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 PETITIONERS, VS. DOMINGO P.
ESPIDOL,
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.
Facts:
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 Cabanatuan City in Civil Case 4451.
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 Philippines to offer 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.
Issues:
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.
Ruling:
One. 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 Philippines (Land Bank) have been paid in full.[18] In this case, the Atienzas' title categorically states that they have fully complied with the requirements for the final grant of title under P.D. 27. This means that they have completed payment of their amortization with Land Bank. Consequently, they could already legally transfer their title to another.
Two. 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. Admittedly, Espidol was unable to pay the second installment of P1,750,000.00 that fell due in December 2002. 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.
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.
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 Philippines (Land Bank) have been paid in full.[18] In this case, the Atienzas' title categorically states that they have fully complied with the requirements for the final grant of title under P.D. 27. This means that they have completed payment of their amortization with Land Bank. Consequently, they could already legally transfer their title to another.
Two. 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. Admittedly, Espidol was unable to pay the second installment of P1,750,000.00 that fell due in December 2002. 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.
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.
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