G.R. No. 101083
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. HON. COURT OF APPEALS AND SPOUSES ANTONIO and ELISA DY, respondents.

July 11, 1996

FACTS

Spouses Antonio and Elisa Dy obtained a loan from Metropolitan Bank and Trust Company (Metrobank) secured by a real estate mortgage over their property. The mortgage contract contained an acceleration clause stating that upon default of any installment, the entire obligation would become due. The Dys defaulted. Metrobank extrajudicially foreclosed the mortgage. The property was sold at a public auction where Metrobank was the highest bidder. A certificate of sale was issued and registered. Within the one-year redemption period, the Dys filed a complaint for annulment of the foreclosure sale, alleging that the acceleration clause was inoperative because Metrobank had accepted late payments on previous occasions, constituting a waiver. The trial court dismissed the complaint. The Court of Appeals reversed the trial court, ruling that Metrobank’s past acceptance of late payments constituted a waiver of the acceleration clause, making the foreclosure premature.

ISSUE

Whether the bank’s previous acceptance of late payments constitutes a waiver of the acceleration clause in the mortgage contract, thereby rendering the extrajudicial foreclosure of the mortgage premature and invalid.

RULING

NO. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s dismissal of the complaint. The Court held that the acceleration clause is a valid and binding stipulation. The bank’s mere acceptance of late payments on past due installments, as an act of forbearance, does not constitute a waiver of its right to invoke the acceleration clause for subsequent defaults. A waiver must be clear, unequivocal, and intentional. There was no such waiver in this case. The bank’s previous leniency did not modify the contract or estop it from enforcing its strict terms upon a new default. The foreclosure was validly undertaken after the Dys defaulted on their obligation.