EN BANC
[G.R. No. 24322. December 16, 1925. ]
H. R. ANDREAS, administrator with the will annexed of the estate of Harry Bridge, Plaintiff-Appellee, v. B. A. GREEN, Defendant-Appellant.
Benji S. Ohnick for Appellant.
Chas. E. Tenney for Appellee.
SYLLABUS
1. NEGOTIABLE INSTRUMENTS; USURY; STIPULATIONS IN NEGOTIABLE INSTRUMENTS FOR THE PAYMENT OF COLLECTION AND ATTORNEY’S FEES. — The lender may without violating the Usury Law provide in a note for an attorney’s fee to cover the cost of collection The purpose of a stipulation in a note for reasonable attorney’s fees is not to give the lender a larger compensation for the loan than the law allows, but is to safeguard the lender against future loss or damage by being compelled to retain counsel to institute judicial proceedings to collect his debt.
2. ID.; ID.; ID. — Whether the creditor could enforce the penalty providing for collection expenses where expenses of collection and attorney’s fees were not actually incurred. is questionable.
2. ID.; ID.; ID. — Whether the creditor could enforce the penalty providing for collection expenses where expenses of collection and attorney’s fees were not actually incurred. is questionable.
D E C I S I O N
MALCOLM, J.:
The defendant and appellant questions the clause in the promissory note sued on reading "and a further sum equal to 10 per cent of the total amount due as and for expenses of collection for attorney’s fees whether actually incurred or not," as in contravention of the Usury Law. The full text of the said note is as follows:jgc:chanrobles.com.ph
"P15,000.00
MANILA, P. I.
"Aug. 19th, 1921
"On or before the 19th day of November, 1921, or on thirty (30) days written demand notice, for value received, I promise to pay to Harry Bridge, at Manila, P. I., the sum of fifteen thousand pesos (P15,000) with interest thereon at the rate of twelve per cent (12%) per annum. If not paid when due after thirty days written demand notice, this note shall bear interest at the rate of 12 per cent per annum until paid; and a further sum equal to 10 per cent of the total amount due as and for expenses of collection for attorney’s fees whether actually incurred or not and in addition to all costs as provided for in the Code of Civil Procedure.
"This note is secured by real-estate mortgage of even date.
(Sgd.) "B. A. GREEN
Stipulations in negotiable instruments for the payment of collection and attorney’s fees are not forbidden by law in this jurisdiction. The lender may without violating the Usury Law provide in a note for an attorney’s fee to cover the cost of collection. This has been definitely held in a long line of cases both here and elsewhere. (Bachrach v. Golingco [1918], 39 Phil., 138; Bachrach Garage and Taxicab Co. v. Golingco [1919], 39 Phil., 912; Laureano v. Kilayco and Lizares de Kilayco [1915], 32 Phil., 194; Warrington v. De la Rama [1923], 46 Phil., 881; Lloyd v. Scott [1830], 4 Peters, 205; Fowler v. Equitable Trust Co. [1891], 141 U. S., 411; Williams v. Flowers [1889], 90 Ala., 136; Peyser v. Cole [1883], 11 Ore., 39; Dorsey v. Wolff [1892], 142 I11., 589; Gambril v. Doe Ex dem. Rose [1846], 44 Am. Dec., 760; Weatherby v. Smith [1870], 30 Iowa, 131; Columbian Building and Loan Association v. Rice [1904], 68 S. C., 236; 1 Ann. Cas., 239.) The purpose of a stipulation in a note for reasonable attorney’s fees is not to give the lender a larger compensation for the loan than the law allows, but is to safeguard the lender against future loss or damage by being compelled to retain counsel to institute judicial proceedings to collect his debt.
The only difference between the provision of the promissory note here complained of and the provisions of the promissory notes in any of the above-cited cases is that the note before us contains these additional words: "whether actually incurred or not." But this clause is merely descriptive in nature — is in reality merely surplusage. The idea of the parties was to provide for a penalty to cover expenses of collection. That such expenses were actually incurred in this case, is disclosed by the obvious fact that the case is now before the appellate court for decision. Whether the creditor could enforce the penalty where expenses of collection and attorney’s fees were not actually incurred, is questionable, but does not affect the result in this case.
