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SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs.

SPOUSES ALFREDO
HUANG and GRACE
HUANG, respondents.
FACTS:
In 1994, SMP offered two parcels of land for sale at P52M to Atty. Helena Dauz, who
was acting in behalf of the spouses Huang. Prior negotiations for the purchase of the
property failed. In March 1994, Atty Dauz wrote SMP, expressing interest to buy the
property. Enclosed with the letter was 1m that represented earnest-deposit money
in consideration that they be given the exclusive option to buy the property within
30 days, during which SMP and the spouses would try to work out a contract. This
initial 30 day period was later extended at Dauz request. The period passed without
the parties arriving at a contract, so on July 1994, SMP wrote a letter terminating
the option and returning the 1m. The spouses then demanded the execution of the
deed of sale, after which they filed an action for specific performance against SMP.
The case eventually found its way to the CA, who ruled that there had been a
perfected contract between SMP and the spouses because pursuant to Article 1482,
whenever earnest money is given in a contract of sale, it shall be considered as
part of the price and as proof of the perfection of the contract." The fact the parties
had not agreed on the mode of payment did not affect the contract as such is not
an essential element for its validity. Smp contended that there was no perfected
contract of sale, as the acceptance of the 1m merely resulted in an option contract.
ISSUE: Was there a perfected contract of sale between SMP and the spouses Huang?
NO.
HELD: The resulting contract when SMP accepted the 1m was an option contract
and not a contract of 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.
The 1m cannot be considered part of the purchase price, as when SMP accepted the
consideration, the contract had not yet been perfected. 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. It is also obvious that the parties never got
beyond the negotiation stage of the contract.
**Thus, 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.
Notes:
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.
Was it an earnest deposit? NO. At the time when petitioner accepted the terms of
respondents offer of
March 29, 1994, their contract had not yet been perfected. It does not satisfy Article
1482. The stages of a contract of sale are as follows: (1) negotiation, (2) perfection,
and (3) consummation. The alleged indubitable evidence of a perfected sale cited
by the appellate court was nothing more than offers and counter-offers which did
not amount to any final arrangement containing the essential elements of a
contract of sale. While the parties already agreed on the real properties which were
the objects of the sale and on the purchase price, the fact remains that they failed
to arrive at mutually acceptable terms of payment, despite the 45-day extension
given by petitioner. There was also failure to agree on the manner of payment. 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. 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.

QUIJADA VS CA
FACTS:
In 1956, Trinidad Quijada and her sisters executed a deed of conditional donation in
favor of the Municipality of Talacogon, the condition being that the land shall be
used exclusively for the construction of a provincial high school. Trinidad remained
in possession of the land. In 1962, Trinidad sold the land to respondent Regalado
Mondejar.
In 1980, the heirs of Trinidad, herein petitioners, filed a complaint for forcible entry
against the respondent. In 1987, the proposed campus did not materialize, and the
Sangguniang Bayan enacted a resolution donating back the land to the donor. In the
meantime, respondent Mondejar conveyed portions of the land to the other
respondents.
In 1988, petitioners filed a complaint for quieting of title, recovery of possession and
ownership of the land.
ISSUE: WON the sale between Trinidad and Regalado is valid considering the
capacity of the vendor to execute the contract in view of the conditional deed of
donation. YES.
HELD:
The donor may have an inchoate interest in the donated property during the time
that ownership of the
land has not reverted to her. Such inchoate interest may be the subject of contracts
including a contract of sale. In this case, however, what the donor sold was the land
itself which she no longer owns. It would have been different if the donor-seller sold
her interests over the property under the deed of donation which is subject to the
possibility of reversion of ownership arising from the non-fulfillment of the
resolutory condition. Sale, being a consensual contract, is perfected by mere
consent, which is manifested the moment there is a meeting of the minds as to the
offer and acceptance thereof on three (3) elements: subject matter, price and terms
of payment of the price. Ownership by the seller on the thing sold at the time of the
perfection of the contract of sale is not an element for its perfection. What the law
requires is that the seller has the right to transfer ownership at the time the thing
sold is delivered. Perfection per se does not transfer ownership which occurs upon
the actual or constructive delivery of the thing sold. A perfected contract of sale
cannot be challenged on the ground of non-ownership on the part of the seller at
the time of its perfection; hence, the sale is still valid.
The consummation, however, of the perfected contract is another matter. It occurs
upon the constructive or actual delivery of the subject matter to the buyer when the
seller or her successors-in-interest subsequently acquires ownership thereof. Such
circumstance happened in this case when petitioners who are Trinidad Quijada's
heirs and successors-in-interest became the owners of the subject property upon
the reversion of the ownership of the land to them. Consequently, ownership is
transferred to respondent Mondejar and those who claim their right from him.

