Case Digest: Maria Paterno, et.al., vs Jao Yan, G.R. No. L-12218

Maria Paterno, et.al., vs Jao Yan, GR No. L-12218, February 28, 1961

Subject: Obligations and Contracts

 

FACTS

This is a direct appeal from a decision of the Court First Instance of Manila involving the applicability of the Statute of Frauds to the lease agreement relied upon by Jao Yan.

By a notarized contract under date 3 of June 1948, the appellees, represented by their attorney-in-fact, Paterno, leased to Jao Yan a parcel of land situated at a corner of Escolta Street and Plaza Moraga, of the City of Manila. The lease was to be for a period of seven (7) years, commencing on the 15th of July 1948. The lesee bound himself to construct a building "to be made of strong wooden materials" on the leased premises, which would become property of the lessors at the termination of the lease; to pay P5,500,00 monthly rental, and all taxes, charges, and assessments on the building.

By complaint dated 20 May 1955, subsequently amended on 20 September 1955, the lessors filed action to recover from the lessee rentals in the sum P23,250.00 due for the months of March to June 1955 and the first days of July 1955; P7,680 for real estate taxes and penalties due on the building for the years 1953 to 1955; P2,500.00 attorney's fees; and for the recovery of the building constructed on the leased land.

In his answer, Jao Yan averred that the original written contract had been orally extended from 7 to 10 years, in consideration of his constructing a semi-concrete building at a cost of P13,000.00; that the rentals due had been retained by him because of plaintiff's refusal to recognize the modified contract; that [plaintiff's refusal to recognize the modified contract; and that plaintiff maliciously garnished the rents due from his sub-lessees.

CFI of Manila rendered decision in favor of Paterno, as acceptance of the evidence presented by the defendant is barred by Statute of Frauds, to which Jao Yan sought to appeal.

ISSUE

Whether or not testimonial evidence may be given in support of such oral extension.

RULING

Yes.

Under the law (Art. 1403, NCC), the following contracts are unenforceable, unless they are ratified: (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 under certain conditions.

In this case, it is established doctrine in this jurisdiction that partial performance takes an oral contract out of the scope of the Statute Frauds. With reference to contract of sale has been partially executed by payment of the price, oral testimony is admissible to evidence the existence of the contract. The rule is entirely applicable supports the doctrine that "the taking of possession by the lessee and the making of valuable improvement, and the like, on the faith of the oral agreement, may operate to the case out of the prohibition of the statute, for it would be gross fraud to permit the lessor in such a case to avoid the lease.”