La Compañia General de Tabacos de Filipina vs. Araza

In an installment obligation without an acceleration clause, a creditor may only sue for installments that have already matured. Furthermore, if the contract does not provide for interest or expressly declare the debtor in default for non-payment, interest for delay runs only from the date of judicial demand.

The plaintiff (appellee) sought to foreclose a mortgage securing a debt of 8,000 pesos. The debt was payable in installments. The defendant (appellant) alleged the contract was vitiated by fraud and mistake.

• Filed in the Court of First Instance (now RTC) of Leyte.
• The lower court overruled the defendant's demurrer and, after trial, rendered judgment in favor of the plaintiff for the full amount claimed.
• The defendant's motion for a new trial was denied.
• The case was appealed to the Supreme Court.

• The plaintiff, La Compañia General de Tabacos de Filipina, filed an action to foreclose a mortgage on land in Leyte to recover a debt of 8,000 pesos.
• The mortgage contract was executed on June 11, 1901.
• Payment terms: 500 pesos due on June 30, 1901, and the balance in monthly installments of 100 pesos on the 30th of each month.
• The defendant paid only 400 pesos.
• The complaint was filed on June 12, 1903.
• The contract contained no acceleration clause (i.e., no provision making the entire debt due upon default of one installment) and no stipulation for interest.

• The contract was executed due to error on his part and fraud on the part of the plaintiff.
• The judgment was not justified by the evidence.

• The contract was valid and enforceable.
• It was entitled to foreclose the mortgage for the full amount due.

• Procedural Issues: N/A
• Substantive Issues:
  1. Whether the plaintiff could enforce the entire obligation in a single suit filed in 1903.
  2. Whether the defendant was liable for interest on the unpaid installments, and if so, from when interest should be computed.

• Procedural: N/A
• Substantive:
  1. No. The SC held that without an acceleration clause, the obligation could only be enforced for the amounts that were due and payable at the time the suit was commenced (June 12, 1903). The judgment for the full 8,000 pesos was erroneous.
  2. Interest only from judicial demand. The contract did not provide for interest. There was also no express stipulation that failure to pay on time would put the debtor in default. Therefore, under the Civil Code, the debtor was not liable for interest until a demand was made. Since there was no evidence of a prior demand, the demand was deemed made only upon the filing of the complaint. Interest should be calculated only from June 12, 1903.

• Acceleration Clause Requirement — For an entire installment obligation to become due and demandable upon a single default, the contract must contain a specific acceleration clause. Absent such a provision, a creditor can only sue for matured installments.
• Default and Interest (Civil Code Art. 1100) — In reciprocal obligations, delay by one party (mora) begins from the moment the other party fulfills his obligation or from the moment judicial or extrajudicial demand is made. If the obligation does not provide for interest, interest for delay runs only from the time of demand.

• "There was no provision in the contract by which, upon failure to pay one installment of the debt, the whole debt should thereupon become at once payable."
• "There was therefore no default which would make him liable for interest until a demand was made."

• N/A (The decision references Manresa's Commentaries on the Civil Code, Vol. 8, p. 56 as authority on the interpretation of Article 1100, but no other case names are cited.)

• Civil Code, Article 1100 — Established the rule that interest for delay (moratory interest) is due only from the moment of demand, judicial or extrajudicial, unless the law or the contract provides otherwise.

• N/A (All justices concurred.)