FLANCIA VS CA

Contracts; Mortgages; Essential Requisites.—Under the Art. 2085 of the Civil Code, the essential
requisites of a contract of mortgage are: (a) that it be constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute owner of the thing mortgaged; and (c) that the
persons constituting the mortgage have the free disposal of their property, and in the absence thereof,
that they be legally authorized for the purpose.

Same; Sales; In a contract of sale, the vendor loses ownership over the property and cannot recover it
unless and until the contract is resolved and rescinded; In a contract to sell, title is retained by the
vendor until full payment of the price.—In a contract of sale, title to the property passes to the vendee
upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved by the
vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a
contract of sale, the vendor loses ownership over the property and cannot recover it unless and until the
contract is resolved or rescinded; in a contract to sell, title is retained by the vendor until full payment of
the price.

Ownership; Words and Phrases; Ownership is the independent and general power of a person over a
thing for purposes recognized by law and within the limits established thereby—aside from the jus
utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus
disponendi, is the power of the owner to alienate, encumber, transform and even destroy the thing
owned.—Ownership is the independent and general power of a person over a thing for purposes
recognized by law and within the limits established thereby. According to Art. 428 of the Civil Code, this
means that: The owner has the right to enjoy and dispose of a thing, without other limitations than
those established by law. xxx xxx xxx Aside from the jus utendi and the jus abutendi inherent in the right
Contracts; Mortgages; Essential Requisites.—Under the Art. 2085 of the Civil Code, the essential
requisites of a contract of mortgage are: (a) that it be constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute owner of the thing mortgaged; and (c) that the
persons constituting the mortgage have the free disposal of their property, and in the absence thereof,
that they be legally authorized for the purpose.

Same; Sales; In a contract of sale, the vendor loses ownership over the property and cannot recover it
unless and until the contract is resolved and rescinded; In a contract to sell, title is retained by the
vendor until full payment of the price.—In a contract of sale, title to the property passes to the vendee
upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved by the
vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a
contract of sale, the vendor loses ownership over the property and cannot recover it unless and until the
contract is resolved or rescinded; in a contract to sell, title is retained by the vendor until full payment of
the price.
Ownership; Words and Phrases; Ownership is the independent and general power of a person over a
thing for purposes recognized by law and within the limits established thereby—aside from the jus
utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus
disponendi, is the power of the owner to alienate, encumber, transform and even destroy the thing
owned.—Ownership is the independent and general power of a person over a thing for purposes
recognized by law and within the limits established thereby. According to Art. 428 of the Civil Code, this
means that: The owner has the right to enjoy and dispose of a thing, without other limitations than
those established by law. xxx xxx xxx Aside from the jus utendi and the jus abutendi inherent in the right

CORONEL VS CA

Contracts; Sales; Essential Elements of a Contract of Sale.—Sale, by its very nature, is a consensual
contract because it is perfected by mere consent. The essential elements of a contract of sale are the
following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price; b) Determinate subject matter; and c) Price certain in money or its equivalent.

PENALOSA VS CA

Appeals; Evidence; Findings of fact of the Court of Appeals are binding and conclusive upon the Supreme
Court, subject to certain exceptions, one of which is when the judgment is based on a misapprehension
of facts.—At any rate, in Baricuatro, Jr. vs. Court of Appeals, 325 SCRA 137, 145 (2000), we reiterated
the doctrine that findings of fact of the Court of Appeals are binding and conclusive upon this Court,
subject to certain exceptions, one of which is when the judgment is based on a misapprehension of
facts. In this case, after carefully poring over the records, we are convinced that the lower courts
misappreciated the evidence presented by the parties and that, indeed, a reversal of the assailed
judgment is in order.

