Rescissible Contracts

Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation of
damages caused to them by a contract, even if this should be valid, by restoration of things to their condition the
moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or
a pecuniary damage to someone.

A rescissible contract possesses the following characteristics:

a. These contracts are valid and enforceable until they are rescinded by a competent court. Hence, rescission in
Article 1381 presupposes contracts validly entered into;
b. While they are valid, they cause pecuniary lesion or prejudice to one of the contracting parties or to a third
person;
c. The defect may not, however be cured by ratification although the right of action for rescission may be lost by
way of prescription;
d. The defect of a rescissible contract cannot be attacked collaterally. An action for rescission must be set up in
an independent civil action and only after full blown trial. An independent action is necessary to prove that the
contract is rescissible.

1. Isidora Cabaliw and Soledad Sadorra v. Sotero Sadorra, Encarnacion Sadora, Emilio Antonio,
Esperenza Ranjo, Anselmo Rala, Basion Velasco, Ignacio Salmazan, and Court of Appeals
11 June 1975 – Munoz Palma, J.

Facts: Isidora Cabaliw was the wife of Benigno Sadorra by his second marriage. This couple had a daughter named
Soledad Sadorra. During their marriage, the spouses acquired two (2) parcels of land. Having been abandoned by her
husband, Isidora Cabaliw instituted an action for support; judgment was rendered requiring Benigno Sadorra to pay
his wife, Isidora Cabaliw, the amount of P75.00 a month in terms of support.

Unknown to Isidora Cabaliw, Benigno Sadorra executed two (2) deeds of sale over the two parcels of land above
described in favor of his son-in-law, Sotero Sadorra, the latter being married to Encarnacion Sadorra, a daughter of
Benigno Sadorra by his first marriage. These deeds were duly registered and OCT cancelled and replaced with TCT.

Because of the failure of her husband to comply with the judgment of support, Isidora Cabaliw filed a motion to cite
Benigno Sadorra for contempt and the court authorized Isidora to take possession of the conjugal property, to
administer the same, and to avail herself of the fruits thereof in payment of the monthly support in arrears. With this
order of the Court, Isidora proceeded to take possession of the aforementioned parcels of land, and it was then that she
discovered that her husband had sold them to his son-in-law Sotero.

Isidora filed with the court against her husband and Sotero Sadorra for the recovery of the lands in question on the
ground that the sale was fictitious; at the same time a notice of lis pendens was filed with the Register of Deeds of
Nueva Vizcaya.

Thereafter, Benigno Sadorra died.

Isidora and her daughter Soledad filed with the court to recover from the spouses Sotero and Encarnacion Sadorra the
aforementioned two parcels of land; they also caused the annotation of a cautionary notice and notice of lis pendens.

Ruling: The CA sustained the validity and efficacy of the deeds of sale executed by Benigno Sadorra in favor of his son-
in-law on the ground that these are public documents and as such are presumed by law to have been fair and legal;
that the vendee Sotero Sadorra, is presumed to have acted in good faith; that fraud is never presumed, and it is settled
in this jurisdiction that strong and convincing evidence is necessary to overthrow the validity of an existing public
instrument. The appellate court continued that inasmuch as under the old Civil Code in force at the time of the sale,
the husband was empowered to dispose of the conjugal property without the consent of the wife, the sales made by
Benigno Sadorra were valid, and the wife Isidora cannot now recover the property from the vendee.

The judgment of the Court of Appeals cannot be sustained.

The facts narrated in the first portion of this Decision which are not disputed, convincingly show or prove that the
conveyances made by Benigno Sadorra in favor of his son-in-law were fraudulent. For the heart of the matter is that
about seven months after a judgment was rendered against him and without paying any part of that judgment,
Benigno Sadorra sold the only two parcels of land belonging to the conjugal partnership to his son-in-law. Such a sale
even if made for a valuable consideration is presumed to be in fraud of the judgment creditor who in this case happens
to be the offended wife.

Article 1297 of the old Civil Code which was the law in force at the time of the transaction provides:
 Contracts by virtue of which the debtor alienates property by gratuitous title are presumed to be
made in fraud of creditors.

Alienations by onerous title are also presumed fraudulent when made by persons against whom
some judgment has been rendered in any instance or some writ of attachment has been issued. The
decision or attachment need not refer to the property alienated and need not have been obtained by
the party seeking rescission.

The above-quoted legal provision was totally disregarded by the appellate court, and there lies its basic error.

We agree with petitioners that the parties here do not stand in equipoise, for the petitioners have in their favor, by a
specific provision of law, the presumption of a fraudulent transaction which is not overcome by the mere fact that the
deeds of sale in question were in the nature of public instruments. As well said in the dissenting opinion of Justice
Magno Gatmaitan, the principle invoked by the majority opinion that to destroy the validity of an existing public
document "strong and convincing evidence is necessary", operates "where the action was brought by one party against
the other to impugn the contract ... but that rule cannot operate and does not, where the case is one wherein the suit is
not between the parties inter se but is one instituted by a third person, not a party to the contract but precisely the
victim of it because executed to his prejudice and behind his back; neither law, nor justice, nor reason, nor logic,
should so permit, otherwise, in such a suit, the courts would be furnishing a most effective shield of defense to the
aggressor."

Furthermore, the presumption of fraud established by the law in favor of petitioners is bolstered by other indicia of
bad faith on the part of the vendor and vendee. Thus (1) the vendee is the son-in-law of the vendor (this Court held
that the close relationship between the vendor and the vendee is one of the known badges of fraud. (2) At the time of
the conveyance, the vendee, Sotero, was living with his father-in-law, the vendor, and he knew that there was a
judgment directing the latter to give a monthly support to his wife Isidora and that his father-in-law was avoiding
payment and execution of the judgment. (3) It was known to the vendee (Sotero) that his father-in-law had no
properties other than those two parcels of land which were being sold to him. The fact that a vendor transfers all of his
property to a third person when there is a judgment against him is a strong indication of a scheme to defraud one who
may have a valid interest over his properties.

