of this marriage, Santiago Pastrano
possessed very little property — a tienda worth about two thousand pesos. The large estate left by
him at his death was acquired by him during his marriage with Candida Vivares.

In 1891, Santiago Pastrano, who had resided continuously in the Philippines since he came to the
Islands at the age of 13, returned to China were he remained for little less than a year. While there
he entered into illicit relations with a Chinese woman, Chan Quieg, also referred to as Chan Ni Yu.

After staying a little less than a year in China, Santiago Pastrano returned to the Philippines where
he remained till his death in Cebu, in March, 1901. He never saw Chan Quieg again, but received
letters from her informing him that she had borne him a son, Uy Soo Lim, the present plaintiff. He
died without ever having seen Uy Soo Lim, but under the belief that he was his only son, and it was
in this belief that he dictated the provisions of his will.

On March 6, 1901, Santiago Pastrano died in Cebu, leaving a large estate. The persons who
survived him, and then or afterward laid claim to an interest in the estate, were his wife, Candida
Vivares, his daughters, Francisca Pastrano and Concepcion Pastrano, Chan Quieg, and the plaintiff
Uy Soo Lim.

By the terms of his will, Santiago Pastrano attempted to dispose of the greater part of his estate in
favor of the appellant, Uy Soo Lim. The will was duly probated in the Court of First Instance of Cebu,
and the defendant Benito Tan Unchuan, husband of the defendant Francisca Pastrano, who was
named in the will as executor, duly qualified as such on May 13, 1902. Basilio Uy Bundan, one of the
defendants herein and brother of Santiago Pastrano, was named by the testator as guardian of
Francisca Pastrano, Concepcion Pastrano, and Uy Soo Lim, who were all three minors at the time of
the death of the testator, and duly qualified as such before the court on August 6, 1902.

On October 21, 1904 the Court of First Instance of Cebu, in the matter of the testamentary estate of
Santiago Pastrano, deceased, issued an order requiring Benito Tan Unchuan, as executor of the
testamentary estate of Santiago Pastrano, to deliver to Basilio Uy Bundan, guardian of Francisca
Pastrano, Concepcion Pastrano, and Uy Soo Lim, the property to which they were entitled under the
will of said Santiago Pastrano. This order was complied with and the administration of the
testamentary estate declared closed.

Basilio Uy Bundan having received, as guardian of the minors Francisca Pastrano, Concepcion
Pastrano, and Uy Soo Lim, the property devised to them under the will of said Santiago Pastrano,
continued to administer the said property as guardian without incident of note till October, 1910. On
October 18, 1910, the court, in the matter of the aforesaid guardianship, issued an order on the
guardian, Basilio Uy Bundan, in which it was noted that Francisca Pastrano had reached majority,
that Concepcion Pastrano would reach her majority in a few months, and that Uy Soo Lim had
married and the guardian was therefore ordered to present a plan of distribution of the estate in
accordance with the dispositions of the will of Santiago Pastrano.

The guardian did not comply with this order at once, and, before the plan of the distribution called for
by this order could be presented, objections against carrying into effect the provisions of the will
were presented to this court.

On May 25, 1991, Candida Vivares presented, through her attorneys, a motion in the matter of the
testamentary estate of Santiago Pastrano in which she claimed the right as the widow of the
deceased to one-half of all the estate, and asked that the administration of said estate reopened and
the rights of the persons readjudged and determined according to law. A motion of similar purport
was filed by her in the matter of the guardianship of Uy Soo Lim et al.

On June 5, 1911, Francisca Pastrano and Concepcion Pastrano filed, through their attorneys, a
motion in the guardianship of Uy Soo Lim et al., in which they opposed the distribution of the estate
of Santiago Pastrano in accordance with the terms of his will, alleging that Uy Soo Lim was not
entitled under the law to the amount of the estate assigned him in the will, for the reason that the
marriage alleged therein of Santiago Pastrano with Chan Quieg, was null and void, and, furthermore,
that Uy Soo Lim was not a son, legitimate or illegitimate, of said Santiago Pastrano. They, therefore,
asked for a suspension of the distribution and a reopening of the matter of the testamentary estate of
Santiago Pastrano and that the rights of all persons in interest be readjudged and determined
according to law. Chan Quieg also appeared in the matter of the estate of Santiago Pastrano on
October 7, 1911, and asked that she be declared entitled to one-half the estate on account of
"having in the year 1892 in the city of Amoy, China, held carnal relations with the deceased Santiago
Pastrano, having lived maritally with him during his stay in said city that year, which union, under the
laws and customs of China, constitutes all the forms of valid marriage in said jurisdiction."

The effect of all these motions was to put in question the right of Uy Soo Lim to seven-ninths of the
property as left him by Santiago Pastrano in his will and even to put in question his right to receive
anything at all. If Uy Soo Lim was merely an illegitimate son of Santiago Pastrano not legitimated
and incapable of being legitimated or of being given the status of an acknowledged natural son, and
if Candida Vivares was the lawful wife of Santiago Pastrano and Francisca and Concepcion are the
lawful issue of that marriage, then the utmost that Uy Soo Lim could have taken under the will of
Santiago Pastrano, according to the contention of Pastrano's widow and daughters, would have
been the third of Santiago Pastrano's one-half interest in the community estate subject to the
testator's disposition, or one-sixth of the entire estate, instead of the seven-ninths bequeathed him
by said will.

Uy Soo Lim, had married in China in 1910. He was aware of the fact that he was heir to a large
fortune in the Philippine Islands under the terms of the will of Santiago Pastrano, having already
drawn from the estate for his personal use P26,800. Before Candida Vivares, Francisca Pastrano,
Concepcion Pastrano, and his own supposed mother Chan Quieg had formally impeached before
the court his right to seven-ninths of the property described in the will of Santiago Pastrano, he was
fully aware of the preparations being made to reduce his interest to nothing or to a small fraction of
that conferred by the will. If was for the express purpose of frustrating these efforts that Uy Soo Lim
left China and arrived in Manila on March 13, 1911, about two months more or less before the first
formal protest made in court attacking the rights conferred on Uy Soo Lim under the will.

Before setting out for Manila Uy Soo Lim employed as his agent and advise one Choa Tek Hee, a
resident merchant of Manila, then on a visit to China. Plaintiff came to Manila on March 13, 1911,
and resided in the house of Choa Tek Hee till his departure in November, 1911. Choa Tek Hee was
then in China, but came to Manila in time to aid plaintiff executed a power of attorney in favor of
Choa Tek Hee to represent him in the pending negotiations. He also secured the services of two
attorneys, Major Bishop to represent him in Manila and Levering, of Cebu, to represent him in Cebu.

About the end of October, 1911, or, perhaps the early part of November, an agreement was reached
between Choa Tek Hee and plaintiff, of the one part, and Tan Unchuan and Del Rosario, an attorney
of Cebu, representing the interest of Candida Vivares, Francisca and Concepcion Pastrano, on the
other, to submit the entire matter in dispute to the judgment of three respectable Chinese merchants
designated. The persons thus designated were not, strictly speaking, arbitrators, but rather friendly
advisers, since there was no agreement that their findings should be binding on the parties. These
advisers came to the conclusion that the sum of P82,500 should be accepted by plaintiff in full
satisfaction and relinquishment of all his right, title, and interest in and to the estate of the deceased
Santiago Pastrano, and this recommendation was accepted by Choa Tek Hee and plaintiff and by
Tan Unchuan and Del Rosario. In accordance with this agreement, plaintiff, on November 18, 1911,
executed a deed by which he relinguished and sold to Francisca Pastrano all his right, title, and
interest in the estate of the deceased Santiago Pastrano in consideration of P82,500, of which sum
P10,000 was received in cash and the balance was represented by six promissory notes payable to
Choa Tek Hee as attorney in fact for Uy Soo Lim, the first for P22,500 and the remaining five for
P10,000 each. This is the document known as plaintiff's Exhibit B, which plaintiff is seeking to annul
in the present action. Thereafter, on December 6, 1911, Candida Vivares and Concepcion Pastrano,
then of age, executed separate deeds by where they relinquished and sold to Francisca Pastrano all
their right, title, and interest in the estate left by Santiago Pastrano.

On November 29, 1911, Chan Quieg, then temporarily in the port of Cebu, executed a deed whereby
she sold and relinquished to Francisca Pastrano all her right, title, and interest in the estate of
Santiago Pastrano. On December 4, 1911, Chan Quieg executed a public document in which she
gave her consent to the sale by Uy Soo Lim of his right and interest in said estate "in case the same
should be necessary by virtue of any legal requirements of the laws of the Philippine Islands."

And finally, on December 4, 1911, Basilio Uy Bundan executed a public document in which he
declared that in spite of the statements in the will of Santiago Pastrano, said testator was the owner
of the entire business in Cebu known as Santiago Pastrano & Co., and that Calixto Uy Conchio, the
brother of testator and of said Basilio Uy Bundan, did not, as declared in said will, own a three-
quarter interest in said business, or any interest at all therein, for which reason the said Basilio Uy
Bundan renounced any interest in said business which he might appear to have as brother and heir
of said Calixto Uy Conchio, who died without direct heirs in the ascending or descending line, said
renunciation of right being made in favor of Francisca Pastrano.

All the documents above mentioned having been duly presented to the lower court by Pantaleon del
Rosario acting as attorney of Francisca Pastrano, that court, on December 11, 1911, issued an order
in the matter of the guardianship of Uy Soo Lim et al., by which Francisca Pastrano was declared the
sole owner of the property left by the deceased Santiago Pastrano, and the guardian Basilio Uy
Bundan was order to deliver the same to Francisca Pastrano. On December 14, 1911, upon proof of
compliance with said order, the guardianship was closed and the guardians bond cancelled.

On August 24, 1914, the plaintiff and appellant, Uy Soo Lim, commenced the present action in the
Court of First Instance of Cebu, for the purpose of vacating the orders of the lower court of
December 11, 1911 and to rescind and annul the contract by which he had sold and transferred to
Francisca Pastrano his interest in the estate of Santiago Pastrano.

