Case Digest (G.R. No. 13660)
Facts:
E. M. Bachrach, plaintiff and appellee, sued Vicente Golingco, defendant and appellant, for the balance due on a promissory note given for the purchase of an automobile truck; the trial court awarded P8,461 as principal, interest at eight percent from July 10, 1916, and P2,115.25 as stipulated attorney's fees, and the defendant appealed. The note was secured by a chattel mortgage; the mortgage was foreclosed, the sheriff sold the truck in Manila where Bachrach purchased it for P539 credited on the debt, and the truck had been removed from Albay and stripped of parts before sale.
Issues:
- Whether the foreclosure sale conducted in Manila, after removal of the truck from Albay, violated section 14 of Act No. 1508 and rendered the sale irregular?
- Whether the stipulation for twenty-five per cent as attorney's fees is void as usurious or otherwise unenforceable as grossly excessive?
Ruling:
The Court held that the sale violated section 14 of Act No. 1508 because the mortgaged chattel was removed from the mortgagor's municipality and sold in Manila without the mortgagor's consent and without notice in Albay, rendering the sale irregular; however, the defendant failed to prove any damage from that irregularity, so the judgment for principal and interest was sustained. The Court held that a stipulation for attorney's fees is valid but must be limited to a reasonable amount and reduced the awarded fee from P2,115.25 to P800; costs were otherwise affirmed.
Ratio:
Section 14 of Act No. 1508 requires sale in the municipality of the mortgagor or where the property is kept for his use; removal and sale elsewhere without consent and without notice render the sale improperly accomplished and expose the mortgagee to liability for the property's value at the time it was removed. The party alleging injury from the irregularity bears the burden of proving damages; here the plaintiff's uncontradicted testimony fixed the truck's value at the sale price, and no damage was established. As to fees, the Negotiable Instruments Law (Act No. 2031, sec. 2, par. E) recognizes the validity of stipulations for collection fees, but section 29 of the Code of Civil Procedure empowers the court to limit recovery to reasonable compensation where the stipulated amount is unreasonable; applying that rule, the Court exercised its discretion to fix P800 as a reasonable fee.
Doctrine:
- Section 14 of Act No. 1508 requires that a mortgaged chattel be sold in the mortgagor’s municipality or where it is kept for his use.
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