CASE #24

KT CONSTRUCTION SUPPLY, INC., REPRESENTED BY WILLIAM

GO, Petitioner, v. PHILIPPINE SAVINGS BANK, Respondent.

G.R. No. 228435, June 21, 2017

TOPIC:
Simple Loan or Mutuum – Acceleration Clause

DOCTRINE:
Contracts of adhesion, where one party imposes a ready-made form of contract on the other,
are not entirely prohibited. The one who adheres to the contract is, in reality, free to reject it
entirely; if he adheres, he gives his consent.

FACTS:
A loan was obtained by KT Construction Supply, Inc. (KTCSI) from Philippine Savings Bank (PSB)
in the amount of P2.5M on October 12,2006. The loan was evidenced by a promissory note
executed on the same date. The note stipulated that the loan was payable within a period of 60
months (5 years) from November 12,2006 to October 12,2011 to be paid on installment basis,
with a stipulation to include attorney’s fees in case of litigation. It also expressly stated that the
entire obligation shall immediately become due and payable upon default of any installment.
On January 3,2011 (9 months and 9 days before maturity date), PSB sent a demand letter asking
payment from KTCSI for its outstanding obligation in the amount of P725,438.81 excluding
interests, penalties, legal fees, and other charges. Failing to comply with the demand, PSB filed
a complaint for sum of money against KTCSI. KTCSI asserted that the complaint is premature
and is not valid since the demand letter came before the maturity date hence the balance is not
due and hence not demandable.

ISSUE:
WON the demand of PSB claiming payment before maturity date was valid and enforceable

RULING:
YES. It has long been settled that acceleration clause is valid and produces legal effects. In the
case at bench, the promissory note explicitly stated that default in any of the installments shall
make the entire obligation due and demandable even without notice or demand. Thus, the
court held that KTCSI was erroneous in saying that PSB’s complaint was premature on the
ground that the loan was due only on October 12,2011. KT Construction’s entire obligation
became due and demandable when it failed to pay an installment pursuant to the acceleration
clause.