Jose v. Herrera

Summary

This case involves a contract to sell real property where the vendee Jose V. Herrera paid the full purchase price but was prevented from assuming the vendor's mortgage obligation due to the vendor's refusal to execute a final deed of sale. L.P. Leviste & Co. sold the Buendia Property to Herrera under conditions requiring mortgage assumption and collateral substitution. Despite Herrera's full payment of P1,895,688.50 and additional P300,000.00 to GSIS, Leviste refused to execute the required final deed of sale, preventing the mortgage assumption. When GSIS foreclosed, Leviste assigned redemption rights to a third party, Jose Marcelo, who successfully redeemed the property. The Supreme Court upheld the automatic forfeiture of Herrera's payments, ruling that his loss was due to his own failure to comply with contract conditions. Justice Teehankee's dissent argued this constituted unjust enrichment, as Leviste prevented performance while receiving full payment. The case highlights the harsh application of forfeiture clauses in contracts to sell and the principle that parties cannot benefit from preventing the other's performance of contractual obligations.