The Bachrach Motor Co v. Faustino Espiritu, Ramon Espiritu G.R. No.

L-28497 November 6, 1928

FACTS:
1. This case involves two separate sale transactions.
One in July 1925 when Faustino bought a truck from Bachrach Motor on installment. To secure payment , Mr Espiritu mortgaged this truck
together with two others (no. 77197 & 92744 in the subsequent sale transaction dated July 1925). The two of the other trucks were already paid.
Faustino failed to pay the balance of this truck.
It appears that in Feb 1925, Faustino purchased another truck from Bachrach. The said truck, together with two other vehicles ((no. 77197 &
92744 ) were mortgaged to the plaintiff to secure the remaining balance. Faustino failed to pay the balance for this truck (July 1925) obtained.??

2. It was agreed in both sales that 12% interest will be paid on the unpaid price, and in case of non-payment of total debt at maturity, 25% shall
be the penalty. Mr Espiritu also signed a promissory note solidarily with his brother Rosario (acting as intervenor), the sums secured by the
mortgages. Rosario is alleged to be the owner of the two white trucks no. 77197 & 92744 mortgaged.
3. 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.

4. Lower Court: ordered Faustino Espiritu and Rosario 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 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.

5. Faustino contend that

(a) trucks 77197 and 92744 were not mortgaged, because, when he signed the mortgage deeds these trucks were not included in those documents,
and were only put in later, without his knowledge;
(b) Faustino sold his rights in trucks Nos. 77197 and 92744 to Rosario (who intervened in this case as owner of the 2 trucks), and that as Rosario
did not sign the mortgage deeds, such trucks cannot be considered as mortgaged.
c) that Faustino and Rosario did not sign the promissory notes, as he (Rosario) was in Ilocos Norte when doc was supposed sign
d) that the 25% penalty is usurious

ISSUE: W/N the 25% penalty upon the debt in addition to the 25% p.a. is usurious. -- NO

RULING:
Court said there is positive proof that the trucks were included at the time the Faustino signed the mortgage deeds. Besides, two of Faustino's
letters to Hidalgo, an employee of Bacharach Motors written a few days before the transaction, showed him to acquiesce in the inclusion of all
his White trucks already paid for, in the mortgage (Exhibit H-I).

Evidence also shows that, Faustino and Rosario, signed 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. Intervenor Rosario 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 such documents.

Claim of intervenor Rosario that he did not sign promissory notes is not sufficient to overthrow the evidence. A comparison of his signature
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, away from Manila, as this does not
necessarily prove that the latter could not have been in Manila on the 25th of that month.

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, does not include the interest, and 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 fixed by the law, since said rate was fixed only for the interest (and
the penalty is separate)
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. The penalty is however reduced from 25 % upon the sum owed, Faustino and
Rosario need to pay only 10 % thereon as penalty. (Judgment appealed from is affirmed in all other respects).