The complaint alleges as one of the reasons for setting aside plaintiffs sale of his rights to Francisca
Pastrano that defendants Benito Tan Unchuan and Basilio Uy Bundan induced the plaintiff to
execute the deed of cession by conspiring together to exercise under influence upon the plaintiff, by
taking advantage of his youth, passions, and inexperience, by misrepresenting materials facts
concerning the value of the property and interest in questions, and by concealing others. The court
below held that appellant had not been induced by deceit, or undue influence to enter into the
contract, but did so deliberately with full knowledge of the facts, after mature deliberation and upon
the advice of capable counsel. This ruling of the court is assigned by appellant as error. Upon this
branch of the case the trial judge said:

The plaintiff testified before the court and a careful reading of the verbal and documentary
evidence furnishes a fair idea of the general characteristics of the plaintiff. That he is a
spendthrift and unable to make a wise use of money is quite evident. But it is equally evident
that the plaintiff now is and at the same time of executing the bill of sale was a youth of more
than ordinary intelligence, with a keen appreciation and understanding of all the elements of
strength and weakness in his case that could only have been bettered by a study of the law
as a profession. As a witness be displayed uncommon ability in avoiding a direct answer to
inconvenient questions and in professing lack of memory in other points. It is true that this
testimony was given some three years, more or less, after signing the document of cession,
but the court has no reason to believe that the plaintiff's evident intelligence, not to say
cunning, was appreciably less then than now. The court upon review of the evidence finds
that plaintiff when he signed the document was in possession of all the essential facts
bearing upon his interest in the estate and had an intelligent comprehension of the nature of
the deed of cession, its contents and its effect upon his interests.

Some shadow of claim might be made on this issue if plaintiff, then a minor, had signed the
document without careful and competent advisers to direct him. He had however three
advisers. One of them was Choa Tek Hee, characterized by Judge Del Rosario as a person
of unusual ability. Whatever discord may have arisen subsequently between plaintiff and
Choa Tek Hee, there is no serious claim either in the complaint or based on the evidence
that Choa Tek Hee was a party to the supposed conspiracy against plaintiff, and the Court
does not doubt but what Choa Tek Hee exerted all his ability to procure for plaintiff the best
possible terms. But plaintiff from the very beginning until the end had the benefit of the
advice of two lawyers, Major Bishop to consult with in Manila, where the document itself was
signed, and Mr. Levering of Cebu, where most of the property was situated, where the other
parties in interest lived and where the litigation itself was pending. To claim that plaintiff did
not know what he was signing appears to the court to be an impeachment of the intelligence
which a reading of the testimony shows the plaintiff to have possessed at the time in
question. To claim that the two attorneys named allowed their client to sign the document
without being satisfied that he understood its import and thereafter consented to the final
decree issued by the court in Cebu based on said sale, constitutes in the opinion of the court
an untenable impeachment of the conduct of two lawyers well and favorably known to the
Bench and Bar of these Islands as attorneys of ability and integrity.

In support of the claim that material facts were concealed and misrepresented by
defendants, special stress is laid on a memorandum furnished the "arbitrators" by Tan
Unchuan. This memorandum was shown to plaintiff's agent Choa Tek Hee and was a
general account of the property left by Santiago Pastrano's estate was credited with a
quarter interest in the business known as Santiago Pastrano & Co., his deceased brother
Calixto Uy Conchio being credited with only the remaining three-fourths, while as a matter of
fact it would appear that Santiago Pastrano was the owner of the entire interest in said
business and subsequently to the execution of the document in question by plaintiff the
entire interest in the business passed by decree of this court to Francisca Pastrano who has
purchased the interest of all the other heirs. But whatever may have been the effect of the
presentation of this memorandum, plaintiff is not shown to have relied thereon. It was for the
purpose among others of being informed as to the nature and value of his interests and as to
 the weight that might be attached to the claims made by persons with adverse interest that
plaintiff employed a lawyer in Cebu where most of the property (and the business known as
Santiago Pastrano & Co.) was located and the facts relating thereto accessible. Without
better proof than has been presented the court will not presume that a document circulated
among the arbitrators, though seen by plaintiff, influenced plaintiff in signing the deed of
cession when he had employed attorneys well able to revise and check up any statements,
made in said memorandum.

Furthermore, the bill of sale itself specifically states that among the rights sold by plaintiff is
his interest in the business of Santiago Pastrano, whatever that might be, and expressly
states that the will erroneously stated that testator's interest was one quarter, whereas in
reality testator owned the entire business. The court finds under the evidence that plaintiff
understood this part of the bill of sale along with its other provisions and that its import was
explained to him by his attorneys before he signed it.

Without going further into all the evidence on this question, the court finds that not only has
plaintiff not sustained the burden of proving the fraud, imposition and deceit, which the law
never presumes, but that plaintiff in fact signed the deed of cession in question without
relying upon the statements and representations of the defendants as the motive for signing
the same; that before signing the same he understood the nature of said document, its
contents and its effect upon his interest, and that in signing the same he was determined by
the advice of his own agent Choa Tek Hee and upon the advice of his two lawyers, who
explained to him fully and to his complete understanding the nature, contents and effect of
said instrument.

Appellant vigorously assails these conclusions of the trial court, but the evidence is amply sufficient
to support the findings, and we find nothing in the record to indicate that the trial court has failed to
consider all the evidence adduced, or that the findings are contrary to the weight of the testimony.
Whenever there is a conflict in the evidence and the conclusion to be reached must rest largely upon
the relative credibility of the witnesses, we rarely disturb the findings of the trial court, and we can
see no reason for doing so in this case. On the contrary, we are convinced that the weight of the
evidence strongly supports the findings, and that the court did not err in rejecting appellant's
contention that the contract is voidable upon the ground that his consent was obtained by fraud or
undue influence. We are particularly impressed by the fact that it is expressly stated in the contract
(Exhibit B) which plaintiff now seeks to repudiate that notwithstanding the statement to the contrary
in Pastrano's will, the latter was in fact the sole owner of the business referred to in that document.
Plaintiff therefore had full information regarding the assets which composed the Pastrano's estate,
and surrounded as he was by skillful and competent advisers, we have no doubt that he was fully
aware of the value of those assets.

The trial court found that plaintiff was a minor at the time of the execution of the contract in question,
but that he not only failed to repudiate it promptly upon reaching his majority but tacitly ratified it by
disposing of the greater part of the proceeds after he became of age and after he had full knowledge
of the facts upon which he now seeks to disaffirm the agreement.

By the terms of the contract by which appellant transferred to the appellee Francisca Pastrano his
interest in the Pastrano Estate he was paid P10,000 in cash, the balance of the P82,500 being
represented by six promissory notes dated November 18, 1911, signed as maker by the defendant
Tan Unchuan, the husband of the defendant Francisca Pastrano. The first note was for P22,500
payable twelve days after date, and the other five for P10,000 each, payable in six, twelve, eighteen,
twenty-four and thirty months, respectively. These notes were made payable to Choa Tek Hee, or
order, as attorney in fact for Uy Soo Lim.
Of these notes the first three, amounting to P42,500 were paid to Choa Tek Hee as they fell due. It
appears, however, that Choa Tek Hee failed to account to the satisfaction of Uy Soo Lim for the
money so received, whereupon the latter returned to Manila on February 20, 1913, to seek an
adjustment of his affairs with his attorney in fact.

Uy Soo Lim, upon his arrival in Manila, sent the following cable to Tan Unchuan at Cebu:

I revoke power to Teck Hee. Don't pay him any more money. Please forward account
payments to him Urgent, Address P. O. 1360.

(Sgd.) UY SOO LIM.

This cable, sent to forestall further payment to Choa Tek Hee, evidences a clear and convincing
knowledge by plaintiff both of the conditions of the bill of sale and his rights thereunder.

Not being able amicably to adjust with Choa Tek Hee the matter of such moneys, Uy Soo Lim filed
suit against him in the Court of First Instance, Manila, asking that the power of attorney be canceled,
and for an accounting. This complaint is dated March 31, 1913, and has attached thereto a copy of
the will of Santiago Pastrano. It recites that plaintiff's interest in the estate of Santiago Pastrano was
reasonably worth P200,000; that this interest had been liquidated and "reduced to a money basis,"
and that in consequence money and choses in action had come into the hand of Choa Tek Hee
amounting to P83,000 more or less. There is also an allegation that the power of attorney was
executed while plaintiff was still a minor.

These allegations are important as showing that on March 31, 1913, plaintiff, while claiming his
interest in the estate of Santiago Pastrano was reasonably worth P200,000 knew such interest had
been sold for P83,000, more or less, and also knew he was a minor under Philippine laws at the time
of such sale.

By his answer Choa Tek Hee laid claim to a considerable portion of the P42,500 collected by him,
for "services rendered," etc., his statement showing a cash balance of only P2,867.94. This latter
amount, upon petition of plaintiff, was ordered deposited with the clerk of the court.

In the meantime Chas. E. Tenney had been appointed guardian ad litem of plaintiff, and on May 12,
1913, filed a motion on behalf of plaintiff reciting that promissory note No. 4 for P10,000 (being one
of the notes executed on account of plaintiff's bill of sale) would fall due on May 18, 1913, and asking
that Choa Tek Hee be directed to indorse it over to the clerk of the court for collection. As the note
was drawn in favor of Choa Tek Hee it took some time to adjust the matter of payment, it being
finally paid by Tan Unchuan to the clerk of the court on October 24, 1913. The P10,000 due on note
No. 5 was paid into court on December 18, 1913, and the final P10,000, being note No. 6, was paid
on May 23, 1914.

In the meantime, on October 8, 1913, Uy Soo Lim reached his majority under Philippine laws, being
then 21 years of age. On October 10, 1913, Chas. E. Tenney, his guardian ad litem, filed a motion
with the court reciting the fact of Uy Soo Lim's majority, stating that the services of a guardian ad
litem were no longer necessary.

