SECOND DIVISION [G.R. No. 180665 : August 11, 2010] HEIRS OF PA !INO A"IEN#A, NA$E!%, R FINA !.

A"IEN#A, ANICIA A. IGNACIO, RO&ER"O A"IEN#A, $A RA A. DO$INGO, A$&ROCIO A"IEN#A, $A'I$A A"IEN#A, ! ISI"O A"IEN#A, CE!ES"INA A. GON#A!ES, REGA!ADO A"IEN#A AND $E!I"A A. DE!A CR # PE"I"IONERS, VS. DO$INGO P. ESPIDO!, RESPONDEN". DECISION A&AD, 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. "() F*+ts *,- t() C*s) Petitioner Heirs of Paulino Atienza, namely, ufina !. Atienza, Anicia A. "gnacio, oberto Atienza, #aura A. $omingo, Ambrocio Atienza, #axima Atienza, !uisito Atienza, %elestina A. &onzales, egalado Atienza and #elita A. $ela %ruz 'collecti(ely, the Atienzas) *+, own a -+,./. square meters of registered agricultural land at 0alle %ruz, %abanatuan %ity.*-, They acquired the land under an emancipation patent*1, through the go(ernment2s land reform program. *3, 4n August +-, -55- the Atienzas and respondent $omingo P. 6spidol entered into a contract calledKasunduan sa Pagbibili ng Lupa na may Paunang-Bayad 'contract to sell land with a down payment) co(ering the property.*/, They agreed on a price of P+15.55 per square meter or a total of P-,7/3,895.55, payable in three installments: P+55,555.55 upon the signing of the contract; P+,9/5,555.55 in $ecember -55-, and the remaining P.93,895.55 in <une -551. espondent 6spidol paid the Atienzas P+55,555.55 upon the execution of the contract and paid P15,555.55 in commission to the brokers. =hen the Atienzas demanded payment of the second installment of P+,9/5,555.55 in $ecember -55-, howe(er, respondent 6spidol could not pay it. He offered to pay the Atienzas P/55.555.55 in the meantime,*8, which they did not accept. %laiming that 6spidol breached his obligation, on >ebruary -+, -551 the Atienzas filed a complaint *9, for the annulment of their agreement with damages before the egional Trial %ourt ' T%) of %abanatuan %ity in %i(il %ase 33/+. "n his answer,*7, respondent 6spidol admitted that he was unable to pay the $ecember -55- second installment, explaining that he lost access to the money which he shared with his wife because of an in?unction order issued by an American court in connection with a domestic (iolence case that she filed against him.*., "n his desire to abide by his obligation, howe(er, 6spidol took time to tra(el to the Philippines to offer P755,555.55 to the Atienzas. espondent 6spidol also argued that, since their contract was one of sale on installment, his failure to pay the installment due in $ecember -55- did not amount to a breach. "t was merely an e(ent that ?ustified the Atienzas2 not to con(ey 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. #oreo(er, 6spidol contended that the action was premature since the last payment was not due until <une -551. "n a decision*+5, dated <anuary -3, -55/, the T% 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 e(ent that

authorized the (endor not to con(ey title, the proper issue was whether the Atienzas were ?ustified in refusing to accept respondent 6spidol2s offer of an amount lesser than that agreed upon on the second installment. The trial court held that, although respondent2s legal problems abroad cannot ?ustify 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 tra(eling to the Philippines from America showed his willingness and desire to make good on his obligation. His good faith negated any notion that he intended to renege on what he owed. The Atienzas brought the case to court prematurely considering that the last installment was not then due. >urthermore, said the T%, any attempt by the Atienzas to cancel the contract would ha(e to comply with the pro(isions of epublic Act ' .A.) 8//- or the ealty "nstallment Auyer Protection Act ' .A. 8//-), particularly the gi(ing of the required notice of cancellation, that they omitted in this case. The T% thus declared the contract between the parties (alid and subsisting and ordered the parties to comply with its terms and conditions. 4n appeal,*++, the %ourt of Appeals '%A) affirmed the decision of the trial court. *+-, Bot satisfied, the Atienzas mo(ed for reconsideration. *+1, They argued that .A. 8//- did not apply to the case because the land was agricultural and respondent 6spidol had not paid two years worth of installment that the law required for co(erage. And, in an apparent shift of theory, the Atienzas now also impugn the (alidity of their contract to sell, claiming that, since the property was co(ered by an emancipation patent, its sale was prohibited and (oid. Aut the %A denied the motion for reconsideration, hence, the present petition. *+3, .u)st/o,s P0)s),t)The questions presented for resolution are: +. =hether or not the Atienzas could (alidly sell to respondent 6spidol the sub?ect land which they acquired through land reform under Presidential $ecree -9 *+/, 'P.$. -9); -. =hether or not the Atienzas were entitled to the cancellation of the contract to sell they entered into with respondent 6spidol on the ground of the latter2s failure to pay the second installment when it fell due; and 1. =hether or not the Atienzas2 action for cancellation of title was premature absent the notarial notice of cancellation required by .A. 8//-. "() Cou0t1s Ru2/,gs O,). That the Atienzas brought up the illegality of their sale of sub?ect land only when they filed their motion for reconsideration of the %A decision is not lost on this %ourt. 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.*+8, Bonetheless, in order to settle a matter that would apparently undermine a significant policy adopted under the land reform program, the %ourt cannot simply shirk from the issue. The Atienzas2 title shows on its face that the go(ernment granted title to them on <anuary ., +..5 by (irtue of P.$. -9. This law explicitly prohibits any form of transfer of the land granted under it except to the go(ernment or by hereditary succession to the successors of the farmer beneficiary. Cpon the enactment of 6xecuti(e 4rder --7*+9, in +.79, howe(er, the restriction ceased to be

