Case Summary (G.R. No. 24322)

Legal Context of Stipulations in Negotiable Instruments

• The lender is permitted to include a clause for attorney's fees in a promissory note without violating the Usury Law.
• Such stipulations are designed to protect the lender from potential future losses incurred while collecting debts.
• The inclusion of attorney's fees is not intended to provide the lender with excessive compensation beyond what is legally permissible.

Examination of the Promissory Note Clause

• The specific clause in question states that the borrower must pay an additional sum equal to 10% of the total amount due for collection expenses and attorney's fees, regardless of whether these fees were actually incurred.
• The full text of the promissory note outlines the principal amount, interest rate, and conditions for payment, including the stipulation for attorney's fees.

Legal Precedents Supporting Attorney's Fees

• The court references a series of cases that affirm the legality of including attorney's fees in negotiable instruments.
• Notable cases include Bachrach vs. Golingco and Warrington vs. De la Rama, which establish a precedent for such stipulations in Philippine law.

Interpretation of the Clause in Question

• The additional wording "whether actually incurred or not" is deemed descriptive and does not alter the fundamental purpose of the clause.
• The intent behind the clause is to establish a penalty for collection expenses, which is a common practice in promissory notes.

Implications of Non-Incurred Fees

• The court raises a question regarding the enforceability of the penalty if no actual collection expenses were incurred.
• However, this question does not impact the outcome of the case at hand, as the case is currently in litigation, indicating that collection efforts have indeed been initiated.

Affir...continue reading

Case Syllabus (G.R. No. 24322)

Case Background

• The case concerns a promissory note in the amount of ₱15,000.00 executed by the defendant, B. A. Green, on August 19, 1921.
• The note stipulates a 12% annual interest rate, with additional terms concerning collection expenses and attorney's fees.
• The specific clause in contention states: "and a further sum equal to 10 percent of the total amount due as and for expenses of collection for attorney's fees whether actually incurred or not."

Legal Issue

• The primary legal question raised by the defendant is whether the clause regarding attorney's fees contravenes the Usury Law.
• The defendant challenges the legitimacy of including attorney's fees in the promissory note, particularly the phrase "whether actually incurred or not."

Ruling of the Court

• The court ruled in favor of the plaintiff, affirming the trial court's judgment that ordered the defendant to pay the amount due under the promissory note.
• The court upheld the validity of the cla...continue reading