G.R. No. 28884, September 8, 1928
PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. FLAVIANO LOPEZ VITO and his wife MAXIMINA DEL CASTILLO and THE NORTH NEGROS SUGAR CO., INC., defendants-appellees.

FACTS

On July 25, 1918, defendants-spouses Flaviano Lopez Vito and Maximina del Castillo mortgaged real property to secure a P24,000 loan from the Philippine National Bank (PNB), payable in ten annual installments. After a partial payment on July 18, 1920, the balance was restructured into eight annual installments. The defendants defaulted on the installments due from 1920 to 1926. PNB filed an action to recover all unpaid installments, including those for 1927 and 1928. The trial court ordered the defendants to pay the past due installments but reserved PNB’s right to file a separate action for the last installment (for 1928), ruling it was not yet demandable. PNB appealed this reservation.

ISSUE

Whether the entire mortgage debt, including the last installment not yet due under the original schedule, became immediately demandable upon the defendants’ default in paying the earlier installments, pursuant to an acceleration clause in the mortgage contract.

RULING

Yes. The Supreme Court modified the trial court’s decision, ruling that the entire debt became due and demandable.

The mortgage contract contained a valid acceleration clause (paragraph 5), which provided that if the mortgagors failed to comply with any stipulation or condition, the mortgagee could declare the stipulations violated and proceed to foreclosure. This clause is a valid stipulation under Article 1255 of the Civil Code. The Court held that the defendants’ default in paying the earlier installments triggered this clause. Consequently, the period for payment of the remaining installments was resolved, making the entire obligation immediately demandable at the creditor’s election. The Court cited established jurisprudence, including *Corpus Juris* and American cases, which uniformly hold that under an acceleration clause, a default in any installment empowers the mortgagee to declare the entire debt due. Therefore, PNB was entitled to collect the whole outstanding debt, including the last installment, and to foreclose the mortgage.