absolute. !and reform beneficiaries were allowed to transfer ownership of their lands pro(ided that their amortizations with the !and Aank of the Philippines '!and Aank) ha(e been paid in full. *+7, "n this case, the Atienzas2 title categorically states that they ha(e fully complied with the requirements for the final grant of title under P.$. -9. This means that they ha(e completed payment of their amortization with !and Aank. %onsequently, they could already legally transfer their title to another. "3o. egarding 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. "n a contract of sale, the title to the property passes to the buyer upon the deli(ery of the thing sold. "n a contract to sell, on the other hand, the ownership is, by agreement, retained by the seller and is not to pass to the (endee until full payment of the purchase price. "n the contract of sale, the buyer2s non@payment of the price is a negati(e resolutory condition; in the contract to sell, the buyer2s full payment of the price is a positi(e suspensi(e condition to the coming into effect of the agreement. "n the first case, the seller has lost and cannot reco(er the ownership of the property unless he takes action to set aside the contract of sale. "n 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. *+., Here, it is quite e(ident that the contract in(ol(ed was one of a contract to sell since the Atienzas, as sellers, were to retain title of ownership to the land until respondent 6spidol, the buyer, has paid the agreed price. "ndeed, there seems no question that the parties understood this to be the case. *-5, Admittedly, 6spidol was unable to pay the second installment of P+,9/5,555.55 that fell due in $ecember -55-. That payment, said both the T% and the %A, was a positi(e suspensi(e condition failure of which was not regarded a breach in the sense that there can be no rescission of an obligation 'to turn o(er title) that did not yet exist since the suspensi(e condition had not taken place. And this is correct so far. Cnfortunately, the T% and the %A concluded that should 6spidol e(entually 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. Aut this is error. "n the first place, since 6spidol failed to pay the installment on a day certain fixed in their agreement, the Atienzas can afterwards (alidly cancel and ignore the contract to sell because their obligation to sell under it did not arise. Dince the suspensi(e condition did not arise, the parties stood as if the conditional obligation had ne(er existed. *-+, Decondly, it was not a pure suspensi(e condition in the sense that the Atienzas made no undertaking while the installments were not yet due. #r. <ustice 6dgardo !. Paras ga(e a fitting example of suspensi(e condition: E"2ll buy your land for P+,555.55 if you pass the last bar examinations.E This he said was suspensi(e for the bar examinations results will be awaited. #eantime the buyer is placed under no immediate obligation to the person who took the examinations.*--, Here, howe(er, although the Atienzas had no obligation as yet to turn o(er title pending the occurrence of the suspensi(e condition, it was implicit that they were under immediate obligation not to sell the land to another in the meantime. =hen 6spidol failed to pay within the period pro(ided in their agreement, the Atienzas were relie(ed of any obligation to hold the property in reser(e for him. The ruling of the T% and the %A that, despite the default in payment, the Atienzas remained bound to this day to sell the property to 6spidol once he is able to raise the money and pay is quite un?ustified. The total price was P-,7/3,895.55. 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.*-1, 6spidol paid a measly P+55,555.55 in down payment or about 1./F of the total price, ?ust about the minimum size of a broker2s commission. 6spidol failed to pay the bulk of the price, P+,9/5,555.55, when it fell due four months later in $ecember -55-. Thus, it was not such a small default as to ?ustify the T% and the %A2s decision to continue to tie up the Atienzas to

the contract to sell upon the excuse that 6spidol tried his honest best to pay. Although the Atienzas filed their action with the T% on >ebruary -+, -551, four months before the last installment of P.93,895.55 fell due in <une -551, it cannot be said that the action was premature. &i(en 6spidol2s failure to pay the second installment of P+,9/5,555.55 in $ecember -55- when it was due, the Atienzas2 obligation to turn o(er ownership of the property to him may be regarded as no longer existing.*-3, The Atienzas had the right to seek ?udicial declaration of such non@existent status of that contract to relie(e themsel(es of any liability should they decide to sell the property to someone else. Parenthetically, 6spidol ne(er offered to settle the full amount of the price in <une -551, when the last installment fell due, or during the whole time the case was pending before the T%. "(0)). Botice of cancellation by notarial act need not be gi(en before the contract between the Atienzas and respondent 6spidol may be (alidly declare non@existent. .A. 8//- which mandated the gi(ing of such notice does not apply to this case. The cancellation en(isioned in that law pertains to extra?udicial cancellation or one done outside of court, *-/, which is not the mode a(ailed 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. Dince the contract has ceased to exist, equity would, of course, demand that, in the absence of stipulation, the amount paid by respondent 6spidol be returned, the purpose for which it was gi(en not ha(ing been attained;*-8, and considering that the Atienzas ha(e consistently expressed their desire to refund the P+15,555.55 that 6spidol paid. *-9, 4HEREFORE, the %ourt GRAN"S the petition and REVERSES and SE"S ASIDE the August 1+, -559 decision and Bo(ember /, -559 resolution of the %ourt of Appeals in %A@&. . %0 73./1. The %ourt declares the Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent $omingo P. 6spidol dated August +-, -55- cancelled and the Heirs2 obligation under it non@existent. The %ourt directs petitioner Heirs of Atienza to reimburse the P+15,555.55 down payment to respondent 6spidol. SO ORDERED. Carpio, (Chairperson), Nachura, Peralta, *,- Mendoza, JJ., +o,+u0.