Case Summary (G.R. No. L-20753)
Factual Background
Basic Books (Phil.), Inc. sued to recover P1,548.70, alleging that in different months of 1957 Emilio Lopez, as its agent, received books on consignment worth that sum which he failed to account for despite demands. The complaint alleged that the criminal charge of estafa was filed against Lopez at the instance of the plaintiff.
The Agreement
On December 10, 1959, Basic Books (Phil.), Inc., Emilio Lopez, and Isidro C. Kintanar executed a written agreement providing that Lopez would pay P1,548.70 in installments over fifteen months, with the remaining P48.70 payable on a sixteenth month, at six percent per annum, and that failure to pay two successive installments would accelerate the whole unpaid balance. The agreement further bound Kintanar jointly and severally with Lopez for the full amount, required the Second Party to post a surety bond, and provided that upon submission of the surety bond the First Party would petition the court for absolute dismissal of the pending estafa case against Lopez.
Municipal Court Proceedings
In the Municipal Court of Manila the parties stipulated to submit the case on the single issue of the legality of the agreement. Emilio Lopez confessed judgment. Isidro C. Kintanar denied liability and asserted that the agreement was void because it was executed to stifle the prosecution for estafa. The Municipal Court ordered Lopez to pay the claim but absolved Kintanar on the ground that his obligation under the agreement was based on illegal consideration.
Court of First Instance Ruling
On appeal the Court of First Instance reviewed the same issue. The trial court found that Lopez was indebted to Basic Books (Phil.), Inc. and that Kintanar knew of that indebtedness. The court relied on a letter from Kintanar dated December 8, 1959, proposing that Lopez satisfy the account by monthly installments. The Court of First Instance concluded that the agreement was executed to secure payment of a lawful obligation and adjudged Kintanar jointly liable for the claim, awarded interest at six percent per annum, attorney’s fees of P200, and costs.
Court of Appeals and Certification
Isidro C. Kintanar appealed the Court of First Instance decision to the Court of Appeals. The Court of Appeals certified the case to the Supreme Court on the ground that the issues presented were questions of law.
Parties' Contentions
Kintanar contended that the agreement was executed in consideration of the plaintiff’s promise to petition for dismissal of the estafa prosecution and therefore was against public policy and void under Art. 1353 and Art. 1409 of the New Civil Code and the precedents cited by him. He disputed the lower court’s reliance on his December 8, 1959 letter and argued that no other evidence supported the finding of a lawful cause. Basic Books (Phil.), Inc. asserted that the agreement was a settlement of a preexisting civil obligation of Lopez and that the promise to dismiss the criminal charge was ancillary; the company emphasized that Lopez had failed to account for about P3,000 worth of books and that the agreement reduced and scheduled payment of a valid civil claim.
Issues Presented
The parties and courts presented two narrow legal questions: whether the written agreement of December 10, 1959 created a valid civil obligation enforceable against Kintanar, and whether the agreement was void on grounds that its cause or consideration was to stifle a criminal prosecution and thus contrary to public policy.
Supreme Court Ruling
The Supreme Court affirmed the judgment of the Court of First Instance. The Court held that Isidro C. Kintanar’s obligation under the agreement was not based on an illegal consideration and was enforceable. Costs were assessed against the appellant.
Legal Reasoning
The Court distinguished the motive of a party from the legal cause of a contract, invoking Art. 1351 of the New Civil Code as articulated in authority. The Court observed that the clause describing Lopez’s motive to avoid criminal liability related to Lopez’s own consideration but that the paragraph binding Kintanar expressly bound him to pay jointly and severally the stated indebtedness. The Court reasoned that the proximate and direct cause of the agreement was the existing account of Lopez with Basic Books (Phil.), Inc., and that Kintanar’s assumption of liability was moved by liberality or gratuitousness rather than by an unlawful purpose to stifle prosecution. The Court noted that there was no showing that the crimi
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Case Syllabus (G.R. No. L-20753)
Parties and Procedural Posture
- BASIC BOOKS (PHIL.), INC. was the plaintiff and appellee in the action to recover P1,548.70 plus attorney's fees.
- EMILIO LOPEZ was a defendant who confessed judgment in the proceedings.
- ISIDRO C. KINTANAR was a defendant and the appellant who denied liability under the challenged agreement.
- The case originated in the Municipal Court of Manila and was appealed to the Court of First Instance, whose decision was in turn appealed and eventually certified to the Court as questions of law by the Court of Appeals.
- The sole legal question submitted for decision was the validity of the written agreement between the parties.
Key Factual Allegations
- The complaint alleged that EMILIO LOPEZ, as agent of BASIC BOOKS, received on consignment various books in 1957 with a total value of P1,548.70 which he failed to account for.
- The plaintiff alleged that the defendants entered into a written agreement on December 10, 1959 to secure payment of the obligation by monthly installments beginning January 1960 with six percent interest per annum and an acceleration clause upon default in two successive installments.
- EMILIO LOPEZ had a pending criminal case for estafa arising from the alleged failure to account for the books.
- ISIDRO C. KINTANAR sent a letter dated December 8, 1959 to BASIC BOOKS proposing installment payments and indicating an intention to help LOPEZ settle the matter.
Contract Terms
- The written agreement bound the second party jointly and severally to pay P1,548.70 in fifteen monthly installments and P48.70 on the sixteenth month, with interest at six percent per annum.
- The agreement provided that the second party would put up a surety bond to assure compliance and that upon submission of the surety bond the first party would petition the court for the absolute dismissal of the estafa case.
- The agreement contained an accelerating clause that made the whole unpaid balance due and demandable upon failure to pay any two successive installments.
- The agreement expressly described LOPEZ as promising payment to avoid criminal liability while describing KINTANAR as binding himself jointly and severally for the payment.
Contentions of Parties
- ISIDRO C. KINTANAR contended that the agreement was void because it was executed to stifle the prosecution of the estafa case and thus offended public policy as reflected in Arroyo vs. Berwin, Velez vs. Ramas, and Monterey vs. Gomez.
- BASIC BOOKS (PHIL.), INC. argued that the agreement was a settlement of LOPEZ's preexisting account and was therefore supported by a lawful cause, and that KINTANAR independently assumed joint and several liability to secure payment.
- KINTANAR