Article 1434 of the New Civil Code supports the ruling that the seller's "title passes
by operation of law to the buyer." This rule applies not only when the subject matter
of the contract of sale is goods, but also to other kinds of property, including real
property.

LAFORTEZA VS MACHUCA
FACTS:
The property involved in this case consists of a house and lot registered in the name
of the late Francisco
Q. Laforteza. SPAs were executed by the heirs of the late Francisco Laforteza in
favor of Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., both as Attorney-in-fact,
authorizing them jointly to sell the subject property and sign any document for the
settlement of the estate of the late Francisco.
In the exercise of the above authority, on January 20, 1989, the heirs of the late
Francisco Q. Laforteza
represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a
Memorandum of Agreement (Contract to Sell) with Alonzo Machuca over the
subject property for the sum of P630,000.00 payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in favor of the heirs if the sale is
not effected due to the fault of Machuca;
(b) P600,000.00, upon issuance of the new certificate of title in the name of the late
Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the
decedents estate with sale in favor of Machuca.
Machuca paid the earnest money plus rentals for the subject property. However,
when Machuca was ready to pay the balance of P600,000, the heirs refused to
accept the balance. He was told that the subject property was no longer for sale.
Later, the heirs informed Machuca that they were canceling the Memorandum of
Agreement (Contract to Sell) in view of Machucas failure to comply with his
contractual obligations. Machuca filed an action for specific performance. The lower
court favored Machuca and ordered the heirs to accept the balance and execute a
registrable Deed of Absolute sale.
CA affirmed this order.
ISSUE: WON there was a perfected contract. - YES
HELD:
A perusal of the Memorandum Agreement shows that the transaction between the
petitioners and the
respondent was one of sale (not contract to sell) and lease (in the MOA, it was
stipulated that Machuca was a buyer-lessee).
A contract of sale is a consensual contract and is perfected at the moment there is a
meeting of the 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.

In the case at bench, there was a perfected agreement between the petitioners and
the respondent
whereby the petitioners obligated themselves to transfer the ownership of and
deliver the house and lot and the respondent to pay the price amounting to
P600,000.00. All the elements of a contract of sale were thus present. However, the
balance of the purchase price was to be paid only upon the issuance of the new
certificate of title in lieu of the one in the name of the late Francisco Laforteza and
upon the execution of an extrajudicial settlement of his estate. Prior to the issuance
of the "reconstituted" title, the respondent was already placed invpossession of the
house and lot as lessee thereof for six months at a monthly rate of P3,500.00. The
six months period was the parties "reasonable estimate" for the reconstitution of
the lost title of the house and lot to be completed. Thus, it was presumed that after
six months, both parties would be able to comply with what was reciprocally
incumbent upon them. The fact that it was stipulated in the MOA that after the
expiration of the six month period, the respondent would retain possession of the
house and lot without need of paying rentals for the use therefor, clearly indicated
that the parties contemplated that ownership over the property would already be
transferred by that time. The 6-month period merely delayed the demandability of
the contract of sale and did not
determine its perfection for after the expiration of the six-month period, there was
an absolute obligation on the part of the petitioners and the respondent to comply
with the terms of the sale.
In sum, there was already a perfected contract. The condition stipulated was
imposed only on the performance of the obligations contained therein. Machuca
thus had a right to demand fulfillment of the petitioners obligation to deliver and
transfer ownership of the house and lot.

