Case Summary (G.R. No. 47806)
Procedural History
Monte de Piedad sued Gabriel in the Court of First Instance (CFI) of Manila for the unpaid balance and enforcement of the mortgage. Gabriel denied authenticity of the mortgage, asserted various defenses, and filed cross- and counterclaims seeking rescission, recovery of alleged illegal salary deductions, unpaid wages for May–June 1933, and damages of P15,000. The CFI ruled for Monte de Piedad. The Court of Appeals affirmed on May 29, 1940, prompting Gabriel’s petition for certiorari.
Contractual Disputes and Defenses
Gabriel argued:
- The mortgage violated law, morals, and public policy and was therefore void.
- It lacked consideration.
- It failed statutory form requirements under section 5 of Act No. 1508.
- His criminal acquittal (Case No. 49078) barred civil enforcement.
Validity Under Freedom of Contract and Public Policy
The Court stressed the constitutional and statutory protection of contractual freedom. A contract is void for public policy only if it:
- Injures the public or public good
- Contravenes established societal interests or good morals
- Undermines individual rights or property security
The mortgage did not meet these criteria. It was neither prohibited by law nor condemned by precedent. The obligation secured—a preexisting admitted liability—posed no threat to public welfare.
Consideration and Preexisting Liability
Under established doctrine, an obligation already owed constitutes valid consideration. Gabriel’s assumption of responsibility for appraisal errors provided sufficient benefit to Monte de Piedad. Although the payment terms were onerous, mere harshness does not invalidate a contract absent fraud, oppression or statutory requirement of adequacy.
Compliance with Chattel Mortgage Formalities
Section 5 of Act No. 1508 requires a specified affidavit form and competent signatory. The affidavit followed statutory language substantially. E. Marco, as Director-General, had implied authority, later ratified by the institution’s Consejo de Administración. Substantial—though not literal—compliance suffices for validity.
Impact of Criminal Acquittal
The Court rejected the bar argument: the criminal and ci
...continue readingCase Syllabus (G.R. No. 47806)
Facts
- Leoncio Gabriel was employed as an appraiser of jewels at the pawnshop of Monte de Piedad from 1913 until May 1933.
- On December 13, 1932, Gabriel executed a chattel mortgage to secure payment of P14,679.07 (plus 6% interest) representing deficiencies from his alleged erroneous appraisals.
- The mortgage obligated Gabriel to pay P300 per month until full settlement; it was registered on December 22, 1932.
- Monte de Piedad sued in the Court of First Instance of Manila (Civil Case No. 50847) to recover the outstanding balance of P11,345.75, or upon default, to foreclose the mortgage.
- Gabriel denied the mortgage’s genuineness under oath and pleaded:
- It was part of a management scheme to conceal pawnshop losses.
- A criminal case (No. 49078) for the same alleged appraisal errors had resulted in his acquittal.
- That acquittal bar redressed civil liability.
- By cross-complaint, Gabriel asserted:
- E. Marco lacked authority to bind Monte de Piedad.
- He was induced by false representations to sign the mortgage.
- The subject matter and consideration were non-existent; the mortgage was void ab initio.
- By counterclaim, Gabriel sought:
- Return of P3,333.25 deducted from his salary without consent.
- Unpaid salaries for May and June 1933.
- P15,000 in damages for malicious prosecution and reputational injury.
Procedural History
- The Court of First Instance rendered judgment in favor of Monte de Piedad, ordering Gabriel to pay the mortgage balance.
- On appeal, the Court of Appe