Facts:

On October 7, 1912, the Bank of the Philippine Islands (plaintiff and appellee) filed a complaint against Gregorio Yulo (defendant and appellant) in the Court of First Instance of Iloilo, seeking the recovery of P43,212.95 plus interest at 8% and P2,000 for costs. The plaintiff asserted that to secure this amount, the defendant had executed and delivered a mortgage that included specific properties. The defendant responded with a general denial. After a trial where evidence was presented, Judge James S. Powell ruled in favor of the bank, awarding it P41,275.18 plus interest from January 21, 1913, at 8%, and authorized the recovery of P2,000 as attorney's fees along with costs. The court ordered that the amounts be paid by the defendant by the first day of the next court term, failing which, the mortgaged properties would be sold to satisfy the debt. The defendant appealed the judgment, arguing two main points. First, he claimed the court erred in refusing to order a sale of

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Facts:

Background of the Case

• The plaintiff, Bank of the Philippine Islands, initiated a complaint on October 7, 1912, in the Court of First Instance of the Province of Iloilo.
• The purpose of the complaint was to recover from the defendant, Grego-ei Yulo, the sum of P43,212.95 plus interest at 8% per annum and P2,000 for costs.
• The complaint was supported by the allegation that the defendant had executed a mortgage on June 26, 1907, on certain described properties as security for the said amount.

Proceedings in the Court of First Instance

• The defendant answered the complaint by filing a general denial.
• After the issue was taken for trial, testimony and evidence were recorded by the trial judge, Honorable James S. Powell.
• The trial resulted in a judgment in favor of the plaintiff for P41,275.18 with interest accruing from January 21, 1913, at 8% per annum, in addition to P2,000 as attorney’s fees and costs.
• The lower court specifically ordered that the sums, including the principal, interest, and costs, be paid by the defendant into the court by the next term following the January 1913 term, and, in the event of default, the mortgage property would be sold to realize the said amount.

Appeal and Assignments of Error

• The defendant appealed the decision, making two primary assignments of error:
• The first argument centered on the method of sale of the mortgage properties, contending that the court erred in not ordering the sale of the properties in aliquot parts as provided under article 1860 of the Civil Code.
• The second argument was that the imposition of P2,000 as attorney’s fees was erroneous because the mortgage clause regarding “gastos y costas” was intended merely to cover expenses incurred in foreclosure, not as an unequivocal promise to pay attorney’s fees.
• In support of the first error, the defendant referenced article 1860 of the Civil Code.
• The plaintiff countered by invoking sections 256 and 257 of the Code of Procedure in Civil Actions and cited precedents such as Banco Espanol-Filipino vs. Donaldson Sim & Co. and Yangco vs. Cruz Herrera, which emphasized adherence to the procedural sale guidelines provided in the current Code of Civil Procedure.

Contractual Provisions and Judicial Considerations

• The mortgage explicitly provided that even if an “upset price” was set, the defendant consented to a sale conducted according to the provisions of the Code of Procedure in Civil Actions.
• The appellate court acknowledged that the legal framework for mortgage foreclosure had evolved, and that the contractual stipulations must yield to the controlling statutory scheme.
• The case was analyzed within the context of established precedents dictating that the sale of pledged articles must follow current procedural law regardless of any contractual upset price clause.

Issue:

Issue on the Method of Sale

• Whether the lower court erred by not dividing the sale of the mortgage properties into aliquot parts as provided by the defendant under article 1860 of the Civil Code.
• Whether the obligation to sell the property should strictly abide by the procedures of the Code of Procedure in Civil Actions rather than any alternative method stipulated in the mortgage.

Issue on the Award for Attorney’s Fees

• Whether the lower court was justified in ordering the defendant to pay P2,000 as attorney’s fees to the plaintiff.
• Whether the phrase “por gastos y costas” in the mortgage was an absolute and independent commitment for the payment of attorney’s fees or merely a provision to cover the plaintiff’s actual costs and expenses incurred during foreclosure proceedings.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)