MANUEL RODRIGUEZ II Obligations and ContractsFEU-Institute of Law Hon. Eugene Paras

Philippine National Bank (PNB) v. Flavianio Lopez Vito

52 PHIL 41

J. Villamor

Facts:

Defendant-spouses mortagaged certain realty to secure the payment of a loan of 24,000PhP granted to them by PNB.

The terms of the mortgage contract the spouses bound themselves to pay 24,000PhP plus interest at 8% per annum, in ten (10) annual instalments of 3,602.04. Payable on or before July 18th

of each year from the date of said contract.

JULY 18, 1920. Spouses paid a sum leaving a balance of 16, 248. Binding themselves to pay the said amount balance with interest at 8% per annum in eight (8) annual instalments of 2,844.68PhP each payable on July 18, 1920, in pursuance of the new scale of payments attached to the complaint.

Spouses-defendants failed to pay to the six (6) yearly instalments and interests (1920-1926).

MAY 31, 1927. PNB instituted action demanding of the payment of instalments due and unpaid as well as those corresponding to the years 1927 and 1928.

Defendant-spouses answered with a general denial and failed to appear at the trial.

Plaintiff adduced evidence. Trial Court rendered judgment ordering the spouses to pay the sum of 13,404.18 plus interest of 8% per annum from 1920,

compounded semiannually, and the costs reserving to the plaintiff the proper action for the last and undue annual instalment of 2,844.88PhP and the interest thereon.

The plaintiff PNB excepted to that part of the judgment reserving the PNB the proper action on the last annual instalment and the interest thereon.

Issue:

Did the trial court commit an error in holding that the eight annual instalment of 2,844.88PhP is not yet demandable?

Held:

The assignment of error is well taken.

The mortgage contract executed by the spouses contained the following stipulation on its paragraph five (5).

That if the mortgagors, their heirs, executors or administrators at any time neglect, fail, or refuse to comply with all or of the stipulations and conditions of this mortgage, the mortgage shall have the right to declare such stipulations and conditions violated and to proceed to the foreclosure of the mortgage.

According to Article 1255 of the Civil Code (NCC), the parties are free to stipulate on any agreement as long as it is not violative of law, morals, good customs, public order, or public policy.

Therefore, the contract in question is valid.

MANUEL RODRIGUEZ II Obligations and ContractsFEU-Institute of Law Hon. Eugene Paras

According to the contract entered into by the parties, the obligation of the mortgagors was to pay the debt in yearly installments on a fixed day of each, until it has been fully satisfied, but in case of non-fulfillment of any of the stipulations and conditions of the mortgage, such as the failure to pay any of the annual installments, the mortgagee could declare said stipulations and conditions violated and proceed to the foreclosure of the mortgage in accordance with law. We are of the opinion that the non-fulfillment of the conditions of the contract renders the period ineffective, and makes the obligation demandable at the will of the creditor.

Wherefore, the judgment appealed from must be as it is hereby, modified, and it is declared that, as the mortgage installments in question have matured may collect by the failure of the mortgagor to pay, the mortgagee may collect the whole debt, with interest thereon, including the P2,844.88 and the interest upon the last annual installment, and to proceed to the foreclosure of the mortgage in accordance with law, without prejudice to the mortgaged lands, in favor of the North Negros Sugar Co., Inc. Without special pronouncement as to costs.

So ordered.

Avanceña, C.J., Johnson, Street, Malcolm, Ostrand, Romualdez and Villa-Real, JJ., concur.