Repide vs.

Afzelius Cause of Action: Specific Performance of a contract of the sale and purchase of real estate Facts: Plaintiff is the owner of a certain parcel of realty. The defendants made a proposition to the plaintiff for the purchase of the property. After negotiating, it was agreed that the defendants would pay the plaintiff the sum of P10,000 for the land, P2000 of which was to be handed over upon the signing of the deed, and the balance of P8,000, paid in monthly installments of P150. The property was to be mortgaged to plaintiff to secure the payment of the balance of P8,000. The plaintiff proceeded to have survey made of the land and to prepare the deed and mortgage. The deed was ready about December 28, 1916, when the defendants were notified to appear and sign the same. They failed to appear and sign the deed hence the defendants wrote and explained that it is impossible for them t effect the purchase of the property as they lost all their savings. In addition they testified that the available sum of P2000 to pay the first installment on the purchase price of the land belonged in part to his wifes sister and that she subsequently needed the money for something else and that they had to return the same. Plaintiff was and still willing to execute the deed in accordance with the terms agreed upon the defendants. Issue: Whether the defendants inability to pay the property bought on installment can be excused from his obligation? Held: Article 1451 provides that, "A promise to sell or buy, when there is an agreement as to the thing and the price, entitles the contracting parties reciprocally to demand the fulfillment of the contract." But the article in recognition of a negative result also provides, "whenever the promise to purchase and sell cannot be fulfilled, the provisions relative to obligations and contracts, contained in this book, shall be applicable in the respective cases to the vendor and the vendee." Turning to these provisions relating to obligations and contracts, we find article 1096 making a distinction between a specific thing to be delivered and an indeterminate or generic thing; article 1098 providing that a person is obligated to do a certain thing according to the tenor of the obligation; and finally, article 1124 in absolute approval of contractual mutually decreeing that "the person prejudiced may choose between exacting the fulfillment of the obligation or its resolution with indemnity for damages and payment of interest in either cases." The vendee is entitled to specific performance essentially as a matter of course. If the doctrine of

mutuality of remedy is to apply, the vendor should likewise be entitled to similar relief. Philippine jurisprudence, however, has never as yet been afforded an opportunity to so hold. The nearest approach to the idea has been, with reference to merchandise, in a decision to the effect that if the purchaser refuses without lawful reason to accept delivery when tendered by the seller in conformity with the contract of sale, the seller may elect to enforce compliance or to rescind. Here we have presented a good and valid contract, bilateral in character, and free from all taint of fraud. The stability of commercial transactions requires that the rights of the seller be protected just as effectively as the rights of the buyer. If this plaintiff had refused to comply with the contract, specific performance of the obligation could have been asked by the defendants. Just as surely should the plaintiff who has lived up to his bargain and who has been put to expense to do so, be permitted to coerce the defendant into going through with the contract. The excuse of the defendants is that they do not now have the money to pay the first installment. In other words, they plead impossibility of performance. The rule of equity jurisprudence in such a case is that mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract, not does it constitute any defense to a decree for specific performance. Central Bank vs. CA Facts: On April 28, 1965, Island Savings Bank, upon favorable recommendation of its legal department, approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate mortgage over his 100-hectare land. The approved loan application called for a lump sum P80,000.00 loan, repayable in semi-annual installments for a period of 3 years, with 12% annual interest. It was required that Sulpicio M. Tolentino shall use the loan proceeds solely as an additional capital to develop his other property into a subdivision. On May 22, 1965, a mere P17,000.00 partial release of the P80,000.00 loan was made by the Bank; and Sulpicio M. Tolentino and his wife Edita Tolentino signed a promissory note for P17,000.00 at 12% annual interest, payable within 3 years from the date of execution of the contract at semi-annual installments of P3,459. An advance interest for the P80,000.00 loan covering a 6-month period amounting to P4,800.00 was deducted from the partial release of P17,000.00. But this prededucted interest was refunded to Sulpicio M. Tolentino on July 23, 1965, after being informed by the Bank that there was no fund yet available for the release of the P63,000.00 balance (p. 47, rec.). The Bank, thru its vice-president and treasurer, promised repeatedly the release of the P63,000.00 balance.

On August 13, 1965, the Monetary Board of the Central Bank, after finding Island Savings Bank was suffering liquidity problems. Hence the Board decided to reserve the deficiencies of Island Savinngs Bank to prohibit the bank from making new loans and investment excluding extensions a=or renewals of already approved loans, provided that such extensions or renewals shall be subject to review by the Superintendent of Banks. On June 14, 1968, the Monetary Board, after finding thatIsland Savings Bank failed to put up the required capital to restore its solvency, issued Resolution No. 967 which prohibited Island Savings Bank from doing business in the Philippines and instructed the Acting Superintendent of Banks to take charge of the assets of Island Savings Bank. On August 1, 1968, Island Savings Bank, in view of non-payment of the P17,000.00 covered by the promissory note, filed an application for the extrajudicial foreclosure of the real estate mortgage covering the 100-hectare land of Sulpicio M. Tolentino On January 20, 1969, Sulpicio M. Tolentino filed a petition with the Court of First Instance of Agusan for injunction, specific performance or rescission and damages with preliminary injunction, alleging that since Island Savings Bank failed to deliver the P63,000.00 balance of the P80,000.00 loan, he is entitled to specific performance by ordering Island Savings Bank to deliver the P63,000.00 with interest of 12% per annum from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate mortgage. Issue: Whether Tolentino is liable to pay the P17,000 debt covered by the promissory note? Held: The promise of Sulpicio M. Tolentino to pay was the consideration for the obligation of Island Savings Bank to furnish the P80,000.00 loan. When Sulpicio M. Tolentino executed a real estate mortgage on April 28, 1965, he signified his willingness to pay the P80,000.00 loan. From such date, the obligation of Island Savings Bank to furnish the P80,000.00 loan accrued. Thus, the Bank's delay in furnishing the entire loan started on April 28, 1965, and lasted for a period of 3 years or when the Monetary Board of the Central Bank issued Resolution No. 967 on June 14, 1968, which prohibited Island Savings Bank from doing further business. Such prohibition made it legally impossible for Island Savings Bank to furnish the P63,000.00 balance of the P80,000.00 loan. The power of the Monetary Board to take over insolvent banks for the protection of the public is recognized by Section 29 of R.A. No. 265, which took effect on June 15, 1948, the validity of which is not in question. The Board Resolution No. 1049 issued on August 13,1965 cannot interrupt the default of Island Savings Bank in complying with its obligation of releasing the P63,000.00 balance because said resolution merely prohibited the Bank from making new loans and

