September 1962 - Philippine Supreme Court Decisions/Resolutions
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G.R. No. L-17165 September 26, 1962 - EMMA R. GENIZA, ET AL. v. HENRY SY, ET AL. :
EN BANC
[G.R. No. L-17165. September 26, 1962.]
EMMA R. GENIZA, AURELIA GENIZA, LORENZO RIVERA, CATALINA CARREON RIVERA and ZACARIAS RIVERA, Plaintiffs-Appellants, v. HENRY SY and ASIAN MERCANTILE CORP., Defendants-Appellants.
Vicente J. Francisco, for Plaintiffs-Appellants.
Dakila F. Castro, for Defendants-Appellants.
D E C I S I O N
LABRADOR, J.:
The original decision rendered by Us in the above entitled case refers to a first decision rendered by the Court of First Instance of Quezon City, Hon. Nicasio Yatco, presiding, dated March 30, 1960. It so happened, however, that the above decision was amended by said court on May 18, 1960, but upon our study of the records of the case the amended decision was overlooked. The original decision of the court of first instance refers to the mortgage contract, Exhibit "A", while the amended decision refers to both contracts of mortgage, Exhibits, "A" and "E", executed on the same date. The appeal was made against the amended decision and involves identical questions on the foreclosure of the two mortgages above mentioned. In view of the fact that We overlooked the amended decision, especially as regards the second contract of mortgage, it has become necessary to render this amended decision on both of the contracts of mortgage already referred to.
On July 8, 1959, Catalina Carreon, with the consent of her husband Zacarias Rivera, mortgaged to the defendant Asia Mercantile Corporation Lot No. 551 of the Piedad estate subdivision for P50,000.00, payable within a period of thirty days with interest at the rate of 12% per annum. Paragraph 4 of the contract provides that upon failure of the mortgagor to pay the indebtedness and the interest when due, the mortgage shall become due and demandable, and without necessity of demand the mortgagee may immediately foreclose the mortgage, judicially or extra-judicially, and for this purpose the mortgagor appoints the mortgagee as his attorney-in-fact to sell the properties and to sign all documents and perform any act requisite and necessary to accomplish said purpose. It was further expressly agreed that in case of foreclosure the mortgagor binds himself to pay the mortgagee 30% of the sum owing and unpaid as attorney’s fees and liquidated damages, exclusive of costs and expenses of the sale.
On the same date another mortgage was executed by plaintiffs Emma R. Geniza, Aurelio Geniza and Lorenzo Rivera over two parcels of registered land for the sum of P50,000.00, and with the same conditions as the mortgage executed by the spouses Catalina Carreon and Zacarias Rivera. Copies of the contracts of mortgage are annexed to the complaint in this case as Annex "A" and Annex "B." The mortgagors in both mortgage contracts defaulted in the payment of their respective obligations. The mortgage executed by Catalina Carreon Rivera and Zacarias Rivera was foreclosed extra-judicially and the proceeds of the sale of the land amounting to P68,567.57 was disposed of by the mortgagees as follows:jgc:chanrobles.com.ph
"1. P50,000.00 — as mortgage loan
2. P12,500.00 — as the 12% interest on the loan as of December 7, 1957 plus daily interest thereafter until the obligation is legally terminated.
3. P15,000.00 — as Attorney’s fees and liquidated damages.
4. The fees and expenses of foreclosure and sale."cralaw virtua1aw library
Plaintiffs brought this action to obtain a judicial declaration that the stipulation in the deeds of mortgage fixing the amount of 30% as attorney’s fees and liquidated damages is excessive, unconscionable and iniquitous and that the same should be reduced to P200.00. The complainants also asked for P5,000.00 as attorney’s fees for bringing this action. The defendants set up the defense that the complaint states no cause of action; that the mortgage executed by Emma R. Geniza and Aurelio Geniza has not yet been foreclosed; that the mortgagors are estopped from alleging that the stipulation regarding liquidated damages and attorney’s fees is excessive and unreasonable.