Added to the above circumstances is the undisputed fact that the vendee Sotero Sadorra secured the cancellation of
the lis pendens on OCT which was annotated in 1940 at the instance of Isidora Cabaliw, and the issuance of a transfer
certificate of title in his favor, by executing an affidavit, wherein he referred to Isidora as "the late Isidora Cabaliw'
when he knew for a fact that she was alive, and alleged that the civil case was decided in his favor where in truth there
was no such decision because the proceedings in said case were interrupted by the last world war. Such conduct of
Sotero Sadorra reveals, as stated by the lower court, an "utter lack of sincerity and truthfulness" and belies his
pretensions of good faith.

On the part of the transferee, he did not present satisfactory and convincing evidence sufficient to overthrow the
presumption and evidence of a fraudulent transaction. His is the burden of rebutting the presumption of fraud
established by law, and having failed to do so, the fraudulent nature of the conveyance in question prevails. 

The decision of the Court of Appeals makes mention of Art. 1413 of the old Civil Code which authorizes the husband as
administrator to alienate and bind by onerous title the property of the conjugal partnership without the consent of the
wife, and by reason thereof, concludes that petitioner Isidora Cabaliw cannot now seek annulment of the sale made by
her husband. On this point, counsel for petitioners rightly claims that the lack of consent of the wife to the
conveyances made by her husband was never invoked nor placed in issue before the trial court. What was claimed all
along by plaintiff, Isidora Cabaliw now petitioner, was that the conveyances or deeds of sale were executed by her
husband to avoid payment of the monthly support adjudged in her favor and to deprive her of the means to execute
said judgment. In other words, petitioner seeks relief not so much as an aggrieved wife but more as a judgment
creditor of Benigno Sadorra. Art. 1413 therefore is inapplicable; but even if it were, the result would be the same
because the very article reserves to the wife the right to seek redress in court for alienations which prejudice her or her
heirs.  The undisputed facts before us clearly show that, the sales made by the husband were merely a scheme to place
beyond the reach of the wife the only properties belonging to the conjugal partnership and deprive her of what rightly
belongs to her and her only daughter Soledad.

PREMISES CONSIDERED, We find merit to this petition and we set aside the decision of the appellate court for being
contrary to the law applicable to the facts of the case. The decision of the trial court stands affirmed with costs against
private respondents.
 2. Hongkong & Shanghai Banking Corporation v. Ralph Pauli and Sally Garganera
30 May 1988 – Grino-Aquino, J.

In Civil Case No. 32799 CFI-Manila,  HSBC filed a complaint against the defendant Ralph Pauli, to collect the sum of
money. After the trial, judgment was rendered in favor of the Bank ordering defendant Pauli to pay to plaintiff. The
decision having become final, the Bank endeavored to execute it but the writs of execution were returned unsatisfied
because no leviable assets of Pauli could be located by the sheriffs. 

Unknown to the HSBC, Pauli had purchased from PNB a sugar cane plantation known as Hacienda Riverside. To avoid
discovery of the transaction by his creditors, he did not register the deed of Sale. Six years later, he fraudulently sold
the hacienda to his daughter, Sally Garganera. The sale was registered and TCT was issued to Sally (state the date of
registration and issuance of TCT)

In Civil Case No. 626 CFI-Negros Occidental, at the instance of Warner Barnes, another creditor of Pauli, the sale to
Sally Garganera was declared fictitious for being in fraud of creditors. The defendants entered into a compromise
agreement with the Warner Barnes & Co, by paying its judgment credit of P28,962.11. The court approved the
compromise and dismissed the case.

In Civil Case No. 75319 CFI-Manila, having discovered that the sugar plantation belonged to Paul, the HSBC filed a
complaint for revival of Civil Case No. 32799 and judgment in its favor. A writ of preliminary attachment was issued
against Pauli's, rights, interests and participation. Pauli prayed for the dismissal of the complaint and the lifting of the
order of attachment on Lot No. 693. 

In Civil Case No. 465 CFI-Negros Occidental, the Bank filed a new complaint against Pauli and the Garganera praying
for annulment of the Conditional Sale as well as the Deed of Sale of Hacienda Riverside to the Garganera and also for
annulment of Garganera's Certificate of Title.

Pauli filed a Motion to Dismiss on the grounds of res judicata, prescription, waiver and abandonment of claim. The
Garganeras filed a similar Motion to Dismiss.

Issue: Has the action for annulment of the sale of Lot 693 to the Garganera prescribed? Did prescription of the action
commence to run from the registration of the sale, or from the discovery of the transaction by the Bank? 

Ruling: When a transaction involves registered land, the four-year period fixed in Article 1391 within which to bring an
action for annulment of the deed, shall be computed from the registration of the conveyance (March 5, 1963) on the
familiar theory that the registration of the document is constructive notice of the conveyance to the whole world

Plaintiff's submission that the four-year period commenced to run from the date when the Bank obtained actual
knowledge of the fraudulent sale of Pauli's land to the Garganera (sometime in 1969) and that hence the four-year
period for bringing an action to annul the sale had not yet expired when it filed the action for annullment is
unacceptable. That theory would diminish public faith in the integrity of torrens titles and impair commercial
transactions involving registered lands for it would render uncertain the computation of the period for the prescription
of such actions. 

Voidable contracts
A contract is voidable when all the essential requisites for the perfection of the contract are present but the element of
consent is defective either because of want of capacity to contract with respect to one the parties thereto or because of
vitiation of consent by reason of mistake, violence, intimidation, undue influence, or fraud.

Characteristics of avoidable contract:

a. It is valid and binding and produces all its civil effects, until it is set aside by a final judgment of a competent
court in an action for annulment;
b. However, it suffers from a defect in the form of vitiation of consent by reason of want of capacity, error,
violence, intimidation, undue influence, or deceit.
c. It may be rendered perfectly valid by ratification, which can be express or implied, such as by accepting and
retaining the benefits of a contract;
d. It is also susceptible of convalidation by prescription since the action for annulment is subject to prescription
or statute of limitations;
e. It can be assailed only in a direct proceeding for that purpose and not collaterally.

