GR 171692; (June, 2013) (Digest)
G.R. No. 171692 , June 3, 2013
SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY, represented by GRACE JULIE ANN TUMIBAY MANUEL, Petitioners, vs. SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION LOPEZ, Respondents.
FACTS
Petitioners, owners of a parcel of land, executed a Special Power of Attorney (SPA) in favor of Reynalda Visitacion, authorizing her to offer the property for sale at a price subject to their approval. Respondents, through Rowena (Reynalda’s daughter), entered into an agreement with petitioners to purchase the land for ₱800,000.00 payable in installments. From 1995 to 1997, Rowena made monthly payments to petitioners. However, without petitioners’ knowledge and consent, Reynalda executed a Deed of Absolute Sale in July 1997, transferring the title to Rowena for a stated price of only ₱95,000.00. Petitioners filed a complaint for nullity of the sale and recovery of ownership, arguing the sale by the agent to herself (through her daughter) was void.
ISSUE
Whether the contract between the parties was a contract to sell or a contract of sale, and whether respondents’ act of transferring title before full payment constituted a fundamental breach warranting rescission.
RULING
The Supreme Court ruled the agreement was a contract to sell, not a contract of sale. In a contract to sell, ownership is retained by the seller until the buyer completes payment. The Court found that respondents, by causing the premature transfer of the title through a deed of absolute sale without petitioners’ knowledge and consent while the balance remained unpaid, committed a substantial and fundamental breach. This act constituted a covert usurpation of ownership, which defeated the very object of the contract to sell. Consequently, petitioners were entitled to rescind the contract. The Court affirmed that the agent’s sale to her daughter was void under Article 1491 of the Civil Code, but the primary ground for rescission was the buyer’s breach of the contract to sell by prematurely securing title. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision with modifications, ordering the reconveyance of the property to petitioners upon reimbursement of the installments paid, with legal interest.