Facts:

In the case of Jose Garrido vs. Jose Perez Cardenas, a petition for review by certiorari was filed to contest a decision from the Court of Appeals that reversed a ruling from the Court of First Instance of Manila. The respondent, Jose Perez Cardenas, and co-defendant Pedro Camus executed a promissory note in favor of the petitioner, Jose Garrido, on May 26, 1941, obliging them to pay the amount of P2,000.00. This obligation was to be fulfilled through a series of installments beginning in June 1941. The note included a stipulation that if two installments were not paid, the entire principal amount would become immediately due. The note further provided for attorney's fees amounting to 20% of the unpaid principal if collection was necessitated through legal means.

Garrido subsequently demanded payment but did not receive it. He initially filed an action in the Municipal Court of Manila; however, it was dismissed for lack of jurisdiction. Garrido then brought the case to the C

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Facts:

Background of the Case

• This is a petition for review by certiorari filed by petitioner Jose Garrido challenging the decision of the Court of Appeals which had reversed the decision rendered by the Court of First Instance of Manila.
• The original action involved a promissory note executed on May 26, 1941, by Pedro Camus (as principal) and Jose Perez Cardenas (as guarantor in solidum) in favor of Jose Garrido for an amount of P2,000.00.

Terms and Conditions of the Promissory Note (Exhibit A)

• The note provided that:
• During the first twelve consecutive months beginning in June 1941, payment of P360.00 was to be made in twelve equal installments of P30.00 each, due on or before the fifth day of every month.
• Thereafter, a balance of P1,640.00 was to be paid in thirty-two equal installments of P50.00 each, with one final installment of P40.00.
• A stipulation included that if any two installments were not paid as provided, the entire remaining principal would immediately become due and payable.
• Additionally, both Camus and Perez Cardenas agreed to pay an amount equivalent to 20% of the unpaid principal as attorney’s fees if the note was not paid according to its tenor and was placed in the hands of an attorney for collection.

Procedural History and Prior Actions

• Jose Garrido initially pursued recovery of the note’s amount in the Municipal Court of Manila (Civil Case No. 15799), but the action was dismissed for lack of jurisdiction.
• Subsequently, Garrido instituted an action in the Court of First Instance of Manila against both Camus and Perez Cardenas.
• Only Perez Cardenas filed an answer; Camus was not located or served.
• The Court of First Instance rendered a judgment in favor of Garrido ordering Perez Cardenas to pay P2,000.00 with 6% interest from the date of filing (December 15, 1953) and an additional P200.00 for attorney’s fees.
• On appeal, the Court of Appeals reversed the decision, holding that the promissory note was unenforceable on the ground that its cause or consideration was allegedly unlawful and contrary to public order and proper administration of justice.

Allegations Regarding the Consideration

• The Court of Appeals held that the consideration for the note was essentially the promise to induce the withdrawal of a criminal complaint (for estafa) against Pedro Camus.
• Garrido argued that:
• The illegal consideration was wrongly raised on appeal even though it was not presented in the lower court.
• The Court of Appeals erred in nullifying the contract by applying the doctrine from Hibberd vs. Rohde and McMillian.
• Testimonies revealed:
• Garrido’s account that Camus, after being advised by Fiscal Dinglagan regarding a pending estafa complaint, proposed the note as a means of settlement.
• Perez Cardenas testified that he signed the note in his office at the National City Bank Building because Camus indicated that he had certain obligations towards Garrido and needed an extension of time to pay, without knowledge of any criminal charge.

Analogous Cases and Evidentiary Comparisons

• The case drew substantial analogy to Hibberd vs. Rohde and McMillian, where an attorney executed a note to secure the dismissal of a criminal complaint, in a context that did not involve any overt criminal suppression or interference with justice.
• Other cases cited include Arroyo vs. Berwin, Velez vs. Ramas, and Reyes vs. Gonzales, wherein the nature and effect of considerations were examined, highlighting the necessity to distinguish between an agreement to prevent a criminal prosecution and a valid contract created to settle a pecuniary obligation.
• The testimonies and documentary evidence showed that no agreement was made to withdraw a complaint, to suppress evidence, or to interfere with the proper administration of justice; rather, the sole consideration remained Camus’s and, in turn, Perez Cardenas’s obligation to pay the P2,000.00 debt.

Final Outcome

• The Supreme Court reversed the decision of the Court of Appeals.
• It affirmed the judgment of the Court of First Instance, holding Perez Cardenas liable for the contractual obligation.
• Costs were to be imposed against respondent Perez Cardenas.

Issue:

• Whether the alleged illegality of the consideration (i.e., allegedly being for the withdrawal of a criminal complaint or to avoid prosecution) could be raised for the first time on appeal despite not being asserted in the pleadings at the lower court.
• Whether the contract underlying the promissory note is null and void ab initio on the ground that its cause or consideration is unlawful and contrary to public order and the proper administration of justice.
• Whether the execution of the promissory note, given the factual background and the stated obligations, can be sustained as having valid and sufficient consideration despite the involvement of a criminal-related controversy.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)