EN BANC

[G.R. No. 28497. November 6, 1928.]

THE BACHRACH MOTOR CO., INC. , plaintiff-appellee, vs . FAUSTINO

ESPIRITU , defendant-appellant.

[G.R. No. 28498. November 6, 1928.]

THE BACHRACH MOTOR CO., INC. , plaintiff-appellee, vs. FAUSTINO

ESPIRITU , defendant-appellant, and ROSARIO ESPIRITU , intervenor-
appellant.

Ernesto Zaragoza and Simeon Ramos for defendant-appellant.

Benito Soliven and Jose Varela Calderon for intervenor-appellant.
B. Francisco for appellee.

SYLLABUS

1. CHATTEL MORTGAGE; PENAL CLAUSE. — Article 1152 of the Civil Code

permits the agreement upon a penalty apart from the interest. Should there be such an
agreement, the penalty, as was held in the case of Lopez vs. Hernaez (32 Phil., 631),
does not include the interest, and as such the two are different and distinct things
which may be demanded separately. The penalty is not to be added to the interest for
the determination of whether the interest exceeds the rate xed by the law, since said
rate was fixed only for the interest.
2. ID.; ID.; REDUCTION OF PENALTY. — When the obligation has been partly
performed, article 1164 of the Civil Code authorizes the court to reduce the penalty
imposed therein.

DECISION

AVANCEÑA , C.J : p

These two cases, Nos. 28497 and 28498, were tried together.
It appears, in connection with case 28497; that on July 28. 1925 the defendant
Faustino Espiritu purchased of the plaintiff corporation a two-ton White truck for
P11,983.50, paying P1,000 down to apply on account of this price, and obligating
himself to pay the remaining P10,983.50 within the periods agreed upon. To secure the
payment of this sum, the defendant mortgaged the said truck purchased and, besides,
three others, two of which are numbered 77197 and 92744 respectively, and all of the
White make (Exhibit A). These two trucks had been purchased from the same plaintiff
and were fully paid for by the defendant and his brother Rosario Espiritu. The defendant
failed to pay P10,477.82 of the price secured by this mortgage.
CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 In connection with case 28498, it appears that on February 18,1925 the
defendant bought a one-ton White truck of the plaintiff corporation for the sum of
P7,136.50, and after having deducted the P500 cash payment and the 12 per cent
annual interest on the unpaid principal, obligated himself to make payment of this sum
within the periods agreed upon. To secure this payment the defendant mortgaged to
the plaintiff corporation the said truck purchased and two others, numbered 77197 and
92744, respectively, the same that were mortgaged in the purchase of the other truck
referred to in the other case. The defendant failed to pay P4,208.28 of this sum.
In both sales it was agreed that 12 per cent interest would be paid upon the
unpaid portion of the price at the execution of the contracts, and in case of non-
payment of the total debt upon its maturity, 25 per cent thereon, as penalty.
In addition to the mortgage deeds referred to, which the defendant executed in
favor of the plaintiff, the defendant at the same time also signed a promissory note
solidarily with his brother Rosario Espiritu for the several sums secured by the two
mortgages (Exhibits B and D).
Rosario Espiritu appeared in these two cases as intervenor, alleging to be the
exclusive owner of the two White trucks Nos. 77197 and 92744, which appear to have
been mortgaged by the defendant to the plaintiff.
While these two cases were pending in the lower court the mortgaged trucks
were sold by virtue of the mortgage, all of them together bringing in, after deducting the
sheriff's fees and transportation charges to Manila, the net sum of P3,269.58.
The judgment appealed from ordered the defendant and the intervenor to pay
plaintiff in case 28497 the sum of P7,732.09 with interest at the rate of 12 per cent per
annum from May 1, 1926 until fully paid, and 25 per cent thereof in addition as penalty.
In case 28498, the trial court ordered the defendant and the intervenor to pay plaintiff
the sum of P4,208.28 with interest at 12 per cent per annum from December 1, 1925
until fully paid, and 25 per cent thereon as penalty.
The appellants contend that trucks 77197 and 92744 were not mortgaged,
because, when the defendant signed the mortgage deeds these trucks were not
included in those documents, and were only put in later, without defendant's
knowledge. But there is positive proof that they were included at the time the defendant
signed these documents. Besides, there were presented two of defendant's letters to
Hidalgo, an employee of the plaintiff's. written a few days before the transaction,
acquiescing in the inclusion of all his White trucks already paid for, in the mortgage
(Exhibit H-I),
Appellants also allege that on February 4, 1925, the defendant sold his rights in
said trucks Nos. 77197 and 92744 to the intervenor, and that as the latter did not sign
the mortgage deeds, such trucks cannot be considered as mortgaged. But the
evidence shows that while the intervenor Rosario Espiritu did not sign the two
mortgage deeds (Exhibits A and C), yet, together with the defendant Faustino Espiritu,
he signed the two promissory notes (Exhibits B and D) secured by these two
mortgages. All these instruments were executed at the same time, and when the trucks
77197 and 92744 were included in the mortgages, the intervenor Rosario Espiritu was
aware of it and consented to such inclusion. These facts are supported by the
testimony of Bachrach, manager of the plaintiff corporation, of Agustin Ramirez, who
witnessed the execution of all these documents, and of Angel Hidalgo, who witnessed
the execution of Exhibits B and D.
We do not nd the statement of the intervenor Rosario Espiritu that he did not
CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 sign promissory notes Exhibits B and C to be su cient to overthrow this evidence. A
comparison of his genuine signature on Exhibit AA with those appearing on promissory
notes B and C, convinces us that the latter are his signatures. And such is our
conclusion, notwithstanding the evidence presented to establish that on the date when
Exhibit B appears to have been signed, that is, July 25, 1925, the intervenor was in
Batac, Ilocos Norte, many miles away from Manila. And the fact that on the 24th of said
month of July, the plaintiff sent some truck accessory parts by rail to Ilocos for the
intervenor does not necessarily prove that the latter could not have been in Manila on
the 25th of that month.
In view of this conclusion that the intervenor signed the promissory notes
secured by trucks 77197 and 92744 and consented to the mortgage of the same, it is
immaterial whether he was or was not the exclusive owner thereof.
It is nally contended that the 25 per cent penalty upon the debt, in addition to
the interest of 12 per cent per annum makes the contract usurious. Such a contention is
not well founded. Article 1152 of the Civil Code permits the agreement upon a penalty
apart from the interest. Should there be such an agreement, the penalty, as was held in
the case of Lopez vs. Hernaez (32 Phil., 631), does not include the interest, and as such
the two are different and distinct things which may be demanded separately. According
to this, the penalty is not to be added to the interest for the determination of whether
the interest exceeds the rate xed by the law, since said rate was xed only for the
interest. But considering that the obligation was partly performed, and making use of
the power given to the court by article 1154 of the Civil Code, this penalty is reduced to
10 per cent of the unpaid debt.
With the sole modi cation that instead of 25 per cent upon the sum owed, the
defendants need pay only 10 per cent thereon as penalty, the judgment appealed from
is a rmed in all other respects without special pronouncement as to costs. So
ordered.
Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.

CD Technologies Asia, Inc. © 2018 cdasiaonline.com