Contracts; Simulated Contracts; Requisites; Words and Phrases; Simulation is a declaration of a fictitious
will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception,
the appearance of a juridical act which does not exist or is different from that which was really
executed.—It should have been readily apparent to the trial court that the circumstances it cited in its
decision are not proper grounds for holding that the second deed is simulated. Simulation is a
declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for
purposes of deception, the appearance of a juridical act which does not exist or is different from that
which was really executed. Its requisites are: a) an outward declaration of will different from the will of
the parties; b) the false appearance must have been intended by mutual agreement; and c) the purpose
is to deceive third persons. None of these requisites is present in this case.

Same; Same; The basic characteristic of an absolutely simulated or fictitious contract is that the
apparent contract is not really desired or intended to produce legal effects or alter the juridical situation
of the parties in any way.—The basic characteristic of an absolutely simulated or fictitious contract is
that the apparent contract is not really desired or intended to produce legal effects or alter the juridical
situation of the parties in any way. However, in this case, the parties already undertook certain acts
which were directed towards fulfillment of their respective covenants under the second deed, indicating
that they intended to give effect to their agreement.

Same; Same; Evidence; Where the genuineness and due execution of a deed was not seriously put in
issue, it should be upheld as the best evidence of the intent and true agreement of the parties—oral
testimony, depending as it does exclusively on human memory, is not as reliable as written or
documentary evidence.—Our attention is also drawn to the fact that the genuineness and due execution
of the second deed was not denied by Severino. Except to allege that he was not physically present
when the second deed was notarized before the notary public, Severino did not assail the truth of its
contents nor deny that he ever signed the same. As a matter of fact, he even admitted that he affixed
his signature on the second deed to help petitioner acquire a loan. This can only signify that he
consented to the manner proposed by petitioner for payment of the balance and that he accepted the
stipulated price of P2,000,000.00 as consideration for the sale. Since the genuineness and due execution
of the second deed was not seriously put in issue, it should be upheld as the best evidence of the intent
and true agreement of the parties. Oral testimony, depending as it does exclusively on human memory,
is not as reliable as written or documentary evidence.

Same; Notarial Law; Non-appearance of the parties before the notary public who notarized the deed
does not necessarily nullify nor render the parties’ transaction void ab initio.—It should be emphasized
that the non-appearance of the parties before the notary public who notarized the deed does not
necessarily nullify nor render the parties’ transaction void ab initio. We have held previously that the
provision of Article 1358 of the New Civil Code on the necessity of a public document is only for
convenience, not for validity or enforceability. Failure to follow the proper form does not invalidate a
contract. Where a contract is not in the form prescribed by law, the parties can merely compel each
other to observe that form, once the contract has been perfected. This is consistent with the basic
principle that contracts are obligatory in whatever form they may have been entered into, provided all
essential requisites are present. Same; Sales; Elements.—The elements of a valid contract of sale under
Art. 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and
(3) price certain in money or its equivalent. In the instant case, the second deed reflects the presence of
all these elements and as such, there is already a perfected contract of sale.

Same; Same; Non-payment of the purchase price is not among the instances where the law declares a
contract to be null and void.—However, it is well-settled that non-payment of the purchase price is not
among the instances where the law declares a contract to be null and void. It should be pointed out that
the second deed specifically provides: That for and in consideration of the sum of TWO MILLION PESOS
(P2,000,000.00), Philippine Currency paid in full by HENRY R. PEÑALOSA, receipt of which is hereby
acknowledged by me to my full satisfaction, I hereby by these presents, sells (sic), cede, convey and
otherwise dispose of the above described parcel of land, unto HENRY R. PEÑALOSA, his heirs, successors
and assigns, free from all liens and encumbrances, x x x (SGD.) SEVERINO C. SANTOS VENDOR x x x As
can be seen from above, the contract in this case is absolute in nature and is devoid of any proviso that
title to the property is reserved in the seller until full payment of the purchase price. Neither does the
second deed give Severino a unilateral right to resolve the contract the moment the buyer fails to pay
within a fixed period. At most, the non-payment of the contract price merely results in a breach of
contract for non-performance and warrants an action for rescission or specific performance under
Article 1191 of the Civil Code.

