VICENTE E. REYES, IN HIS CAPACITY AS ADMINISTRATOR OF THE ESTATE OF FELIPA ALONSO Y DE MESA VIUDA DE MENDIOLA, PLAINTIFF AND APPELLANT, VS. HENRY W. ELSER, DEFENDANT AND APPELLA…

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STATEMENT

At the time of her death, Felipa Alonso y de Mesa, widow of Mendiola, was the
sole owner of a parcel of land, known as lot 44-B subdivision of lot No. 44 of
block No. 2130 of the cadastral survey of the City of Manila, together with the
buildings and improvements thereon, consisting of 1,844.60 square meters, which
is more fully described in transfer certificate of title No. 17652, issued by
the register of deede of Manila on June 22, 1922.

In August, 1921, after her death, the plaintiff, Vicente E. Reyes, was
appointed as administrator of her estate, and duly qualified as such, and at all
times since has been and is now such administrator.

After some negotiations, and by and with the knowledge, consent and approval
of the heirs of the deceased, and founded upon an order of the probate court,
the administrator sold the land in question to the defendant Henry W. Elser at
the agreed price of P74,242.69, of which P10,000 was paid at the time of the
purchase, and on March 29, 1922, Elser made his note to the plaintiff, as
administrator, for the balance of 1*64,242.69 made due and payable May 29, 1922.
To secure the payment of the note and on the same day, Elser executed to the
administrator a first and voluntary mortgage on the premises, which was duly
registered. By the terms of the note and the mortgage, the P64,242.69 was to
bear interest at the rate of 12 per cent per annum from maturity until final
payment. It was further provided that in case of a suit or action to collect the
note and enforce the mortgage, Elser would pay the further sum of P5,000, as
attorney’s fees.

For failure to pay the note at maturity, and on July 5, 1922, this suit was
commenced to foreclose the mortgage and have the property sold.

Among other things, the mortgage also provides:

“(c) It is distinctly understood and agreed that all rents on the
property above described from the date of the execution of this document until
the full payment of the amount of the said note, shall be, as at present,
collected by the party of the first part for the benefit of the estate under his
administration.”

In the original complaint, the plaintiff prayed for P64,242.69, with interest
thereon from May 29, 1922, at 12 per cent per annum, and for P5,000, as
attorney’s fees, and the sale of the property, and the application of the
proceeds of the sale to satisfy the debt. Later, the plaintiff filed a plea in
which he admits having collected rent upon the mortgaged property from May 29,
1922 to November 8, 1922, and that he kept the amount collected to apply upon
the payment of the necessary expenses upon the mortgaged premises, and the
balance, if any, to be applied to the payment of interest, and “that the
plaintiff is, and always has been, ready to make an accounting of the rent
collected upon the mortgaged premises and the expenses incurred in its
preservation, but the defendant has never asked the plaintiff for a formal
accounting.”

For answer, defendant Elser made a general denial, and further alleged that
the plaintiff had collected all the rents upon the mortgaged premises from March
29, 1922, and never paid any part thereof to the defendant or given him credit
therefor; that he has also collected from the defendant P104.80 as taxes which
accrued prior to March 29, 1922, and further alleged that the “mortgage is
invalid in that it provides for the payment of interest at the rate of 12 per
cent per annum and for collection by the mortgagee for his benefit of the rents
of the property alleged to have been mortgaged which amount to and have amounted
to a sum in excess of 1*200 each month, constituting usury in violation of Act
No. 2655, laws of the Philippine Islands.”

Over the protest and objection of the plaintiff, Mariano Alonso y de Mesa was
permitted to file a bill of intervention, in which he alleges that for the last
six years he has been and is now the usufructuary and in the possession of a
two-story house on a certain lot on the premises, and that he obtained it as a
compensation “for the long and valuable services rendered by him in favor of
Felipa Alonso who died on June 25, 1921;” that the right existed a long time
prior to her death, and was recognized and confirmed by the deceased in her
will; that the real property described in the mortgage was sold by Vicente
Reyes, as administrator of the estate of Felipa Alonso to Henry W. Elser for
P74,242.69; that the intervenor gave his consent to the sale with the
understanding that he would intervene in the execution of the deed of sale, and
that he was to receive “the proportional amount corresponding to his right of
usufruct and possession,” and that he has never received any part thereof; that
the intervenor is entitled to, should have and receive, his proportional part
“which corresponds to his usufructuary right and possession, inasmuch as on
account of said sale he would be deprived of his aforesaid right of usufruct and
possession, and for the reason that he had and was enjoying said usufructuary
right and possession even prior to the death of the late Felipa Alonso.”