Before a party can have the necessary standing to institute the action for annulment, he must either be:
a. The party obliged principally or subsidiarily in the contract which he seeks to annul; or
 b. The party suffering from incapacity to give consent or the victim of intimidation, violence, unfue influence,
fraud or mistake. Thus, persons who are capable cannot allege the incapacity of those with whom they
contracted; nor can those who exerted intimidation, violence or undue influence, employed fraud, or caused
mistake base on their action upon these flaws of the contract.

The prescriptive period is four years and the period commences to run:
a. In cases of intimidation, violence or undue influence – from the time the defect of the contract ceases.
b. In cases of mistake or fraud – from the time the discovery of the same.
c. In cases of incapacity to give consent – from the time the guardianship ceases.

Contracts that are voidable or annulable, even though there may have been no damage to the contracting parties, are
the following:
a. Those were one of the parties is incapable of giving consent to a contract; and
b. Those were the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

1. Eduardo Felipe, Hermogena Felipe and Vicente Felipe v. Heirs of Maximo Aldon: Gimena
Almosara, Sofia Aldon, Salvador Aldon, and the Court of Appeals
16 Feb 1983 – Abad Santos, J.

Facts: In 1951, Gimena Almosara sold the lots to the spouses Felipe. The sale was made without the consent of her
husband, Maximo Aldon.

On April 26, 1976, the heirs of Maximo Aldon, namely his widow Gimena and their children Sofia and Salvador Aldon,
filed a complaint in the Court of First Instance of Masbate against the Felipes. The complaint alleged that the plaintiffs
were the owners of lot; that they had orally mortgaged the same to the defendants Felipe; and an offer to redeem the
mortgage had been refused so they filed the complaint in order to recover the three parcels of land. 

The defendants asserted that they had acquired the lots from the plaintiffs by purchase and subsequent delivery to
them.  

Ruling: The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal
partnership made by the wife without the consent of the husband. 

It is useful at this point to re-state some elementary rules: The husband is the administrator of the conjugal
partnership. Subject to certain exceptions, the husband cannot alienate or encumber any real property of the conjugal
partnership without the wife's consent. And the wife cannot bind the conjugal partnership without the husband's
consent, except in cases provided by law.

In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership without the consent of the
husband and the sale is not covered by the phrase "except in cases provided by law." The Court of Appeals described
the sale as "invalid" - a term which is imprecise when used in relation to contracts because the Civil Code uses specific
names in designating defective contracts, namely: rescissible, voidable, unenforceable and void or inexistent.

The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a voidable contract. 

According to Art. 1390 of the Civil Code, among the voidable contracts are "those where one of the parties is incapable
of giving consent to the contract." In the instant case, Gimena had no capacity to give consent to the contract of sale.
The capacity to give consent belonged not even to the husband alone but to both spouses. 

The view that the contract made by Gimena is a voidable contract is supported by the legal provision that contracts
entered by the husband without the consent of the wife when such consent is required, are annullable at her instance
during the marriage and within ten years from the transaction questioned.

Gimena's contract is not rescissible for in such contract all the essential elements are untainted but Gimena's consent
was tainted. Neither can the contract be classified as unenforceable because it does not fit any of those described in
Art. 1403 of the Civil Code. And finally, the contract cannot be void or inexistent because it is not one of those
mentioned in Art. 1409 of the Civil Code. By process of elimination, it must perforce be a voidable contract. 

The voidable contract of Gimena was subject to annulment by her husband only during the marriage because he was
the victim who had an interest in the contract. Gimena, who was the party responsible for the defect, could not ask for
its annulment. Their children could not likewise seek the annulment of the contract while the marriage subsisted
because they merely had an inchoate right to the lands sold. 

The termination of the marriage and the dissolution of the conjugal partnership by the death of Maximo Aldon did not
improve the situation of Gimena. What she could not do during the marriage, she could not do thereafter. 
The case of Sofia and Salvador Aldon is different. After the death of Maximo they acquired the right to question the
defective contract insofar as it deprived them of their hereditary rights in their father's share in the lands. The
petitioners have been in possession of the lands since 1951. It was only in 1976 when the respondents filed action to
recover the lands. In the meantime, Maximo Aldon died. 

Two questions come to mind, namely: (1) Have the petitioners acquired the lands by acquisitive prescription? (2) Is
the right of action of Sofia and Salvador Aldon barred by the statute of limitations? 

Anent the first question, We quote with approval the following statement of the Court of Appeals: 

We would like to state further that petitioners herein could not have acquired ownership of the lots by
prescription in view of what we regard as their bad faith. This bad faith is revealed by testimony to the
effect that defendant-appellee Vicente V. Felipe (son of appellees Eduardo Felipe and Hermogena V.
Felipe) attempted in December 1970 to have Gimena Almosara sign a ready-made document
purporting to self the disputed lots to the appellees. This actuation clearly indicated that the appellees
knew the lots did not still belong to them, otherwise, why were they interested in a document of sale
in their favor? Again why did Vicente V. Felipe tell Gimena that the purpose of the document was to
obtain Gimena's consent to the construction of an irrigation pump on the lots in question? The only
possible reason for purporting to obtain such consent is that the appellees knew the lots were not
theirs. Why was there an attempted improvement (the irrigation tank) only in 1970? Why was the
declaration of property made only in 1974? Why were no attempts made to obtain the husband's
signature, despite the fact that Gimena and Hermogena were close relatives? An these indicate the bad
faith of the appellees. Now then, even if we were to consider appellees' possession in bad faith as a
possession in the concept of owners, this possession at the earliest started in 1951, hence the period
for extraordinary prescription (30 years) had not yet lapsed when the present action was instituted on
April 26, 1976. 

As to the second question, the children's cause of action accrued from the death of their father in 1959 and they had
thirty (30) years to institute it. They filed action in 1976 which is well within the period. 