VDA DE APE VS CA
FACTS:
Cleopas Ape died in 1950 and left a parcel of land (Lot 2319) to his 11 children. The
children never formally divided the property amongst themselves except through a
hantal-hantal manner, whereby each just occupied a certain portion and
developed each.
On the other hand, the spouses Lumayno were interested in the land so they started
buying the portion of land that each of the heirs occupied. On 11 Apr 1973, one of
the children, Fortunato, entered into a contract of sale with Lumayno. In exchange
of his lot, Lumayno agreed to pay P5,000.00. She paid in advance P30.00. Fortunato
was given a receipt prepared by Lumaynos son in law (Andres Flores). Flores also
acted as witness. * Lumayno also executed sales transactions with Fortunatos
siblings separately.
In 1973, Lumayno compelled Fortunato to make the delivery to her of the
registrable deed of sale over
Fortunato's portion of the Lot No. 2319. Fortunato assailed the validity of the
contract of sale. He also invoked his right to redeem (as a co-owner) the portions of
land sold by his siblings to Lumayno. Fortunato died during the pendency of the
case.
ISSUE: WON there was a valid contract of sale? NO
HELD:
No. Fortunato was a no read, no write person. It was incumbent for the other party
to prove that details of the contract were fully explained to Fortunato before
Fortunato signed the receipt.
A contract of sale is a consensual contract, thus, it is perfected by mere consent of
the parties. It is born
from the moment there is a meeting of minds upon the thing which is the object of
the sale and upon the price. Upon its perfection, the parties may reciprocally
demand performance, that is, the vendee may compel the transfer of the ownership
and to deliver the object of the sale while the vendor may demand the vendee to
pay the thing sold. For there to be a perfected contract of sale, however, the
following elements must be present: 1. consent, 2. object, and 3. price in money or
its equivalent.
For consent to be valid, it must meet the following requisites:
(a) it should be intelligent, or with an exact notion of the matter to which it refers;
(b) it should be free and
(c) it should be spontaneous.
Intelligence in consent is vitiated by error; freedom by violence, intimidation or
undue influence; spontaneity by fraud. Lumayno claimed that she explained fully
the receipt to Fortunato, but Flores testimony belies it.

As can be gleaned from Flores's testimony, while he was very much aware of
Fortunato's inability to read and write in the English language, he did not bother to
fully explain to the latter the substance of the receipt (Exhibit "G"). He even
dismissed the idea of asking somebody else to assist Fortunato considering that a
measly sum of thirty pesos was involved. Evidently, it did not occur to Flores that
the document he himself prepared pertains to the transfer altogether of Fortunato's
property to his mother-in-law. It is precisely in situations such as this when the
wisdom of Article 1332 of the Civil Code readily becomes apparent which is "to
protect a party to a contract disadvantaged by illiteracy, ignorance, mental
weakness or some other handicap."
In sum, we hold that petitioner is no longer entitled to the right of redemption under
Article 1632 of the
Civil Code as Lot No. 2319 had long been partitioned among its co-owners. This
Court likewise annuls the contract of sale between Fortunato and private
respondent on the ground of vitiated consent.

REYNALDO VILLANUEVA,
respondent.

petitioner,

vs.

PHILIPPINE

NATIONAL

BANK

(PNB),

FACTS
Respondent began with an invitation to bid covering several of its acquired assets
Lot No. 17 and 19,
which is considered a definite offer as it identified with certainty the properties
sought o be purchased and fixed the contract price. Petitioner then made an offer to
buy Lot No. 17 and Lot No. 19 for an aggregate price ofP3,677,000.00. However, this
offer was made after the lapse of the period given initially by the respondent on its
invitation to bid.
Thereafter, respondent replied to the offer with a letter that only Lot No. 19 is
available and that the price therefore is now P2,883,300.00. Upon receipt by the
petitioner, he signed his conformity with the quoted price of P2,883,300.00 but
inserted the term "downpayment of P600,000.00 and the balance payable in two
years at quarterly amortization."
ISSUE WON there was a perfected contract? NO.
HELD:
Contracts of sale are perfected by mutual consent whereby the seller obligates
himself, for a price certain, to deliver and transfer ownership of a specified thing or
right to the buyer over which the latter agrees. Mutual consent being a state of
mind, its existence may only be inferred from the confluence of two acts of the
parties: an offer certain as to the object of the contract and its consideration, and
an acceptance of the offer which is absolute in that it refers to the exact object and
consideration embodied in said offer. While it is impossible to expect the acceptance
to echo every nuance of the offer, it is imperative that it assents to those points in
the offer which, under the operative facts of each contract, are not only material but
motivating as well. Anything short of that level of mutuality produces not a contract
but a mere counter-offer awaiting acceptance. More particularly on the matter of
the consideration of the contract, the offer and its acceptance must be unanimous
both on the rate of the payment and on its term. An acceptance of an offer which
agrees to the rate but varies the term is ineffective.
To determine whether there was mutual consent between the parties herein, it is
necessary to retrace each offer and acceptance they made. In this case, the reply of
the respondents was certainly not an acceptance, but a mere counter-offer. It
deviated from the original offer. And the reply to the counter-offer, the conformity
made by the petitioner was not an acceptance but a further counter-offer for, while
petitioner accepted the P2,883,300.00 price for Lot No. 19, he qualified his
acceptance by proposing a two-year payment term.
Therefore, there was no perfected contract.