Wherefore, he prays a corresponding judgment for the value of the usufruct,
or at least P4,640.

To the bill of intervention, the plaintiff made a general denial.

Pending the suit Mr. Elser died, and C. W. Rosenstock was appointed as
administrator of his estate, and, as such, was substituted as defendant.

The case was tried upon such issues, and the lower court rendered judgment in
favor of the plaintiff and against the defendant Elser for the sum of
P64,242.69, with interest thereon from May 29, 1922, at the rate of 12 per cent
per annum, from which was deducted the sum of P1,812.29, the total amount of the
rents received by the plaintiff, as shown by Exhibit J. The trial court also
rendered judgment for the further sum of P5,000, as attorney’s fees and the
costs of the action, and dismissed the cross-complaint of the defendant Elser,
and directed the sale of the property to satisfy the judgment. It also rendered
judgment against the plaintiff, as administrator, in favor of Mariano Alonso y
de Mesa, as intervenor, for the sum of P2,000 as the value of his right of
occupation and usufruct, with interest from the date of the judgment, without
costs. From the judgment against him and in favor of the plaintiff, as
administrator, the defendant Rosenstock, as executor of the Elser estate,
appeals and assigns the following errors:

“I. The trial court erred in not finding that the sum or value reserved and
secured by Exhibit A, paragraph 6, sub-paragraphs (a) and (c) was for
the forbearance of P64,242.69 imported by the said exhibit and was greater than
is allowed by section 2 of Act No. 2655.

“II. The trial court erred in not finding that Exhibit A was tainted with
usury and therefore void.

“III. The trial court erred in condemning the defendant-appellant to pay to
the plaintiff-appellant within the space of three months from April 30, 1923,
the sum of P64,242.69 with interest at 12 per cent per annum less the sum of
P1,812.29 and to pay the further sum of P5,000 as attorneys’ fees and the costs
of the action.”

From the judgment against him and in favor of the intervenor, the plaintiff
appeals and assigns the following errors:

“I. The trial court erred in finding that the intervenor signed the petition
asking for a license to sell the property, Exhibit D, with the understanding
that he (intervenor) would intervene in the execution of the deed of sale and
receive a remuneration as payment of his right of occupation in house No. 30 on
Calle Almanza, which was included in the property sold to the defendant Henry W.
Elser.

“II. The trial court erred in holding that the intervenor had a right to
receive P2,000, as reasonable compensation for his usufruct and right of
occupation.

“III. The trial court erred in accepting the intervenor’s motion, asking
permission to intervene, filed right at the trial of this case without serving
previous notice to the plaintiff, as required by section 121 of the Code of
Civil Procedure and section 10 of the rules of Courts of First Instance, and in
not ordering the striking out of the record of the complaint in intervention, as
prayed for by the plaintiff in his motion under date of November 15, 1922.

“IV. The trial court erred in condemning the plaintiff to pay the intervenor
the sum of P2,000 with legal interest.”

JOHNS, J.:

The note and mortgage in question were executed by Mr. Elser, now deceased,
to and in favor of the plaintiff, as administrator, and the whole transaction
was authorized and approved by the court. It was the result of a series of
negotiations between the plaintiff and Elser, and the sale itself was authorized
and approved by the heirs of the deceased, including Mariano Alonso y de Mesa,
the intervenor. It is true that clause C of the mortgage in question above
quoted specifically provides “that all rents on the property above described
from the date of the execution of this document until the full payment of the
amount of the said note, shall be, as at present, collected by the party of the
first part for the benefit of the estate under his administration.” Standing
alone and within itself, it might be construed as tending to show that the
plaintiff was to receive more than 12 per cent interest on the amount of the
note.

March 22, 1922, Elser wrote the plaintiff as follows:

“I have the honor to advise you that the said property is now sold to the
undersigned under the following conditions :

“The sum of ten thousand (P10,000) pesos to be paid upon the execution of the
deed of sale, and

“The balance to a term of sixty (60) days after the sale, same to be recorded
on regular mortgage, upon the same property. It is understood that the said
mortgage will carry no interest, during that period of sixty (60) days, but
whatever rent to be derived from said property during said period to redound to
the benefit of the estate.“

Based upon that letter, the probate court made an order authorizing and
approving the sale of the property.

