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.

Ponente: J. VILLAMOR

FACTS

On July 25, 1918, the spouses Flaviano Lopez Vito and Maximina del Castillo (defendants) mortgaged real property to the Philippine National Bank (PNB) to secure a loan of P24,000, payable in ten annual installments. The mortgage deed was duly registered. After a partial payment on July 18, 1920, the balance was restructured into eight annual installments of P2,844.68 each. The defendants defaulted on the installments due from 1920 to 1926. Consequently, PNB filed an action on May 31, 1927, demanding payment of all due and unpaid installments, including those for 1927 and 1928. The trial court ordered the defendants to pay the sum of P13,404.18 with interest 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 creditor-mortgagee (PNB) can demand payment of the entire mortgage debt, including installments not yet due under the original schedule, due to the debtor’s default on 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 (Exhibit A) contained a valid acceleration clause in its paragraph 5, stipulating that if the mortgagors fail to comply with any condition, the mortgagee may declare all stipulations violated and proceed to foreclosure. This clause constitutes a resolutory condition that, upon the debtor’s default, renders the agreed period ineffective and allows the creditor to demand immediate payment of the entire obligation.

The Court held that the parties’ intention, as expressed in the contract, was to authorize the creditor, upon default on any installment, to declare all remaining installments due. This principle is supported by jurisprudence and legal doctrine (e.g., *Corpus Juris*) which states that when an agreement provides for acceleration upon partial default, foreclosure may be had for the entire amount.

Thus, the defendants’ failure to pay the due installments triggered the acceleration clause, making the entire outstanding debtincluding the last installment of P2,844.88 and its interestimmediately due and collectible. PNB is entitled to proceed with the foreclosure of the mortgage for the full amount. The Court’s decision is without prejudice to any rights of the North Negros Sugar Co., Inc. over the mortgaged property.