WHEREFORE, the decision of the Court of Appeals is hereby modified. Judgment is entered awarding to Sofia and
Salvador Aldon their shares of the lands as stated in the body of this decision; and the petitioners as possessors in bad
faith shall make an accounting of the fruits corresponding to the share aforementioned from 1959 and solidarity pay
their value to Sofia and Salvador Aldon; costs against the petitioners.

2. House of International Building Tenants Association v. IAC, Centertown Marketing Corp.,

Manila Towers Dev’t Corp., and the GSIS
30 June 1987 - Cortes, J.

Petitioner House International Building Tenants Association, Inc. (ASSOCIATION) is a domestic non-stock, non-
profit civic corporation, whose incorporators, directors and members constitute the great majority of more than a
hundred heads of families who are tenants of long and good standing of the 14-storey House International Building.
The land and the improvements thereon were formerly owned by Atty. Felipe Ang who mortgaged the same to the
GSIS to secure payment of an obligation. After foreclosure of the mortgage and for failure of Ang to exercise his right
of redemption over the foreclosed property, the ownership thereof was consolidated with the GSIS which subsequently
sold it to Centertown in a deed of conditional sale, without notice to the tenants of the building and without securing
the prior clearance of the then Ministry of Human Settlements.

As Centertown was not authorized by its AOI to engage in the real estate business, it organized Towers for the primary
purpose of engaging in the real estate business. Subsequently, Centertown assigned to Towers all its rights and
obligations under the Deed of Conditional Sale, with the consent and approval of the GSIS.

Thereafter, petitioner filed a complaint with the RTC-Manila against Centertown, Towers and GSIS for annulment of
the deed of conditional sale and the subsequent assignment. The complaint alleged in part that the Deed of
Conditional Sale is null and void ab initio for being ultra vires, since defendant Centertown is not qualified to acquire
real estate property or to engage in real estate transactions.

The main issues raised in the petition are: (1) whether petitioner has the personality to sue, on its own, as a
corporation representing its members who are tenants of the House International Building, and (2) whether petitioner
has a cause of action against respondents GSIS, CENTERTOWN and TOWERS.

Assuming arguendo, that the tenants have the alleged right, such rights of the tenants are personal and
individual rights which can only be claimed by the tenants who must necessarily be the indispensable and real
parties in interest and certainly not the plaintiff-appellant organization.
The main thrust of the petitioner's challenge on the validity of the conditional sale is that the contract is ultra
vires because the respondent Centertown is not qualified to acquire properties under its AOI. The petitioner has
confused a void contract with an ultra vires contract which is merely voidable.

We agree with the Court of Appeals that on this issue the provision of Art. 1397 of the Civil Code is in point, thus:

Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged
principally or subsidiarily.

Petitioner Association is neither a party nor a privy to the Deed of Conditional Sale and the assignment thereof: thus, it
cannot assail the validity of the said contracts. In Ibañez vs. Hongkong and Shanghai Bank, we said:

From these legal provisions it is deduced that it is the interest had in a given contract, that is the determining
reason of the right which lies in favor of the party obligated principally or subsidiarily to enable him to bring
an action for the nullity of the contract in which he intervened, and, therefore, he who has no right in a
contract is not entitled to prosecute an action for nullity, for, according to the precedents established by the
courts, the person who is not a party to a contract, nor has any cause of action or representation from those
who intervened therein, is manifestly without right of action and personality such as to enable him to assail
the validity of the contract.

In the decision sought to be reviewed We agree with the Court of Appeals that:

The corollary issue is whether appellant has the personality to assail the validity of the conditional sale and its
assignment. The answer is partly supplied by the above discussion: further arguments against the appellant
are the provisions of the Civil Code which say that contracts take effect only between parties (Art. 131 1) hence
the action for their annulment may be instituted only by those who are thereby obliged principally or
subsidiarily. Appellant is not privy to either the deed of conditional sale or the assignment.

WHEREFORE, the petition is DENIED, with costs against the petitioner.

3. Joseph Harry Walter Poole-Blunded v. Unionbank of the Philippines

29 November 2017 – Leonen, J.

Facts: Poole-Blunden came across an advertisement placed by Union Bank in the Manila Bulletin. The ad was for the
public auction of a condominium unit. The Unit was advertised to have an area of 95 square meters. Thinking that it
was sufficient and spacious enough for his residential needs, Poole-Blunden decided to register for the sale and bid on
the unit.

Poole-Blunden placed his bid and won the unit.  Poole-Blunden entered into a Contract to Sell with Union Bank. He
started occupying the unit in June 2001. By July 20, 2003, he was able to fully pay for the Unit.

In late 2003, Poole-Blunden decided to construct two (2) additional bedrooms in the Unit. Upon examining it, he
noticed apparent problems in its dimensions. He took rough measurements of the Unit, which indicated that its floor
area was just about 70 square meters, not 95 square meters, as advertised by Union Bank.

Poole-Blunden got in touch with an officer of Union Bank to raise the matter, but no action was taken. He asked for a
rescission of the Contract to Sell, along with a refund of the amounts he had paid, in the event that it was conclusively
established that the area of the unit was less than 95 square meters.

Union Bank informed Poole-Blunden that after inquiring with the HLURB, the Homeowners' Association of T-Tower
Condominium, and its appraisers, the Unit was confirmed to be 95 square meters, inclusive of the terrace and the
common areas surrounding it.

Poole-Blunden's dissatisfaction with Union Bank's answer prompted him to file his Complaint for Rescission of
Contract and Damages with the RTC-Makati City.

Poole-Blunden charges Union Bank with fraud in failing to disclose to him that the advertised 95 square meters was
inclusive of common areas. With the vitiation of his consent as to the object of the sale, he asserts that the Contract to
Sell may be voided. He insists that Union Bank is liable for breach of warranty despite the "as-is-where-is" clause in
the Contract to Sell.

Issue: Whether or not respondent Union Bank of the Philippines committed such a degree of fraud as would entitle
petitioner Joseph Harry Walter Poole-Blunden to the voiding of the Contract to Sell the condominium unit.
Ruling: No longer in dispute at this juncture is how the Unit's interior area is only 74.4 square meters. While
respondent has maintained that the Unit's total area is in keeping with the advertised 95 square meters, it has
conceded that these 95 square meters is inclusive of outside spaces and common areas.

