Spouses Cipriano Pamplona and Bibiana Intac vs. Spouses Lilia I. Cueto and Vedasto Cueto

An oral contract to sell real property that has been partially executed through the buyer’s payment of part of the purchase price and the seller’s delivery of possession is removed from the Statute of Frauds and may be enforced by an action for specific performance. For a statement to be admitted against a party as an admission by silence, the party must have heard or observed the statement and had an opportunity to deny it; absence from the jurisdiction negates these requisites.

Sisters Bibiana Intac (petitioner) and Lilia Cueto (respondent) verbally agreed in January 1989 that Lilia would buy from Bibiana and her husband Cipriano a residential lot in Batangas City, covered by TCT No. RT-1504 (34558), for US$25,000, payable at US$300 per month. Bibiana sent Lilia, who was working in Italy, a notebook bearing the handwritten terms. Lilia remitted a total of US$14,000, while her son Roilan and later her husband Vedasto occupied the property, paying realty taxes and utilities. In 1997, the petitioners filed an unlawful detainer suit against Roilan and his wife, leading to eviction in early 1998. Upon returning to the Philippines, Lilia learned of the eviction, annotated an adverse claim on the title, tendered the balance of US$11,000 (later consigned in court), and sued for specific performance when petitioners refused to execute a deed of sale, claiming the payments were for a prior loan and no sale existed.

• The Oral Agreement and Its Documentation: Bibiana Intac and her sister Lilia Cueto orally agreed in January 1989 that Lilia would purchase from Bibiana and Cipriano Pamplona a 476‑sq m lot in Batangas City with improvements, covered by TCT No. RT‑1504 (34558), for US$25,000, payable in monthly instalments of US$300. Bibiana sent Lilia a notebook inscribed in her own hand with the date of the first payment (“1‑10‑89”), the total price, and the monthly amount; the notebook was meant to record remittances.
• Partial Payments and Possession: From 10 January 1989, Lilia remitted to Bibiana a total of US$14,000 through registered mail, leaving a balance of US$11,000. Bibiana did not dispute receipt. Possession of the property was transferred; Lilia’s son Roilan (Rolando) Cueto resided there, paid electricity and water bills, and, using funds sent by Lilia, paid realty taxes for 1991‑1996. No rent was ever demanded or paid.
• Eviction and Denial of the Contract: In 1997, petitioners filed an unlawful detainer suit against Roilan and his spouse (Civil Case No. 3429) before the MTCC, Batangas City. Roilan, unable to afford counsel, was declared in default and evicted in January 1998. Lilia was abroad at the time and learned of the eviction only when she returned in June 1998. Petitioners thereafter refused to honour the oral contract, asserting that Lilia’s remittances were repayment of a prior loan.
• Protective Steps and Consignation: On 15 June 1998, Lilia registered an Affidavit of Adverse Claim on the title. Through counsel, she tendered US$11,000 to Bibiana on 17 June 1998; Bibiana received the tender but did not accept it. Lilia consigned the equivalent in Philippine currency and commenced the suit for specific performance.
• Admissions by Vedasto and Roilan: Vedasto Cueto, Lilia’s husband, signed a written undertaking to vacate that acknowledged petitioners’ ownership. Roilan did not assert the oral contract to sell as a defence in the ejectment case. Petitioners relied on both as admissions against Lilia’s claim.
• Lower Court Findings: The RTC dismissed the complaint for lack of preponderant evidence, finding no documentary proof of the contract. The CA reversed, ruling that the oral contract had been partially executed and was therefore enforceable, and also invalidated the petitioners’ subsequent transfer of the property to Redima Baytown Development Corporation, a firm associated with their counsel Atty. Dimayacyac, as violative of Article 1491 of the Civil Code.

• Absence of a Contract to Sell: Petitioners maintained that the money Lilia sent was in payment of past debts, not the purchase price, and that no sale had ever been agreed upon.
• Statute of Frauds: They argued that an oral contract for the sale of real property worth more than PHP 500 is unenforceable under Article 1403 of the Civil Code because it was not reduced to writing and signed by the party to be charged.
• Admissions by Lilia’s Family: Petitioners relied on Vedasto’s written undertaking acknowledging their ownership and Roilan’s failure to plead the contract in the ejectment case as admissions that negated the alleged sale.
• Validity of Transfer to Redima: They contended that the deed of transfer of rights to Redima did not breach Article 1491 because the transferee was a separate corporate entity, distinct from the lawyer‑shareholder.

• Partial Execution of the Oral Contract: Respondents countered that the oral contract to sell was proved by Bibiana’s handwritten notebook, the unchallenged receipt of US$14,000, delivery of possession, and payment of taxes; partial execution removed the contract from the Statute of Frauds.
• Failure to Prove Affirmative Defence: They argued that petitioners bore the burden of proving that the remittances were for prior loans and failed to offer any evidence in support.
• Inapplicability of Admission by Silence: Respondents maintained that Lilia could not be bound by the admissions of her husband and son because she was abroad and had no opportunity to hear or repudiate them; the requisites of an admission by silence were absent.
• Violation of Article 1491: They asserted that the transfer to Redima was void because Atty. Dimayacyac, as counsel for petitioners in the litigation, acquired the property indirectly through the corporate vehicle, in breach of the prohibition on lawyers purchasing property in litigation.

• Existence of Partially Executed Contract to Sell: Whether respondents presented sufficient evidence to establish an oral contract to sell that had been partially executed, thereby overcoming the Statute of Frauds.
• Validity of Deed of Transfer to Redima: Whether the deed of transfer of rights executed by petitioners in favour of Redima Baytown Development Corporation violated Article 1491 of the Civil Code.