The case having been tried in the Court of First Instance of Quezon City, Hon. Nicasio Yatco, presiding, rendered judgment dismissing the action of plaintiffs Emma Geniza and Aurelio Geniza as premature, and ordering the defendants Asia Mercantile Corporation to return to plaintiff Catalina C. Rivera the sum of P13,567.57 which represents the excess of the total obligations of the mortgagor based on the following computation:chanrob1es virtual 1aw library
Proceeds of Sale (TCT No. 7464) P68,567.57
Less:chanrob1es virtual 1aw library
Amount of Loan P 50,000.00
12% Interest 2,000.00
5% Attorney’s fees and liquidated
damages 2,500.00
—————
Total Obligation 55,000.00
————
Excess Recoverable 13,567.57
A motion for reconsideration having been presented to the effect that the parcels of land subject of the mortgage in Exhibit "A" were foreclosed on March 22, 1960 and sold to the defendant Henry Sy for P51,965.80, the court on May 18, 1960 rendered an amended decision the dispositive parts of which read as follows:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered one in favor of the plaintiffs and against the defendants by ordering the reduction of the stipulated 30% attorney’s fees and liquidated damages to 5% in the mortgage contracts entered into by them (Exhs. A and B); ordering the defendant Henry Sy to return to plaintiffs Aurelio Geniza, Emma Geniza and Lorenzo Rivera the sum of P5,277.30 representing the excess of the public sales of said plaintiffs’ mortgaged properties (TCT No. 39230, TCT No. T-22028 and TCT No. 20384) in the total amount of P60,277.30 over the obligations of same plaintiffs in the amount of P55,000.00 based on the following computation:chanrob1es virtual 1aw library
Proceeds of Sales (TCT No. 39230,
TCT No. 22028 and TCT No. 20384) P 60,277.30
Less:chanrob1es virtual 1aw library
Amount of Loan P50,000.00
12% Interest 2,500.00
5% Attorney’s fees and liquidated
damages 2,500.00
————
Total Obligations 55,000.00
————
Excess Recoverable 5,277.30
ordering the defendant Asia Mercantile Corporation to return to plaintiff Catalina C. Rivera the sum of P13,567.57 representing the excess of the public sale of said plaintiff’s mortgaged land (TCT No. 7464) in the amount of P68,567.57 over the total obligations of same plaintiff in the amount of P55,000.00 based also on the following computation:chanrob1es virtual 1aw library
Proceeds of Sale (TCT No. 7464) 68,167.57
Less:chanrob1es virtual 1aw library
Amount of Loan 50,000.00
12% Interest 2,500.00
5% Attorney’s fees and liquidated
damages 2,500.00
————
Total Obligations 55,000.00
————
Excess Recoverable 13,567.57
without pronouncement as to costs.
"SO ORDERED."cralaw virtua1aw library
It is against the above judgment that the plaintiffs have prosecuted the appeal to this Court, claiming that the lower court erred in not reducing the liquidated damages and the attorney’s fees to not more than P500.00 and in not declaring the stipulation exacting attorney’s fees and liquidated damages as a usurious stipulation, by reason of which plaintiffs (appellants herein) should be entitled to attorney’s fees amounting to P5,000.00.
In reducing the 30% attorney’s fees and liquidated damages to 5%, the judge below appears to be fully justified. As the loans were for a period of thirty days only, damages amounting to 30% of the loans of P50,000.00 each would appear to be iniquitous and subject to reduction in accordance with the provisions of Articles 1227 and 1229 of the Civil Code of the Philippines. We do not agree with counsel for plaintiffs-appellants that the contract was a usurious contract there being no allegation of fact that the mortgagee’s intention was to exact a usurious interest, nor evidence to that effect. Neither is there any allegation or claim that the mortgage is contra bonos mores, so that we may assume that he demanded the insertion of the iniquitous clause or 30% damages cover a usurious deal. Under these circumstances we cannot sustain the claim of the plaintiffs-appellants that the agreement was a usurious one; so that we hold that the trial court was fully justified in considering the provision only as an iniquitous clause subject to reduction.
We also find the reduced liquidated damages and attorney’s fees to be fair and we find no reason for distributing the discretion of the court below in this respect.
WHEREFORE, the judgment appealed from is hereby affirmed, with costs against the plaintiffs-appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal, J., took no part.
On July 8, 1959, Catalina Carreon, with the consent of her husband Zacarias Rivera, mortgaged to the defendant Asia Mercantile Corporation Lot No. 551 of the Piedad estate subdivision for P50,000.00, payable within a period of thirty days with interest at the rate of 12% per annum. Paragraph 4 of the contract provides that upon failure of the mortgagor to pay the indebtedness and the interest when due, the mortgage shall become due and demandable, and without necessity of demand the mortgagee may immediately foreclose the mortgage, judicially or extra-judicially, and for this purpose the mortgagor appoints the mortgagee as his attorney-in-fact to sell the properties and to sign all documents and perform any act requisite and necessary to accomplish said purpose. It was further expressly agreed that in case of foreclosure the mortgagor binds himself to pay the mortgagee 30% of the sum owing and unpaid as attorney’s fees and liquidated damages, exclusive of costs and expenses of the sale.
On the same date another mortgage was executed by plaintiffs Emma R. Geniza, Aurelio Geniza and Lorenzo Rivera over two parcels of registered land for the sum of P50,000.00, and with the same conditions as the mortgage executed by the spouses Catalina Carreon and Zacarias Rivera. Copies of the contracts of mortgage are annexed to the complaint in this case as Annex "A" and Annex "B." The mortgagors in both mortgage contracts defaulted in the payment of their respective obligations. The mortgage executed by Catalina Carreon Rivera and Zacarias Rivera was foreclosed extra-judicially and the proceeds of the sale of the land amounting to P68,567.57 was disposed of by the mortgagees as follows:jgc:chanrobles.com.ph
"1. P50,000.00 — as mortgage loan
2. P12,500.00 — as the 12% interest on the loan as of December 7, 1957 plus daily interest thereafter until the obligation is legally terminated.