For there to be a valid contract, all the three (3) elements of consent, subject matter, and price must be present.
Consent wrongfully obtained is defective. The party to a contract whose consent was vitiated is entitled to have the
contract rescinded. Accordingly, Article 1390 of the Civil Code stipulates that a contract is voidable or annullable even
if there is no damage to the contracting parties where consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.

Under Article 1338 of the Civil Code "there is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. "
However, not all instances of fraud enable the voiding of contracts. Article 1344 clarifies that in order to make a
contract voidable, the fraud "should be serious (dolo causante) and should not have been employed by both
contracting parties."

The fraud required to annul or avoid a contract must be so material that had it not been present, the defrauded party
would not have entered into the contract. The fraud must be the determining cause of the contract, or must have
caused the consent to be given.

Petitioner's contention on how crucial the dimensions and area of the Unit are to his decision to proceed with the
purchase is well-taken. The significance of space and dimensions to any buyer of real property is plain to see. This is
particularly significant to buyers of condominium units in urban areas, and even more so in central business districts,
where the scarcity of space drives vertical construction and propels property values. It would be immensely guileless of
this Court to fail to appreciate how the advertised area of the Unit was material or even indispensable to petitioner's
consent. As petitioner emphasized, he opted to register for and participate in the auction for the Unit only after
determining that its advertised area was spacious enough for his residential needs.

The significance of the Unit's area as a determining cause of the Contract to Sell is readily discernible. Falsity on its
area is attributable to none but to respondent, which, however, pleads that it should not be considered as having acted
fraudulently given that petitioner conceded to a sale on an as-is-where-is basis, thereby waiving "warranties regarding
possible errors in boundaries or description of property."

Reliance on as-is-where-is stipulation is misplaced for two (2) reasons. First, a stipulation absolving a seller of liability
for hidden defects can only be invoked by a seller who has no knowledge of hidden defects. Respondent here knew that
the Unit's area, as reckoned in accordance with the Condominium Act, was not 95 square meters. Second, an as-is-
where-is stipulation can only pertain to the readily perceptible physical state of the object of a sale. It cannot
encompass matters that require specialized scrutiny, as well as features and traits that are immediately appreciable
only by someone with technical competence.

It is clear from the records that respondent fully knew that the Unit's area, reckoned strictly in accordance with the
Condominium Act, did not total 95 square meters. Respondent admits that the only way the Unit's area could have
amounted to 95 square meters was if some areas for common use were added to its interior space. It acknowledged
knowing this fact through the efforts of its appraisers and even conceded that their findings were documented in their
reports.

Any waiver of warranties in the Contract to Sell could have only been concerned with the readily apparent subpar
condition of the Unit. A person not equipped with technical knowledge and expertise to survey real property could not
reasonably be expected to recognize deficiencies in measurement at the first instance especially if that property was of
irregular shape, neither square nor rectangle, and having a circular terrace.

Contrary to the Court of Appeals' assertion, Article 1542 of the Civil Code does not bar the voiding of the Contract to
Sell. Article 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or
number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the
boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the
contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area
or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.

Article 1542 has nothing to do with annulling fraudulently made sales. What it is concerned with is the proportionate
reduction of the purchase price in relation to the measurable units of the thing sold. Petitioner does not seek a
reduction of the purchase price. He seeks judicial relief to have the entirety of his purchase annulled, his consent
having been fraudulently obtained. By filing an action under Article 1390 of the Civil Code, petitioner declared that his
consent to the entire subject matter of the contract was vitiated. What suffices as relief is the complete annulment of
the sale, not the partial reimbursement upon which Article 1542 is premised.

Likewise, Article 1542 does not contemplate the seller's delivery to the buyer of things other than the agreed object of
the sale. While it is true that petitioner did not buy the unit on a per-square-meter basis, it remains that what he
bought was a condominium unit. A condominium unit's bounds are reckoned by "the interior surfaces of [its]
perimeter walls, floors, ceilings, windows and doors." It excludes common areas. Thus, when petitioner agreed to
purchase the Unit at a lump-sum price, he never consented to including common areas as part of his purchase. Article
1542's concern with a ratable reduction of the price delivered by the buyer assumes that the seller correctly delivered,
albeit deficiently, the object of the sale.

In any case, for Article 1542 to operate, "the discrepancy must not be substantial." Article 1542 remains anchored on a
sense of what is reasonable. An estimate given as a premise for a sale should be "more or less" the actual area of the
thing sold. Here, the area advertised and stipulated in the Contract to Sell was 95 square meters but the actual area of
the unit was only 74.4 square meters. By no stretch of the imagination can a 21.68% deficiency be discounted as a mere
minor discrepancy.

By definition, fraud presupposes bad faith or malicious intent. It transpires when insidious words or machinations are
deliberately employed to induce agreement to a contract. Thus, one could conceivably claim that respondent could not
be guilty of fraud as it does not appear to have crafted a deceptive strategy directed specifically at petitioner. However,
while petitioner was not a specific target, respondent was so callously remiss of its duties as a bank. It was so grossly
negligent that its recklessness amounts to a wrongful willingness to engender a situation where any buyer in
petitioner's shoes would have been insidiously induced into buying a unit with an actual area so grossly short of its
advertised space.

In Spouses Carbonell v. Metropolitan Bank and Trust Company, this Court considered gross negligence, in relation to
the fiduciary nature of banks:

Gross negligence connotes want of care in the performance of one's duties; it is a negligence characterized by the want
of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but wilfully
and intentionally, with a conscious indifference to consequences insofar as other persons may be affected. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them.

In order for gross negligence to exist as to warrant holding the respondent liable therefor, the petitioners must
establish that the latter did not exert any effort at all to avoid unpleasant consequences, or that it wilfully and
intentionally disregarded the proper protocols or procedure . . . and in selecting and supervising its employees.

