Facts:

 Parties involved:
 Petitioners: Evelyn J. Sangrador and Rodrigo Sangrador
 Respondents: Francisco Valderrama and Teresita Valderrama
 Respondents obtained a loan of P500,000 from Manuel Asencio,
secured by a real estate mortgage.
 Respondents sought another loan from the petitioners in the amount of
P1,000,000, anticipating that they would not be able to pay off the
loan.
 Loan was evidenced by a promissory note and a deed of real estate
mortgage, stating that the loan amount was P1,400,000.
 Loan was to be paid eight months after the date of the promissory
note.
 When respondents failed to pay the loan on the specified date,
petitioners filed a complaint for judicial foreclosure of the real estate
mortgage.
 Trial court ruled in favor of the petitioners, ordering the foreclosure of
the mortgage and directing the respondents to pay the mortgage
obligation of P1,400,000, plus an additional amount of P569,718.61
pursuant to an escalation clause in the agreement.
 Trial court also awarded attorney's fees equivalent to 20% of the total
indebtedness.
 Respondents appealed to the Court of Appeals.
 Court of Appeals modified the decision of the trial court, holding that
the loan amount was only P1,000,000 based on the evidence
presented.
 Court of Appeals nullified the escalation clause, as there was no proof
of extraordinary inflation between the date of the loan and its
maturity.
 Court of Appeals reduced the award of attorney's fees to P50,000.
 Petitioners filed a petition for review on certiorari with the Supreme
Court.
 Issue:
 Whether the loan amount is P1,000,000 or P1,400,000.
 Whether the escalation clause is valid.
 Whether the award of attorney's fees should be reduced.

Ruling:
 The loan amount is P1,000,000.
 The escalation clause is nullified.
 The award of attorney's fees is reduced to P50,000.

Ratio:
 The Supreme Court affirmed the decision of the Court of Appeals,
finding that the loan amount was indeed P1,000,000 based on the
evidence presented.
 The Supreme Court upheld the nullification of the escalation clause, as
there was no proof of extraordinary inflation between the date of the
loan and its maturity.
 The Supreme Court agreed with the Court of Appeals in reducing the
award of attorney's fees to P50,000, as the contractual provision for
attorney's fees may be modified by the courts.