March 25, 1922, Elser wrote the plaintiff another letter in which he
said:

“The balance to a term of sixty (60) days after the sale, same to be recorded
on regular mortgage, upon the same property. It is understood that the said
mortgage will carry no interest during that period of sixty (60) days, but
whatever rent to be derived from said property during said period to redound to
the benefit of the estate.”

Upon its receipt, another order of the probate court was obtained authorizing
the sale upon the terms stated in that letter.

It is important to note that all of the transactions between the plaintiff
and Elser were authorized and approved by the probate court, and that the
transaction was a sale of property as distinguished from a loan of money by one
person to another. It is also important to note that the promissory note in
question became due and payable sixty days after its execution, and that it
specifically provides that it shall not draw interest until after maturity. It
is very apparent that at the time the mortgage was executed, it was contemplated
by both parties that the note would be paid at its maturity, and that the
clause, giving the plaintiff the right to the rents for the first sixty days,
was inserted in consideration of plaintiff’s waiver of interest on the note for
the first sixty days. In other words, it was contemplated that the note would be
paid at maturity. Pending that time it did not draw interest, and for such
reason the plaintiff was to have the rents pending the maturity of the note.
That was the real purpose and intent of the parties. It is true that in the
original complaint the plaintiff claimed both the interest and the rents from
May 29, 1922. But in a subsequent pleading, the exclusive right to the rents
after May 29th was waived, and the plaintiff offered to account for them, and in
its finding the lower court allowed the defendant credit for rents to the amount
of P1,812.29, and as a payment pro tanto on the note.

Clause C in the mortgage is a literal copy of Elser’s letter to the plaintiff
of March 25th, in which he modified his proposition of March 22d. In other
words, clause C of the mortgage in question was founded on Elser’s own
proposition. It is very apparent that neither the plaintiff nor Elser ever
contemplated the making of an usurious contract, and that, at the time it was
made, neither of them ever thought or understood that it was. There is no merit
in the claim that it was an usurious transaction. It was a sale as distinguished
from a loan, and was authorized and approved by the probate court, and upon that
question the judgment of the lower court is in accord with the actual facts and
the intention of the parties, and for such reason is affirmed, with costs in
favor of the plaintiff and against the appellant Rosenstock, as
administrator.

Upon the bill of intervention, the trial court rendered judgment in favor of
the intervenor and against the plaintiff for the sum of P2,000, without
costs.

Here, again, it will be noted that both the note and the mortgage were
executed by Elser to, and in favor of, the plaintiff, as administrator, and that
there are other heirs of the deceased Felipa Alonso y de Mesa, of which the
intervenor is only one, and that the deceased was the sole owner of the real
property in question at the time of her death; that there are other improvements
upon it outside of those claimed by the intervenor; that the sale in question
was authorized and consummated with both the knowledge, written consent and
approval of the intervenor, and that he shared in the proceeds of the sale.

This is a suit to foreclose the mortgage, and the validity of the mortgage is
the only question involved between the plaintiff and the defendant Elser. The
note and mortgage, having been executed to, and in favor of, the plaintiff, as
administrator, by and with the knowledge, consent and approval of the heirs of
the deceased, as administrator, plaintiff is entitled to have and receive the
proceeds from the sale of the property. The question as to how it should be
divided, and to whom it should be paid, and the amount which each should
receive, and which the intervenor now seeks to litigate in this case, is a
matter solely between the heirs of the deceased, and between them only, and the
intervenor is the only one of them, who is a party to this action, and the other
heirs would not be bound by any judgment of preference rendered in favor of the
intervenor. In other words, the questions sought to be litigated by the
intervenor in this action are questions between the heirs of the deceased, and
between them only, and to which all of them should be made a party.

Assuming, without deciding, that the intervenor has a just and equitable
claim, as contended for in his bill of intervention, it is a matter which should
be settled in the administration of the estate between the intervenor and his
coheirs.

The judgment in his favor and against the plaintiff, as administrator, is
reversed, without costs to either party, and without prejudice to any rights
which the intervenor may have arising from, or growing out of, any of the
matters alleged in his bill of intervention. So ordered.

Araullo, C. J., Street, Malcolm, Avancena, Ostrand, and
Romualdez, JJ., concur.