The Supreme Court held that a contract can be valid even without signatures if the parties’ actions demonstrate their consent. Specifically, the acceptance of payments under an unsigned agreement to extend a redemption period after a foreclosure sale constitutes implied consent, binding the parties to the terms of the agreement. Furthermore, a party’s actions that lead another to rely on the existence of a contract prevent that party from later denying its validity under the principle of estoppel. This ruling clarifies that actions speak louder than signatures when determining the existence and enforceability of contractual obligations, especially in the context of loan agreements and property redemption.

Beyond the Signature: How Actions Solidified a Redemption Agreement

In this case, Luzon Development Bank (LDB) sought a writ of possession for a property owned by Spouses Angeles, which LDB had foreclosed due to the spouses’ loan default. The crux of the dispute was whether a new agreement extending the redemption period was valid, despite the absence of signatures on the written contract. LDB argued that without signatures, the agreement never took effect and therefore it was entitled to the writ of possession. However, the Spouses Angeles contended that LDB had accepted payments under the new agreement, thus implying consent and making the contract binding.

The central legal question revolved around the formation of contracts, specifically whether a written contract requires signatures to be valid and binding. The Supreme Court emphasized that a contract comes into existence when there is a meeting of minds between two parties, agreeing on the object and the cause, as stipulated in the Civil Code. As the Court explained, such consent may be expressed or implied, unless the law requires a specific formality. The absence of a signature does not automatically invalidate a contract if other actions demonstrate consent. The Court referenced Article 1315 of the Civil Code, stating that:

Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

The Supreme Court highlighted that LDB’s acceptance of payments from Spouses Angeles constituted an implied consent to the new agreement, effectively extending the redemption period and fixing the redemption price. This was a critical point in the Court’s reasoning. The Court also invoked the principle of estoppel. This legal doctrine prevents a party from denying or contradicting its own previous actions or statements if another party has relied on those actions to their detriment. In this case, by accepting payments from Spouses Angeles, LDB led them to believe that the redemption period was indeed extended. LDB could not later claim the agreement was invalid simply to resell the property at a higher price.

To further explain, estoppel arises when:

One party, through their actions, representations, or silence, leads another party to believe certain facts exist; the other party relies on those facts in good faith; and the first party is subsequently prevented from denying the truth of those facts if doing so would prejudice the other party.

The Court also distinguished this case from the general rule regarding the issuance of a writ of possession. RA 3135 generally mandates the court to issue a writ of possession to the purchaser after a foreclosure sale or during the redemption period. However, the Court recognized exceptions to this rule, such as instances where the mortgagee-bank receives payments from persons who assumed the mortgage obligations. The facts in this case, the Court noted, warrant an additional exception. By entering into a new contract, LDB voluntarily withheld its right of possession, implicitly acknowledging the Spouses Angeles’ right to redeem the property under the new terms. This was evidenced by LDB’s delay in seeking the writ of possession, doing so four years after the foreclosure sale. Given the totality of these circumstances, the Court held that the parties were bound by the new contract and directed them to comply with its provisions.

FAQs

What was the key issue in this case?	The key issue was whether an agreement extending the redemption period of a foreclosed property was valid and binding, despite the absence of signatures on the written contract.
What is implied consent?	Implied consent refers to agreement manifested through actions and conduct, rather than express words or signatures, indicating a willingness to be bound by the terms of a contract. In this case, acceptance of payments was deemed implied consent.
What is the doctrine of estoppel?	The doctrine of estoppel prevents a party from denying a previous representation or action that another party has relied on in good faith, especially if that reliance would cause detriment to the relying party.
Can a contract be valid without signatures?	Yes, a contract can be valid without signatures if the actions of the parties demonstrate a clear intention to be bound by the terms of the agreement, unless the law specifically requires a signed document.
What is a writ of possession?	A writ of possession is a court order directing a sheriff to deliver possession of property to the party entitled to it, typically the purchaser in a foreclosure sale.
What is the significance of RA 3135?	RA 3135 governs the procedure for extrajudicial foreclosure of real estate mortgages and outlines the rights and obligations of both the mortgagor and mortgagee, including the right to redeem the property.
What was the agreed redemption price?	The agreed redemption price in the new contract between LDB and Spouses Angeles was P871,182.78, inclusive of interests and reimbursement of expenses.
What were the terms of payment in the new contract?	The terms of payment included a down payment, followed by monthly installments with an interest rate subject to adjustment, as stipulated in their agreement.

This case serves as a crucial reminder that contractual obligations are not solely determined by the presence of signatures but also by the conduct and representations of the parties involved. Luzon Development Bank was bound by its actions, reinforcing the principle that equity and fairness play a significant role in contract law.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Luzon Development Bank vs. Spouses Bartolome and Zenaida Angeles, G.R. NO. 150393, July 31, 2006