G.R. No. 5273
FRANCISCA JOSE, plaintiff-appellee, vs. WENCESLAUA DAMIAN, defendant-appellant.
September 9, 1909

FACTS:
On June 2, 1908, Francisca Jose (plaintiff-appellee) sued Wenceslaua Damian (defendant-appellant) to recover a debt. The plaintiff alleged that the defendant, authorized by her husband, borrowed P1,394 under a notarized contract dated September 19, 1906, agreeing to pay P20 monthly. From September 1906 to May 15, 1907, the defendant paid P160, leaving a balance of P1,234. The plaintiff claimed the defendant defaulted on payments since June 16, 1907, and sought cancellation of the contract, payment of P1,234 plus interest, and costs.

The defendant denied the amount owed, alleging that the plaintiff had received several pieces of diamond jewelry (valued at P3,000) for sale on commission, with proceeds to be applied to the debt, and had failed to render an accounting. The defendant contended that only P240 (representing 12 months x P20) was due at the time of the complaint, not the full balance, as the contract did not stipulate acceleration upon default. The defendant also counterclaimed P2,000 as the balance from the sale of the jewelry.

In reply, the plaintiff clarified that the P1,394 was a remaining balance from an earlier P2,404 debt, after jewelry held as security was sold for P875 (with the defendant’s acquiescence) and an additional P135 cash payment, totaling P1,010, which reduced the previous debt to the P1,394 now being claimed. The defendant’s husband had granted her ample power of attorney to enter into such contracts.

The trial court ruled that the plaintiff was entitled to recover P250, with 6% interest per annum from June 2, 1908, plus costs, “without prejudice to an action to recover such other installments as might become due upon maturity.” The defendant appealed this decision.

ISSUE:
1. Whether the plaintiff is entitled to demand the entire outstanding balance of the loan upon the defendant’s failure to pay monthly installments.
2. Whether the defendant had the legal capacity to enter into the contract.
3. When does interest on the unpaid installments begin to accrue?

RULING:
The Supreme Court affirmed the trial court’s decision.

1. Regarding the demand for the entire balance: The Court held that the plaintiff was not entitled to demand immediate payment of the entire P1,394 balance. While the debt’s existence and correctness were proven, the contract explicitly stipulated payment in monthly installments of P20. Crucially, the contract did not contain a stipulation that the failure to pay any installment would accelerate the maturity of the entire debt, making the whole amount immediately due and demandable. Under Article 1255 of the Civil Code, contracting parties may establish covenants as long as they are not contrary to law, morals, or public order. In the absence of an acceleration clause, only the installments that are due and unpaid at the time of the complaint can be claimed. From May 16, 1907, to June 2, 1908 (the date the complaint was filed), twelve and a half months had elapsed. Therefore, only P250 (12.5 months x P20) was due.
2. Regarding defendant’s capacity: The Court found that the defendant had the legal capacity to contract and execute the documents, as her husband had granted her ample power and authority to enter into contracts and administer conjugal property.
3. Regarding interest accrual: The Court held that, based on Article 1755 of the Civil Code, interest only accrues when expressly agreed upon. As the contract did not stipulate interest, and no extrajudicial demand for settlement was proven to make the debt delinquent, legal interest on the P250 could only commence from the filing of the complaint in June 1908, which constituted a judicial demand (Arts. 1100, 1108, 1109 of the Civil Code).

Therefore, the judgment appealed from, awarding the plaintiff P250 with interest from June 1908, without prejudice to future installments, was affirmed.