HEIRS OF PAULINO ATIENZA, G.R. No.
180665
namely,
RUFINA L. ATIENZA,
ANICIA
A. IGNACIO, ROBERTO
ATIENZA,
MAURA A. DOMINGO,
AMBROCIO
ATIENZA, MAXIMA
ATIENZA,
LUISITO ATIENZA,
CELESTINA
A. GONZALES,
REGALADO
ATIENZA and
MELITA
A. DELA CRUZ
Petitioners, Present:
CARPIO, J., Chairperson,
- versus - NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
DOMINGO P. ESPIDOL,
Respondent. Promulgated:
August 11, 2010
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ABAD, J.:
This
case is about the legal consequences when a buyer in a contract to sell on installment
fails to make the next payments that he promised.
The Facts and the Case
Petitioner Heirs of Paulino Atienza, namely, Rufina L.
Atienza, Anicia A. Ignacio, Roberto Atienza, Maura A. Domingo, Ambrocio
Atienza, Maxima Atienza, Luisito Atienza, Celestina A. Gonzales, Regalado
Atienza and Melita A. Dela Cruz (collectively, the Atienzas)[1]
own a 21,959 square meters of registered agricultural land at Valle Cruz,
Cabanatuan City.[2] They acquired the land under an emancipation
patent[3]
through the government’s land reform program.[4]
On August 12, 2002 the Atienzas and respondent Domingo P.
Espidol entered into a contract called Kasunduan sa Pagbibili ng Lupa na may
Paunang-Bayad (contract to sell land with a down payment) covering the property.[5] They agreed on a price of P130.00 per
square meter or a total of P2,854,670.00, payable in three installments:
P100,000.00 upon the signing of the contract; P1,750,000.00 in
December 2002, and the remaining P974,670.00 in June 2003. Respondent Espidol
paid the Atienzas P100,000.00 upon the execution of the contract and paid
P30,000.00 in commission to the brokers.
When the Atienzas demanded
payment of the second installment of P1,750,000.00 in December 2002, however,
respondent Espidol could not pay it. He
offered to pay the Atienzas P500.000.00 in the meantime,[6]
which they did not accept. Claiming that
Espidol breached his obligation, on February 21, 2003 the Atienzas filed a
complaint[7]
for the annulment of their agreement with damages before the Regional Trial
Court (RTC) of
In his answer,[8]
respondent Espidol admitted that he was unable to pay the December 2002 second
installment, explaining that he lost access to the money which he shared with
his wife because of an injunction order issued by an American court in
connection with a domestic violence
case that she filed against him.[9] In his desire to abide by his obligation,
however, Espidol took time to travel to the P800,000.00
to the Atienzas.
Respondent Espidol also
argued that, since their contract was one of sale on installment, his failure to
pay the installment due in December 2002 did not amount to a breach. It was merely an event that justified the Atienzas’
not to convey the title to the property to him.
The non-payment of an installment is not a legal ground for annulling a
perfected contract of sale. Their remedy was to bring an action for specific
performance. Moreover, Espidol contended
that the action was premature since the last payment was not due until June
2003.
In a decision[10]
dated January 24, 2005, the RTC ruled that, inasmuch as the non-payment of the
purchase price was not considered a breach in a contract to sell on installment
but only an event that authorized the vendor not to convey title, the proper
issue was whether the Atienzas were justified in refusing to accept respondent
Espidol’s offer of an amount lesser than that agreed upon on the second
installment.
The trial court held that, although respondent’s legal
problems abroad cannot justify his failure to comply with his contractual obligation
to pay an installment, it could not be denied that he made an honest effort to
pay at least a portion of it. His
traveling to the
Furthermore, said the RTC, any attempt by the Atienzas to cancel
the contract would have to comply with the provisions of Republic Act (R.A.) 6552
or the Realty Installment Buyer Protection Act (R.A. 6552), particularly the
giving of the required notice of cancellation, that they omitted in this case. The RTC thus declared the contract between
the parties valid and subsisting and ordered the parties to comply with its
terms and conditions.
On appeal,[11]
the Court of Appeals (CA) affirmed the decision of the trial court.[12] Not satisfied, the Atienzas moved for
reconsideration.[13] They argued that R.A. 6552 did not apply to
the case because the land was agricultural and respondent Espidol had not paid
two years worth of installment that the law required for coverage. And, in an apparent shift of theory, the
Atienzas now also impugn the validity of their contract to sell, claiming that,
since the property was covered by an emancipation patent, its sale was
prohibited and void. But the CA denied
the motion for reconsideration, hence, the present petition.[14]
Questions Presented
The questions presented for resolution are:
1. Whether or not the Atienzas could validly sell to respondent
Espidol the subject land which they acquired through land reform under
Presidential Decree 27[15]
(P.D. 27);
2. Whether or not the Atienzas were entitled to the cancellation
of the contract to sell they entered into with respondent Espidol on the ground
of the latter’s failure to pay the second installment when it fell due; and
3. Whether or not the Atienzas’ action for cancellation of title
was premature absent the notarial notice of cancellation required by R.A. 6552.
