AQUILINO F. PANDO, ADMINISTRATOR OF THE ESTATE OF A. F. PANDO, DECEASED, PLAINTIFF AND APPELLEE, VS. CARMEN KETTE, REPRESENTED BY HER ATTORNEY IN FACT A. A. ADDISON, AND GEORGE …

This is an appeal taken by Carmen Kette from the judgment of
the Court of First Instance of Rizal, the dispositive part of which is as
follows:

“For the foregoing, it is ordered that judgment be rendered
sentencing Carmen Kette to pay the plaintiff the sum of twenty thousand pesos
(P20,000), the amount of the mortgage credit; to pay the stipulated interest at
the rate of P200 a month from the month of August, 1926, inclusive, until full
payment of said credit; to pay 10 per cent on the sum of P20,000, the amount of
the loan, and on the sum of P200, which is the interest for the month of August,
1926, as expressly agreed by the parties in the mortgage instrument, and also to
pay the costs of this action. Should ninety (90) days elapse after the defendant
has been notified of this judgment, without her making payment of such amounts
as she is obliged to pay, the provincial sheriff shall, after the legal notices,
proceed to the sale of the mortgage property at public auction, applying the
proceeds thereof to the payment of the judgment, costs and expenses incurred,
and the remainder, if any, is to be delivered to the defendant, submitting the
sale and the instrument of transfer made to the court for approval. But if after
the sale has been made of the property given as mortgage security the amounts
claimed shall not have been in full. the defendant George C. Sellner is
sentenced to pay the sums lacking for the full payment of the mortgage credit,
as well as the 10 per cent additional payment as penalty and costs. So
ordered.”

In support of her appeal, the appellant assigns the following
alleged errors as committed by the trial court in its judgment, to wit:

“1. The trial court committed an error in not dismissing the
complaint as premature, since the mortgage deed Exhibit A which is the basis of
said complaint, provides that the mortgage shall last for one year, and shall be
extendible for another year if suitable to the creditor, and because there was lis pendens.

“2. The lower court committed an error in not holding the
mortgage void, the interest being usurious, and therefore immoral and against
public order.

“3. The trial court committed an error in not findingthat the
sum really loaned by the deceased Adolfo F. Pando during his lifetime to Carmen
Kette was only P19,000 and not P20,000 as appearing in the mortgage deed.

“4. The trial court committed an error in holding that the
defendant defaulted in the payment of the interest due for the month of August
1926.

“5. And lastly the trial court committed an error in sentencing
the defendant instead of absolving her, with costs against the plaintiff.”

There is no question that the defendant-appellant Carmen Kette,
through her attorney in fact A. A. Addison, in consideration of the sum of
P20,000, which she had received from Adolfo F. Pando by her aforesaid attorney,
executed a first mortgage on a lot of her property, described in the deed
executed to that effect, in favor of the said Adolfo F. Pando, among others
under the following conditions:

“The conditions of this mortgage are such that if I, Carmen
Kette, within the period of one year,—extendible for another year from the date
of the execution of the present instrument, if suitable to the creditor,—should
pay Adolfo F. Pando the sum of twenty thousand pesos (P20,000) Philippine
currency, and during said period of one year extendible to another, should have
paid in advance every month within the first ten (10) days of each month the
interest on the said sum of the P20,000 at the rate of 12 per cent per annum, as
well as the taxes on the land, and the improvements thereon, and each of the
other conditions hereinafter enumerated, this mortgage shall be deemed cancelled
and without further effect; otherwise, it shall remain in full force and
effect.

“4. I, Carmen Kette, through my attorney in fact and legal
representative, A. A. Addison, do hereby agree that if at any time during the
subsistence of this mortgage should fail to comply with any of the conditions
stipulated herein, or should not perform any of the acts which I hereby bind
myself to perform, or let a month elapse without paying the corresponding
interest, Adolfo F. Pando, his heirs and assigns may declare the present
mortgage violated and due, or may proceed to its foreclosure as provided for by
law, or take any other action they may deem proper and convenient for the
recovery of the sum owed; should any action be taken for the foreclosure of the
mortgage or any other nature, I, Carmen Kette, shall be bound to reimburse the
mortgagee Adolfo F. Pando, for the expenses he may have incurred as attorney’s
fees and a per centum of the collection, which expenses are hereby fixed at a
sum equal to ten per cent of the amount still owing at that time, apart from all
the costs and rights established by the Code of Civil Procedure, which sum is
also hereby secured by the present mortgage;”