Banks assume a degree of prudence and diligence higher than that of a good father of a family, because their business
is imbued with public interest and is inherently fiduciary. Thus, banks have the obligation to treat the accounts of its
clients "meticulously and with the highest degree of care." With respect to its fiduciary duties, this Court explained:

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No.
8791 ("RA 8791”) declares that the State recognizes the "fiduciary nature of banking that requires high standards of
integrity and performance." This new provision in the general banking law is a statutory affirmation that "the bank is
under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.

This fiduciary relationship means that the bank's obligation to observe "high standards of integrity and performance"
is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil
Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a good father of a family. Section 2 of RA 8791 prescribes the statutory diligence
required from banks — that banks must observe "high standards of integrity and performance" in servicing their
depositors.

The high degree of diligence required of banks equally holds true in their dealing with mortgaged real properties, and
subsequently acquired through foreclosure, such as the Unit purchased by petitioner. In the same way that banks are
"presumed to be familiar with the rules on land registration," given that they are in the business of extending loans
secured by real estate mortgage, banks are also expected to exercise the highest degree of diligence. This is especially
true when investigating real properties offered as security, since they are aware that such property may be passed on to
an innocent purchaser in the event of foreclosure. Indeed, "the ascertainment of the status or condition of a property
offered to it as security for a loan must be a standard and indispensable part of a bank's operations."
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is applied
more strictly. Being in the business of extending loans secured by real estate mortgage, banks are presumed to be
familiar with the rules on land registration. Since the banking business is impressed with public interest, they are
expected to be more cautious, to exercise a higher degree of diligence, care and prudence, than private individuals in
their dealings, even those involving registered lands. Banks may not simply rely on the face of the certificate of title.
Hence, they cannot assume that, simply because the title offered as security is on its face free of any encumbrances or
lien, they are relieved of the responsibility of taking further steps to verify the title and inspect the properties to be
mortgaged. As expected, the ascertainment of the status or condition of a property offered to it as security for a loan
must be a standard and indispensable part of a bank's operations. It is of judicial notice that the standard practice for
banks before approving a loan is to send its representatives to the property offered as collateral to assess its actual
condition, verify the genuineness of the title, and investigate who is/are its real owner/s and actual possessors.

Credit investigations are standard practice for banks before approving loans and admitting properties offered as
security. It entails the assessment of such properties: an appraisal of their value, an examination of their condition, a
verification of the authenticity of their title, and an investigation into their real owners and actual possessors. Whether
it was unaware of the unit's actual interior area; or, knew of it, but wrongly thought that its area should include
common spaces, respondent's predicament demonstrates how it failed to exercise utmost diligence in investigating the
Unit offered as security before accepting it. This negligence is so inexcusable; it is tantamount to bad faith.

Even the least effort on respondent's part could have very easily confirmed the Unit's true area. Similarly, the most
cursory review of the Condominium Act would have revealed the proper reckoning of a condominium unit's area.
Respondent could have exerted these most elementary efforts to protect not only clients and innocent purchasers but,
most basically, itself. Respondent's failure to do so indicates how it created a situation that could have led to no other
outcome than petitioner being defrauded.

WHEREFORE, the Petition is GRANTED.

The Contract to Sell entered into by petitioner Joseph Harry Walter Poole-Blunden and respondent Union Bank of the
Philippines is declared null and void. Respondent is ordered to refund the amounts petitioner has paid to purchase
Condominium unit located.

Unenforceable contracts
These are contracts that cannot be sued upon or enforced by a proper court action, unless they are ratified, as
distinguished from rescissible and voidable contract which are binding unless rescinded or annulled by a proper
action in court.

Three kinds of unenforceable contracts:

a. Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers;
b. Those who do not comply with the Statute of Frauds; and
c. Those where both of the parties are incapable of giving their consent to a contract.

Characteristics of unenforceable contracts:

a. They are valid contracts but which cannot be enforced by a proper action in court.
b. They are susceptible of ratification.
c. The defect of an unenforceable contract is of a permanent nature and it will exist as long as the contract
is not duly ratified. The mere lapse of time cannot give effect to such contract. The defect is such that it
cannot be cured except by the subsequent ratification of the unenforceable contract.
d. They cannot be assailed by third persons.

1. Marta Ortega v. Daniel Leonardo

28 May 1958 – Bengzon, J.

Ratio: Well known is the general rule in the Statute of Frauds precluding enforcement of oral contracts for the sale of
land. Not so well known is exception concerning the partially executed contracts — least our jurisprudence offers few,
if any, apposite illustrations.

Facts: The complaint averred that long before and until her house had been completely destroyed during the liberation
of the City of Manila, plaintiff occupied a parcel of land (Lot I); that after liberation she re-occupied it; that when the
administration and disposition of the said Lot I were assigned by the Government to the Rural Progress
Administration plaintiff asserted her right thereto (as occupant) for purposes of purchase; that defendant also asserted
a similar right, alleging occupancy of a portion of the land subsequent to plaintiff's; that during the investigation of
such conflicting interests, defendant asked plaintiff to desist from pressing her claim and definitely promised that if
and when he succeeded in getting title to Lot I, he would sell to her a portion thereof provided she paid for the
surveying and subdivision of the Lot and provided further that after he acquired title, she could continue holding the
lot as tenant by paying a monthly rental of P10.00 until said portion shall have been segregated and the purchase price
fully paid; that plaintiff accepted defendant's offer, and desisted from further claiming Lot I; that defendant finally
acquired title thereto; that relying upon their agreement, plaintiff caused the survey and segregation of the portion
which defendant had promised to sell incurring expenses therefor, said portion being now designated as Lot I-B in a
duly prepared and approved subdivision plan; that in re-modelling her son's house constructed on a lot adjoining Lot I
she extended it over said Lot I-B; that after defendant had acquired Lot I plaintiff regularly paid him the monthly
rental of P10.00; that after the plans of subdivision and segregation of the lot had been approved by the Bureau of
Lands, plaintiff tendered to defendant the purchase price which the latter refused to accept, without cause or reason.

