G.R. No. 107992 - Odyssey Park, Inc. vs. Court of Appeals

On November 4, 1981, Bancom Development Corporation and Odyssey Park, Inc. executed a Contract to Sell, where Bancom agreed to sell an 8,499‑square‑meter parcel of land in Baguio City together with a structure identified as the Europa Clubhouse.
On February 11, 1982, Bancom confirmed the transfer of all its rights over the property to Union Bank through a Separate Deed of Conveyance.

The total purchase price was P3,500,000.00.
A down payment of P700,000.00 was agreed upon, divided into three installments (P100,000.00 upon signing; P200,000.00 sixty days later, with a postdated check; and P400,000.00 ninety days later, also covered by a postdated check).
The remaining balance of P2,800,000.00 was to be amortized quarterly over three years (twelve quarterly payments of P298,346.08 each, inclusive of interest and service charges), with the first payment due four months and fifteen days after the contract date.

Section 5 of the contract stipulated that if Odyssey Park, Inc. failed to pay any portion of the purchase price or the interest and service charges, or otherwise violated any of the provisions of the contract, Bancom could cancel and rescind the contract upon giving thirty (30) days’ written notice.
In case of cancellation/rescission, all payments made by Odyssey were to be forfeited as rentals and as a penalty for breach, and any improvements made by Odyssey would become the property of Bancom, unless Bancom exercised the option to require removal at Odyssey’s expense.

On November 26, 1981, Odyssey paid P100,000.00 – twenty-two days after executing the contract.
Additional payments totaling P110,000.00 were made on subsequent dates (P20,000.00 on September 22, 1982; P10,000.00 on April 13, 1983; P10,000.00 on April 30, 1983; P50,000.00 on July 20, 1983; and P20,000.00 on September 19, 1983), all of which were made beyond the stipulated periods.

On December 23, 1981, Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc., questioned the propriety of the contract, stressing that the Europa Center was represented to prospective buyers and government authorities as part of common areas and amenities under a condominium concept.
On January 4, 1982, Odyssey, through its Chairman Mr. Carmelito A. Montano, acknowledged receipt of the protest letter and indicated that payment of the amortization was being withheld pending resolution of the issue.
On the same day, Bancom clarified to Europa Condominium Villas, Inc. (via a letter from its Senior Vice-President) that the Europa Center and its adjoining land did not form part of the condominium project.

On March 29, 1983, Union Bank sent a letter demanding the overdue amount of P2,193,720.91 (inclusive of interest and service charges), warning that the contract could be cancelled and rescinded if the demand was not satisfied.
On April 12, 1983, Odyssey proposed a settlement in a letter to Union Bank, which prompted Union Bank to request additional details. This led to the drafting of a Memorandum of Agreement, which ultimately remained unsigned.

On January 6, 1984, Union Bank, through counsel, formally rescinded and cancelled the contract by sending a letter to Odyssey, demanding that Odyssey vacate the premises.
Around August 20, 1984, due to Odyssey’s failure to vacate the property, Union Bank initiated an action for illegal detainer and for damages.
On July 5, 1988, Odyssey filed a case seeking a declaration of nullity of the rescission of the contract along with damages.
The trial court rendered judgment in favor of Union Bank, declaring the contract to have been properly rescinded, dismissing Odyssey’s complaint as frivolous and unfounded, and ordering Odyssey to pay attorney’s fees and litigation expenses.
The judgment of the trial court was affirmed by the Court of Appeals. Odyssey’s subsequent motion for reconsideration was denied, prompting the current petition for review.

Whether the rescission of the contract to sell by Union Bank complied with the contractual stipulation (Section 5) and was therefore valid.
Whether Odyssey’s failure to make timely payments, and its subsequent suspension or withholding of payments due to the protest letter from Europa Condominium Villas, Inc., justified its claim for nullity of the rescission.
Whether the provisions of Republic Act No. 6552 (An Act to Protect Buyers of Real Estate on Installment Payments), particularly the requirement for a notarial act to effect cancellation or rescission, applied to the contract at issue.
Whether Articles 1191 and 1592 of the Civil Code, which deal with rescission of obligations, are applicable to a contract to sell and the intended suspensive conditions therein.