Professional Documents
Culture Documents
of the Dept. of Commercial and Savings Bank, in his capacity as statutory ISB claims that there was an overvaluation of the loan collateral. But such does not
receiver of Island Savings Bank, petitioners, vs. COURT OF APPEALS and Sulpicio exempt it from complying w/its reciprocal oblig. Bank officials should exercise caution
M. Tolentino, respondents [1985] & prudence in the discharge of their functions by investigating existence & valuation
Apr 28, 1965: Tolentino’s loan application of P80k w/the Island Savings Bank (ISB) of properties being offered as loan security. They can’t rely merely on the customer’s
was approved. As security, he executed a real estate mortgage over his 100-hec land representation. Besides, lower court prevented petitioner from presenting proof on
in Cubo, Las Nievas, Agusan. Terms of the loan: alleged over-valuation because of their failure to raise the same in their pleadings in
1. lump sum loan of P80k effect waiving their right to do so (ROC Sec. 9, Rule 9). Thus, such can’t be raised in
2. repayable in semi-annual installments for 3 yrs w/12% annual interest the SC.
3. loan to be used solely as an additional capital to develop his other property into 2. WON a an action for specific performance can prosper – NO
a subdivision ISB is now prohibited from doing further business by Monetary Board Resolution No.
May 22, 1965: P17k partial release. Tolentino & his wife signed a promissory note for 967.
such amount at 12% annual interest payable in 3yrs from date of execution of 3. WON recission is proper – YES
contract at semi-annual installments of P3,459.00. Advance 6-month interest for the But only for the P63k balance w/c ISB failed to deliver.
P80k loan was deducted from the P17k amounting to P4,800.00. But such amount Tolentino is bound by the promissory note he released WRT the P17k loan. He has a
was refunded to Tolentino on July 23, 1965. No fund available yet for the P63k reciprocal oblig to pay such when it falls due. So WRT to this amount, he’s not
balance. entitled to recission since he’s also a party in default (CC Art. 1191). As a matter of
Aug. 13, 1965: Monetary Board of Central Bank issued Resolution No. 1049 finding fact, rt to rescind belongs to the aggrieved party, ISB. Had he not signed a
ISB suffering liquidity problems. Bank was prohibited making new loans & promissory note, Tolentino would be entitled to ask for recission of entire loan there
investments except in gov’t securities & loans already approved subj to the review of being no date for him to perform his reciprocal oblig to pay.
the Supt of Banks who may impose certain limitations. Since both parties were in default, they’re both liable for damages.
June 14, 1968: Monetary Board issued Resolution No. 967 finding that ISB failed to CC Art. 1192: In case both parties committed a breach of their reciprocal obligations,
put up required capital to restore its solvency. Bank prohibited from doing business the liability of the first infractor shall be equitably tempered by the courts. Thus,
in RP & Acting Supt of Banks to take charge of ISB’s assets. ISB’s liability for damages is offset by Tolentino’s liability for damages in the form of
Aug. 1, 1968: due to Tolentino’s failure to pay P17k covered by promissory note, ISB penalties & surcharges.
filed for extra judicial foreclosure of the real estate mortgage. Sheriff scheduled The liability of Tolentino for the interest of the P17k debt shall not be included in
auction for Jan. 22, 1969. offsetting the liabilities of both parties since he derived some benefit for his use of
Jan. 20, 1969: Tolentino filed a petition for injunction, specific performance or said amount. But Tolentino’s real estate mortgage can’t be entirely foreclosed to
recission & damages w/prelim injunction alleging that since ISB failed to deliver P63k satisfy his P17k debt. Note that the consideration of the accessory contract of the
balance, he’s entitled to specific performance by ordering delivery of balance w/12% real estate mortgage is the same as that of the principal contract. In both instances,
per annum interest from Apr. 28, 1965 & if such can’t be done, to rescind mortgage. the consideration of the debtor’s oblig to pay is the existence of a valid, voidable or
Court issued TRO. unenforceable debt (CC Art. 2086 in relation to Art. 2052). The consideration in
CFI: ordered Tolentino to pay ISB P17k + legal interest & charges due and TRO lifted executing a mortgage may either be a prior or subsequent matter. But when the
so foreclosure may proceed. consideration is subsequent, the mortgage can only take effect when the debt
CA: Affirmed dismissal of Tolentino’s petition but ruled that ISB can neither foreclose secured by it is created as a binding contract to pay. And when there’s partial failure
mortgage nor collect P17k loan. of consideration, the mortgage becomes unenforceable to the extent of such failure.
Issues & Ratio: The mortgage can’t be enforced for more than the actual sum due (Metropolitan Life
1. WON ISB’s defenses in its failure to fulfill its obligation are acceptable – NO Ins. v Peterson). Since ISB failed to furnish the P63k balance, the mortgage is
In reciprocal obligations such as in this case, obligation/promise of each party is the unenforceable to such extent w/c is 78.75% of the total loan. Thus, 78.75 of the
consideration for that of the other. When one party has performed or is ready & 100-hec mortgage is unenforceable. The remaining 21.25 hec is more than sufficient
willing to perform his part, the other party who has not yet performed or is not ready to secure the P17k debt.
& willing incurs in delay (CC Art. 1169). Thus, consideration for Tolentino’s promise CC Art. 2089’s rule on indivisibility of real estate mortgage is not applicable since
to pay was ISB’s obligation to furnish P80k loan. Oblig began when Tolentino such rule presupposes several heirs of the debtor/creditor w/c is not the case here.
executed real estate mortgage and it lasted until Central Bank issued Resolution No. Holding:
967 w/c made it legally impossible for ISB to furnish the balance. Resolution No. 1. Tolentino to pay ISB P17k + P41,210.00 as 12% interest per annum from May 22,
1049 can’t interrupt ISB’s default in complying w/its oblig since it did not prohibit 1965 to Aug. 22, 1985 and 12% interest on total amount counted from Aug. 22,
bank from releasing the loan balance of loan agreements previously contracted. 1985 until paid.
Mere pecuniary inability to fulfill an engagement does not discharge the oblig of the 2. In case Tolentino fails to pay, his real estate mortgage of 21.25 hec shall be
contract nor does it constitute any defense to a decree of specific performance foreclosed to satisfy his total indebtedness.
(Gutierrez Repide v. Afzelius) and mere fact of insolvency of a debtor is never an 3. 78.75 hec real estate mortgage is unenforceable & ordered released in favor of
excuse for the non-fulfillment of an oblig but instead it’s taken as a breach of Tolentino.
contract by him (CJS).
Fact that Tolentino demanded & accepted the refund of pre-deducted 6-month
interest of P4,800 can’t be taken as a waiver of his rt to collect balance. In fact,
collection of the pre-deducted interest was improper considering that only P17k was
released. A person can’t be legally charged interest for a non-existing debt. In
accepting the refund, Tolentino was only exercising his rt.