ANTONIO R. CORTES (in his capacity as Administrator of the estate of Claro S.


Cortes), petitioner, vs. HON. COURT OF APPEALS and VILLA ESPERANZA
DEVELOPMENT CORPORATION, respondents.
FACTS:
For the purchase price of P3,700,000.00, private respondent Villa Esperanza
Development Corporation (Corporation) as buyer, and Antonio Cortes (Cortes) as
seller, entered into a contract of sale over the subject lots located at Baclaran. On
various dates in 1983, the Corporation advanced to Cortes the total sum of
P1,213,000.00.
Sometime in September 1983, the parties executed a deed of absolute sale
containing several terms (DP=P2.2M, P1.5M payable in 1 year). Said Deed was
retained by Cortes for notarization. The parties agreed that the Corporation would
pay the balance of the downpayment when Cortes delivers the TCTs.
In 1985, the Corporation filed a case for specific performance seeking to compel
Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale.
According to the Corporation, despite its readiness and ability to pay the purchase
price, Cortes refused delivery of the sought documents. On the other hand, Cortes
claimed that the owners duplicate copy of the three TCTs were surrendered to the
Corporation and it is the latter which refused to pay in full the agreed down
payment. He added that portion of the subject property is occupied by his lessee
who agreed to vacate the premises upon payment of disturbance fee. However, due
to the Corporations failure to pay in full the sum of P2,200,000.00, he in turn failed
to fully pay the disturbance fee of the lessee who now refused to pay monthly
rentals.
RTC rescinded the sale and directed Cortes to return to the Corporation the amount
of P1,213,000.00,
plus interest. CA reversed the RTC decision and directed Cortes to execute a Deed of
Absolute Sale conveying the properties and to deliver the same to the Corporation
together with the TCTs, simultaneous with the Corporations payment of the balance
of the purchase price of P2,487,000.00.
ISSUE: WON the parties are compelled to perform their respective obligations to the
Contract of Sale - YES
HELD:
CA correctly ordered the parties to perform their respective obligation in the
contract of sale. The contract of sale in question gave rise to a reciprocal obligation
of the parties. Reciprocal obligations are those which arise from the same cause,
and which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. They are to be
performed simultaneously, so that the performance of one is conditioned upon the
simultaneous fulfillment of the other.
Article 1191 of the Civil Code, states:

ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
As to when said failure or delay in performance arise, Article 1169 of the same Code
provides that
ART. 1169
xxxx
In reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other begins.
In the case at bar, the stipulation in the Deed of Absolute Sale was that the
Corporation shall pay in full
the P2,200,000.00 down payment upon execution of the contract. However, Cortes
admitted that he agreed that the Corporations full payment of the sum of
P2,200,000.00 would depend upon his delivery of the TCTs of the three lots. In fact,
his main defense is that, he performed what is incumbent upon him by delivering to
the Corporation the TCTs and the carbon duplicate of the Deed of Absolute Sale, but
the latter refused to pay in full the down payment.
By agreeing to transfer title upon full payment of P2,200,000.00, Cortes impliedly
agreed to deliver the TCTs to the Corporation in order to effect said transfer. Since
Cortes did not perform his obligation to have the Deed notarized and to surrender
the same together with the TCTs, the trial court erred in concluding that he
performed his part in the contract of sale and that it is the Corporation alone that
was remiss in the performance of its obligation.
Actually, both parties were in delay. Considering that their obligation was reciprocal,
performance thereof must be simultaneous. The mutual inaction of Cortes and the
Corporation therefore gave rise to a compensation morae or default on the part of
both parties because neither has completed their part in their reciprocal obligation.
Thus, Cortes is yet to deliver the original copy of the notarized Deed and the TCTs,
while the Corporation
is yet to pay in full the agreed down payment of P2,200,000.00. This mutual delay
of the parties cancels out the effects of default, such that it is as if no one is guilty
of delay.

