Republic of the Philippines
SUPREME COURT
Manila
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,
vs.
HENRY SY and ASIA MERCANTILE CORPORATION, defendants-appellees.
Vicente J. Francisco for plaintiffs-appellants.
Dakila F. Castro for defendants-appellees.
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 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 mortgaged may immediately foreclose the mortgage, judicially or extrajudicially and for this purpose the mortgagor appoint 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 extrajudicially and the proceeds of the sale of the land amounting to P68,567.57 was disposed of by the mortgagee as follows:
| Proceeds of Sale (TCT No. 7464) | P68,567.57 |
| Less: |
| 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 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:
| Proceeds of Sale (TCT No. 7464) | P68,567.57 |
| Less: |
| 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 plaintiff have prosecuted the appeal to this Court, claiming the lower court erred in not reducing the liquidated damages and the attorney's fees to not more than P500.00 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 from 30% to 5%, the judge below appears to be fully justified. As the loan was for a period of thirty days only, damages amounting to 30% of the loan of P50,000 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, 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 claim of the plaintiffs-appellants that the agreement was usurious one; so that we hold that the trial court was fully justified in considering the provision only as 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.
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