GR 47644; (July, 1941) (Digest)
G.R. No. 47644; July 29, 1941
LUNETA MOTOR COMPANY, demandante-apelante, vs. RUFINO MORA y FRANCISCO LIMGENCO, demandados-apelados.
FACTS
The plaintiff, Luneta Motor Company, proved in Civil Case No. 51732 of the Court of First Instance of Manila that the defendant Rufino Mora purchased a second-hand Plymouth Sedan automobile from it for P900. Mora paid P600 down, and for the remaining balance of P300, he and his co-defendant Francisco Limgenco jointly and severally executed a promissory note. In the note, they obligated themselves to pay the balance in installments with 12% annual interest and, in case the plaintiff was compelled to resort to the courts for collection, to pay an additional 20% of the amount due as attorney’s fees. Upon maturity of the installments and after demand for payment, the defendants failed to pay any part of the promissory note’s amount. On April 1, 1939, the trial court rendered judgment ordering the defendants to pay, jointly and severally, the sum of P300 plus legal interest from the filing of the complaint, and the costs. The plaintiff appealed, seeking modification of the judgment to grant the stipulated interest and the penalty clause.
ISSUE
Whether the stipulated 12% annual interest and the 20% penalty clause (for attorney’s fees) in the promissory note should be enforced by the court.
RULING
Yes. The appeal is well-founded. The parties stipulated via the promissory note that in case of default, the defendants would pay 12% annual interest and 20% of the resulting debt as attorney’s fees. There is no reason for the courts not to enforce this obligation. The agreed-upon interest and penalty clause are lawful and not contrary to morals; therefore, the stipulation has the force of law between the contracting parties (Articles 1091 and 1255, Civil Code; Bachrach vs. Golingco, 39 Phil. 146; Bachrach Motor Co. vs. Espiritu, 52 Phil. 356; Government of the Philippine Islands vs. Lim, 61 Phil. 789). The appealed decision is modified to order the defendants to pay, jointly and severally, 12% annual interest and 20% on the P300 debt. In all other respects, the decision is affirmed, with costs of this instance against the defendants-appellees.