PHILIPPINE TRUST CO., PLAINTIFF AND APPELLEE, VS. LUCIO ECHAUS TAN SIUA, DEFENDANT AND APPELLANT.

This action was instituted in the Court of First Instance of
Occidental Negros by the Philippine Trust Co., hereinafter called the
bank, for the purpose of foreclosing a mortgage on five parcels of real
property belonging to the appellant, Lucio Echaus Tan Siua, given as
security for a debt owing to the bank by the Visayan General Supply
Co., Inc., hereinafter referred to as the debtor. Upon hearing the
cause the trial judge entered judgment declaring the defendant herein
to be indebted to the bank in the amount of P53,741.82, with interest
at the rate of 10 per cent per annum, to be capitalized monthly, also
declaring the defendant to be indebted to the bank in the sum of P4,000
for stipulated attorney’s fee, with the requirement that said sums be
deposited in court within three months from the date of the judgment,
in default of which the mortgaged property to be sold in ordinary
course of foreclosure; and with further provision that execution should
issue against the defendant for any balance of the aforesaid
indebtedness which should not be satisfied from the proceeds of the
sale. From this judgment the defendant, Lucio Echaus Tan Siua, appealed.

It appears that by agreement dated May 18, 1923, the plaintiff bank
granted to the Visayan General Supply Co., Inc., credit in current
account to the extent of P40,000, which credit was, in ordinary course,
utilized by the debtor party. Among the stipulations of this contract
material to be here noted, we find the following, namely: First, that
the Visayan General Supply Co., Inc., should pay interest on the
average daily debit balances of its said current account at the rate of
10 per cent per annum, said interest to be computed on the last day of
each month, or at such other time as the party of the second part might
deem expedient, and the amount thereof debited in said current account;
secondly, it was agreed that the debit balance shown in said current
account by the books of 4he bank should be taken and held to be the
true and correct amount owing by the debtor; thirdly, the debtor party
agreed to furnish such security as the bank might from time to time
require for the payment of any sum advanced by the bank to the debtor.

Pursuant, apparently, to the agreement of the debtor to furnish
security for said indebtedness, the defendant, Lucio Echaus Tan Siua,
on August 2, 1923, mortgaged to the bank the five parcels of land which
are the subject of this proceeding for the purpose of securing the
aforesaid indebtedness.

From this mortgage we reproduce two provisions which are pertinent to the present controversy, as follows:

“This mortgage is given as security for the payment
on demand of a credit in current account in the sum of forty thousand
pesos (P40,000), Philippine currency, granted by the mortgagee to the
Visayan General Supply Co., Inc., together with interest on the average
daily debit balances of said current account at the rate of ten per
cent (10%) per annum, payable quarterly, all in accordance with the
terms and conditions of a certain agreement for the credit in current
account entered into by and between the said Visayan General Supply
Company, Inc., under date of May 18, 1923, a copy of which said
agreement is attached hereto, marked A, and made a part hereof.

* * * * * * *

“The
conditions of this obligation are such that if the mortgagor shall well
and truly pay, or caused to be paid, any sum or sums that may be due to
the mortgagee ,by the Visayan General Supply Company, Inc., under and
by virtue of the terms of that certain agreement for credit in current
account entered into by and between the said Visayan General Supply
Company, Inc., and the Philippine Trust Company, under date of May 18,
1923, a copy of said agreement is attached hereto, marked A, and made a
part hereof; and shall comply with all the terms and conditions set
forth in this mortgage, then this obligation shall be void; otherwise
it shall remain in full force and effect/’

It will be observed that in the first of the two paragraphs above
quoted the credit in current account granted by the bank is described
as bearing interest at the rate of 10 per centum per annum, payable
“quarterly;” and from this the appellant contends, with some
plausibility, that the interest due to the bank cannot be capitalized
monthly but only quarterly. On the part of the appellee it is claimed
that the word “quarterly” was used in the mortgage by manifest error
and that the word “quarterly” should be read “monthly,” as stated in
the contract of May 18, 1923.

We are of the opinion that the position taken by the appellee on
this point is correct and that the error is manifest and apparent from
the mortgage itself in relation with the principal contract. The
reasons that conduct us to this conclusion are these: First, the
mortgage was evidently given pursuant to that clause of the original
contract by which the debtor had agreed to furnish security to the bank
for any sum for which the debtor might become obligated to the bank
under the terms of the original agreement; secondly, the paragraph of
the mortgage in which the word “quarterly” is used explicitly states
that the obligation to pay interest is “all in accordance with the
terms and conditions” of the original agreement; thirdly, the same
paragraph of the mortgage makes express reference to the original
agreement for the granting of credit in current account by the bank to
the debtor and said contract is incorporated in the mortgage by
reference; fourthly, in the defeasance clause of the mortgage, which is
the second of the two paragraphs above quoted from the mortgage, the
debt secured is not described as being one for the payment of
interest quarterly, but the original contract is again referred to and
incorporated in said clause without specifying how the interest should
be paid.

From this accumulation of circumstances the conclusion is
irresistible that a mistake was made in using the word “quarterly” in
the mortgage as descriptive of the obligation to pay interest on the
principal debt; and inasmuch as the original contract is incorporated
by reference in the mortgage, the court cannot hesitate to give effect
to the mortgage in the sense evidently intended by the parties, that is
to say, that the interest on the principal debt must be paid in
accordance with the terms of the original contract. Under the original
contract it is clear that the interest was to be
debited in current account and capitalized monthly.

Error is assigned to the action of the trial court in allowing the
stipulated attorney’s fee of P4,000. In view of the fact that this fee
constitutes less than 71/2 per cent of the amount which the court found
to be due, we think that the stipulation was reasonable and that the
fee was properly
incorporated in the judgment.

The last error assigned is directed to that feature of the appealed
decision in which the trial court ordered that execution should issue
personally against the defendant for any deficiency that might result
from the failure of the mortgaged property to bring the full amount of
the indebtedness due to the creditor. It is admitted by the appellee
that this feature of the judgment must be eliminated, since the
defendant did not assume personal liability for the debt but only
mortgaged his property in security therefor.

From what has been said it follows that that portion of the
dispositive part of the appealed judgment which purports to make the
defendant liable for any deficiency must be eliminated. With this
modification the judgment appealed from is affirmed, without costs. So
ordered.

Johnson, Malcolm, Villamor, Ostrand, Johns, Romualdez, and Villa-Real, JJ., concur.