investments, and nowhere did it prohibit island Savings Bank from releasing the balance of loan agreements previously contracted. Besides, the mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract, nor does it constitute any defense to a decree of specific performance (Gutierrez Repide vs. Afzelius and Afzelius, 39 Phil. 190 [1918]). And, the mere fact of insolvency of a debtor is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the contract by him The fact that Sulpicio M. Tolentino demanded and accepted the refund of the pre-deducted interest amounting to P4,800.00 for the supposed P80,000.00 loan covering a 6-month period cannot be taken as a waiver of his right to collect the P63,000.00 balance. The act of Island Savings Bank, in asking the advance interest for 6 months on the supposed P80,000.00 loan, was improper considering that only P17,000.00 out of the P80,000.00 loan was released. A person cannot be legally charged interest for a non-existing debt. Thus, the receipt by Sulpicio M. 'Tolentino of the pre-deducted interest was an exercise of his right to it, which right exist independently of his right to demand the completion of the P80,000.00 loan. The exercise of one right does not affect, much less neutralize, the exercise of the other. Vda. De Lacson vs. Diaz Facts: Rosario Vda. De Lacson leased to the defendant lots nos. 429 and 1179 of the Talisay Cadatre together with its sugar quota of about 5,728.5 piculs. The term of lease was for 5 crop years beginning with the crop year 1940-41; with an option in favor of the defendant for another 2 years, after the expiration of the original period. The contract provided that the defendant was to pay to the plaintiffs an annual rental of 1,000 piculs of export sugar , of which 500 piculs were to be paid in the month of January of every year and the rest at the end of every milling season. The defendant also obligated himself to pay to the plaintiff 20% of whatever alcohol he receive from the Talisay-Silay Milling Co. Inc. To guarantee the payment of the said annual rentals, the defendant Abelardo Diaz, loaned to the plaintiffs the sum of P10,000 without interest, which was to be paid by plaintiffs with the proceeds of the annual rentals in sugar provided however, that the sum of P7,000 was to be maintained as the permanent balance until the termination of the lease period, as security for the payment by the defendant of said rentals. On October 23, 1940 a supplemental agreement was entered by the parties wherein they defendant Abelardo G. Diaz, with the approval of the plaintiff, Rosario S. Vda. de Lacson, sold 400 piculs of said rentals for the sum of P1,984.76, and this amount was applied on the loan of the plaintiffs thereby leaving a balance of P8,015.24 against them and in favor of the defendant at the beginning of the crop year 1941-42.

On December 8, 1941, the war broke out. The defendant claims that due to the unsettled conditions which follows, he was unable to mill all his sugar canes so that during the crop year 1941-42 he produced only the total amount of 966.42 piculs of sugar from the two haciendas, of which 579.86 piculs went to him as his planter's share. It appears that the defendant failed to pay the plaintiffs the rentals of 1,000 piculs of export sugar and alcohol for said crop year. The defendant also failed to pay the plaintiffs the stipulated rentals for the remaining crop years. it was established that during the years 1943 and 1944 the haciendas in question were worked and cultivated by the tenants of the defendant who planted cereal crops thereon like corn and rice but there was no evidence as to how much was really produced on the land. The court below absolved the defendant, on the principle of fortuitous circumstance, from any liability for rent for the crop years 1942-43, 1943-44 and 194445, although it allowed the plaintiffs "proportionate share of the War Damage Compensation which the defendant may recover from the War Damage Commission for the products of the afore-mentioned haciendas for the crop year 1941-42, on the basis of P5,000, the total value of 1,000 piculs of sugar which is the corresponding rental of said haciendas for the crop year 1941-42." Issue: Whether the obligation of extinguished by reason of war? Held: No. In binding himself to deliver centrifugal sugar, the defendant promised a generic thing. It could be any centrifugal sugar without regard to origin or how he secured it. Hence, his inability to produce sugar, irrespective of the cause, did not relieve him from his commitment. War, like floods and other catastrophes, was a contingency, a collateral incident, which he could have provided for by proper stipulation In reality there was no fortuitous event which interfered with the exploitation of the leased property in the form and manner the defendant had intended. We refer to the agricultural years 1945-46 and 194647. It should be observed that the defendant was not bound to keep the lands during those years; it was entirely optional on his part to put an end to the lease after the 1944-45 crop year. When he decided to exercise the option he was fully aware that there were no sugar mills in operation and he did not except to produce sugar, He must have had an object other than to plant sugar cane when he chose to retain the lands for two more years. His purpose was, beyond doubt, to plant other crops, which he did. If those crops did not bring good return he can not, under any principle of law or equity, shift the loss to the lessor. Performance is not excused by the fact that the contract turns out to be hard and improvident, unprofitable or impracticable, ill-advised, or even foolish. the defendant is