G.R. No. 36321; November 10, 1932
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. JOSE FERNANDEZ ESPEJO, defendant-appellant.

FACTS

The Government of the Philippine Islands, representing the Postal Savings Bank, filed a foreclosure action against Jose Fernandez Espejo for a mortgage loan of P45,000. The mortgage contained stipulations allowing the mortgagee to take possession and administer the property or to foreclose judicially upon the mortgagor’s default in certain obligations, such as paying semi-annual interest, taxes, or insurance premiums. Espejo defaulted on these obligations, leading the mortgagee to pay the taxes and insurance premiums. The trial court ruled in favor of the government, ordering payment of the principal, interest, and other sums, with a foreclosure sale if unpaid. Espejo appealed, arguing the foreclosure was premature because it was initiated before the mortgage’s due date.

ISSUE

Whether the foreclosure action was premature, given that it was instituted prior to the mortgage’s original due date, based on the mortgagor’s default in performing ancillary stipulations.

RULING

No, the foreclosure was not premature. The mortgage agreement provided that upon default in specified stipulations (e.g., non-payment of interest, taxes, or insurance), the mortgage would become foreclosable under Act No. 3135. Espejo’s defaults in paying interest, taxes, and insurance premiums triggered these provisions, accelerating the maturity of the mortgage debt for foreclosure purposes. Although the mortgage used the term “automatically foreclosed,” which is not legally permissible, sections 8 and 9 clarified that it meant the mortgagee had the right to take possession, administer the property, or sell it via foreclosure. Thus, the debt was deemed due for judicial foreclosure upon default. The judgment of the trial court was affirmed.

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