Douglas Anama vs Court of Appeals

G.R. No. 128609 – 421 SCRA 338 – Civil Law – Law on Sales – Contract to Sell vs Contract of Sale

In March 1973, Douglas Anama and PSBank (Philippine Savings Bank) entered into a Contract to Buy whereby Anama gets to buy back his parents’ land which was foreclosed by the bank. It was agreed that the purchase price is P135k. As agreed, P5k would be due upon signing of the contract, another P5k would be due on April 12, 1973, and P20k would be due on April 30, 1973; the remaining P105k would be the amount of mortgage that would have to be executed by Anama with the bank plus interest.

The bank reserves to either rescind the contract or let Anama pay the full amount in case he defaults in any of the payments.

Anama was able to pay the first 2 installments but then he failed to pay the P20k due on April 30, 1973. In July 1974, Anama’s dad wrote the bank asking for an extension. In February 1975, Anama paid to the bank. In May 1976, Anama promised the bank that he’ll pay P20k more on August 3, 1976. He never did, instead he made a payment of on November 26, 1976.

On September 9, 1977, the Bank executed an Affidavit of Cancellation rescinding the contract. Anama was then advised to vacate the premises. In addition, the Bank forfeited the payments made by Anama, which were applied as rentals for the use of the property.

Anama opposed the rescission of the Contract to Buy, he wrote to the bank’s GM alleging that he was led to believe that the Bank treated the deposits he made as payments on the Contract to Buy.

On November 6, 1978, PSBank sold the property to spouses Tomas Co and Saturnina Baria, in whose favor a title was subsequently issued.

ISSUE: Whether or not Anama has ownership over the disputed property.

HELD: No. The Supreme Court used two views in interpreting the contract.

Regard the contract as it is – a Contract to Buy

It was agreed that Anama is to pay installment payment amounts on certain dates. Under the Contract to Buy, Anama was supposed to pay the Bank the amount of P20, covering the third installment on or before April 30, 1973. Anama was not able to pay said amount on the date stipulated. However, he made payments in the amount of P17, on February 22, 1975 and P15, on November 25, 1976. On the face of the official receipts covering these amounts appear the words “penalties/interest charges.” Anama insists, though, that he made arrangements with the lawyers of the bank that these words were to be considered mere “typographical errors” and that the amounts reflected as payments covering the third installment.

As Anama failed to pay the third installment, PSBank was entitled to rescind the Contract to Buy. The contract provides the Bank two options in the event that Anama fails to pay any of the installments. It was just enforcing its options under the contract.

The Contract as a Contract to Sell

Viewed in another light, the Contract to Buy is actually a contract to sell whereby PSBank reserves ownership of the property and is not to pass until full payment. Such payments as a positive suspensive condition, the failure of which is not a breach but simply an event that prevents the obligation of PSBank to convey title from acquiring binding force. Since ownership of the subject property was not to pass to Anama until full payment of the purchase price, his failure to pay on the date stipulated, or in the extension granted, prevented the obligation for the Bank to pass title to the property to him from arising. It is clear that as of April 30, 1973 which was the deadline for the last installment, the balance of the principal stood at P125,.

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