Case Summary (G.R. No. 180665)
Petitioners
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, heirs of the original land patent holder.
Respondent
Domingo P. Espidol, buyer under a contract to sell land with down payment and installment terms.
Key Dates
• January 9, 1990 – Final grant of title under PD 27.
• August 12, 2002 – Execution of contract to sell.
• December 2002 – Second installment due.
• February 21, 2003 – Petitioners filed for annulment of contract.
• June 2003 – Last installment due.
• January 24, 2005 – RTC decision.
• August 31, 2007 & November 5, 2007 – CA decision and resolution.
• August 11, 2010 – Supreme Court decision.
Applicable Law
• 1987 Constitution – Governing framework for property rights.
• PD 27 – Emancipation patent, prohibiting transfer except by succession or to government.
• EO 228 (1987) – Permits sale of land reform grants upon full amortization.
• Civil Code of the Philippines – Distinction between contract of sale and contract to sell.
• RA 6552 (Realty Installment Buyer Protection Act) – Requirements for extrajudicial cancellation.
Facts
The Atienzas acquired title under PD 27 and fully paid amortization to Land Bank, as reflected in their title. Under their August 12, 2002 agreement with Espidol, the purchase price was ₱2,854,670 at ₱130/sqm, payable in three installments: ₱100,000 down-payment; ₱1,750,000 in December 2002; and ₱974,670 in June 2003. Espidol paid only ₱100,000 and offered partial payment when the second installment fell due.
Failure to Pay and Initial Proceedings
Espidol did not pay the second installment of ₱1,750,000 on time, citing frozen assets abroad. He offered ₱800,000 as interim payment, which the Atienzas refused. The heirs filed for annulment of the contract with damages before the RTC, claiming breach.
Trial Court Ruling
The RTC held that the agreement was a contract to sell, making non-payment a suspensive condition rather than a breach. It deemed the action premature (last installment not due until June 2003) and held that extrajudicial cancellation under RA 6552 required notice, which was not given. The contract was declared valid and subsisting.
Court of Appeals Ruling
The CA affirmed the RTC decision. The petitioners’ argument on the sale’s illegality under PD 27 was raised too late. RA 6552 applied but had not been complied with. The contract remained enforceable.
Issues for Resolution
- Whether beneficiaries of land reform under PD 27 may validly sell the land.
- Whether failure to pay an installment in a contract to sell justifies cancellation.
- Whether the action for cancellation was premature without a notarial notice under RA 6552.
Supreme Court’s Analysis
Validity of Sale Under Land Reform Laws
• PD 27 prohibits transfer except to government or by succession.
• EO 228 (1987) removed that absolute restriction once full amortization is completed.
• The Atienzas’ title shows compliance with final grant requirements; thus, they could legally convey the land.Nature of Contract and Effect of Non-Payment
• The agreement is a contract to sell: ownership remains with seller until full payment.
• Non-payment of a fixed installment is a failure of a positive suspensive condition.
• Such failure does not merely suspend the transfer; it allows the vendor to declare the contract non-existent.
• The RTC
Case Syllabus (G.R. No. 180665)
Title and Citation
- Supreme Court of the Philippines, Second Division
- G.R. No. 180665, August 11, 2010
- Reported at 642 Phil. 408
Facts of the Case
- The Atienzas collectively own a 21,959-sq.m. parcel of registered agricultural land in Valle Cruz, Cabanatuan City, acquired by Emancipation Patent No. 416698 under Presidential Decree No. 27.
- On August 12, 2002, they and Domingo P. Espidol executed a “Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad” for a total price of ₱2,854,670 (₱130 per sq.m.), payable in three instalments:
• ₱100,000 upon signing (paid, plus ₱30,000 broker’s commission)
• ₱1,750,000 due December 2002 (unpaid; Espidol offered ₱500,000/₱800,000 but was refused)
• ₱974,670 due June 2003 (never reached) - Espidol’s failure to pay the December 2002 instalment prompted the Atienzas to seek annulment of the contract and damages.
Procedural History
- February 21, 2003: Atienzas filed Civil Case No. 4451 for annulment of contract with damages before RTC Cabanatuan.
- Respondent’s answer admitted non-payment due to a U.S. injunction stemming from a domestic violence case and asserted that non-payment in an instalment contract does not justify rescission but only withholding of title; he offered specific performance and claimed the action premature.
- January 24, 2005 (RTC Decision): Held that non-payment was not a breach but an event allowing vendor to withhold title; action premature pending last instalment; noted omission of extrajudicial cancellation notice under R.A. 6552; declared contract valid and subsisting.
- Court of Appeals affirmed on August 31, 2007; denied Atienzas’ motio