Philippine National Bank v. Flaviano Lopez Vito

Summary

The Philippine National Bank sued to recover mortgage debt from defendant spouses who defaulted on installment payments of a P24,000 loan secured by real property. The trial court awarded partial recovery but reserved action on the final installment. The Supreme Court modified the judgment, interpreting the mortgage contract's acceleration clause to make all remaining installments immediately due upon any default. The Court relied on Civil Code provisions on contracts and obligations, and American jurisprudence, to establish that when parties agree that the entire debt becomes due upon partial default, the creditor may collect the whole amount and proceed to foreclosure. This landmark 1928 decision established important precedent on mortgage acceleration clauses in Philippine jurisprudence, clarifying that such clauses effectively waive the debtor's right to the benefit of the term upon breach of any contract condition.