[WITH AMENDED DECISION OF SEPTEMBER 26, 1962]

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
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 Becoverable…………………………………………………		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:

	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 Becoverable…………………………………………………		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.

AMENDED DECISION

Sept. 26, 1962

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 record 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
mortgagee as follows:

“1. P50,000.00—as mortgage loan.

2.
P2,500.00—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 any liquidated damages.

4. The fees and expenses of foreclosure and sale.”

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, fton, 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:

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, I960 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:

“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 E);
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:

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:

without pronouncement as to costs.

“So ordered.

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 per cent 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 per cent 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 his hereby affirmed, with costs against the plaintiffs-appellants. So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, and Regala, JJ., concur.