Alleging partial performance, plaintiff sought to compel defendant to comply with their oral contract of sale of a parcel
of land. Plaintiff argues that the contract in question, although verbal was partially performed because plaintiff
desisted from claiming the portion of Lot I in question due to the promise of defendant to transfer said portion to her
after the issuance of the title to the defendant.

Upon a motion to dismiss, the court ordered dismissal following the above general rule.

Ruling: American Jurisprudence in its title "Statute of Frauds" lists other acts of partial performance, such as
possession, the making of improvements, rendition of services, payment of taxes, relinquishment of rights, etc. 

Thus, it is stated that "The continuance in possession may, in a proper case, be sufficiently referable to the parol
contract of sale to constitute a part performance thereof. There may be additional acts or peculiar circumstances which
sufficiently refer the possession to the contract. . . . Continued possession under an oral contract of sale, by one already
in possession as a tenant, has been held a sufficient part performance, where accompanied by other acts which
characterize the continued possession and refer it to the contract of purchase. Especially is this true where the
circumstances of the case include the making of substantial, permanent, and valuable improvements."

It is also stated that "The making of valuable permanent improvements on the land by the purchaser, in pursuance of
the agreement and with the knowledge of the vendor, has been said to be the strongest and the most unequivocal act of
part performance by which a verbal contract to sell land is taken out of the statute of frauds, and is ordinarily an
important element in such part performance. . . . Possession by the purchaser under a parol contract for the purchase
of real property, together with his making valuable and permanent improvements on the property which are referable
exclusively to the contract, in reliance on the contract, in the honest belief that he has a right to make them, and with
the knowledge and consent or acquiescence of the vendor, is deemed a part performance of the contract. The entry
into possession and the making of the improvements are held on amount to such an alteration in the purchaser's
position as will warrant the court's entering a degree of specific performance."

Again, it is stated that "A tender or offer of payment, declined by the vendor, has been said to be equivalent to actual
payment, for the purposes of determining whether or not there has been a part performance of the contract. This is
apparently true where the tender is by a purchaser who has made improvements. But the doctrine now generally
accepted, that not even the payment of the purchase price, without something more, . . . is a sufficient part
performance.

And the relinquishment of rights or the compromise thereof has likewise been held to constitute part performance.

In the light of the above four paragraphs, it would appear that the complaint in this case described several
circumstance indicating partial performance: relinquishment of rights, continued possession, building of
improvements, tender of payment plus the surveying of the lot at plaintiff's expense and the payment of rentals.

We shall not take, time to discuss whether one or the other or any two or three of them constituted sufficient
performance to take the matter away from the operation of the Statute of Frauds. Enough to hold  that the
combination of all of them amounted to partial performance; and we do so line with the accepted basis of the doctrine,
that it would be a fraud upon the plaintiff if the defendant were permitted to oppose performance of his part after he
has allowed or induced the former to perform in reliance upon the agreement.

The paragraph immediately preceding will serve as our comment on the appellee's quotations from American
Jurisprudence itself to the effect that "relinquishment" is not part performance, and that neither "surveying the land"
nor tender of payment is sufficient. The precedents hereinabove transcribed oppose or explain away or qualify the
appellee's citations. And at the risk of being repetitious we say: granting that none of the three circumstances indicated
by him, (relinquishment, survey, tender) would separately suffice, still the combination of the three with the others
already mentioned, amounts to more than enough.

Hence, as there was partial performance, the principle excluding parol contracts for the sale of realty, does not apply.
The judgment will accordingly be reversed and the record remanded for further proceedings.
 2. Rosario Carbonnel v. Jose Poncio, Ramon Infante, and Emma Infante
12 May 1958 – Conception, J.

Facts: Plaintiff Rosario Carbonnel alleges that she purchased from defendant Jose Poncio a parcel of land known as
Lot No. 13-B of subdivision plan Psd-19567, excluding the improvements thereon; that plaintiff paid the price and
assumed Poncio's obligation with the Republic Savings Bank, with the understanding that the balance would be
payable upon execution of the corresponding deed of conveyance; that one of the conditions of the sale was that
Poncio would continue staying in said land for one year, as stated in a document signed by him; that Poncio refuses to
execute the corresponding deed of sale, despite repeated demand; that Poncio has conveyed the same property to
defendants Ramon and Emma Infante, who knew, of the first sale to plaintiff.

Plaintiff prayed, therefore, that she be declared owner of the land in question; that the sale to the Infantes be annulled;
that Poncio be required to execute the corresponding deed of conveyance in plaintiff's favor; that the Register of Deeds
of Rizal be directed to issue the corresponding title in plaintiff's name.

Defendants moved to dismiss said complaint upon the ground that plaintiff's claim is unenforceable under the Statute
of Frauds.

Thereafter, the Infantes alleged that they purchased the land in question in good faith, for value, and without
knowledge of the alleged sale to plaintiff; and that plaintiff's claim is unenforceable under the Statute of Frauds.

In his answer, Poncio denied specifically some allegations of said complaint. By way of special defenses, he alleged that
he had consistently turned down several offers, made by plaintiff, to buy the land in question for he believes that it is
worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter; that,
on or about January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the property at P20 a
square meter, she would allow him to remain in the property for one year; that plaintiff then induced Poncio to sign a
document, copy of which is probable, the one appended to the second amended complaint; that Poncio signed it
"relying upon the statement of the plaintiff that the document was a permit for him to remain in the premises in the
event that defendant decided to sell the property to the plaintiff at P20 a square meter"; that on January 30, 1955, Mrs.
Infante improved her offer and he agreed to sell the land and its improvements to her for P3,535; that Poncio has not
lost "his mind," to sell his property, worth at least P4,000, for the paltry sum of P1,177.48, the amount of his obligation
to the Republic Savings Bank; and that plaintiff's action is barred by the Statute of Frauds. Poncio similarly set up a
counterclaim for damages.

