Not all deals may be sealed by a handshake

In 1975, Ali was able to register the said parcel of land under her name. The land was subject of a free patent. In 1978, Flor was able to take possession of the land and the owner’s duplicate of OCT No. F-1123, and paid its realty taxes. Apparently, Ali had orally sold the property to her within the five-year restriction of alienating lands subject of a free patent.

In 1996, Ali died leaving behind her four children. In 2009, the heirs of Ali executed a Deed of Adjudication of the above-mentioned property and sought to register the property in their names. As such, they needed to retrieve OCT No. F-1123, but Flor refused to do so. Thus, the children constrained to file a petition before the RTC for Flor to surrender the owner’s duplicate of the title.

The RTC granted the petition filed by Ali’s heirs. The trial court ruled that since Ali is the registered owner of the property, Flor cannot assert any right over the same and that the payment of realty taxes does not prove ownership over the property. It explained that as registered owner of the land, Ali’s right cannot be defeated by prescription.

The RTC also expounded that the purported sale between Ali and Flor was not valid because it was an oral sale. The trial court posited that the law requires that the sale of real property must appear in a public instrument. It expounded that the delivery of the certificate of title did not create a valid sale.

Q: What is Statute of Frauds?

A: Article 1403(2) of the Civil Code, or otherwise known as the Statute of Frauds, requires that covered transactions must be reduced in writing, otherwise the same would be unenforceable by action. In other words, sale of real property must be evidenced by a written document as an oral sale of immovable property is unenforceable.

Q: What are the contracts that must be reduced in a public document?

A: Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Art. 1403, No. 2, and 1405; (2) cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; (3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; and (4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds P500 must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405. (1280a)

Q: Is a contract of sale of a real property without its terms being reduced in writing void?

A: No. The failure to observe the proper form prescribed by law does not render the acts or contracts enumerated therein invalid. The form required under the said Art. 1358 is not essential to the validity or enforceability of the transaction, but merely for convenience.

Thus, a sale of real property, though not consigned in a public instrument or formal writing, is, nevertheless, valid and binding among the parties, for the rule is that even a verbal contract of sale of real estate produces legal effects between the parties. Stated differently, although a conveyance of land is not made in a public document, it does not affect the validity of such conveyance. The law does not require the accomplishment of the acts or contracts in a public instrument in order to validate the act or contract but only to insure its efficacy.

Further, the Statute of Frauds applies only to executory contracts and not to those which have been executed either fully or partially.

Q: Was the RTC correct in dismissing Flor’s claim of ownership simply because the sale between her and Ali was not supported by a written deed?

A: No. An oral sale of real property is not void and even enforceable and binding between the parties if it had been totally or partially executed.

The Statute of Frauds is inapplicable in the present case as the verbal sale between Flor and Ali had been executed. From the time of the purported sale in 1978, respondent peacefully possessed the property and had in her custody of the original title. Further, she had been the one paying the real property taxes and not Ali. Possession of the property, making improvements therein and paying its real property taxes may serve as indicators that an oral sale of a piece of land had been performed or executed.

It should be noted that From 1978 until her death, Ali never questioned Flor’s continued possession of the property, as well as of the original title. Neither did she Flor from paying realty taxes under the latter’s name. Ali allowed Flor to exercise all the rights and responsibilities of an owner over the subject parcel of land.

Even after her death, neither her heirs disturbed Flor’s possession of the property nor started paying for the real property taxes on the said lot. Further, it is noteworthy that the heirs do not assail that Flor had acquired the property fraudulently or illegally as they merely rely on the fact that there was no deed of sale to support the said transaction. However, as manifested by the actions or inactions of Ali and Flor, it can be reasonably concluded that Ali had sold the property to respondent and that the said transaction had been consummated.

Q: Can the heirs still assail the oral sale of the property?

A: Yes. It is settled that lands acquired through free patent cannot be alienated or encumbered within five years from the date of issuance of the patent. This is so considering that the grant of free patent is done out of the benevolence of the State to provide lots for land-destitute citizens for their home and cultivation. As such, any sale in violation of the five-year prohibition on alienation is void and produces no effect whatsoever. As a result, the law still regards the original owner as the rightful owner subject to escheat proceedings by the State.

In the present case, Ali had already sold the property to Flor within three years from the time she had acquired title thereto pursuant to her free patent application. Clearly, the said transaction is void because it transgresses the five-year prohibition on alienation of lands acquired through free patent.

(Source: Heirs of Alido vs. Campano, , G.R. NO. 226065, July 29, 2019)

Ma. Soledad Deriquito-Mawis is Dean at the Lyceum of the Philippines University; Chairman of Philippine Association of Law Schools; founder of Mawis Law Office