G.R. No. 9358; September 24, 1915
BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. GREGORIO YULO, defendant-appellant.

FACTS:
On October 7, 1912, the Bank of the Philippine Islands (plaintiff-appellee) filed a complaint in the Court of First Instance of Iloilo to recover from Gregorio Yulo (defendant-appellant) the sum of P43,212.95 with interest. The bank alleged that to secure the loan, Yulo executed a real estate mortgage on June 26, 1907, over certain properties. The mortgage contract contained a stipulation for the payment of “gastos y costas” (expenses and costs), including a sum of P2,000, in case judicial foreclosure was resorted to. The trial court rendered a judgment in favor of the bank, ordering Yulo to pay the amount due and, in default thereof, the mortgaged properties would be sold. The court also awarded the bank P2,000 as attorney’s fees pursuant to the mortgage stipulation. Yulo appealed, assigning two errors: (1) the court erred in not ordering the sale of the mortgaged properties for aliquot parts of the debt as allegedly provided in the mortgage and required under the Civil Code; and (2) the court erred in awarding attorney’s fees.

ISSUE:
1. Whether the foreclosure sale of the mortgaged properties should be governed by the Civil Code provision on aliquot sale or by the Code of Civil Procedure.
2. Whether the stipulated sum of P2,000 for “gastos y costas” in the mortgage contract is automatically recoverable as attorney’s fees without proof of actual expenses.

RULING:
1. On the first issue, the Supreme Court ruled against the appellant. The Court held that the foreclosure and sale of mortgaged property must be governed by the Code of Civil Procedure, not by the Civil Code. The contract was executed in 1907, after the adoption of the Code of Civil Procedure. The Court cited previous doctrines (Banco Español-Filipino vs. Donaldson Sim & Co. and Yangco vs. Cruz Herrera) establishing that statutory procedure for judicial sales cannot be contravened by private agreement. Furthermore, the mortgage contract itself, in its paragraph 7, expressly provided that the property could be sold in accordance with the Code of Civil Procedure, even if it contained an upset price. Therefore, the trial court did not err in ordering a sale under the procedural code.

2. On the second issue, the Supreme Court modified the trial court’s decision. The Court held that the stipulation for “gastos y costas” was intended to cover the costs and expenses actually incurred in the foreclosure suit, not as an absolute promise to pay a fixed sum as attorney’s fees regardless of actual expense. Since there was no evidence in the record to prove that the plaintiff incurred expenses amounting to P2,000, the award was improper. The Court modified the judgment by deleting the award of P2,000 and allowing the plaintiff to recover only the actual costs of suit.

DISPOSITIVE PORTION:
With the modification disallowing the P2,000 award for attorney’s fees and limiting the recovery to actual costs, the judgment of the lower court was AFFIRMED.