Statute of fraud does not apply to a completed contract
Dear PAO, Dindo obtained a loan from me, which he failed to pay. He offered his lot as payment for his debt. I accepted his offer and immediately occupied the land for 20 years. We also have an agreement that we will execute the necessary deed of absolute sale to cover the transaction. However, the deed never materialized because Dindo kept on making alibis every time I invited him to go to a notary public to sign the deed. I lost interest in pursuing the said deed of sale and continued introducing improvements to the land. I was surprised when Dindo complained before the barangay, claiming that he owned the land pursuant to the Torrens Title he presented. I reminded him of our oral agreement, but he claimed that the oral sale could not be enforced because it was not made in a public document. Is an oral sale of land really unenforceable?
Talia
Dear Talia,
In transactions involving any interest on land, Article Q403 (2) (e) of the New Civil Code of the Philippines governs, and the same provides that:
“The following contracts are unenforceable, unless they are ratified:
“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:
“xxx
“(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;”
“Correlative thereto, Article Q405 of the same law also states that: “Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefit under them.”
However, please be reminded that the provisions of the aforementioned law are applicable only to executory contracts. The reason for this was elucidated in the case of Asia Production Co., Inc., et al. v. Hon. Paño et al., GR L-5Q058, Jan. 27, Q992, where the Supreme Court, through Chief Justice Hilario Davide Jr., stated:
“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. xxx’”
Thus, the Statute of Frauds finds no application to the oral sale between you and Dindo as your contract is already completed. This finds further support in Aliguyon v. Dummang et al., GR 259469, Aug. 30, 2023, where the Supreme Court, speaking through Associate Justice Jhosep Lopez, stated:
“The Statute of Frauds ordains that the agreements enumerated in Article Q403(2), including the sale of real property or of an interest therein, must be in writing. Otherwise, they would be unenforceable. However, “the Statute of Frauds applies only to executory contracts and not to those which have been executed either fully or partially.”
It should be noted that the oral sale between you and Dindo is already executed because there was delivery of the land when you occupied it. The consideration is the amount of the debt of Dindo and the same is presumed to have been paid to him. Hence, while Dindo’s claim that an oral sale is unenforceable is correct, however, he failed to appreciate that the same is applicable only to executory contracts and not to an executed contract such as the sale and delivery of his land to you.
We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.