8 October 1997, 280 SCRA 253

FACTS:

Bancom Development Corporation and Odyssey Park, Inc., entered into a Contract to Sell, whereby the former agreed to sell to the latter the parcel of land with an area of 8,499 square meters situated in Baguio City and the structure constructed thereon identified as the Europa Clubhouse.

Subsequently, in a document entitled “Separate Deed of Conveyance”, Bancom confirmed and acknowledged that it has ceded, transferred and conveyed in favor of Union Bank all the rights, title and interest it has over the property.

The purchase price of P3,500,000.00 was, per Section 2 of the Contract to Sell, with the agreement that Sec. 5:

In the event Odyssey fails to pay any portion of the purchase price of the Property or the interest and service charge thereon as and when it falls due, or otherwise fails to comply with or violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel and rescind this Contract and declare the same as null, void and no further force and effect by serving on Odyssey a written notice of cancellation and rescission thirty (30) days in advance.

In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts which the Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall be forfeited in favor of Bancom as rentals for the use and occupancy of the Property and as penalty for the breach and violation of this Contract.

Furthermore, all the improvements which Odyssey may have introduced on the Property shall form part thereof and belong to Bancom without right of reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion instead require Odyssey to remove such improvements from the Property at expense of Odyssey.

Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc., wrote Union Bank, a letter stating that the Europa Center was reported to prospective buyers as well as government authorities as part of common areas and amenities under the condominium concept of selling to the public and for that reason wants to make it of record that Europa Condominium Villas, Inc., questions the propriety of the contract to sell.

Odyssey, through its Chairman of the Board, Mr. Carmelito A. Montano, wrote Bancom a letter stating that it acknowledges receipt of a copy of the letter-protest from the Europa Condominium Villas, Inc., and that in the meantime that there is a question on the propriety of the sale, it is stopping/withholding payments of the amortization.

On the same date Bancom, through its Senior Vice-President, wrote Europa Condominium Villas, Inc. a letter explaining that the Europa Center and the parcel of land on which it is built are not part of the Europa Condominium Villas, Inc.Union Bank wrote Odyssey Park a letter demanding payment of the overdue account of inclusive of interest and service charges, otherwise the contract to sell would be cancelled and rescinded. Odyssey wrote Union Bank a letter proposing a manner of settlement which Union Bank answered asking for more details of the proposal.

The series of communications led to the drafting of a Memorandum of Agreement which was not, however, signed by the parties. Union Bank, through counsel, wrote Odyssey Park a letter formally rescinding and/or cancelling the contract to sell and demanding that Odyssey vacate and peaceably surrender possession of the premises.For failure of Odyssey to vacate, Union Bank filed a case for illegal detainer and damages. Odyssey, on the other hand, filed this case for “Declaration of the Nullity of the Rescission of the Contract to Sell With Damages”

The lower court rendered that the Contract to Sell have been properly rescinded and dismissed the complaint for being frivolous and unfounded which the CA affirmed.

ISSUE:

Whether or not the rescission of the contract to sell by private respondent accords with the requirements of Republic Act (“R.A.”) No. 6552, also known as “An Act to Protect Buyers of Real Estate on Installment Payments” which, petitioner insists, requires a cancellation or rescission of the contract by means of a notarial act.

RULING:

Contract properly rescinded, RA 6552 does not apply. Unfortunately for petitioner, the invocation of Republic Act No. 6552 is misplaced. This law, which normally applies to the sale or financing of real estate on installment payments, excludes “industrial lots, commercial buildings, and sales to tenants under R.A. No. 3844.” The appellate court has thus aptly said:

“While the law applies to all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments, excluded are industrial lots, commercial buildings and sales to tenants under R.A. 3844 as amended. The property subject of the contract to sell is not a residential condominium apartment. Even on the basis of the letter of Mr. Vicente A. Araneta, Exhibit E, the building is merely `part of common areas and amenities under the Condominium concept of selling to the public’. The property subject of the contract to sell is more of a commercial building.”

So, too, must Article 1592 of the Civil Code be held inapplicable. This law states:

“Art. 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 a notarial act. After the demand, the court may not grant him a new term.”

It is clear that the above provisions contemplate neither a conditional sale nor a contract to sell but an absolute sale.

*Case digest by Rezeile S. Morandarte, JD – 4, Andres Bonifacio College, SY 2019–2020