3. P15,000.00 — as Attorney’s fees and liquidated damages.
4. The fees and expenses of foreclosure and sale."cralaw virtua1aw library
Plaintiffs brought this action to obtain a judicial declaration that the stipulation in the deeds of mortgage fixing the amount of 30% as attorney’s fees and liquidated damages is excessive, unconscionable and iniquitous and that the same should be reduced to P200.00. The complainants also asked for P5,000.00 as attorney’s fees for bringing this action. The defendants set up the defense that the complaint states no cause of action; that the mortgage executed by Emma R. Geniza and Aurelio Geniza has not yet been foreclosed; that the mortgagors are estopped from alleging that the stipulation regarding liquidated damages and attorney’s fees is excessive and unreasonable.
The case having been tried in the Court of First Instance of Quezon City, Hon. Nicasio Yatco, presiding, rendered judgment dismissing the action of plaintiffs Emma Geniza and Aurelio Geniza as premature, and ordering the defendants Asia Mercantile Corporation to return to plaintiff Catalina C. Rivera the sum of P13,567.57 which represents the excess of the total obligations of the mortgagor based on the following computation:chanrob1es virtual 1aw library
Proceeds of Sale (TCT No. 7464) P68,567.57
Less:chanrob1es virtual 1aw library
Amount of Loan P 50,000.00
12% Interest 2,000.00
5% Attorney’s fees and liquidated
damages 2,500.00
—————
Total Obligation 55,000.00
————
Excess Recoverable 13,567.57
A motion for reconsideration having been presented to the effect that the parcels of land subject of the mortgage in Exhibit "A" were foreclosed on March 22, 1960 and sold to the defendant Henry Sy for P51,965.80, the court on May 18, 1960 rendered an amended decision the dispositive parts of which read as follows:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered one in favor of the plaintiffs and against the defendants by ordering the reduction of the stipulated 30% attorney’s fees and liquidated damages to 5% in the mortgage contracts entered into by them (Exhs. A and B); ordering the defendant Henry Sy to return to plaintiffs Aurelio Geniza, Emma Geniza and Lorenzo Rivera the sum of P5,277.30 representing the excess of the public sales of said plaintiffs’ mortgaged properties (TCT No. 39230, TCT No. T-22028 and TCT No. 20384) in the total amount of P60,277.30 over the obligations of same plaintiffs in the amount of P55,000.00 based on the following computation:chanrob1es virtual 1aw library
Proceeds of Sales (TCT No. 39230,
TCT No. 22028 and TCT No. 20384) P 60,277.30
Less:chanrob1es virtual 1aw library
Amount of Loan P50,000.00
12% Interest 2,500.00
5% Attorney’s fees and liquidated
damages 2,500.00
————
Total Obligations 55,000.00
————
Excess Recoverable 5,277.30
ordering the defendant Asia Mercantile Corporation to return to plaintiff Catalina C. Rivera the sum of P13,567.57 representing the excess of the public sale of said plaintiff’s mortgaged land (TCT No. 7464) in the amount of P68,567.57 over the total obligations of same plaintiff in the amount of P55,000.00 based also on the following computation:chanrob1es virtual 1aw library
Proceeds of Sale (TCT No. 7464) 68,167.57
Less:chanrob1es virtual 1aw library
Amount of Loan 50,000.00
12% Interest 2,500.00
5% Attorney’s fees and liquidated
damages 2,500.00
————
Total Obligations 55,000.00
————
Excess Recoverable 13,567.57
without pronouncement as to costs.
"SO ORDERED."cralaw virtua1aw library
It is against the above judgment that the plaintiffs have prosecuted the appeal to this Court, claiming that the lower court erred in not reducing the liquidated damages and the attorney’s fees to not more than P500.00 and in not declaring the stipulation exacting attorney’s fees and liquidated damages as a usurious stipulation, by reason of which plaintiffs (appellants herein) should be entitled to attorney’s fees amounting to P5,000.00.
In reducing the 30% attorney’s fees and liquidated damages to 5%, the judge below appears to be fully justified. As the loans were for a period of thirty days only, damages amounting to 30% of the loans of P50,000.00 each would appear to be iniquitous and subject to reduction in accordance with the provisions of Articles 1227 and 1229 of the Civil Code of the Philippines. We do not agree with counsel for plaintiffs-appellants that the contract was a usurious contract there being no allegation of fact that the mortgagee’s intention was to exact a usurious interest, nor evidence to that effect. Neither is there any allegation or claim that the mortgage is contra bonos mores, so that we may assume that he demanded the insertion of the iniquitous clause or 30% damages cover a usurious deal. Under these circumstances we cannot sustain the claim of the plaintiffs-appellants that the agreement was a usurious one; so that we hold that the trial court was fully justified in considering the provision only as an iniquitous clause subject to reduction.
We also find the reduced liquidated damages and attorney’s fees to be fair and we find no reason for distributing the discretion of the court below in this respect.
WHEREFORE, the judgment appealed from is hereby affirmed, with costs against the plaintiffs-appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal, J., took no part.