ANG YU VS CA

Obligations; Essential elements of an obligation.—An obligation is a juridical necessity to give, to do or

not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential
elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the
various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object
which is the prestation or conduct, required to be observed (to give, to do or not to do); and (c) the
subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the
passive (obligor) subjects.

Same; Contracts; Various stages of a contract.—Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305, Civil Code). A contract
undergoes various stages that include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is concluded (perfected). The perfection of the contract
takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to
perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and
acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above,
the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a
donation of real property, is essential in order to make the act valid, the prescribed form being thereby
an essential element thereof. The stage of consummation begins when the parties perform their
respective undertakings under the contract culminating in the extinguishment thereof.

PROVINCE OF CEBU VS HEIRS OF RUFINA MORALES

Sales; Public Auctions; A sale by public auction is perfected “when the auctioneer announces its
perfection by the fall of the hammer or in other customary manner” and it does not matter that another
was allowed to match the bid of the highest bidder at the said auction sale.—A sale by public auction is
perfected “when the auctioneer announces its perfection by the fall of the hammer or in other
customary manner.” It does not matter that Morales merely matched the bid of the highest bidder at
the said auction sale. The contract of sale was nevertheless perfected as to Morales, since she merely
stepped into the shoes of the highest bidder.
Same; Elements; Words and Phrases; A contract of sale is a consensual contract and is perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract and upon the
price—from that moment, the parties may reciprocally demand performance subject to the provisions
of the law governing the form of contracts.—There was a meeting of minds between the City of Cebu
and Morales as to the lot sold and its price, such that each party could reciprocally demand performance
of the contract from the other. A contract of sale is a consensual contract and is perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract and upon the
price. From that moment, the parties may reciprocally demand performance subject to the provisions of
the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of
the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. All these elements were present in the transaction between the City
of Cebu and Morales.

Same; Statute of Frauds; Subject to the provisions of the Statute of Frauds, a formal document is not
necessary for the sale transaction to acquire binding effect—for as long as the essential elements of a
contract of sale are proved to exist in a given transaction, the contract is deemed perfected regardless
of the absence of a formal deed evidencing the same.—There is no merit in petitioner’s assertion that
there was no perfected contract of sale because no “Contract of Purchase and Sale” was ever executed
by the parties. As previously stated, a contract of sale is a consensual contract that is perfected upon a
meeting of minds as to the object of the contract and its price. Subject to the provisions of the Statute of
Frauds, a formal document is not necessary for the sale transaction to acquire binding effect. For as long
as the essential elements of a contract of sale are proved to exist in a given transaction, the contract is
deemed perfected regardless of the absence of a formal deed evidencing the same.

Same; Failure to pay the balance of the purchase price does not render the sale inexistent or invalid, but
merely gives rise to a right in favor of the vendor to either demand specific performance or rescission of
the contract of sale.—Petitioner erroneously contends that the failure of Morales to pay the balance of
the purchase price is evidence that there was really no contract of sale over the lot between Morales
and the City of Cebu. On the contrary, the fact that there was an agreed price for the lot proves that a
contract of sale was indeed perfected between the parties. Failure to pay the balance of the purchase
price did not render the sale inexistent or invalid, but merely gave rise to a right in favor of the vendor
to either demand specific performance or rescission of the contract of sale. It did not abolish the
contract of sale or result in its automatic invalidation.

Same; Contracts; Stages.—The stages of a contract of sale are as follows: (1) negotiation, covering the
period from the time the prospective contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements
of the sale which are the meeting of the minds of the parties as to the object of the contract and upon
the price; and (3) consummation, which begins when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment thereof. In this case, respondents’
predecessor had undoubtedly commenced performing her obligation by making a down payment on the
purchase price. Unfortunately, however, she was not able to complete the payments due to legal
complications between petitioner and the city.

