When is a sale by public action perfected?

A sale by public auction is perfected "when the auctioneer announces its perfection by the fall of the hammer or in other customary manner".²¹ 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. 

Consequently, 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.²² 

What is the nature of a contract of sale?

 

 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. 

 What are the elements of a valid contract of sale?

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.²³ All these elements were present in the transaction between the City of Cebu and Morales.

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. 

 Is a formal document of sale necessary for a sale transaction to acquire a binding effect?

Subject to the provisions of the Statute of Frauds, a formal document is not necessary for the sale transaction to acquire binding effect.²⁴ 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.

Similarly, 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. 

 Is failure to pay the balance of the purchase price equivalent to an invalid sale?

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.²⁵ It did not abolish the contract of sale or result in its automatic invalidation.

As correctly found by the appellate court, the contract of sale between the City of Cebu and Morales was also partially consummated. The latter had paid the deposit and down payment for the lot in accordance with the terms of the bid award. She first occupied the property as a lessee in 1961, built a house thereon and was continuously in possession of the lot as its owner until her death in 1969. Respondents, on the other hand, who are all surviving heirs of Morales, likewise occupied the property during the latter’s lifetime and continue to reside on the property to this day.²⁶

 What are the three stages of a contract of sale?

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.²⁷ 

G.R. No. 170115             February 19, 2008

PROVINCE OF CEBU, petitioner, vs.HEIRS OF RUFINA MORALES, NAMELY: FELOMINA V. PANOPIO, NENITA VILLANUEVA, ERLINDA V. ADRIANO and CATALINA V. QUESADA, respondents.