G.R. No. 128609; January 29, 2004
DOUGLAS F. ANAMA, Petitioner, vs. COURT OF APPEALS, PHILIPPINE SAVINGS BANK, SPS. TOMAS CO & SATURNINA BARIA and REGISTER OF DEEDS, METRO MANILA, DISTRICT II, Respondents.

FACTS

Petitioner Douglas Anama entered into a “Contract to Buy” a parcel of land from respondent Philippine Savings Bank (PSBank) for P135,000.00. The contract required a down payment of P30,000.00 in three installments, with the balance to be covered by a mortgage loan from the Bank. A critical provision stated that failure to pay any installment would result in the automatic forfeiture of all amounts paid, though the Bank reserved the right to demand full payment instead. Petitioner paid the first two installments but defaulted on the third P20,000.00 installment due on April 30, 1973. Subsequently, petitioner and his father made several payments in 1975 and 1976, which PSBank accepted and issued receipts for, indicating they were for “penalty/interest charges.”
Despite these subsequent payments, PSBank executed an Affidavit of Cancellation rescinding the contract in 1977, forfeited the payments as rentals, and later sold the property to respondent spouses Tomas Co and Saturnina Baria in 1978. Petitioner filed a complaint in 1982 for nullity of the deed of sale, cancellation of title, and specific performance. The Regional Trial Court dismissed his complaint, a decision affirmed by the Court of Appeals.

ISSUE

The primary issue is whether PSBank validly rescinded the Contract to Buy, thereby justifying the subsequent sale to the spouses Co and Baria, or whether the Bank’s acceptance of payments after the default constituted a waiver of its right to rescind.

RULING

The Supreme Court denied the petition and upheld the validity of the rescission and the subsequent sale. The Court’s legal logic centered on the terms of the contract and the nature of the payments made after default. The contract explicitly provided for automatic forfeiture of payments upon default, with PSBank reserving the alternative right to demand full payment. Petitioner’s failure to pay the third installment constituted a breach. The subsequent payments made in 1975 and 1976, accepted as “penalty/interest charges,” did not constitute a waiver of the Bank’s right to rescind nor a revival of the contract. These payments were merely for the incurred charges due to delay and were not intended as continued installment payments for the principal purchase price. The Bank’s act of accepting payments for accrued interest and penalties is separate from affirming the contract of sale. Therefore, PSBank was within its contractual rights to rescind the agreement through the Affidavit of Cancellation after the breach. The subsequent sale to innocent purchasers for value, the spouses Co and Baria, was thus valid. The Court also found no merit in petitioner’s procedural claims regarding the trial court’s delay, as he failed to demonstrate any prejudice affecting the merits of the case.