The sum of P2,867.94 deposited by Choa Tek Hee was part of the proceeds accruing to plaintiff
under his bill of sale to Francisca Pastrano, as was also the P30,000, deposited by Tan Unchuan in
payment of promissory notes Nos. 4, 5, and 6, which notes accrued subsequent to the filing of suit
against Choa Tek Hee. The whole of this P30,000 was paid into court upon demand of plaintiff, such
payments being made after October 8, 1913, when plaintiff became of age.

On March 30, 1914, Uy Soo Lim secured judgment against Choa Tek Hee in the sum of
P31,511.993, with interest, which amount was in addition to the P32,867.94 deposited with the court
during the pendency of the proceedings. As heretofore noted, the final promissory note for P10,000
was paid into court on May 23, 1914. On May 25, 1914, or within two days after the final P10,000
due upon his bill of sale had been paid into court, Uy Soo Lim filed suit in the Court of First Instance
of Manila, to annul it on the ground of minority, fraud, conspiracy, and deceit.

Before filing the suit to annul his contract plaintiff had already withdrawn from the P32,867.94
deposited with the court, the sum of P9,517.20, of which amount the sum of P7,550 was withdrawn
after he reached his majority.

In filing his suit to annul the contract no offer was made by appellant to return to Francisca Pastrano
the consideration of such contract, or to hold, subject to her disposition, the balance of
P54,863.61 then on deposit with the court and represented by the Choa Tek Hee judgment. On the
contrary, he proceeded with the utmost celerity to secure, spend and otherwise dispose of the last
cent of such consideration.

On August 24, 1914, or more than ten months after plaintiff reached his majority, the present suit
was filed in the Court of First Instance of Cebu, the action brought in Manila having been dismissed
for lack of jurisdiction.

On March 29, 1915, this court affirmed on appeal the decision of the trial court awarding Uy Soo Lim
P31,511.93, with interest, in his suit against Choa Tek Hee. 1 Appellant lost no time in seeking to get
possession of these additional funds. Execution was secured against Choa Tek Hee on April 27,
1915, and by June 5, 1915, the whole of this judgment was collected and converted to plaintiff's use
except the sum of P7,200.

By the time the present action came to trial, therefore, the whole of this P64,377.81 — the then
available balance on hand derived from plaintiff's bill of sale — had been collected and converted by
him save and except the sum of P7,200, still due upon the judgment against Choa Tek Hee. As soon
as the trial of this case was closed appellant proceeded at once to realize this remaining remnant
accruing from his bill of sale, by transferring his interest therein to one Wee Thiam Tew, of
Singapore.

As showing how and in what manner the P82,500 was realized by plaintiff, we quote as follows from
the findings of the trial court (B. E., pp. 109,110):

To recapitulate, plaintiff has secured and converted to his own use the entire amount of
P82,500 the consideration for which he executed the deed of cession he is now seeking to
annul.

Of this amount of P82,500, plaintiff, speaking in rough figures, has received and converted to
his own use:

About P20,000 before coming of age under the laws of the Philippine Islands.

About P62,500 since coming of age under the laws of the Philippine Islands.
 Of the P62,500 received and spent by plaintiff since coming of age under our laws, plaintiff
has spent approximately about P7,500 before bringing suit to set aside his deed of cession,
and about P55,000 since filing his first action in Manila to set aside the deed of cession.

And of this sum of about P55,000, about P36,000 were received and spent by plaintiff after
filing the present suit.

And of the sum of P36,000 more or less which plaintiff has received and spent since filing the
present suit, P7,200 was received and spent after the trial of the present case before this
court had been closed; that is, after all the evidence had been presented and the case
submitted to the court for its final decision upon briefs to be filed. It was this disposal by
plaintiff of the lasts remains of the consideration price which was presented to the court as
additional evidence on the reopening of the trial.

It is important to note that this final P7,200 was disposed of by plaintiff on April 13, 1916, or more
than two and a half years after he reached his majority, and an equal time after he knew all the facts
now alleged by him to constitute fraud.

Uy Soo Lim became of age under Philippine laws on October 8, 1913. On March 31, 1913 (some
months prior to reaching majority) he filed suit against Choa Tek Hee for an accounting, wherein
reference is had to this bill of sale and to the fact of minority. The purpose of that action was to
reduce to possession the consideration accruing to him from his bill of sale.

Knowing his legal rights, therefore, plaintiff should have been prompt to disaffirm his contract upon
reaching majority. This was not done. Instead, he deliberately permitted defendants to continue
making payments thereunder, and then, on May 25, 1914, when the last cent upon such contract
was collected, sought to avail himself of this ground of rescission. This was almost eight months
after he had attained his majority.

The privilege granted minors of disaffirming their contracts upon reaching majority is subject to
prompt election in the matter. The court, in Hastings vs. Dollarhide (24 Cal., 195, 212), states the
principle thus:

The exemption of infants from liability on their contracts proceeds solely upon the principle
that such exemption is essential to their protection; and it is admitted that the law of infancy
should be so administered that result may, in all cases, be secured. But it has not
unfrequently happened that courts, in their anxiety to protect the rights of infants in the
matter of contracts made by them during non-age, have after they have become adults,
treated them to same extent as infants still, exempting them from the operation of rules of
law, not only of general obligation, but founded on essential justice. The strong tendency of
the modern decisions, however, is to limit the exemptions of infancy to the principle upon
which the disability proceeds.

To the same effect Goodnow vs. Empire Lumber Company (31 Minn., 468; 47 Am. Rep., 798) where
the court, in discussing the question, said:

The rule holding certain contracts of an infant voidable (among them his conveyances of real
estate) and giving him the right to affirm or disaffirm after he arrives at majority, is for the
protection of minors, and so that they shall not be prejudiced by acts done or obligations
incurred at a time when they are not capable of determining what is for their interest to do.
For this purpose of protection the law gives them an opportunity, after they have become
capable of judging for themselves, to determine whether such acts or obligations are
 beneficial or prejudicial to them, and whether they will abide by or avoid them. If the right to
affirm or disaffirm extends beyond an adequate opportunity to so determine and to act on the
result, it ceases to be a measure of protection, and becomes, in the language of the court in
Wallace vs. Lewis (4 Harr., 75, 80), "a dangerous weapon of offense, instead of a defense."
For we cannot assent to the reason given in Boody vs. McKenney (23 Me., 517), (the only
reason given by any of the cases for the rule that long acquiescense is no proof of
ratification), "that by his silent acquiescence he occasions no injury to other persons, and
secures no benefits or new rights to himself. There is nothing to urge him as a duty to others
to act speedily." The existence of such an infirmity in one's title as the right of another at his
pleasure to defeat it, is necessarily prejudicial to it; and the longer it may continue, the more
serious the injury. Such a right is a continual menace to the title. Holding such a menace
over the title is of course an injury to the owner of it; one possessing such a right is bound in
justice and fairness toward the owner of the title to determine without unnecessary delay
whether he will exercise it. The right of a minor to disaffirm on coming of age, like the right to
disaffirm in any other case, should be exercised with some regard to the rights of others —
with as much regard to those rights as is fairly consistent with due protection to the interests
of the minor.

In every other case of a right to disaffirm, the party holding it is required, out of regard to the
rights of those who may be affected by its exercise, to act upon it within a reasonable time.
There is no reason for allowing greater latitude where the right exists because of infancy at
the time of making the contract. A reasonable time after majority within which to act is all that
is essential to the infant's protection. That ten, fifteen, or twenty years, or such other time as
the law may give for bringing an action, is necessary as a matter of protection to him is
absurd. The only effect of giving more than a reasonable time is to enable the mature man,
not to correct what he did amiss in his infancy, but to speculate on the events of the future —
a consequence entirely foreign to the purposes of the rule, which is solely protection to the
infant. Reason, justice to others, public policy (which is not subserved by cherishing
defective titles), and convenience, require the right of disaffirmance to be acted upon within a
reasonable time. What is a reasonable time will depend on the circumstances of each
particular case, and may be either for the court or for the jury to decide. Where, as in this
case, there is mere delay, with nothing to explain or excuse it, or show its necessity, it will be
for the court.

The above decisions (which could be multiplied indefinitely) are based upon justice and sound
sense, and have peculiar application to the case now before us. Here plaintiff not only showed a
personal knowledge of his rights under this contract prior to and at the time of reaching majority, but
he was surrounded by able advisers, legal and otherwise, retained to protect his interests. As a
result of his failure to disaffirm promptly on reaching majority, he received a balance of P30,000
upon the contact, which amount certainly would not have been paid if it had been known that he was
about to attempt to repudiate his agreement. This amount was not only collected by Uy Soo
Lim after reaching majority, but was effectually disposed of as rapidly as possible.

The record shows that of the P2,867.94 deposited in court by Choa Tek Hee, and the P30,000 paid
into court by Tan Unchuan, only P1,967.20 was withdrawn by plaintiff before reaching majority.
Seven thousand five hundred and fifty pesos was withdrawn after he became of age and before filing
suit to rescind. There was still uncollected the P31,511.93, with interest — represented by the Choa
Tek Hee judgment. When plaintiff reached majority, therefore, there was P62,412.67 of the original
consideration available for refund, and there still remained P55,000 when he filed his suit to rescind.
This sum could have been returned to Francisca Pastrano or held by the court for her account.
Positive statutory law, no less than uniform court decisions, require, as a condition precedent to
rescission of a contract on account of minority that the consideration received be refunded. We cite
and quote as follows:

ART. 1295 (Civil Code). Rescission obliges the return of the things which were the objects of
the contract, with their fruits and the sum with interest; therefore it can only be carried into
effect when the person who may have claimed it can return that which, on his part, he is
bound to do.

ART. 1304 (Civil Code). When the nullity arises from the incapacity of one of the contracting
parties, the incapacitated person is not obliged to make restitution, except to the extent he
has profited by the thing or by the sum he may have received.

ART. 1308 (Civil Code). While one of the contracting parties does not return that which he is
obliged to deliver by virtue of the declaration of nullity, the other cannot be compelled to
fulfill, on his part, what is incumbent on him.

Not only should plaintiff have refunded all moneys in his possession upon filing his action to rescind,
but, by insisting upon receiving and spending such consideration after reaching majority, knowing
the rights conferred upon him by law, he must be held to have forfeited any right to bring such
action.

