This is an appeal taken by  Gonzalo Abaya and Segunda Abella from the judgment of the Court of First Instance of Laguna,  the dispositive  part of which is as  follows:

"The court finds the complaint  borne out by the evidence and sentences the defendants  Gonzalo Abaya and Segunda Abella to pay the plaintiff,  within three  months, the sun; of eight thousand one hundred thirteen  pesos and seventy-seven centavos (P8,113.77), with interest at five per  centum from February 21,1929, plus an additional sum of one thousand three hundred pesos (P1,300)  as attorney's fees, and in default thereof, it is ordered that the mortgaged property described in Exhibit D be sold, subject to the rights of the creditors Rosendo R. Llamas and Calixto R. Llamas, as holders of the first mortgage, and to pay the costs hereof.   So ordered."

In support of their appeal, the  appellants  assign the following alleged errors as  committed by the court below in its judgment, to wit:

1. The lower court erred  in not finding that the deeds of sale with pacto de retro, Exhibits 1 and 2 Abaya, were really contracts of loan secured by mortgages on real property.
   
2. The lower court erred in not finding that the contracts of loan between  the  plaintiff and the  defendant Gonzalo Abaya on December 5,1921 and September 10,1923, guaranteed by the defendant and his wife, were usurious loans.
   
3. The lower court erred  in not absolving the defendant Gonzalo Abaya from the plaintiff's complaint, and  in not sentencing the latter to pay him one thousand pesos as attorney's fees, together with the costs of the trial.
   
4. The lower court erred in finding that the preponderance of the evidence was in favor of the plaintiff.
   
5. The lower court erred in denying the motion for a new trial filed  by the defendants Gonzalo Abaya and Segunda Abella."

This action was instituted by Joaquin A. Eleazar against Gonzalo Abaya and Segunda Abella, praying that they be sentenced to pay him the sum of P8,113.77, which is the unpaid  balance  of  a  mortgage  credit  in the  amount of P10,220.15 plus the sum of P1,300 as attorney's fees, and that they be ordered to deposit said sum in court within three months from the date of the judgment, or, in default thereof, that a writ of execution be issued against the mortgaged property.

The defendants, answering the complaint, denied each and  every one  of  the allegations therein, with  the exception of those contained in paragraph I,  and by way of special  defense they  alleged that  the contract was usurious and prayed that it be declared null and void, together with the other contracts from which it was derived, absolving said defendants, with costs against the plaintiff.

The relevant facts necessary to decide the questions raised in the appeal,  as established by a  preponderance of the evidence, are as follows:

In the month of June, 1919, Gonzalo Abaya and his wife Segunda Abella, being in urgent need of money, appealed to the plaintiff Joaquin A.  Eleazar  for a loan  of P4,000. As the lands offered in security were not  registered, the plaintiff refused to furnish the money unless they sold those lands to him subject to repurchase.   The deed  Exhibit A was drawn  up accordingly, reserving to the vendors the right to repurchase the  lands sold within  the  period of one  year from June 12,  1919, the date of  the  deed, and stipulating  therein that  the vendors  should continue in possession of the property sold; it was further agreed orally that they should  pay a monthly rent of P40,  which was faithfully paid to the plaintiff  (Exhibit A).  Ten months after the contract took effect,  the defendants repurchased the property, and in April, 1920, the  plaintiff made out a deed of repurchase in their name.   On June 25, 1920, the defendants being again in urgent need of money, obtained a new loan of P4,000  from the  plaintiff,  upon  the same condition of a sale subject to repurchase.   They made out a new deed of sale (Exhibit B) reserving to themselves the right to repurchase the lands sold within the period of six months, and to remain in possession, paying a monthly rental of P40.  When this six-month term had almost expired,  Gonzalo Abaya, being in no position  to  make the repurchase, appealed to Joaquin A. Eleazar for an extension of one year, which was granted him, and endorsed upon Exhibit B.   When the year's extension was about to expire, Gonzalo Abaya, being again in financial straits, instead of repurchasing the lands sold under  the  deed Exhibit  B, requested an additional loan of P2,000 which was  granted him by Joaquin  A.  Eleazar;  whereupon the  mortgage deed Exhibit C was executed on  December  5,  1921,  for the sum of P6,000 for a period of five years at 10 per cent per annum, the interest for said five years being calculated at P3,000, which  added to the principal of P6,000, made a total of P9,000, as stated in said deed (Exhibit C), where it was stipulated that the mortgagors should  pay a fixed monthly sum of P150, of which P100 would  be applied to the principal of P6,000 and the remaining P50, to the P3,000 calculated interest.  Up to the  month of   December, 1922, the defendants punctually paid  the monthly amount to be applied to the principal and interest.  About  that  date Gonzalo Abaya begged the plaintiff to reduce the monthly payments to P75, of which P25 should be applied to the principal, and P50 to the interest, in view of the fact that he had punctually fulfilled his obligation until the month of June, 1923.  In July, 1923, Gonzalo Abaya was again in need of money, and approached the plaintiff for a loan of P5,000.  As Joaquin A. Eleazar did not have that amount at the time, he went to his father-in-law, Vicente Reyes who gave it to him and he turned it  over to the defendant Gonzalo Abaya, in evidence whereof the deed Exhibit D was executed.   Inasmuch as the defendants had already  paid P1,350 on account of the principal of P6,000 and P950 on account of the  P3,000 interest under the deed Exhibit C, it left P4,650 as principal and P2,050  as interest, and to this  balance was added P5,570.15,  the amount of the new loan to Gonzalo Abaya, making a grand  total of P10,220.15, as noted in said deed Exhibit D,  as the principal payable in eight years, with interest at 5 per cent per annum, payable in ninety-six monthly installments counted from September 10,  1923,  at the rate of P106.46  monthly to be applied on the principal and  P42.58  monthly on the interest. Up to the month of October, 1928,  the defendants only  made forty-eight payments  amounting to P3,582.22 on account of the  principal, and  P2,612.22 on account of the interest, leaving a  balance of  P8,113.77  against the defendants in favor of the plaintiff,  which the latter seeks to recover through this complaint.

With regard  to the first assignment  of error,  even considering the plaintiff's Exhibits A and  B and the defendants' Exhibits 1  and 2, as mortgage contracts under the guise of sales subject to repurchase, and the P40 agreed upon by way of monthly rental,  as interest, such contracts would not be usurious, for the .reason that the rate of yearly interest would not exceed 12 per centum, and that the payment of interest in advance  does not render such interest usurious.   (Lopez and Javelona vs. El  Hogar Filipino, 47 Phil., 249.)

As to the second assignment  of error, while  it is true that due to the stipulated manner of paying of  the  principal  and  the interest  by fixed monthly payments  for  a certain number of months, the time would arrive when, owing to the gradual  decrease of the principal, the interest to be paid would be  usurious, it is also true that the defendants paid neither punctually nor fully, according to the agreement, but only P1,350 on account of the P6,000 principal,  and  P950  on account of the  interest  due  from December, 1921, to June, 1923, under the deed  Exhibit C, and P3,582.22  on  account  of the P10,220.15  principal,  and P2,612.22  on account  of the interest from September,  1923, until the month of October, 1928,  under the deed Exhibit D, and taking the average interest collected  during the time the defendants were paying under each  contract, and applying the rule given in Lopez and Javelona vs. El Hogar Filipino, supra, the plaintiff did not at any time collect usurious interest.

In view of the premises,  the judgment appealed from is modified so that the 5  per centannual interest  shall be computed from September  11,  1931, and in all  other  respects it is affirmed, with costs against the appellants.¹   So ordered.

Avanceña, C. J., Johnson,  Street, Malcolm,  Villamor, Ostrand, Romualdez, and Imperial, JJ., concur.

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¹ Paragraph corrected in pursuance of a resolution of the Supreme Court  of October 14, 1931.