As the case came up for trial on February 23, 1956 plaintiff introduced the testimony of one Constancio Meonada, who
said that he is janitor of the Sto. Domingo Church and a high school, as well as auto-mechanic, graduate; that he has
been and still is a paying boarder in plaintiff's house; that Poncio is his townmate, both being from Mahatao, Batanes;
that, after making a rough draft, based upon data furnished by plaintiff, he typed Exhibit A, which is, in the Batanes
dialect; that, thereafter, Poncio came to plaintiff's house, where he was shown Exhibit A; that after the witness had
read its contents to Poncio and given him a copy thereof, Poncio signed Exhibit A and so did the plaintiff; that
Meonada likewise signed at the foot of Exhibit A, as attesting witness; and that translated freely into English, Exhibit
A, reads as follows:

From this date, January 27, Jose Poncio may stay in this lot that I bought from him until one year without
payment. After that one year and he cannot find any place where to transfer his house, he can also stay in this
lot and he will pay according agreement. (t.s.n., p. 4.)

Then, taking the witness stand, plaintiff testified that she has known Poncio since childhood, he being related to her
mother; that Poncio's lot adjoins her lot, in San Juan, Rizal; that one day Poncio told her that he wanted to sell his
property; that, after both had agreed on its price, he said that his lot is mortgaged to the Republic savings Bank; and
that at noon time, on the same day, he came back stating that both would "go to the bank to pay the balance in
arrears." At this juncture, defense counsel moved to strike out the statement of the witness, invoking, in support of the
motion, the Statute of Frauds. After an extended discussion, the parties agreed to submit memoranda and the hearing
was suspended. Later on, the lower court issued an order dismissing plaintiff's complaint, without costs, upon the
ground that her cause of action is unenforceable under the Statute of Frauds. The counterclaims were, also, dismissed.
Hence, this appeal by plaintiff.

Ruling: We are of the opinion and so hold that the appeal is well taken. It is well settled in this jurisdiction that the
Statute of Frauds is applicable only to executory contracts not to contracts that are totally or partially performed.

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 that a sufficient part performance by the purchaser under a parol
contract for the sale of real estate removes the contract from the operation of the statute of frauds.

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." 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 denied by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities
or liabilities assumed or contracted by him thereby.

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.

The true basis of the doctrine of part performance according to the overwhelming weight of authority, is that it
would be a fraud upon the plaintiff if the defendant were permitted to escape performance of his part of the
oral agreement after he has permitted the plaintiff to perform in reliance upon the agreement. The oral
contract is enforced in harmony with the principle that courts of equity will not allow the statute of frauds to
be used as an instrument of fraud. In other words, the doctrine of part performance was established for the
same purpose for which, the statute of frauds itself was enacted, namely, for the prevention of fraud, and
arose from the necessity of preventing the statute from becoming an agent of fraud for it could not have been
the intention of the statue to enable any party to commit a fraud with impunity.

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"

Upon submission of the case for decision on the merits, the Court should determine whether said allegation is true,
bearing in mind that parol evidence is easier to concoct and more likely to be colored or inaccurate than documentary
evidence. If the evidence of record fails to prove clearly that there has been partial performance, then the Court should
apply the Statute of Frauds, if the cause of action involved falls within the purview thereof. If the Court is, however,
convinced that the obligation in question has been partly executed and that the allegation of partial performance was
not resorted to as a devise to circumvent the Statute, then the same should not be applied.

Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's claim might not
be entirely devoid of factual basis. Thus, for instance, Poncio admitted in his answer that plaintiff had offered several
times to purchase his land.

Again, the document signed by the defendant. It is in the Batanes dialect, which, according to plaintiff's
uncontradicted evidence, is the one spoken by, Poncio, he being a native of said region. It states that Poncio would stay
in the land sold by him to plaintiff for one year, from January 27, 1955, free of charge, and that, if he cannot find a
place where to transfer his house thereon, he may remain in said lot under such terms as may be agreed upon.
Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the belief that it "was a
permit for him to remain in the premises in the event" that "he decided to sell the property" to the plaintiff at P20 a sq.
m." is, on its face, somewhat difficult to believe. Indeed, if he had not decided as yet to sell the land to plaintiff, who,
had never increased her offer of P15 a square meter, there was no reason for Poncio to get said, Permit from her. Upon
the other hand, if plaintiff intended to mislead Poncio, she would have caused Exhibit A to be drafted, probably in
English, instead of taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes.
Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign a document
without reading its contents, apart from the fact that Meonada had read Exhibit A to him and given him a copy
thereof, before he signed thereon, according to Meonada's uncontradicted testimony.

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any relation to her claim that there has been partial
performance of the supposed contract of sale, is the notation of the sum of P247.26 in the bank book of
defendant Jose Poncio. The noting or jotting down of the sum of P247.26 in the bank book of Jose Poncio does
not prove the fact that said amount was the purchase price of the property in question. For all we knew, the
sum of P247.26 which plaintiff claims to have paid to the Republic Savings Bank for the account of the
defendant, assuming that the money paid to the, Republic Savings Bank came from the plaintiff, was the result
 of some usurious loan or accommodation, rather than earnest money or part payment of the land. Neither is a
competent or satisfactory evidence to prove the conveyance on the land in question the fact that the bank book
account of Jose Poncio happens to be in the possession of the plaintiff. (Defendants-Appellees' brief, pp. 25-
26.)

How shall we know why Poncio's bank deposit book is in plaintiff's possession or whether there is any relation
between the P247.26 entry therein and the partial payment of P247.26 allegedly made by plaintiff to Poncio on
account of the price of his land, if we do not allow the plaintiff to explain it on the witness stand? Without expressing
any opinion on the merits of plaintiff's claim, it is clear, therefore, that she is entitled, legally as well as from the
viewpoint of equity, to an opportunity to introduce parol evidence in support of the allegations of her second amended
complaint.

Wherefore, the order appealed from is hereby set aside, and let this case be remanded to the lower court for further
proceedings not inconsistent with this decision, with the costs of this instance against defendants-appellees. It is so
ordered.

3. Babao v. Perez
4. Cabague v. Auxilio
5. Yuvienco v. Dacuycuy
6. Clarin v. Rulona
7. Bisaya Land Transportation v. Sanchez