Article 1314, Civil Code, provides as follows:

The action for nullity of a contract shall also be extinguished when the thing which is the
object thereof should be lost by fraud or fault of the person having the right to bring the
action.

If the cause of the action should be the incapacity of any of the contracting parties, the loss
of the thing shall be no obstacle for the action to prevail, unless it has occurred by fraud or
fault on the part of the plaintiff after having acquired capacity.

Plaintiff has disposed of the whole of the P85,000 which was paid him in consideration of the
execution of the contract he is now seeking to annul. The record establishes beyond peradventure of
doubt that he is utterly without funds to reimburse this consideration. In the Choa Tek Hee suit
(Exhibit 10) there appears at folio 17 a motion by plaintiff, under oath, wherein he recites as a
ground for realizing certain of the moneys deposited under this contract that he (plaintiff) has no
funds with which to support himself except such as may be advanced to him out of the moneys
belonging to him which is now or may hereafter be in the hands of the clerk of this court." Being
without other funds, there was the greater reason why this deposit, derived from the very contract
sought to be repudiated, should have been held intact to reimburse his vendee.

In note to Englebert vs. Pritchett reported in 26 L.R.A., 177, the various cases relating to the
necessity of returning the entire consideration in order to disaffirm infant's contracts are correlated
and discussed. We quote as follows:

The rule which comes the nearest to being general is that all consideration which remains in
the infant's possession upon his reaching majority or at the time of an attempted
disaffirmance in case he is still under age must be returned, but that disaffirmance will not be
defeated by inability to return what he has parted with prior to such time.
 He will not be permitted to regain what he parted with or refuse payment while still
possessed of what he received.

There have been many distinctions attempted such as between executory and executed
contacts, and between seeking relief at law and in equity, but with only a few exceptions the
rule as stated above has governed the decisions regardless of the facts relied on as
distinguishing facts. There is no substantial ground for a distinction as to the rule to be
applied, although there may be as to the manner of its application.

The rule is that the consideration must be restored. (Dickerson vs. Gordon, 24 N. Y. S. R.,

448.)

Whatever difference may exist in the authorities as to the obligation of the infant to return the entire
consideration received as a condition precedent to disaffirming the contract, they are unanimous in
holding that he must return such portion thereof as remains in his possession when reaching
majority.

As heretofore noted, a very considerable portion of the moneys called for by the contract under
consideration was collected and used by plaintiff after May 25, 1914, when he definitely elected to
disaffirm it by bringing suit to rescind.

A leading case on the general subject is that of Manning vs. Johnson (26 Ala., 446), reported in 62
Am. Dec. 732, with an extensive footnote. Discussing the general subject the court there lays down
the following rule. (p. 733):

When we come to reason upon the proposition, however, it is surrounded with difficulty; for if
the infant can raise money to the whole value of his estate by a voidable sale or mortgage
and can only avoid the conveyance after refunding, he is furnished the means of indulging
habits of dissipation and prodigality, which in many instances would doubtless result in
squandering the whole of the proceeds, while the purchaser or mortgagee would risk
nothing, the land or estate of the infant so sold or mortgaged furnishing adequate security.
On the other hand to allow the infant to retain the consideration and yet to repudiate or
disaffirm the conveyance, would tempt as well as enable him to practice frauds upon others.
We think safe rule should furnish a check both upon the infant and the party contracting with
him. That rule we take to be this: If the infant after he arrives at age is shown to be
possessed of the consideration paid him, whether it be property, money or choses in action,
and either disposes of it so that he cannot restore it, or retains it for an unreasonable length
of time after attaining his majority, this amounts to an affirmance of the contract. So likewise
if it be shown that he has the power to restore the thing that he received, he cannot be
allowed to rescind without first making restitution.

Certainly the rule as above stated is far and equitable.

Appellant argues that the notes of Tan Unchuan were accepted in payment of the consideration
moving from Francisca Pastrano and that therefore the fact that some of these notes were collected
after he reached his majority is of no importance. We cannot accept this view. Even had the whole of
the payment been made in cash at the time of the execution of the contract, if it had been shown that
all or part of that money or its proceeds was still in the possession of appellant when he attained his
majority, it would have been incumbent upon him to make restitution, as far as was then possible,
upon coming of age. The important fact is not the time when he received the money, but the time
when he disposed of it.
The contract involved herein is an executed contract. When plaintiff reached majority there was
P62,412.67 in esse, and, when suit was filed, the sum of P55,000. The "offer to account" in
paragraph 20 of the complaint, "if such accounting should be necessary," is not the tender or offer to
produce or pay, which the law makes a condition precedent to demanding equitable relief. Certainly
it cannot be so construed in the present case, where it is conclusively shown that plaintiff after
reaching majority and after filing his action to annul, that he had "no other funds." If plaintiff had
succeeded in having the contract set aside it would have left him in the same position as that in
which he stood when it was executed — that is to say, he would have been compelled to face the
contention that he was lawfully entitled to little or nothing. Had he made restitution of all the money
which came into his hands after he attained his majority, a decision in favor of the claims of the
widow and legitimate daughters of Santiago Pastrano would not have been a wholly barren victory
for them. By consuming the last centavo of the proceeds of the contract plaintiff placed himself in a
position where he was bound to enjoy the most advantageous position whatever might be the
outcome of the litigation. To give countenance to such conduct would be to encourage deliberate
bad faith.

On the assumption, therefore, that plaintiff might have had a right to rescind this contract on the
ground of minority, his action fails.

(1) Because, with a full knowledge of his rights in the premises, he failed to disaffirm his contract
within a reasonable time after reaching majority; and

(2) Because he not only failed to tender, or offer to produce and pay the consideration in esse when
he reached majority, and when he filed his action, but proceeded, after such events, to demand,
collect and dispose of such consideration when according to his own statement under oath he had
no other funds with which to make reimbursement.

It is argued on behalf of appellee that it having been shown that appellant is a Chinese subject or
citizen, and that under the law of China he was of age when he executed the contract here in dispute
his contractual capacity must be determined by his national law (estatuti personal). The conclusion
we have reached upon the assumption most favorable to appellant, the he was a minor at the time of
the execution of the contract makes it unnecessary for us to decide this question or to consider the
effect of the marriage of appellant before attaining the age of twenty-one upon his contractual
capacity.

For the reasons stated we are of the opinion that the judgment of the trial court is without error, and
it is, therefore, affirmed, with the costs of both instances. So ordered.
ASIA PRODUCTION CO., INC., ,vs.ON. ERNANI CRUZ PAñO,

The simple issue in this case is whether or not an action for the refund of partial payments of the
purchase price of a building covered by an oral agreement to sell it with an oral promise to assign
the contract of lease on the lot where the building is constructed is barred by the Statute of Frauds.

Sometime in March 1976, private respondents, who claimed to be the owners of a building
constructed on a lot leased from Lucio San Andres and located in Valenzuela, Bulacan, offered to
sell the building to the petitioners for P170,000.00. Petitioners agreed because of private
respondents' assurance that they will also assign to the petitioners the contract of lease over the
land. The above agreement and promise were not reduced to writing. Private respondents undertook
to deliver to the petitioners the deed of conveyance over the building and the deed of assignment of
the contract of lease within sixty (60) days from the date of payment of the downpayment of
P20,000.00. The balance was to be paid in monthly installments. On 20 March 1976, petitioners paid
the downpayment and issued eight (8) postdated checks drawn against the Equitable Banking
Corporation for the payment of the eight (8) monthly installments, as follows:

Check No. Amount Due Date

10112253 P10,000.00 June 30, 1976

10112254 20,000.00 July 30, 1976
10112255 20,000.00 August 30, 1976
10112256 20,000.00 September 30, 1976
10112257 20,000.00 October 30, 1976
10112258 20,000.00 November 30, 1976
10112259 20,000.00 December 30, 1976
10112260 20,000.00 January 31, 1977

Relying on the good faith of private respondents, petitioners constructed in May 1976 a weaving
factory on the leased lot. Unfortunately, private respondents, despite extensions granted, failed to
comply with their undertaking to execute the deed to sale and to assign the contract despite the fact
that they were able to encash the checks dated 30 June and 30 July 1976 in the total amount of
P30,000.00. Worse, the lot owner made it plain to petitioners that he was unwilling to give consent to
the assignment of the lease unless petitioners agreed to certain onerous terms, such as an increase
in rental, or the purchase of the land at a very unconscionable price.

Petitioners were thus compelled to request for a stop payment order of the six (6) remaining checks.
Succeeding negotiations to save the transaction proved futile by reason of the continued failure of
private respondents to execute the deed of sale of the building and the deed of assignment of the
contract of lease.

So, on or about 29 December 1976, upon prior agreement with private respondents, petitioners
removed all their property, machinery and equipment from the building, vacated the same and
returned its possession to private respondents. Petitioners demanded from the latter the return of
their partial payment for the purchase price of the building in the total sum of P50,000.00. Private
respondents refused to return it. Hence, petitioners, filed against private respondents a
complaint   for its recovery and for actual, moral and exemplary damages and attorney's fees with
1

the then Court of First Instance (now Regional Trial Court) of Quezon City, which was docketed as
Civil Case No. Q-23593. The case was raffled to Branch XVIII of the court which was then presided
over by herein respondent Judge.
Private respondent Lolita Lee Le Hua did not file an Answer; hence, she was declared in default.

Upon the other hand, private respondent Alberto Dy filed a motion

to dismiss the complaint on the ground that the claim on which the action is based — an alleged
purchase of a building which is not evidenced by any writing — cannot be proved by parol evidence
since Article 1356 in relation to Article 1358 of the Civil Code requires that it should be in writing.   In 2

their
opposition   to said motion, petitioners argue that their complaint is essentially for collection of a sum
3

of money; it does not seek to enforce the sale, but aims to compel private respondents to refund a
sum of money which was paid to them as purchase price in a sale which did not materialize by
reason of their bad faith. Furthermore, the execution of the document was an undertaking of the
private respondents, which they refused to comply with. Hence, they cannot now be heard to
complain against something which they themselves brought about.

