G.R. No. 97442 June 30, 1994
PILAR T. OCAMPO, petitioner, vs. COURT OF APPEALS and MAGDALENA S. VILLARUZ, respondents.

FACTS

Severino Tolosa was the registered owner of a parcel of land under OCT No. 0-7743. On March 17, 1975, Tolosa and Pilar T. Ocampo (represented by Teresa T. Borres) entered into a contract for Tolosa to sell the land to Ocampo by May 15, 1975, for P22,000.00. On April 21, 1975, they executed an “Agreement to Sell Real Property” where Tolosa “sells, cedes and transfers” the land to Ocampo for P25,000.00, with P12,500.00 paid upon signing and the balance due within six months. Ocampo paid a total of P16,700.00 within the period and later made late payments totaling P3,900.00, which Tolosa accepted. On June 6, 1976, Ocampo caused an adverse claim to be annotated on Tolosa’s title after learning of a mortgage lien. On March 15, 1977, Tolosa wrote Ocampo seeking cancellation of the adverse claim and offered her a refund or a share if sold to a third party. Ocampo, through counsel, expressed readiness to pay the balance of P5,400.00 upon Tolosa’s delivery of the deed of absolute sale and the owner’s duplicate certificate. On June 3, 1977, Tolosa and Magdalena S. Villaruz executed a “Contract to Sell” over the same land for P94,300.00. On July 19, 1977, Tolosa again wrote Ocampo offering reimbursement for cancellation of her adverse claim. Tolosa filed a petition to cancel Ocampo’s adverse claim, which was denied on July 30, 1977. Ocampo annotated another adverse claim on August 4, 1977. On October 7, 1977, Tolosa filed an action for “Breach of Contract, Damages and Quieting of Title” against Borres, who was substituted by Ocampo after Borres’ death. Villaruz intervened. During the pendency of the case, Tolosa secured the cancellation of Ocampo’s adverse claims without notice to her, paving the way for the registration of Villaruz’s contract of sale and the issuance of TCT No. T-100021 in her name on November 23, 1979. Ocampo filed a third-party complaint against Villaruz. The Regional Trial Court dismissed Tolosa’s complaint and Villaruz’s complaint in intervention, declared the contract between Tolosa and Villaruz null and void, ordered Tolosa to execute a deed of sale in favor of Ocampo upon payment of the balance, and awarded damages to Ocampo. The Court of Appeals reversed, declaring Villaruz the absolute owner and ordering the annotation of Ocampo’s adverse claims on Villaruz’s title.

ISSUE

Whether the “Agreement to Sell Real Property” dated April 21, 1975, between Tolosa and Ocampo is a contract of absolute sale or merely a contract to sell, and consequently, who between Ocampo and Villaruz has a better right to the property.

RULING

The Supreme Court ruled that the April 21, 1975 agreement between Tolosa and Ocampo was a perfected contract of absolute sale. The contract contained the words “sells, cedes and transfers,” and nowhere in the contract was there a stipulation that title was reserved in the vendor until full payment or that the vendor had the right to unilaterally rescind upon the vendee’s failure to pay. Paragraph 4 of the contract, which required the vendor to execute and deliver documents necessary to implement the sale and transfer title upon complete payment, pertained merely to the seller’s undertaking to execute documents necessary by law to implement the already perfected sale and did not indicate that ownership was retained pending full payment. Ocampo’s failure to pay the full price within the stipulated period did not automatically rescind the contract; it merely gave Tolosa the option to rescind upon judicial or notarial demand. Tolosa’s alleged rescission letter was defective as it was not notarized and its receipt by Ocampo was not proven. Tolosa’s complaint against Borres/Ocampo did not pray for rescission and thus could not be considered a judicial demand for rescission. Tolosa accepted Ocampo’s late payments, constituting a waiver of the period for payment. Therefore, the contract of sale in favor of Ocampo remained valid and subsisting. The subsequent sale to Villaruz was void as Tolosa was no longer the owner of the property at the time of the sale. The Court reinstated the decision of the Regional Trial Court with modifications, declaring the contract between Tolosa and Villaruz null and void, ordering Tolosa to execute a deed of absolute sale in favor of Ocampo upon payment of the balance, and ordering Villaruz to reconvey the property to Ocampo.