Facts:

The case involves H. R. Andreas, the administrator with the will annexed of the estate of Harry Bridge, as the plaintiff and appellee, and B. A. Green as the defendant and appellant. The events leading to the case began with a promissory note dated August 19, 1921, wherein B. A. Green promised to pay Harry Bridge the sum of fifteen thousand pesos (P15,000) on or before November 19, 1921, or upon a thirty-day written demand notice. The note stipulated an interest rate of twelve percent (12%) per annum and included a clause for a further sum equal to ten percent (10%) of the total amount due as expenses for collection and attorney's fees, whether actually incurred or not. The note was secured by a real estate mortgage.

When the payment was not made, the plaintiff filed a case in the lower court to collect the amount due. The trial court ruled in favor of the plaintiff, ordering the defendant to pay the principal amount, interest, and the stipulated attorney's fees. T...

Facts:

Parties and Instrument

• Plaintiff/Appellee: H. R. Andreas, Administrator with the Will Annexed of the Estate of Harry Bridge.
• Defendant/Appellant: B. A. Green.
• Instrument: A promissory note in the amount of P15,000.00, executed in Manila, P.I., dated August 19, 1921.
• Security: The note is secured by a real estate mortgage of even date.

Terms of the Promissory Note

• Payment Obligations:
• Principal amount of P15,000.
• Interest at a rate of 12% per annum, calculated from the date specified.
• Additional interest of 12% per annum on delayed payments following a thirty-day written demand notice.
• Stipulated Expense Clause:
• Provision for a further sum equal to 10% of the total amount due.
• The clause is designated to cover expenses of collection for attorney’s fees.
• Contains the phrase “whether actually incurred or not,” which became the subject of dispute.
• Collection Mechanism:
• Provision for sale of the mortgaged property if the penalty (10% fee) is not paid within three months from the decision.

Proceedings and Trial Court Judgment

• The defendant questioned the validity of the clause providing for 10% penalty for attorney’s fees and collection expenses.
• The trial court rendered judgment in favor of the plaintiff:
• Ordering the defendant to pay the principal of P15,000.
• Imposing interest at the rate of 12% per annum beginning May 19, 1923, until full payment.
• Enforcing the additional penalty amounting to 10% of P15,000.
• Establishing a three-month period for payment of the penal clause before proceeding with the sale of the mortgaged land.

Context of the Dispute

• The defendant raised the issue that the clause might be in contravention of the Usury Law.
• The dispute centered on whether the stipulated collection expenses, regardless of their actual incidence, violated legal limits on interest or fees.

Issue:

Legal Validity of the Stipulated Expense Clause

• Does the clause “and a further sum equal to 10 per cent of the total amount due as and for expenses of collection for attorney’s fees whether actually incurred or not” violate the Usury Law?
• Is the additional clause for attorney’s fees enforceable given that the expenses might not be actually incurred?

Interpretation of the Clause and Its Purpose

• Whether the phrase “whether actually incurred or not” renders the clause excessive or superfluous.
• What is the true intention of the parties in including this provision in the promissory note?

Precedential Concerns and Legal Consistency

• How do precedents in similar cases (both in the Philippines and elsewhere) influence the interpretation of this contractual stipulation?
• Whether the clause serves as a penalty mechanism or as a safeguard for anticipated collection costs.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)