In his Order   of 18 April 1979, respondent Judge granted the motion to dismiss on the ground that
4

the complaint is barred by the Statute of Frauds. He says:

It cannot be disputed that the contract in this case is condemned by the Statutes of
Fraud (sic) it involves not merely the sale of real property (the building), it also
includes an alleged lease agreement that must certainly be for more than one year
(See Art. 1403, No. 2, subparagraph e, New Civil Code).

Plaintiffs cannot avoid the Statutes of Fraud (sic) by saying that this is merely an
action for the collection of a sum of money. To be entitled to the sum of P50,000.00,
it is necessary to show that such contract was executed and the same was violated
but — plaintiffs are prevented from proving this alleged agreement by parol evidence.

Neither may plaintiffs claim that by the payment of the sum of P50,000.00 the
contract was removed from the Statutes of Fraud (sic). This is so because plaintiffs
have not fully complied with their obligation to pay P170,000.00. If there had been full
payment of P170,000.00, the situation would have been different.

Plaintiffs knew or should have known that their contract (as described by them in
their complaint) was unenforceable; they had thereby voluntarily assumed the risks
attendant to such contract. Moreover, the primordial aim of the Statutes of Fraud (sic)
is to prevent fraud and perjury in the enforcement of obligations depending upon the
unassisted memory of witnesses (Shoemaker vs. La Tondeña, 68 Phil. 24). The
Court would find it difficult to determine whether the sum of P50,000.00 was paid
because of the unenforceable contract or for some other transactions.

Their motion for reconsideration   having been denied by respondent Judge in his Order   of 21 June
5 6

1979 for the reason that the oral contract in this case was not removed from the operation of the
Statute of Frauds because there was no full or complete performance by the petitioners of the
contract as required in Paterno vs. Jao Yan   and Babao vs. Perez, 8 petitioners filed this petition   on 16 July
7 9

1979, alleging therein as ground therefor grave abuse of discretion on the part of respondent Judge in issuing the orders of 18 April 1979
and 21 June 1979.

After private respondent Alberto Dy filed his Comment   to the petition in compliance with the
10

resolution   of 23 July 1979 and petitioners filed their Reply   to said comment on 2 April 1980, this
11 12

Court gave due course   to the petition. Private respondent Lolita Lee Le Hua was considered to
13

have waived her right to file her comment to the petition. 14

Petitioners were subsequently required to file their Brief, which they complied with on 13 October
1981;   they make the following assignment of errors:
15

The lower court erred in holding that for a contract of purchase and sale to be
removed from the operation of the Statute of Frauds, there must be full and complete
payment of the purchase price.

II

The lower court erred in failing to appreciate the nature of petitioners' cause of
action.

III

The lower court erred in not finding that this case is not covered by the Statute of
Frauds.

IV

The lower court erred in not following the procedure prescribed by this Honorable
Court in cases when partial performance is alleged.

The lower court erred in dismissing the case.

Private respondents did not file their Brief.

We find merit in the petition. Respondent Judge committed grave abuse of discretion in dismissing
the complaint on the ground that the claim is barred by the Statute of Frauds.

Article 1403 of the Civil Code declares the following contracts, among others, as unenforceable,
unless they are ratified:

xxx xxx xxx

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In
the following cases an agreement hereafter made shall be 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; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary evidence of its
contents:

(a) An agreement that by its terms is not to be performed within a

year from the making thereof;

(b) A special promise to answer for the debt, default, or miscarriage

of another;
 (c) An agreement made in consideration of marriage, other than a
mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in action, at

a price not less than five hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the evidences, or some of
them, of such things in action, or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the sale, of
the amount and kind of property sold, terms of sale, price, names of
the purchasers and person on whose account the sale is made, it is a
sufficient memorandum;

(e) An agreement for the leasing for a longer period than one year, or
for the sale of real property or of an interest therein;

(f) A representation to the credit of a third person.

x x x           x x x          x x x

The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by the party to be
charged.   It was not designed to further or perpetuate fraud. Accordingly, its application is limited. It
16

makes only ineffective actions for specific performance of the contracts covered by it; it does not
declare them absolutely void and of no effect. As explicitly provided for in the above-quoted
paragraph (2), Article 1403 of the Civil Code, the contracts concerned are simply "unenforceable"
and the requirement that they — or some note or memorandum thereof — be in writing refers only to
the manner they are to be proved. It goes without saying then, as held in the early case of Almirol, et
al. vs. Monserrat,   that the statute will apply only to executory rather than executed contracts.
17

Partial execution is even enough to bar the application of the statute. In Carbonnel vs. Poncio, et
al.,   this Court held:
18

. . . 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, et al. vs. Monserrat, 48 Phil. 67, 70; Robles vs.
Lizarraga Hermanos, 50 Phil. 387; Diana vs. Macalibo, 74 Phil. 70).

Subject to a rule to the contrary followed in a few jurisdictions, it is the

accepted view that part performance of a parol contract for the sale of
real estate has the effect, subject to certain conditions concerning the
nature and extent of the acts constituting performance and the right
to equitable relief generally, of taking such contract from the
operation of the statute of frauds, so that chancery may decree its
specific performance or grant other equitable relief. It is well settled in
Great Britain and in this country, with the exception of a few states,
that a sufficient part performance by the purchaser under a parol
contract for the sale of real estate removes the contract form the
operation of the statute of frauds (49 Am. Jur. 722-723).

In the words of former Chief Justice Moran: "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." (Comments on the Rules of Court, by
Moran, Vol. III [1957 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 form the
transaction in litigation, and, at the same time, evade the obligations, responsibilities
or liabilities assumed or contracted by him thereby.

It follows then that the statute applies only to executory contracts and in actions for their
specific performance. It does not apply to actions which are neither for violation of a contract
nor for the performance thereof.  19

There can be no dispute that the instant case is not for specific performance of the agreement to sell
the building and to assign the leasehold right. Petitioners merely seek to recover their partial
payment for the agreed purchase price of the building, which was to be paid on installments, with the
private respondents promising to execute the corresponding deed of conveyance, together with the
assignment of the leasehold rights, within two (2) months from the payment of the agreed
downpayment of P20,000.00. By their motion to dismiss, private respondents theoretically or
hypothetically admitted the truth of the allegations of fact in the complaint.   Among the allegations
20

therein are:
(1) that the P50,000.00 sought to be recovered represents the downpayment of P20,000.00 and two
(2) monthly installments of the purchase price, and (2) that petitioners decided, in effect, to withdraw
from the agreement by ordering the stop payment of the remaining six (6) checks and to return the
possession of the building to private respondents because of the latter's failure to comply with their
agreement. The action is definitely not one for specific performance, hence the Statute of Frauds
does not apply. And even if it were for specific performance, partial execution thereof by petitioners
effectively bars the private respondents from invoking it. Since it is for refund of what petitioners had
paid under the agreement, originally unenforceable under the statute, because petitioners had
withdrawn therefrom due to the "bad faith" of the private respondents, the latter cannot be allowed to
take shelter under the statute and keep the P50,000.00 for themselves. If this were the case, the
statute would only become a shield for fraud, allowing private respondents not only to escape
performance of their obligations, but also to keep what they had received from petitioners, thereby
unjustly enriching themselves.

Besides, even if the action were for specific performance, it was premature for the respondent Judge
to dismiss the complaint by reason of the Statute of Frauds despite the explicit allegations of partial
payment. As this Court stated in Carbonnel vs. Poncio, et al.:  21

For obvious reasons, it is not enough for a party to allege partial performance in

order to hold that there has been such performance and
to render a decision declaring that the Statute of Frauds is inapplicable. But neither is
such party required to establish such partial performance
by documentary proof before he could have the opportunity to introduce oral
testimony on the transaction. Indeed, such oral testimony would usually be
unnecessary if there were documents proving partial performance. Thus, the
rejection of any and all testimonial evidence on partial performance, would nullify the
rule that the Statute of Frauds is inapplicable to contracts which have been partly
executed, and lead to the very evils that the statute seeks to prevent.

xxx xxx xxx

 When the party concerned has pleaded partial performance, such party is entitled to
a reasonable chance to establish by parol evidence the truth of this allegation, as
well as the contract itself. "The recognition of the exceptional effect of part
performance in taking an oral contract out of the statute of frauds involves the
principle that oral evidence is admissible in such cases to prove both the contract
and the part performance of the contract" (49 Am. Jur. 927).

We thus rule that an action by a withdrawing party to recover his partial payment of the consideration
of a contract, which is otherwise unenforceable under the Statute of Frauds, by reason of the failure
of the other contracting party to comply with his obligation, is not covered by the Statute of Frauds.

WHEREFORE, the petition is hereby GRANTED. The challenged Orders of 18 April 1979 and 21
June 1979 in Civil Case No. Q-23593 of the court below are hereby ANNULLED and SET ASIDE,
and the complaint in said case is hereby ordered REINSTATED. The default order against private
respondent Lolita Lee Le Hua shall stand and private respondent Alberto Dy is ordered to file his
Answer to the complaint with the court below within ten (10) days from receipt of this decision. This
decision shall be immediately executory.

Costs against private respondents.

IT IS SO ORDERED.
WESTERN MINDANAO LUMBER CO., INC., plaintiff-appellant,
vs.
NATIVIDAD M. MEDALLE and ANTONIO MEDALLE, defendants-appellees.

Jalandoni & Jamir for appelant.

Fernandez Law Office for appellee

CONCEPCION JR., J.: têñ.£îhqwâ£

Appeal from the order of the Court of First Of the complaint upon the ground that the claim on which
it is founded is unenforceable under the Statute of Fraud and Special law.