The Court’s Rulings
One. That the Atienzas brought
up the illegality of their sale of subject land only when they filed their motion
for reconsideration of the CA decision is not lost on this Court. As a rule, no question will be entertained on
appeal unless it was raised before the court below. This is but a rule of fairness.[16]
Nonetheless, in order to
settle a matter that would apparently undermine a significant policy adopted
under the land reform program, the Court cannot simply shirk from the
issue. The Atienzas’ title shows on its
face that the government granted title to them on January 9, 1990 by virtue of
P.D. 27. This law explicitly prohibits
any form of transfer of the land granted under it except to the government or
by hereditary succession to the successors of the farmer beneficiary.
Upon the enactment of
Executive Order 228[17]
in 1987, however, the restriction ceased to be absolute. Land reform beneficiaries were allowed to
transfer ownership of their lands provided that their amortizations with the
Land Bank of the
Two. Regarding the right to
cancel the contract for non-payment of an installment, there is need to
initially determine if what the parties had was a contract of sale or a
contract to sell. In a contract of sale,
the title to the property passes to the buyer upon the delivery of the thing
sold. In a contract to sell, on the
other hand, the ownership is, by agreement, retained by the seller and is not
to pass to the vendee until full payment of the purchase price. In the contract of sale, the buyer’s non-payment of the price
is a negative resolutory condition; in the contract to sell, the buyer’s full
payment of the price is a positive suspensive condition to the coming into
effect of the agreement. In the first
case, the seller has lost and cannot recover the ownership of the property
unless he takes action to set aside the contract of sale. In the second case, the title simply remains
in the seller if the buyer does not comply with the condition precedent of
making payment at the time specified in the contract.[19] Here, it is quite evident that the contract
involved was one of a contract to sell since the Atienzas, as sellers, were to
retain title of ownership to the land until respondent Espidol, the buyer, has
paid the agreed price. Indeed, there
seems no question that the parties understood this to be the case.[20]
Admittedly, Espidol was unable to pay
the second installment of P1,750,000.00 that fell due in December
2002. That payment, said both the RTC
and the CA, was a positive suspensive condition failure of which was not regarded
a breach in the sense that there can be no rescission of an obligation (to turn
over title) that did not yet exist since the suspensive condition had not taken
place. And this is correct so far. Unfortunately, the RTC and the CA concluded
that should Espidol eventually pay the price of the land, though not on time,
the Atienzas were bound to comply with their obligation to sell the same to
him.
But this is error. In the first place, since Espidol failed to
pay the installment on a day certain fixed in their agreement, the Atienzas can
afterwards validly cancel and ignore the contract to sell because their
obligation to sell under it did not arise.
Since the suspensive condition did not arise, the parties stood as if
the conditional obligation had never existed.[21]
Secondly, it
was not a pure suspensive condition in the sense that the Atienzas made no
undertaking while the installments were not yet due. Mr. Justice Edgardo L. Paras gave a fitting
example of suspensive condition: “I’ll buy your land for P1,000.00 if you
pass the last bar examinations.” This he
said was suspensive for the bar examinations results will be awaited. Meantime the buyer is placed under no
immediate obligation to the person who took the examinations.[22]
Here,
however, although the Atienzas had no obligation as yet to turn over title
pending the occurrence of the suspensive condition, it was implicit that they
were under immediate obligation not to sell the land to another in the meantime. When Espidol failed to pay within the period
provided in their agreement, the Atienzas were relieved of any obligation to
hold the property in reserve for him.
The
ruling of the RTC and the CA that, despite the default in payment, the Atienzas
remained bound to this day to sell the property to Espidol once he is able to raise
the money and pay is quite unjustified. The total price was P2,854,670.00. The
Atienzas decided to sell the land because petitioner Paulino Atienza
urgently needed money for the treatment of his daughter who was suffering from
leukemia.[23] Espidol
paid a measly P100,000.00 in down payment or about 3.5% of the total
price, just about the minimum size of a broker’s commission. Espidol failed to pay the bulk of the price, P1,750,000.00,
when it fell due four months later in December 2002. Thus, it was not such a small default as to
justify the RTC and the CA’s decision to continue to tie up the Atienzas to the
contract to sell upon the excuse that Espidol tried his honest best to pay.
