G.R. No. L-3784; October 17, 1952
ERNEST BERG, plaintiff-appellee, vs. MAGDALENA ESTATE, INC., defendant-appellant.

FACTS

Ernest Berg and Magdalena Estate, Inc. were co-owners of the Crystal Arcade in Manila, with Berg owning a one-third interest and Magdalena Estate owning two-thirds. Berg filed an action for partition, alleging an inability to agree with the defendant on the property’s management. In its answer, Magdalena Estate claimed that under their original deed of sale dated September 22, 1943, both parties had granted each other an irrevocable first option to purchase the other’s share at the seller’s price. It alleged that in January 1946, Berg offered to sell his one-third share for P200,000, an offer which Magdalena Estate accepted, with payment to be made by May 31, 1947. Magdalena Estate counterclaimed for specific performance, alleging Berg refused to accept payment. Berg replied that any such alleged agreement was unenforceable under the Statute of Frauds, as it was not evidenced by any note or memorandum subscribed by the party to be charged. The trial court ruled in favor of Berg, ordering partition. Magdalena Estate appealed.

ISSUE

The primary issue is whether a valid and enforceable agreement for the sale of Berg’s share to Magdalena Estate for P200,000 was reached. A preliminary issue is whether the evidence presented by Magdalena Estate satisfies the writing requirement of the Statute of Frauds.

RULING

The Supreme Court ruled that a written agreement to sell was sufficiently proven to satisfy the Statute of Frauds, but the counterclaim for specific performance was denied because the suspensive conditions of the agreement failed to materialize within a reasonable time, leading to its implied abandonment.
1. On the Statute of Frauds: The Court held that the written memoranda requirement was satisfied by two documents: Berg’s application (Exhibit “3”) to the U.S. Treasury Department for a license to sell his interest in the Crystal Arcade to Magdalena Estate for P200,000, and Magdalena Estate’s application (Exhibit “4”) to the same department for a license to use loan proceeds to purchase Berg’s one-third share. Taken together, these documents, which were properly connected by their common subject matter and purpose, contained all essential elements of a contract (parties, price, subject matter) and were signed by the respective parties. They constituted a sufficient note or memorandum under the Statute of Frauds, proving that an agreement to sell had been reached.
2. On the Counterclaim for Specific Performance: The Court found that the agreement to sell was subject to suspensive conditions: Berg obtaining a necessary permit from the U.S. Treasury Department to sell, and Magdalena Estate securing a loan from the National City Bank of New York to pay the price. These conditions did not materialize. The conduct of both parties—including a lack of demand by Magdalena Estate for over a year, Berg raising funds by selling other property to Magdalena Estate instead, and no mention of the sale in their ongoing correspondence—demonstrated that they had impliedly withdrawn from the contract upon the failure of these contingencies. Therefore, specific performance could not be compelled.
The decision of the lower court ordering partition was affirmed, but on different grounds. The partition was granted not due to a lack of a sale agreement, but because the conditional sale agreement had been abandoned by the parties.