FACTS:
Warner, Barnes & Co., Limited, plaintiff-appellee, filed an action in the Court of First Instance of Albay to foreclose a mortgage of P66,000 on certain real estate. The mortgage secured a promissory note for P66,500 executed by Roman Jaucian, et al., defendants-appellants, on February 28, 1905. The note stipulated installment payments: P10,000 by August 31, 1905; P5,000 by December 31, 1905; P5,000 by June 30, 1906, and successively P5,000 every six months until the total sum was paid.

The note contained several key provisions:
1. Paragraph 2 stated: “The total amount of the debt shall be paid… on or before the 31st day of December, 1910.”
2. Paragraph 3, an acceleration clause, stated: “In case of default, no payment being made on or before any of the days above fixed, all subsequent installment shall then be considered as due.”
3. Paragraph 4 provided that in case of default, the total amount due would draw interest at 10% per annum.

The defendants admitted defaulting on prior installments, prompting the plaintiff to file the foreclosure action before December 31, 1910. A default judgment was entered against the defendants for failure to appear and answer. The defendants applied to set aside the default, arguing that their defense was that the main obligation was not due until December 31, 1910, and that prior defaults only triggered interest and lawyer’s fees, not the acceleration of the principal. The trial court denied this application. The defendants appealed the final judgment and the denial of their motion to set aside default.

ISSUE:
Did the entire debt secured by the mortgage become due and demandable upon default in payment of any installment, thereby allowing the plaintiff to foreclose the mortgage prior to the ultimate maturity date of December 31, 1910, as stipulated in the promissory note?

RULING:
Yes. The Supreme Court, in its decision dated January 8, 1908, affirmed the judgment of the lower court. The Court ruled that the construction of the promissory note was “free from doubt.” Paragraph 3 of the note clearly stipulated that “if default is made in the payment of any installment, all the subsequent installments shall become due.” This acceleration clause unequivocally made the entire debt due and demandable upon the defendants’ admitted default in prior installment payments.

The Court clarified that Paragraph 4, which provided for 10% interest per annum on the total amount due in case of default, did not contradict or vary the acceleration clause in Paragraph 3. Paragraph 4’s purpose was merely to establish the imposition of interest from the time of default, as the note itself bore no interest if paid strictly according to its original terms. The ultimate due date of December 31, 1910, specified in Paragraph 2, was the final maturity date in the absence of an earlier default but did not override the immediate effect of the acceleration clause when a default occurred. Since the defendants admitted default in prior installments, the plaintiff had the right to immediately demand the full amount and initiate foreclosure proceedings. The defendants’ proposed defense, being based solely on an untenable interpretation of the note, did not present a factual issue.