The judgment of the trial court in favor of the plaintiff and against the defendant, whereby the latter was condemned and ordered to pay to the former the sum of fifteen thousand pesos (P15,000), with interest at 12 per cent per annum beginning with May 19, 1923, and continuing until the complete payment of the debt, together with 10 per cent of fifteen thousand pesos (P15,000) to cover the penal clause, and in case of nonpayment of the same within three months from the date of the decision providing for the sale of the land described in the mortgage in accordance with law, is affirmed in all of its parts, it being understood that the three-month period above mentioned shall begin to run from the date when this judgment becomes final. With the costs of this instance against the appellant, it is so ordered.
Avanceña, C.J., Street, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
Johnson, J., did not take part.
"P15,000.00
MANILA, P. I.
"Aug. 19th, 1921
"On or before the 19th day of November, 1921, or on thirty (30) days written demand notice, for value received, I promise to pay to Harry Bridge, at Manila, P. I., the sum of fifteen thousand pesos (P15,000) with interest thereon at the rate of twelve per cent (12%) per annum. If not paid when due after thirty days written demand notice, this note shall bear interest at the rate of 12 per cent per annum until paid; and a further sum equal to 10 per cent of the total amount due as and for expenses of collection for attorney’s fees whether actually incurred or not and in addition to all costs as provided for in the Code of Civil Procedure.
"This note is secured by real-estate mortgage of even date.
(Sgd.) "B. A. GREEN
Stipulations in negotiable instruments for the payment of collection and attorney’s fees are not forbidden by law in this jurisdiction. The lender may without violating the Usury Law provide in a note for an attorney’s fee to cover the cost of collection. This has been definitely held in a long line of cases both here and elsewhere. (Bachrach v. Golingco [1918], 39 Phil., 138; Bachrach Garage and Taxicab Co. v. Golingco [1919], 39 Phil., 912; Laureano v. Kilayco and Lizares de Kilayco [1915], 32 Phil., 194; Warrington v. De la Rama [1923], 46 Phil., 881; Lloyd v. Scott [1830], 4 Peters, 205; Fowler v. Equitable Trust Co. [1891], 141 U. S., 411; Williams v. Flowers [1889], 90 Ala., 136; Peyser v. Cole [1883], 11 Ore., 39; Dorsey v. Wolff [1892], 142 I11., 589; Gambril v. Doe Ex dem. Rose [1846], 44 Am. Dec., 760; Weatherby v. Smith [1870], 30 Iowa, 131; Columbian Building and Loan Association v. Rice [1904], 68 S. C., 236; 1 Ann. Cas., 239.) The purpose of a stipulation in a note for reasonable attorney’s fees is not to give the lender a larger compensation for the loan than the law allows, but is to safeguard the lender against future loss or damage by being compelled to retain counsel to institute judicial proceedings to collect his debt.
The only difference between the provision of the promissory note here complained of and the provisions of the promissory notes in any of the above-cited cases is that the note before us contains these additional words: "whether actually incurred or not." But this clause is merely descriptive in nature — is in reality merely surplusage. The idea of the parties was to provide for a penalty to cover expenses of collection. That such expenses were actually incurred in this case, is disclosed by the obvious fact that the case is now before the appellate court for decision. Whether the creditor could enforce the penalty where expenses of collection and attorney’s fees were not actually incurred, is questionable, but does not affect the result in this case.
The judgment of the trial court in favor of the plaintiff and against the defendant, whereby the latter was condemned and ordered to pay to the former the sum of fifteen thousand pesos (P15,000), with interest at 12 per cent per annum beginning with May 19, 1923, and continuing until the complete payment of the debt, together with 10 per cent of fifteen thousand pesos (P15,000) to cover the penal clause, and in case of nonpayment of the same within three months from the date of the decision providing for the sale of the land described in the mortgage in accordance with law, is affirmed in all of its parts, it being understood that the three-month period above mentioned shall begin to run from the date when this judgment becomes final. With the costs of this instance against the appellant, it is so ordered.
Avanceña, C.J., Street, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
Johnson, J., did not take part.