• Existence of Partially Executed Contract to Sell: The CA’s finding of a partially executed oral contract to sell was affirmed. The uncontroverted evidence—the notebook with Bibiana’s handwriting, the remittance of US$14,000, the transfer of possession, and the payment of realty taxes—was sufficient to prove the contract. Bibiana did not deny receiving the money, and her claim that it was for past debts was an affirmative allegation she failed to prove, contrary to the rule that a party must prove her own affirmative assertions. The admissions of Vedasto and Roilan could not operate as an admission by silence against Lilia because she was abroad and did not hear, observe, or have a realistic opportunity to deny them. An admission by silence under Section 32, Rule 130 requires that the party heard or observed the act or declaration and had an opportunity to refute it; those requisites were absent. Further, Roilan’s failure to raise the contract in the ejectment suit did not bind Lilia under the principle res inter alios acta alteri nocere non debet. Because the contract was partially executed—through part payment and delivery of possession—it was taken out of the Statute of Frauds and could be proved by parol evidence.
• Validity of Deed of Transfer to Redima: The issue was not reached. Redima’s motion to intervene had been denied with finality; ruling on the validity of the transfer would infringe upon the corporation’s and Atty. Dimayacyac’s right to due process, since they were not parties and had no opportunity to be heard on the matter.

• Distinction Between Contract to Sell and Contract of Sale — A contract to sell is a conditional sale where the vendor’s obligation to transfer title is subordinated to the full payment of the price (a positive suspensive condition). If the condition does not occur, the parties stand as if the obligation never existed. In a contract of sale, title passes upon delivery and non‑payment is a resolutory condition; in a contract to sell, ownership is retained by the seller until full payment. Here, the admissions of Vedasto and Roilan that petitioners still owned the property were perfectly consistent with a contract to sell where ownership had not yet passed because the price was not fully paid. (Citing Serrano v. Caguiat, 517 SCRA 57.)
• Partial Execution and Statute of Frauds — An oral contract for the sale of land, although ordinarily unenforceable under the Statute of Frauds, is removed from the statute’s operation when it has been partially executed through payment of part of the purchase price and delivery of possession. Such a contract may then be proved by parol evidence and enforced by specific performance.
• Admission by Silence (Section 32, Rule 130) — The requisites for an admission by silence are: (a) the party heard or observed the act or declaration; (b) he had the opportunity to deny it; (c) he understood it; (d) he had an interest to object as would be natural if it were untrue; (e) the facts were within his knowledge; and (f) the admission or inference is material to the issue. Absence of the first two elements defeats the claim. Where the admission is in writing, the rule is strictly applied only if the party was carrying on mutual correspondence with the declarant; otherwise a prompt written reply cannot be expected. Because Lilia was abroad and not in correspondence with Vedasto or Roilan regarding these admissions, her silence did not constitute an admission. (Citing People v. Ciobal, 184 SCRA 464, and Villanueva v. Balaguer, 590 SCRA 661.)
• Burden of Proof on Affirmative Defences — The burden of proof lies on the party who asserts a claim, not on the party who denies it. Mere allegations cannot replace evidence. A party raising an affirmative defence—such as that money received was in payment of a pre‑existing debt—bears the burden of proving that defence by preponderance of evidence. Petitioners’ failure to prove their allegation meant that the money was properly inferred to be for the purchase price.

• “A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.” (per Serrano v. Caguiat) — This passage clarifies why the family’s acknowledgment of petitioners’ ownership was not inconsistent with a subsisting contract to sell.
• “For an act or declaration to be admissible against a party as an admission by silence, the following requirements must be present, namely: (a) the party must have heard or observed the act or declaration of the other person; (b) he must have had the opportunity to deny it; (c) he must have understood the act or declaration; (d) he must have an interest to object as he would naturally have done if the act or declaration was not true; (e) the facts are within his knowledge; and (f) the fact admitted or the inference to be drawn from his silence is material to the issue.” — The Court enumerated these elements and found that the first two were absent, precluding the application of the rule against Lilia.

• Serrano v. Caguiat, G.R. No. 139173, 28 February 2007, 517 SCRA 57: Distinguished a contract to sell from a contract of sale; followed to show that the admissions of ownership were consistent with the suspensive condition in a contract to sell.
• People v. Ciobal, G.R. No. 86220, 20 April 1990, 184 SCRA 464: Enumerated the requisites of admission by silence under Section 32, Rule 130; applied to reject the argument that Lilia had admitted the absence of a sale through silence.
• Villanueva v. Balaguer, G.R. No. 180197, 23 June 2009, 590 SCRA 661: Clarified that the rule on admission by silence in written statements is relaxed absent mutual correspondence; relied upon to hold that Lilia’s silence in the face of written admissions did not bind her.

• Article 1403, Civil Code (Statute of Frauds): Declared inapplicable because the oral contract to sell had been partially executed.
• Section 32, Rule 130, Rules of Court (Admission by Silence): The requisites were not satisfied; Lilia neither heard nor had the opportunity to deny the statements.
• Section 28, Rule 130, Rules of Court (Res Inter Alios Acta): Embodies the rule that the rights of a party cannot be prejudiced by the act, declaration, or omission of another, preventing Roilan’s and Vedasto’s admissions from binding Lilia.
• Article 1491, Civil Code (Prohibition on Lawyers Acquiring Property in Litigation): Not applied because the transferee’s right to due process would be violated; the Court declined to rule.

Presbitero J. Velasco, Jr., Marvic M.V.F. Leonen, Samuel R. Martires, Alexander G. Gesmundo.