Although the Atienzas filed their action with the
RTC on February 21, 2003, four months before the last installment of P974,670.00
fell due in June 2003, it cannot be said that the action was premature. Given Espidol’s failure to pay the second
installment of P1,750,000.00 in December 2002 when it was due, the Atienzas’ obligation
to turn over ownership of the property to him may be regarded as no longer
existing.[24] The Atienzas had the right to seek judicial
declaration of such non-existent status of that contract to relieve themselves
of any liability should they decide to sell the property to someone else. Parenthetically, Espidol never offered to
settle the full amount of the price in June 2003, when the last installment
fell due, or during the whole time the case was pending before the RTC.
Three.
Notice of cancellation by notarial act need not be given
before the contract between the Atienzas and respondent Espidol may be validly declare
non-existent. R.A. 6552 which mandated
the giving of such notice does not apply to this case. The cancellation envisioned in that law
pertains to extrajudicial cancellation or one done outside of court,[25] which is not the mode availed of here. The Atienzas came to court to seek the
declaration of its obligation under the contract to sell cancelled. Thus, the absence of that notice does not bar
the filing of their action.
Since
the contract has ceased to exist, equity
would, of course, demand that, in the absence of stipulation, the amount paid
by respondent Espidol be returned, the purpose for which it was given not
having been attained;[26]
and considering that the Atienzas have consistently expressed their desire to
refund the P130,000.00 that Espidol paid.[27]
WHEREFORE, the Court GRANTS the petition and REVERSES
and SETS ASIDE the August 31, 2007 decision and November 5, 2007 resolution
of the Court of Appeals in CA-G.R. CV 84953.
The Court declares the Kasunduan sa Pagbibili ng Lupa na may
Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent
Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs’ obligation
under it non-existent. The Court directs
petitioner Heirs of Atienza to reimburse the P130,000.00 down payment to
respondent Espidol.
SO ORDERED.
ROBERTO A. ABAD
Associate Justice
WE
CONCUR:
ANTONIO T. CARPIO
Associate Justice
ANTONIO EDUARDO B. NACHURA
DIOSDADO M. PERALTA
Associate Justice Associate Justice
JOSE CATRAL
Associate Justice
ATTESTATION
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution and the Division Chairperson’s Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.
RENATO
C. CORONA
Chief Justice
[1] Petitioners are the heirs of Paulino Atienza, the original plaintiff in this case, who died on September 7, 2007. Please see: Certificate of Death, rollo, p. 84 and October 13, 2008 Resolution of this Court, id. at 97.
[2] Covered by Transfer Certificate of Title T-3971.
[3] Emancipation Patent 416698.
[4] Records, pp. 73-74.
[5]
[6] Respondent claimed that the amount offered
was P800,000.00.
[7] Rollo, pp. 56-59.
[8]
[9] TSN, June 4, 2004, pp. 7-8.
[10] Rollo, pp. 70-79.
[11] Docketed as CA-G.R. CV 84953.
[12] Rollo, pp. 34-44. Penned by Associate Justice Myrna Dimaranan Vidal, with Associate Justices Jose L. Sabio, Jr. and Jose C. Reyes, Jr. concurring.
[13]
[14]
[15] Decreeing the Emancipation of Tenants From the Bondage of the Soil, Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanism Therefor.
[16] Bacsasar v. Civil Service Commission, G.R. No. 180853, January 20, 2009, 576 SCRA 787, 793; Jacot v. Dal, G.R. No. 179848, November 27, 2008, 572 SCRA 295, 311.
[17] Declaring Full Land Ownership to Qualified Farmer Beneficiaries Covered by P.D. 27: Determining the Value of Remaining Unvalued Rice and Corn Lands Subject to P.D. 27; and Providing for the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner, issued on July 17, 1987.
[18] Section 6, E.O. 228.
[19] Lim v. Court of Appeals, G.R. No. 85733, February 23, 1990, 182 SCRA 564, 570, citing Sing Yee v. Santos, 47 O.G. 6372; Chua v. Court of Appeals, 449 Phil. 25, 41-42 (2003).
[20] Rollo, p. 67.
[21] See: Valenzuela v. Kalayaan Development & Industrial Corporation, G.R. No. 163244, June 22, 2009, 590 SCRA 380, 389-390; Ayala Life Assurance, Inc. v. Ray Burton Development Corporation, G.R. No. 163075, January 23, 2006, 479 SCRA 462, 470.
[22] Paras IV, CIVIL CODE OF THE
[23] TSN, December 16, 2003, p. 36.
[24] See: Ong v. Court of Appeals, 369 Phil. 243, 253-254 (1999); Cordero v. F.S. Management & Development Corporation, G.R. No. 167213, October 31, 2006, 506 SCRA 451, 463.
[25] Pagtalunan v. Dela Cruz Vda. de Manzano, G.R. No. 147695, September 13, 2007, 533 SCRA 242, 249, 253.
[26] See: Manuel v. Rodriguez, Sr., 109 Phil. 1, 12 (1960).
[27] Rollo, pp. 17, 29; CA rollo, p. 26.