Same; Rescission; Article 1592 of the Civil Code allows the vendee of an immovable property to pay as
long as no demand for rescission has been made, and the consignation of the balance of the purchase
price before the trial court thus operates as full payment, which results in the extinguishment of the
vendee’s obligation under the contract of sale.—Article 1592 of the Civil Code pertinently provides:
Article 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by notarial act. After the demand, the court may
not grant him a new term. (Italics supplied) Thus, respondents could still tender payment of the full
purchase price as no demand for rescission had been made upon them, either judicially or through
notarial act. While it is true that it took a long time for respondents to bring suit for specific
performance and consign the balance of the purchase price, it is equally true that petitioner or its
predecessor did not take any action to have the contract of sale rescinded. Article 1592 allows the
vendee to pay as long as no demand for rescission has been made. The consignation of the balance of
the purchase price before the trial court thus operated as full payment, which resulted in the
extinguishment of respondents’ obligation under the contract of sale.

Appeals; Pleadings and Practice; It is basic that defenses and issues not raised below cannot be
considered on appeal.—Petitioner cannot raise the issue of prescription and laches at this stage of the
proceedings. Contrary to petitioner’s assignment of errors, the appellate court made no findings on the
issue because petitioner never raised the matter of prescription and laches either before the trial court
or Court of Appeals. It is basic that defenses and issues not raised below cannot be considered on
appeal. Thus, petitioner cannot plead the matter for the first time before this Court.

SAN MIGUEL PROPERTIES VS HUANG

Civil Law; Property; Sales; Amount given not as a part of the purchase price and as proof of the
perfection of the contract of sale but only as a guarantee that respondents would not back out of the
sale.—With regard to the alleged payment and acceptance of earnest money, the Court holds that
respondents did not give the P1 million as “earnest money” as provided by Art. 1482 of the Civil Code.
They presented the amount merely as a deposit of what would eventually become the earnest money or
downpayment should a contract of sale be made by them. The amount was thus given not as a part of
the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that
respondents would not back out of the sale. Respondents in fact described the amount as an “earnest-
deposit.”
Same; Same; Same; Option giving respondents the exclusive right to buy the properties within the
period agreed upon is separate and distinct from the contract of sale which the parties may enter.—The
first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As
petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but
merely to an option or an accepted unilateral promise on the part of respondents to buy the subject
properties within 30 days from the date of acceptance of the offer. Such option giving respondents the
exclusive right to buy the properties within the period agreed upon is separate and distinct from the
contract of sale which the parties may enter. All that respondents had was just the option to buy the
properties which privilege was not, however, exercised by them because there was a failure to agree on
the terms of payment. No contract of sale may thus be enforced by respondents.

Same; Same; Same; Option secured by respondents from petitioner was fatally defective; Consideration
in an option contract may be anything of value, unlike in sale where it must be the price certain in
money or its equivalent.—Even the option secured by respondents from petitioner was fatally defective.
Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor only if the promise is supported by a distinct
consideration. Consideration in an option contract may be anything of value, unlike in sale where it must
be the price certain in money or its equivalent. There is no showing here of any consideration for the
option. Lacking any proof of such consideration, the option is unenforceable.

Same; Same; Same; The manner of payment of the purchase price is an essential element before a valid
and binding contract of sale can exist.—The appellate court opined that the failure to agree on the
terms of payment was no bar to the perfection of the sale because Art. 1475 only requires agreement by
the parties as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative
Marketing Association, Inc., we laid down the rule that the manner of payment of the purchase price is
an essential element before a valid and binding contract of sale can exist. Although the Civil Code does
not expressly state that the minds of the parties must also meet on the terms or manner of payment of
the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of
Appeals, agreement on the manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.

Same; Same; Same; It is not the giving of earnest money, but the proof of the concurrence of all the
essential elements of the contract of sale which establishes the existence of a perfected sale.—It is not
the giving of earnest money, but the proof of the concurrence of all the essential elements of the
contract of sale which establishes the existence of a perfected sale.