The complaint, filed on December 16, 1960, alleges that: ñé+.£ªwph!1

2. — The Plaintiff is engaged in logging operations in Curuan Zamboanga City and in

connection with the said logging operation it obtained on September 8, 1955 a right-
of-way through the said Lot 2136, of the Cadastral Survey of Zamboanga from Mr.
Luciano Hernandez, then the registered owner, a copy of the agreement being
enclosed as Annex A';

3. — The former owners of the logging concession operated by the Plaintiff

constructed and maintained the said road through Lot 2136, but the Plaintiff
improved the said road, paying to the registered owner for all the improvements
damaged by the improvement of the road;

4. — Long before the execution of the right-of-way agreement on September 8,

1955, since then and up to the present time the said road has been maintained and
used not only by the predecessor of the Plaintiff and the Plaintiff, but also by the
public:

5. — The said Lot 2136 was purchased by the defendants in 1958 and the said road
then existed and was in public use and the defendants did not oppose but instead
allowed the continued use and maintenance of the road by the Plaintiff and the
public;

6. — The said road is indispensable to the business operations of the Plaintiff,

because it is the only access from their concession to the highway;

7. — That defendants have now sent to the Plaintiff a notice (Annex'B') of their
intention to close the road; and
 8. — The Plaintiff has the right to the continued use of said road, the closing of which
will cause injustice and irreparable damages to the Plaintiff and the Plaintiff is willing
to post a bond for the issuance of a writ of preliminary injunction to stop the
defendants from closing the road.

xxx xxx xxx

Wherefore, the plaintiff prayed that a writ of preliminary injunction be issued restraining the
defendants from closing the said road, and after hearing, make the injunction permanent. It also
prayed that the defendants be directed to recognize and respect the said road right-of-way
agreement. 1 Copies of the road right-of-way agreement and the letter of the defendants advising the
plaintiff of the closure of the road were attached thereto. 2 Upon the filing of a bond in the amount of
P1,000.00, a writ of preliminary injunction was issued, restraining the defendants from closing the road. 3

Instead of a responsive pleading, the defendants filed a motion to dismiss the complaint on January 4,
1961, upon the ground that the claim on which the action or suit is founded is unenforceable under the
provisions of the Statute of Frauds and special law, in that the first page of the said road right-of-way
agreement was not signed by both parties and their instrumental witnesses; page two thereof is not
dated, and the signature of the plaintiffs corporate agent does not appear; and that said agreement is not
acknowledged before a person authorized to administer oaths. 4

The plaintiff opposed the motion, stating that the agreement between plaintiff and Luciano
Hernandez is not one of those agreements specified in the Statute of Frauds 5 Nevertheless, the trial
court granted the motion to dismiss on January 17, 1961 and the cases. 6

The plaintiff filed a motion for reconsideration of the said order, insisting that the road right-of-way
agreement is not covered by the Statute of Frauds. 7 Then, on March 4, 1961, the plaintiff filed an
Amended Complaint, accompanied by a motion for its admission. The plaintiff therein prayed, among
others, that the Defendants be ordered to keep the road open and to respect the right-of-way agreement,
and "should it be ascertained that under the law the plainttiff is bound to pay compensation for the right-
of- way to the defendants, it is prayed that the reasonable amount of such compensation be fixed. 8

After hearing the parties, the trial court issued an order on September 6, 1961, denying the motion
for reconsideration. 9

Whereupon, the plaintiff perfected an appeal to the Court of Appeals. 10 The Appellate Court, finding
that only questions of law are raised, elevated the appeal to this Court. 11

The plaintiff-appellant made the following assignment of errors in its Brief:  ñé+.£ªwph!1

1. The trial court erred in dismissing the complaint on the ground that the claim on
which the action or suit is founded is unenforceable under the provisions of the
Statute of Frauds and special law; and

2. The trial court erred in denying plaintiffs motion for reconsideration.

The appeal is meritorious. The Statute of Frauds refers to specific kinds of transactions and cannot
apply to any that is not enumerated therein. 12 The transactions or agrrements covered by said statute
are the following: 
ñé+.£ªwph!1

(a) An agreement that by its terms is not to be performed within a year from the
making thereof;
 (b) A special promise to answer for the debt, default, or miscarriage of another;

(c) An agreement made in consideration of marriage, other than a mutual promise to

marry;

(d) An agreement for the sale of goods, chattels or things in action, at a price not less
than five hundred pesos unless the buyer accept and receive part of such goods and
chattels, or the evidences, or some of them, of such things in action, or pay at the
time somepart of the purchase money; but when a sale is made by auction and entry
is made by the auctioneer in his sales book, at the time of the sale, of the amount
and kind of property sold, terms of sale price, names of purchasers and person on
whose account the sale is made, it is sufficient memorandum;

(e) An agreement for the leasing for a longer period than one year, or for the sale of
real property or of an interest therein;

(f) A representation as to the credit of a third person. 13

Obviously, an agreement creating an easement of right-of-way is not one of those contracts coverede by
the statue of rauds since it is not a sale of property or of an interest therein. The trial court therefore, erred
in dismissing the case upon the defendants' claim that the road fight-of-way agreement in question is
unenforceable under the statute of frauds. Besides, the complaint, as amended, may be viewed not only
as a claim for the recognition of the existence of an easement of right-of-way on defendants' estate, but
also a demand for the establishment of an easement of right-of-way, if none exist, pursuant to Art. 649 of
the Civil Code, in view of the plaintiffs offer to pay reasonable compensation for the use of the land.

WHEREFORE, the judgment from is hereby reversed and the order of January 17, 1961 and
September 6, 1961 set aside.Costs against the defendants-appellees.

SO ORDERED.
LIMKETKAI SONS MILLING vs. COURT OF APPEALS

The issue in the petition before us is whether or not there was a perfected contract between
petitioner Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering
the sale of a parcel of land, approximately 3.3 hectares in area, and located in Barrio Bagong Ilog,
Pasig City, Metro Manila.

Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig
ruled that there was a perfected contract of sale between petitioner and BPI. It stated that there was
mutual consent between the parties; the subject matter is definite; and the consideration was
determined. It concluded that all the elements of a consensual contract are attendant. It ordered the
cancellation of a sale effected by BPI to respondent National Book Store (NBS) while the case was
pending and the nullification of a title issued in favor of said respondent NBS.

Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected
because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil
Code. The decision of the trial court was reversed and the complaint dismissed.

Hence, the instant petition.

Shorn of the interpretations given to the acts of those who participated in the disputed sale, the
findings of facts of the trial court and the Court of Appeals narrate basically the same events and
occurrences. The records show that on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI
as its trustee to manage, administer, and sell its real estate property. One such piece of property
placed under trust was the disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig,
Metro Manila covered by Transfer Certificate of Title No. 493122.

On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI
to sell the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of
the Philippine Remnants.

Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8,
1988, petitioner's officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant
Vice-President, to enter and view the property they were buying.

On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On
July 11, 1988, petitioner's officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the
sale. They were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin.
Petitioner asked that the price of P1,000.00 per square meter be reduced to P900.00 while Albano
stated the price to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00
per square meter to be paid in cash. Since the authority to sell was on a first come, first served and
non-exclusive basis, it may be mentioned at this juncture that there is no dispute over petitioner's
being the first comer and the buyer to be first served.

Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso
Lim asked if it was possible to pay on terms. The bank officials stated that there was no harm in
trying to ask for payment on terms because in previous transactions, the same had been allowed. It
was the understanding, however, that should the term payment be disapproved, then the price shall
be paid in cash.

It was Albano who dictated the terms under which the installment payment may be approved, and
acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano
embodying the payment initially of 10% and the remaining 90% within a period of 90 days.

Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim
went to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The
payment was refused because Albano stated that the authority to sell that particular piece of
property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-
President Nelson Bona who also refused to receive payment.

An action for specific performance with damages was thereupon filed on August 25, 1988 by
petitioner against BPI. In the course of the trial, BPI informed the trial court that it had sold the
property under litigation to NBS on July 14, 1989. The complaint was thus amended to include NBS.

On June 10, 1991, the trial court rendered judgment in the case as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against

defendants Bank of the Philippine Islands and National Book Store, Inc.: —

1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the
name of the Bank of the Philippine Islands, situated in Barrio Bagong Ilog, Pasig,
Metro Manila, in favor of National Book Store, Inc., null and void;

2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer
Certificate of Title which may have been issued in favor of National Book Store, Inc.
by virtue of the aforementioned Deed of Sale dated July 14, 1989;

3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of

P33,056,000.00, to execute a Deed of Sale in favor of plaintiff of the aforementioned
property at the price of P1,000.00 per square meter; in default thereof, the Clerk of
this Court is directed to execute the said deed;

4. Ordering the Register of Deeds of Pasig, upon registration of the said deed,
whether executed by defendant BPI or the Clerk of Court and payment of the
corresponding fees and charges, to cancel said T.C.T. No. 493122 and to issue, in
lieu thereof, another transfer certificate of title in the name of plaintiff;

5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and
severally, to the plaintiff the sums of P10,000,000.00 as actual and consequential
damages and P150,000.00 as attorney's fees and litigation expenses, both with
interest at 12% per annum from date hereof;

6. On the cross-claim of defendant bank against National Book Store, ordering the
latter to indemnify the former of whatever amounts BPI shall have paid to the plaintiff
by reason hereof; and

7. Dismissing the counterclaims of the defendants against the plaintiff and National
Book Store's cross-claim against defendant bank.
 Costs against defendants.

(pp. 44-45, Rollo.)

As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and
Mabutas, JJ.), on August 12, 1994, reversed the trial court's decision and dismissed petitioner's
complaint for specific performance and damages.

The issues raised by the parties revolve around the following four questions:

(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the
subject matter of the contract and the cause of the obligation?

(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned
contract?

(3) Is there competent and admissible evidence to support the alleged meeting of the minds?

(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?

There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine
Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square
meter; (b) that Philippine Remnants confirmed the authority to sell of Revilla and the price at which
he may sell the lot; (c) that petitioner and Revilla agreed on the former buying the property; (d) that
BPI Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the
property; and (e) that BPI was formally informed about the broker having procured a buyer.

The controversy revolves around the interpretation or the significance of the happenings or events at
this point.

Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top
officials and broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando
V. Aromin at the BPI offices.

Respondents, however, contend that what transpired on this date were part of continuing
negotiations to buy the land and not the perfection of the sale. The arguments of respondents center
on two propositions — (1) Vice-Presidents Aromin and Albano had no authority to bind BPI on this
particular transaction and (2) the subsequent attempts of petitioner to pay under terms instead of full
payment in cash constitutes a counter-offer which negates the existence of a perfected contract.

