Heirs of Atienza v.

Espidol

Facts:
The case involves a dispute between the petitioners, Heirs of Paulino
Atienza, and the respondent, Domingo P. Espidol, over a contract for
the sale of agricultural land in Cabanatuan City, covering 21,959
square meters. The land was acquired by the petitioners through an
emancipation patent under the government's land reform program. On
August 12, 2002, the parties entered into a contract wherein Espidol
agreed to purchase the land for ₱130.00 per square meter, totaling
₱2,854,670.00, payable in three installments. Espidol paid
₱100,000.00 upon the signing of the contract but failed to pay the
second installment of ₱1,750,000.00 in December 2002. This led to a
legal dispute, with the petitioners filing a complaint for the annulment
of the agreement with damages before the Regional Trial Court (RTC)
of Cabanatuan City.

Contention of Parties:
The petitioners contended that Espidol's failure to pay the second
installment constituted a breach of their agreement, warranting the
cancellation of the contract. They argued that they were justified in
refusing Espidol's offer of a lesser amount and sought the cancellation
of the contract based on Espidol's default. On the other hand, Espidol
argued that the contract was one of sale on installment, and his failure
to pay the installment did not amount to a breach. He contended that
his legal problems abroad, including an injunction order related to a
domestic violence case, hindered his ability to pay but claimed his
willingness to fulfill his obligation by offering partial payment.

Legal Proceedings:
The case was first filed before the RTC of Cabanatuan City, which ruled
in favor of Espidol, declaring the contract valid and subsisting. The
RTC held that Espidol's failure to pay the installment did not justify the
cancellation of the contract and that the petitioners' action was
premature as the last installment was not yet due. On appeal, the Court
of Appeals affirmed the RTC's decision. The petitioners then filed a
petition for review before the Supreme Court.

Issues:
 1. Whether the petitioners could validly sell the subject land
acquired through land reform.
2. Whether the petitioners were entitled to cancel the contract for
Espidol's failure to pay the second installment.
3. Whether the petitioners' action for cancellation of the contract
was premature.

Ruling:
The Supreme Court ruled in favor of the petitioners, granting the
petition and declaring the contract between the parties cancelled and
non-existent. The Court held that the contract was a contract to sell,
and Espidol's failure to pay the second installment constituted a
breach, allowing the petitioners to cancel the agreement. The absence
of a notarial notice of cancellation did not bar the petitioners from
seeking judicial declaration of the contract's non-existence. The Court
ordered the petitioners to reimburse the ₱100,000.00 down payment
to Espidol.

The ruling of the Supreme Court reaffirms the legal principles

governing contracts for the sale of real property, particularly
contracts to sell. It underscores the importance of honoring
contractual obligations and provides clarity on the procedural
requirements for seeking judicial relief in cases of contract disputes.
This decision serves to uphold the integrity of contractual agreements
while ensuring that parties have access to legal remedies in cases of
breach or non-performance. The Court applied Article 1479 of the
Civil Code, which states that in a contract to sell, the ownership is
retained by the seller until the fulfillment of a suspensive condition,
usually the full payment of the purchase price. Additionally, the Court
clarified the procedural requirements for seeking judicial relief,
interpreting the provisions of the Realty Installment Buyer
Protection Act (R.A. 6552) to determine that the absence of a
notarial notice of cancellation did not prevent the petitioners from
seeking relief through judicial declaration of the contract's non-
existence.