Almocera vs Ong
FACTS:
Johnny Ong tried to acquire from Andre T. Almocera and First Builder Multi-Purpose
Cooperative (FBMC) a "townhome" in Cebu City. As reflected in a Contract to Sell,
the selling price of the unit was P3,400,000.00 pesos. Out of the purchase price, he
was able to pay the amount of P1,060,000.00.
In trying to recover the amount he paid as down payment for the townhouse unit,
Johnny Ong filed a complaint for Damages against Andre T. Almocera and FBMC
alleging that they were guilty of fraudulent
concealment and breach of contract when they sold to him a townhouse unit
without divulging that the same, at the time of the perfection of their contract, was
already mortgaged with the Land Bank of the Philippines (LBP), with the latter
causing the foreclosure of the mortgage and the eventual sale of the townhouse
unit to a third person.
In their Answer, Almocera and FBMC denied liability claiming that the foreclosure of
the mortgage on the townhouse unit was caused by the failure of Johnny Ong to pay
the balance of the price of said townhouse unit.
ISSUE: WON the respondents refusal to pay the balance of the purchase price is
justified. -YES
HELD:
The respondent is justified in refusing to pay the balance of the contract price. It
cannot be disputed that the contract entered into by the parties was a contract to
sell. The contract was denominated as such and it contained the provision that the
unit shall be conveyed by way of an Absolute Deed of Sale, together with the
attendant documents of Ownership the Transfer Certificate of Title and Certificate
of Occupancy and that the balance of the contract price shall be paid upon the
completion and delivery of the unit, as well as the acceptance thereof by
respondent. All these clearly indicate that ownership of the townhouse has not
passed to respondent.
The unit shall be completed and conveyed by way of an Absolute Deed of Sale
together with the attendant documents of Ownership in the name of the BUYER
the Transfer Certificate of Title and Certificate of Occupancy within a period of six
(6) months from the signing of Contract to Sell.
From the terms of the contract, it is clear that petitioner and FBMC had the
obligation to complete the
townhouse unit within six months from the signing of the contract. Upon compliance
therewith, the obligation of respondent to pay the balance of P2,400,000.00 arises.
Upon payment thereof, the townhouse shall be delivered and conveyed to
respondent upon the execution of the Absolute Deed of Sale and other relevant
documents. The evidence adduced shows that petitioner and FBMC failed to fulfill

their obligation -- to complete and deliver the townhouse within the six-month
period. With petitioner and FBMCs non-fulfillment of their obligation, respondent
refused to pay the balance of the contract price. Respondent does not ask that
ownership of the townhouse be transferred to him, but merely asks that the amount
or down payment he had made be returned to him.

The contract subject of this case contains reciprocal obligations which were to be
fulfilled by the parties,
i.e., to complete and deliver the townhouse within six months from the execution of
the contract to sell on the part of petitioner and FBMC, and to pay the balance of
the contract price upon completion and delivery of the townhouse on the part of the
respondent.
In the case at bar, the obligation of petitioner and FBMC which is to complete and
deliver the townhouse unit within the prescribed period, is determinative of the
respondents obligation to pay the balance of the contract price. With their failure to
fulfill their obligation as stipulated in the contract, they incurred delay and are liable
for damages. They cannot insist that respondent comply with his obligation. Where
one of the parties to a contract did not perform the undertaking to which he was
bound by the terms of the agreement to perform, he is not entitled to insist upon
the performance of the other party.

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