Bank of the Philippine Islands v. Yulo
REITERATIONFacts
The Antecedents: On October 7, 1912, the Bank of the Philippine Islands (BPI) filed a complaint against Gregorio Yulo to recover P43,212.95 plus 8% interest and P2,000 for costs. BPI alleged that Yulo executed a mortgage on June 26, 1907, to secure the payment of the sum. Yulo filed a general denial. Procedural History: The Court of First Instance of Iloilo rendered judgment in favor of BPI, ordering Yulo to pay P41,275.18 with 8% interest from January 21, 1913, and P2,000 as attorney's fees, plus costs. The court further ordered that if Yulo defaulted, the mortgaged property would be sold to satisfy the debt. The Petition: Yulo appealed, assigning as errors (1) the court's failure to order the sale of properties for aliquot parts of the debt as stipulated in the mortgage, and (2) the judgment against him for P2,000 in attorney's fees.
Issue(s)
Whether the lower court erred in not ordering the sale of the mortgaged properties for their aliquot parts as provided in the mortgage. Whether the lower court erred in rendering judgment against the defendant for P2,000 as attorney's fees.
Ruling
The judgment of the lower court is affirmed with modification. The award of P2,000 as attorney's fees is deleted and replaced with the actual costs and expenses necessarily incurred by the plaintiff in the foreclosure action.
Ratio Decidendi
On the first issue (aliquot parts of the debt): The Court held that the sale of mortgaged properties must be conducted in accordance with the provisions of the Code of Procedure in Civil Actions, not the law in force at the time the contract was made, especially when the contract was executed after the new Code's adoption. This principle was established in Banco Español Filipino vs. Donaldson Sim & Co. and Yangco vs. Cruz Herrera. Furthermore, even if a mortgage contains a clause fixing an upset price, parties cannot by agreement contravene statutory procedure or interfere with the lawful process of the courts. The mortgage itself expressly consented to the sale being conducted according to the Code of Procedure in Civil Actions, rendering the appellant's argument moot. On the second issue (attorney's fees): The Court found that the mortgage provision for P2,000 for "gastos y costas" was intended to cover only the necessary costs and expenses incurred by the plaintiff in resorting to court action for foreclosure. It was not an absolute promise to pay P2,000 as attorney's fees, as the mortgage did not contain such an explicit stipulation. Since there was no proof in the record detailing the expenses incurred by the plaintiff in the present action, that part of the judgment awarding P2,000 as attorney's fees was modified to include only the plaintiff's costs.
Main Doctrine
While a mortgage may contain a clause fixing an upset price, the sale must proceed in accordance with the provisions of the Code of Procedure in Civil Actions, and parties cannot, by agreement, contravene statutory procedure. Attorney's fees awarded in foreclosure proceedings should be limited to necessary costs and expenses incurred, not an absolute sum unless explicitly stipulated.