The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the
record.

At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed
lot. Exhibit B dated June 23, 1988 states, "this will serve as your authority to sell on an as is, where
is basis the property located at Pasig Blvd., Bagong Ilog . . . ." We agree with Revilla's testimony that
the authority given to him was to sell and not merely to look for a buyer, as contended by
respondents.

Revilla testified that at the time he perfected the agreement to sell the litigated property, he was
acting for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up
the sale of the land, Revilla saw it fit to bring BPI officials into the transaction. If BPI could give the
authority to sell to a licensed broker, we see no reason to doubt the authority to sell of the two BPI
Vice-Presidents whose precise job in the Bank was to manage and administer real estate property.

Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made
up of top bank officials. It appears from the record that this trust committee meets rather infrequently
and it does not have to pass on regular transactions.

Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI
Real Property Management Unit. He had been in the Real Estate Division since 1985 and was the
head supervising officer of real estate matters. Aromin had been with the BPI Trust Department
since 1968 and had been involved in the handling of properties of beneficial owners since 1975 (tsn.,
December 3, 1990, p. 5).

Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while
purporting to inform Aromin of his poor performance, is an admission of BPI that Aromin was in
charge of Torrens titles, lease contracts, problems of tenants, insurance policies, installment
receivables, management fees, quitclaims, and other matters involving real estate transactions. His
immediate superior, Vice-President Merlin Albano had been with the Real Estate Division for only
one week but he was present and joined in the discussions with petitioner.

There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident.
Revilla brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a
perfectly natural manner on the transaction before him with not the slightest indication that he was
acting ultra vires. This shows that BPI held Aromin out to the public as the officer routinely handling
real estate transactions and, as Trust Officer, entering into contracts to sell trust properties.

Respondents state and the record shows that the authority to buy and sell this particular trust
property was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have
any authority to act as alleged, there was no need to withdraw authority which he never possessed.

Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank
vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co.
(52 ND 752, 204 NW 818, 40 ALR 1021), to wit:

Accordingly a banking corporation is liable to innocent third persons where the

representation is made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal
or some other person for his own ultimate benefit.

(at pp. 652-653.)

In the present case, the position and title of Aromin alone, not to mention the testimony and
documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the
questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin
was acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that a top
official of the bank was personally interested in the sale of the Pasig property and did not like
Aromin's testimony. Aromin was charged with poor performance but his dismissal was only
sometime after he testified in court. More than two long years after the disputed transaction, he was
still Assistant Vice-President of BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine
Remnants Co. regarding the sale of the firm's property was addressed to Aromin. The P1,000.00
figure on the first page of broker Revilla's authority to sell was changed to P1,100.00 by Aromin. The
price was later brought down again to P1,000.00, also by Aromin. The permission given to petitioner
to view the lot was signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988
from broker Revilla informing BPI that he had a buyer was addressed to Aromin. The conference on
July 11, 1988 when the contract was perfected was with Aromin and Vice-President Albano. Albano
and Aromin were the ones who assured petitioner Limketkai's officers that term payment was
possible. It was Aromin who called up Miguel Bicharra of Philippine Remnants to state that the BPI
rejected payment on terms and it was to Aromin that Philippine Remnants gave the go signal to
proceed with the cash sale. Everything in the record points to the full authority of Aromin to bind the
bank, except for the self-serving memoranda or letters later produced by BPI that Aromin was an
inefficient and undesirable officer and who, in fact, was dismissed after he testified in this case. But,
of course, Aromin's alleged inefficiency is not proof that he was not fully clothed with authority to bind
BPI.

Respondents' second contention is that there was no perfected contract because petitioner's request
to pay on terms constituted a counter-offer and that negotiations were still in progress at that point.

Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among
his statements is one to the effect that —

. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano
counter-offered to sell the property at P1,100.00 per square meter but after the usual
haggling, we finally agreed to sell the property at the price of P1,000.00 per square
meter . . .

(tsn, 12-3-90, p. 17; Emphasis supplied.)

Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of
P1,000.00 per square meter, Aromin answered:

Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price
is concerned, sir.

(ibid, p. 17.)

The requirements in the payment of the purchase price on terms instead of cash were suggested by
BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the
possibility of paying on terms was referred to the Trust Committee but with the mutual agreement
that "if the proposed payment on terms will not be approved by our Trust Committee, Limketkai
should pay in cash . . . the amount was no longer subject to the approval or disapproval of the
Committee, it is only on the terms." (ibid, p. 19). This is incontrovertibly established in the following
testimony of Aromin:

A. After you were able to agree on the price of P1,000.00/sq. m.,

since the letter or authority says the payment must be in cash basis,
what transpired later on?

B. After we have agreed on the price, the Lim brothers inquired on

how to go about submitting the covering proposal if they will be
 allowed to pay on terms. They requested us to give them a guide on
how to prepare the corresponding letter of proposal. I recall that,
upon the request of Mr. Albino Limketkai, we dictated a guide on how
to word a written firm offer that was to be submitted by Mr. Lim to the
bank setting out the terms of payment but with the mutual agreement
that if his proposed payment on terms will not be approved by our
trust committee, Limketkai should pay the price in cash.

Q And did buyer Limketkai agree to pay in cash in case the offer of
terms will be cash (disapproved).

A Yes, sir.

Q At the start, did they show their willingness to pay in cash?

A Yes, sir.

Q You said that the agreement on terms was to be submitted to the

trust committee for approval, are you telling the Court that what was
to be approved by the trust committee was the provision on the
payment on terms?

A Yes, sir.

Q So the amount was no longer subject to the approval or

disapproval of the committee, it is only on the terms?

A Yes, sir.

(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)

The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But
because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent
to higher officials. Immediately upon learning that payment on terms was frozen and/or denied,
Limketkai exercised his right within the period given to him and tendered payment in full. The BPI
rejected the payment.

In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of

Appeals (238 SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem that the legal
principles found in said case strengthen and support petitioner's submission that the contract was
perfected upon the meeting of the minds of the parties.

The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI
to sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to
broker Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property
and finally (d) the negotiations with Aromin and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and
the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the
cause thereof.

The phases that a contract goes through may be summarized as follows:

a. preparation, conception or generation, which is the period of negotiation and

bargaining, ending at the moment of agreement of the parties;

b. perfection or birth of the contract, which is the moment when the parties come to
agree on the terms of the contract; and

c. consummation or death, which is the fulfillment or performance of the terms

agreed upon in the contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No.
116650, May 23, 1995).

But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:

. . . A contract undergoes various stages that include its negotiation or preparation,

its perfection and, finally, its consummation. Negotiation covers the period from the
time the prospective contracting parties indicate interest in the contract to the time
the contract is concluded (perfected). The perfection of the contract takes place
upon the concurrence of the essential elements thereof. A contract which
is consensual as to perfection is so established upon a mere meeting of minds, i.e.,
the concurrence of offer and acceptance, on the object and on the cause thereof. A
contract which requires, in addition to the above, the delivery of the object of the
agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities prescribed
by law, such as in a donation of real property, is essential in order to make the act
valid, the prescribed form being thereby an essential element thereof. The stage of
consummation begins when the parties perform their respective undertakings under
the contract culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation,

serve as a binding juridical relation. In sales, particularly, to which the topic for
discussion about the case at bench belongs, the contract is perfected when a
person, called the seller, obligates himself, for a price certain, to deliver and to
transfer ownership of a thing or right to another, called the buyer, over which the
latter agrees.

(238 SCRA 602; 611 [1994].)

In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents
similar to this case, the Court, through Justice Aquino (later to be Chief Justice), quoting authorities,
upheld the perfection of the contract of sale thusly:

The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts. (Art. 1475, Ibid.)

xxx xxx xxx

 Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer (Art. 1319,
Civil Code). "An acceptance may be express or implied." (Art. 1320, Civil Code).

xxx xxx xxx

It is true that an acceptance may contain a request for certain changes in the terms
of the offer and yet be a binding acceptance. "So long as it is clear that the meaning
of the acceptance is positively and unequivocally to accept the offer, whether such
request is granted or not, a contract is formed." (Stuart vs. Franklin Life Ins. Co., 105
Fed. 2nd 965, citing Sec. 79, Williston on Contracts).

xxx xxx xxx

. . . the vendor's change in a phrase of the offer to purchase, which change does not
essentially change the terms of the offer, does not amount to a rejection of the offer
and the tender or a counter-offer. (Stuart vs. Franklin Life Ins. Co., supra.)

(at pp. 362-363; 365-366.)

In the case at bench, the allegation of NBS that there was no concurrence of the offer and
acceptance upon the cause of the contract is belied by the testimony of the very BPI official with
whom the contract was perfected. Aromin and Albano concluded the sale for BPI. The fact that the
deed of sale still had to be signed and notarized does not mean that no contract had already been
perfected. A sale of land is valid regardless of the form it may have been entered into (Claudel vs.
Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article 1458 of the Civil
Code is merely for greater efficacy or convenience and the failure to comply therewith does not
affect the validity and binding effect of the act between the parties (Vitug, Compendium of Civil Law
and Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other special
form, as in the sale of real property, the contracting parties may compel each other to observe that
form, once the contract has been perfected. Their right may be exercised simultaneously with action
upon the contract (Article 1359, Civil Code).

Regarding the admissibility and competence of the evidence adduced by petitioner, respondent
Court of Appeals ruled that because the sale involved real property, the statute of frauds is
applicable.

In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held that
contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks
questions on cross-examination. The succinct words of Justice Araullo still ring in judicial cadence:

As no timely objection or protest was made to the admission of the testimony of the
plaintiff with respect to the contract; and as the motion to strike out said evidence
came too late; and, furthermore, as the defendants themselves, by the cross-
questions put by their counsel to the witnesses in respect to said contract, tacitly
waived their right to have it stricken out, that evidence, therefore, cannot be
considered either inadmissible or illegal, and court, far from having erred in taking it
into consideration and basing his judgment thereon, notwithstanding the fact that it
was ordered to be stricken out during the trial, merely corrected the error he
committed in ordering it to be so stricken out and complied with the rules of
procedure hereinbefore cited.
 (at p. 748.)