Neither is there any question that when the mortgage in
question was executed, A. A. Addison issued 11 checks in favor of the creditor,
Adolfo F. Pando, for the sum of P200 each, and deposited them with attorney
Antonio Opisso, who was to deliver monthly in advance to said creditor Adolfo F.
Pando, one check in payment of the interest corresponding to that month, such
checks not becoming effective save upon the creditor’s receiving them. When
August, 1926, came around, the last month of the contract, the plaintiff failed
to pay the interest corresponding thereto, notwithstanding the demand made to
that effect.

With regard to the first assignment of error, while it is true
that the mortgage stipulates that the one year during which the mortgage was to
be in force was extendable for another year, such an extension could only take
place if the creditor agreed thereto.

One of the conditions of the mortgage is that if the mortgagor
allowed a month to elapse without paying the interest corresponding thereto, the
creditor could declare the mortgage due and matured, and could proceed as
provided for by law.

It is logical that the extension of one year, could take place
only when the debtor had fulfilled all the conditions stipulated in the contract
within the year during which the same was in force, and should not have caused
it to become forcibly matured and due by reason of the breach of any condition
of the contract. The mortgagor failed to comply with one of the conditions of
the contract referring to the payment of the interest for the month of August,
1926, and the creditor declared the obligation due and matured. Carmen Kette,
therefore, has lost her right to the extension. Moreover, the consent of the
creditor to the extension was necessary. As the latter notified the debtor
through her attorney in fact that he was not agreeable to the extension, such
extension could not take place.

With respect to the fact that there was an action pending
between the same parties at the filing of the complaint in the present case, it
is no bar to the continuation of the present case inasmuch as the first case
dealt with the annulment of the mortgage while the instant case is for the
foreclosure thereof, and the cause of action is different. (Hongkong &
Shanghai Banking Corporation vs. Aldecoa & Co., 30 Phil., 255.)

As to the second assignment of error, the fact that it has been
stipulated that the interest of 12 per cent per annum was to be paid monthly in
advance within the first ten days of each month, does not make the contract
usurious when, as in the instant case, the advancement of the interest is only
made monthly, as in banking transactions.

Upon this particular point, American jurisprudence has laid
down the following rule:

“Interest taken in advance.—Taking the highest rate of
interest in advance, so that the borrower receives less than the principal sum
he contracts to repay, is unquestionably usurious on principle, and seems at
first to have been so considered in all cases. But an early concession was made
to the usage among banks and other persons dealing in commercial paper whose
customary short term loans made the violation of the law involved insignificant.
The usage has widened, however, as is the custom of the law merchant, until at
the present time it is the settled rule that upon any short term loan interest
may be reserved in advance at the highest legal rate without rendering the loan
usurious. But some American courts still insist that the right to take such
advance interest is strictly confined to commercial transactions. It is manifest
that the rule permitting interest in advance must be limited to short term
loans, since otherwise the borrower might incur an obligation to repay a large
sum in consideration of the present receipt of an insignificant amount. But no
limit has been fixed by the cases by which to determine the maximum period that
will be permitted. The taking of interest in advance on loans for one yea? has
been held to be legal; but with a single exception there seems to be no case in
which a loan stipulating for full legal interest in advance for a longer period
has been held enforceable in the absence of spedal statutory provision.” (39
CYC., 948-951.)

Touching the third assignment of error, the preponderance of
the evidence shows that the amount really delivered to Adolfo F. Pando as loaned
to Carmen Kette, was P20,000, P19,000 of which was paid by check and P1,000 in
cash.

For the foregoing, we are of the opinion and so hold, that the
trial court did not commit any of the errors assigned to it in its judgment.

In virtue whereof, and not finding any error in the judgment
appealed from, the same is affirmed in all respects, with costs against the
appellant. So ordered.

Avanceña, C. J., Johnson, Street, Malcolm, Villamor, Ostrand,
and Romualdez, JJ., concur.