CA deliver the remaining balance of P63,000, he is entitled to
specific performance by ordering the BANK to deliver the same DOCTRINE: The rule of indivisibility of a real mortgage provided for by with interest, and if the said balance cannot be delivered, to Article 2089 of the Civil Code is inapplicable to the facts of the case as rescind the REM. the said rule presupposes several heirs of the debtor or creditor which does not obtain in this case. ● TC: ruled in favor of the BANK. Ordered TOLENTINO to pay the BANK P17,000 due to the non-payment of the PN. FACTS: ● Island Savings Bank (BANK) approved the loan application for ● CA: ruled in favor of TOLENTINO. BANK can neither foreclose P80,000 of Sulpicio Tolentino (TOLENTINO), who, as a security the REM nor collect P17,000 of the loan, executed a REM over his 100-hectare land. The approved loan application called for a lump sum of P80,000 loan, ISSUES: repayable in semi-annual installments for a period of 3 years, with 12% annual interest. The purpose of the loan was to serve 1. Can the action of TOLENTINO for specific performance prosper? as an additional capital to develop his property into a subdivision. (NO) 2. Is TOLENTINO liable to pay the P17,000 covered by the PN? ● However, out of the P80,000 loan to be released, only P17,000 (YES) was made by the BANK, and TOLENTINO signed a PN for 3. If the liability to pay P17,000 subsists, can TOLENTINO’s entire P17,000 at 12% annual interest, payable within 3 years from the REM be foreclosed to satisfy said amount? (NO) date of the execution of the contract. Moreover, the BANK demanded an advanced interest for the P80,000. But this pre- HELD (1 & 2): deducted interest was refunded to TOLENTINO after being informed that there was no fund yet available for the release of ● The loan agreement entered into between the BANK and the P63,000 balance. The BANK repeatedly promised to release TOLENTINO is a reciprocal obligation where the promise of each the remaining balance. party is the consideration of the other. The rule is that default commences only when one of the party has performed his ● The Monetary Board of the Central Bank, after finding Island obligation or shows his willingness to perform the said obligation. Savings Bank was suffering from liquidity problems, issued a The other party who is not ready nor is willing to perform shall be Resolution which prohibited the bank from making NEW LOANS in delay. and investments and later on, through another resolution, prohibited the BANK from doing business in the Philippines. ● When TOLENTINO executed the REM, he signified his willingness to pay P80,000. From such date, the BANK’s ● In view of TOLENTINO’s non-payment of the P17,000 covered obligation to furnish P80,000 accrued. Thus, the BANK’s delay by the PN, the BANK filed an application for the extra-judicial strated when the the Monetary Bank of the Central Bank issued foreclosure of the REM and scheduled an auction. TOLENTINO, the Resolution prohibiting the BANK from doing further business. on the other hand, filed a petition for injunction, specific Such prohibition made it legally impossible for the BANK to performance or rescission alleging that since the BANK failed to furnish P63,000. ● The Resolution issued by the Monetary Board cannot interrupt ● And where there is partial failure of consideration, the mortgage the BANK ‘s failure of releasing the remaining balance of becomes unenforceable to the extent of such failure. Where the P63,000 because the said resolution merely prohibited the BANK indebtedness actually owing to the holder of the mortgage is less from making NEW LOANS AND INVESTMENTS, and nowhere than the sum named in the mortgage, the mortgage cannot be did it prohibit the bank from releasing the balance of loan enforced for more than the actual sum due. agreements PREVIOUSLY CONTRACTED. ● Since the BANK failed to furnish the P63, 000 balance of the P80,000 loan, the REM of TOLENTINO became ● The mere insolvency of a debtor is never an excuse for the non- UNENFORCEABLE to such extent. P63,000 is 78.75% of fulfillment of an obligation but instead is taken as a breach of the P80,000, hence, the REM covering 100-hectares is contract by him. Since the BANK was in default in fulfilling its unenforceable to the extent of 78.75 hectares. The mortgage reciprocal obligation under the loan agreement, TOLENTINO, covering the remainder of 21.25 hectares subsists as a security may choose between specific performance or rescission with for the P17,000 debt. damages to both cases. But since the BANK is now prohibited from doing further business as mentioned by the Resolution, ● The rule on indivisibility of a real estate mortgage provided for by specific performance cannot be granted. Article 2089 is inapplicable for the provision presupposes several heirs of the debtor or creditor which does not obtain in this case. ● Rescission, on the other hand, cannot also be granted for Hence, the indivisibility of a mortgage cannot apply. TOLENTINO was also at fault for his non-payment of the P17,000 loan he received after signing the PN. His failure to pay the overdue amortizations under the PN made him a party in default. If TOLENTINO had not signed the PN, he would be entitled to ask for rescission of the entire loan because he cannot possibly be in default as there was no date for him to perform his reciprocal obligation to pay.
● Since both parties were in default, both shall be liable for
damages.
HELD (3):
● The consideration of the accessory contract of real estate
mortgage is the same as that of the principal contract. For the debtor, the consideration is his obligation to pay is the existence of a debt. Thus, in the accessory contract of real estate mortgage, the consideration of the debtor in furnishing the mortgage is the existence of a valid, voidable, or unenforceable debt.