In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the
contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla,
and other details of the litigated contract. Under the Abrenica rule (reiterated in a number of cases,
among them Talosig vs. Vda. de Nieba 43 SCRA 472 [1972]), even assuming that parol evidence
was initially inadmissible, the same became competent and admissible because of the cross-
examination, which elicited evidence proving the evidence of a perfected contract. The cross-
examination on the contract is deemed a waiver of the defense of the Statute of Frauds (Vitug,
Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, supra, p. 563).

The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were
stricken out, the cross-examination could have no object whatsoever, and if the questions were put
to the witnesses and answered by them, they could only be taken into account by connecting them
with the answers given by those witnesses on direct examination" (pp. 747-748).

Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts
pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the
contract. The memorandum may be found in several writings, not necessarily in one document. The
memorandum or memoranda is/are written evidence that such a contract was entered into.

We cite the findings of the trial court on this matter:

In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a
written contract of the sale is not necessary so long as the agreement to sell real
property is evidenced by a written note or memorandum, embodying the essentials of
the contract and signed by the party charged or his agent. Thus, it has been held:

The Statute of Frauds, embodied in Article 1403 of the Civil Code of

the Philippines, does not require that the contract itself be
written. The plain test of Article 1403, Paragraph (2) is clear that a
written note or memorandum, embodying the essentials of the
contract and signed by the party charged, or his agent suffices to
make the verbal agreement enforceable, taking it out of the operation
of the statute. (Emphasis supplied)

xxx xxx xxx

In the case at bar, the complaint in its paragraph 3 pleads that the
deal had been closed by letter and telegram (Record on Appeal, p.
2), and the letter referred to was evidently the one copy of which was
appended as Exhibit A to plaintiffs opposition to the motion to
dismiss. The letter, transcribed above in part, together with the one
marked as Appendix B, constitute an adequate memorandum of the
transaction. They are signed by the defendant-appellant; refer to the
property sold as a Lot in Puerto Princesa, Palawan, covered by
T.C.T. No. 62, give its area as 1,825 square meters and the purchase
price of four (P4.00) pesos per square meter payable in cash. We
have in them, therefore, all the essential terms of the contract and
they satisfy the requirements of the Statute of Frauds.

(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).

 While there is no written contract of sale of the Pasig property executed by BPI in
favor of plaintiff, there are abundant notes and memoranda extant in the records of
this case evidencing the elements of a perfected contract. There is Exhibit P, the
letter of Kenneth Richard Awad addressed to Roland Aromin, authorizing the sale of
the subject property at the price of P1,000.00 per square meter giving 2%
commission to the broker and instructing that the sale be on cash basis.
Concomitantly, on the basis of the instruction of Mr. Awad, (Exh. P), an authority to
sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr., representing Assetrade Co.,
authorizing the latter to sell the property at the initial quoted price of P1,000.00 per
square meter which was altered on an unaccepted offer by Technoland. After the
letter authority was issued to Mr. Revilla, a letter authority was signed by Mr. Aromin
allowing the buyer to enter the premises of the property to inspect the same (Exh. C).
On July 9, 1988, Pedro Revilla, Jr., acting as agent of BPI, wrote a letter to BPI
informing it that he had procured a buyer in the name of Limketkai Sons Milling, Inc.
with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila, represented by
its Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff,
through Alfonso Lim, wrote a letter to the bank, through Merlin Albano, confirming
their transaction regarding the purchase of the subject property (Exh. E). On July 18,
1988, the plaintiff tendered upon the officials of the bank a check for P33,056,000.00
covered by Check No. CA510883, dated July 18, 1988. On July 1, 1988, Alfonso
Zamora instructed Mr. Aromin in a letter to resubmit new offers only if there is no
transaction closed with Assetrade Co. (Exh. S). Combining all these notes and
memoranda, the Court is convinced of the existence of perfected contract of sale.
Aptly, the Supreme Court, citing American cases with approval, held:

No particular form of language or instrument is necessary to

constitute a memorandum or note in writing under the statute of
frauds; any document or writing, formal or informal, written either for
the purpose of furnishing evidence of the contract or for another
purpose, which satisfies all the requirements of the statute as to
contents and signature, as discussed respectively infra secs. 178-
200, and infra secs. 201-205, is a sufficient memorandum or note. A
memorandum may be written as well with lead pencil as with pen and
ink. It may also be filled in on a printed form. (37 C.J.S., 653-654).

The note or memorandum required by the statute of frauds need not

be contained in a single document, nor, when contained in two or
more papers, need each paper be sufficient as to contents and
signature to satisfy the statute. Two or more writings properly
connected may be considered together, matters missing or uncertain
in one may be supplied or rendered certain by another, and their
sufficiency will depend on whether, taken together, they meet the
requirements of the statute as to contents and the requirements of
the statutes as to signature, as considered respectively infra secs.
179-200 and secs. 201-215.

(pp. 460-463, Original RTC Record).

The credibility of witnesses is also decisive in this case. The trial court directly observed the
demeanor and manner of testifying of the witnesses while the Court of Appeals relied merely on the
transcript of stenographic notes.
In this regard, the court of origin had this to say:

Apart from weighing the merits of the evidence of the parties, the Court had occasion
to observe the demeanor of the witnesses they presented. This is one important
factor that inclined the Court to believe in the version given by the plaintiff because
its witnesses, including hostile witness Roland V. Aromin, an assistant vice-president
of the bank, were straightforward, candid and unhesitating in giving their respective
testimonies. Upon the other hand, the witnesses of BPI were evasive, less than
candid and hesitant in giving their answers to cross examination questions.
Moreover, the witnesses for BPI and NBS contradicted each other. Fernando Sison
III insisted that the authority to sell issued to Mr. Revilla was merely an evidence by
which a broker may convince a prospective buyer that he had authority to offer the
property mentioned therein for sale and did not bind the bank. On the contrary,
Alfonso Zamora, a Senior Vice-President of the bank, admitted that the authority to
sell issued to Mr. Pedro Revilla, Jr. was valid, effective and binding upon the bank
being signed by two class "A" signatories and that the bank cannot back out from its
commitment in the authority to sell to Mr. Revilla.

While Alfredo Ramos of NBS insisted that he did not know personally and was not
acquainted with Edmundo Barcelon, the latter categorically admitted that Alfredo
Ramos was his friend and that they have even discussed in one of the luncheon
meetings the matter of the sale of the Pasig property to NBS. George Feliciano
emphatically said that he was not a consultant of Mr. Ramos nor was he connected
with him in any manner, but his calling card states that he was a consultant to the
chairman of the Pacific Rim Export and Holdings Corp. whose chairman is Alfredo
Ramos. This deliberate act of Mr. Feliciano of concealing his being a consultant to
Mr. Alfredo Ramos evidently was done by him to avoid possible implication that he
committed some underhanded maneuvers in manipulating to have the subject
property sold to NBS, instead of being sold to the plaintiff.

(pp. 454-455, Original RTC Record.)

On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals
and the trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of
Appeals (196 SCRA 107 [1991]) bears stressing:

It is a settled principle of civil procedure that the conclusions of the trial court
regarding the credibility of witnesses are entitled to great respect from the appellate
courts because the trial court had an opportunity to observe the demeanor of
witnesses while giving testimony which may indicate their candor or lack thereof.
While the Supreme Court ordinarily does not rule on the issue of credibility of
witnesses, that being a question of fact not properly raised in a petition under Rule
45, the Court has undertaken to do so in exceptional situations where, for instance,
as here, the trial court and the Court of Appeals arrived at divergent conclusions on
questions of fact and the credibility of witnesses.

(at p. 110.)

On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows
that it is not. It acted in bad faith.
Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It
was the willingness and design of NBS to buy property already sold to another party which led BPI to
dishonor the contract with Limketkai.

Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner
from paying the agreed price and getting possession of the property:

1. The sale was supposed to be done through an authorized broker, but top officials of BPI
personally and directly took over this particular sale when a close friend became interested.

2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was
his friend; that they had lunch meetings before this incident and discussed NBS's purchase of the lot.
Barcelon's father was a business associate of Ramos.

3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop
the case and give up the lot. Feliciano went to petitioner's office and haggled with Alfonso Lim but
failed to convince him inspite of various and increasing offers.

4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse
marked by easy portability. The warehouse is bolted to its foundations and can easily be dismantled.

It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly
negates any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the
vendor guarantee its title to the land and recognize the right of the vendee to proceed against the
vendor if the title to the land turns out to be defective as when the land belongs to another person,
the reverse is found in the deed of sale between BPI and NBS. Any losses which NBS may incur in
the event the title turns out to be vested in another person are to be borne by NBS alone. BPI is
expressly freed under the contract from any recourse of NBS against it should BPI's title be found
defective.

NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply
cites the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the
enumeration there is exclusive. The decision in said case plainly states "the following are some of
the circumstances attending sales which have been denominated by courts (as) badges of fraud."
There are innumerable situations where fraud is manifested. One enumeration in a 1912 decision
cannot possibly cover all indications of fraud from that time up to the present and into the future.

The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the
amended complaint to implead NBS, sheriffs fees, registration fees, plane fare and hotel expenses
of Cebu-based counsel. Petitioner also claimed, and the trial court awarded, damages for the profits
and opportunity losses caused to petitioner's business in the amount of P10,000,000.00.

We rule that the profits and the use of the land which were denied to petitioner because of the non-
compliance or interference with a solemn obligation by respondents is somehow made up by the
appreciation in land values in the meantime.

Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner
Limketkai; that the BPI officials who transacted with petitioner had full authority to bind the bank; that
the evidence supporting the sale is competent and admissible; and that the sale of the lot to NBS
during the trial of the case was characterized by bad faith.
WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET
ASIDE. The June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The National
Capital Judicial Region stationed in Pasig, Metro Manila is REINSTATED except for the award of
Ten Million Pesos (P10,000,000.00) damages which is hereby DELETED.