EN BANC
[G.R. No. L-17165. July 31, 1962. ]
EMMA R. GENIZA, AURELIO GENIZA, LORENZO RIVERA, CATALINA CARREON RIVERA and ZACARIAS RIVERA, Plaintiffs-Appellants, v. HENRY SY and ASIA MERCANTILE CORPORATION, Defendants-Appellees.
Vicente J. Francisco, for Plaintiffs-Appellants.
Dakila F. Castro for Defendants-Appellees.
SYLLABUS
1. OBLIGATIONS AND CONTRACTS; LOAN PAYABLE WITHIN THIRTY DAYS; STIPULATION PROVIDING 30 PER CENT AS ATTORNEY’S FEES AND LIQUIDATED DAMAGES INIQUITOUS. — Although a contract of loan for a period of thirty days fixing an amount equivalent to 30 per cent as attorney’s fees and liquidated damages is not usurious per se, there being no allegation that the mortgagee’s intention in inserting the provision in the contract is to exact a usurious interest, nor that said contract is contra bonos mores, that particular stipulation is iniquitous and as such is subject to reduction in accordance with the provisions of Articles 1227 and 1229 of the Civil Code of the Philippines.
D E C I S I O N
LABRADOR, J.:
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 extrajudicially, 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 mortgagee as follows:chanrob1es virtual 1aw library
Proceeds of Sale (TCT No. 7464) P68,567.57
Less:chanrob1es virtual 1aw library
Amount of Loan P50,000.00
12% Interest 2,000.00
5% Attorney’s fees
and liquidated damages 2,500.00
————
Total Obligation P55,000.00
Excess Recoverable 13,567.57
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 defendant 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 P50,000.00
12% Interest 2,000.00
5% Attorney’s fees
and liquidated damages 2,500.00
————
Total obligation P55,000.00
Excess Recoverable 13,567.57
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 per cent attorney’s fees and liquidated damages from 30 per cent to 5 per cent, the judge below appears to be fully justified. As the loan was for a period of thirty days only, damages amounting to 30 per cent of the loan of P50,000.00 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 to 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 disturbing the discretion of the court below in this respect.
WHEREFORE, the judgment appealed from is hereby affirmed, with costs against the plaintiffs-appellants. So ordered.
Bengzon, C.J., Padilla, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Bautista Angelo and Reyes, J.B.L., JJ., took no part.
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 mortgagee as follows:chanrob1es virtual 1aw library
Proceeds of Sale (TCT No. 7464) P68,567.57
Less:chanrob1es virtual 1aw library
Amount of Loan P50,000.00
12% Interest 2,000.00
5% Attorney’s fees
and liquidated damages 2,500.00
————
Total Obligation P55,000.00
Excess Recoverable 13,567.57
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 defendant 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 P50,000.00
12% Interest 2,000.00
5% Attorney’s fees
and liquidated damages 2,500.00
————
Total obligation P55,000.00
Excess Recoverable 13,567.57
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 per cent attorney’s fees and liquidated damages from 30 per cent to 5 per cent, the judge below appears to be fully justified. As the loan was for a period of thirty days only, damages amounting to 30 per cent of the loan of P50,000.00 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 to 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 disturbing the discretion of the court below in this respect.
WHEREFORE, the judgment appealed from is hereby affirmed, with costs against the plaintiffs-appellants. So ordered.
Bengzon, C.J., Padilla, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Bautista Angelo and Reyes, J.B.L., JJ., took no part.
