Haystack: United General Industries vs. Paler (GR L-30205, 15 March 1982)

United General Industries vs. Paler
[G.R. No. L-30205. March 15, 1982.]
Second Division, Abad Santos (J): 5 concurring, 1 took no part

Facts: On 20 January 1962, Jose Paler and his wife Purificacion Paler, purchased from United General Industries (UGI) Zenith 23" TV set with serial 3493594 on installment basis. To secure the payment of the purchase price, the Paler spouses executed in favor of UGI a promissory note in the amount of P2,690.00. To further guarantee the payment of the promissory note, the Paler spouses constituted a chattel mortgage over the television set in favor of UGI which mortgage was duly registered in the chattel mortgage registry.

By virtue of the violation by the Paler spouses of the terms and conditions of the chattel mortgage (by selling the mortgaged television), UGI filed a criminal action against the Paler spouses for estafa under Art. 319 of the Revised Penal Code with the City Fiscal's Office of Pasay City. To settle extra-judicially the criminal case against the Paler spouses, Jose Paler and Jose de la Rama executed in favor of UGI a promissory note dated 11 April 1964 in the amount of P3,083.58. Notwithstanding repeated demands, Paler and de la Rama have failed to pay UGI the sum of P3,083.58 with 1% interest per month from 11 April 1964 until full payment is made. Paler and De la Rama admitted the fact that they executed a promissory note dated 11 April 1964 in favor of UGI in the amount of P3,083.58, with 12% interest per annum; and the fact that said obligation has not been paid UGI notwithstanding repeated demands made.

On pre-trial, the defendants nor their counsel did not appear despite notice. Upon motion of UGI, the defendants were declared in default. Upon motion of UGI’s counsel, the case was submitted for judgment on the pleadings. The CFI Manila (Branch IX, Civil Case 60418) rendered judgment in favor of UGI, sentencing Paler and de la Rama to pay to UGI the sum of P3,083.58, with 12% interest thereon per annum from the date the complaint was filed on 14 October 1965 until full payment is made, and attorney's fees in the sum of P250.00. With costs against Paler and de la Rama.

Paler and de la Rama appealed, contending that that the complaint should have been dismissed because "the obligation sought to be enforced by plaintiff-appellee against defendants-appellants arose or was incurred in consideration for the compounding of a crime.

The Supreme Court modified the judgment of the court a quo by excluding Jose de la Rama therefrom and increasing the award for attorney's fees to P1,000.00. The judgment was affirmed in all other respects. Triple costs.

1. Agreement to stifle prosecution of a crime contrary to public policy
In Arroyo vs. Berwin, 36 Phil. 386 (1917), it was held that an agreement to stifle the prosecution of a crime is manifestly contrary to public policy and due administration of justice and will not be enforced in a court of law. (See also Monterey vs. Gomez, et al., 104 Phil. 1059 [1958]).

2. No recovery against accommodation signer of promissory note vitiated by illegality of cause
Under the law and jurisprudence, there can be no recovery against Jose de la Rama who incidentally appears to have been an accommodation signer only of the promissory note which is vitiated by the illegality of the cause.

3. Paler has an obligation to pay UGI independently of the promissory note co-signed with de la Rama
Jose Paler, who bought a television set from UGI but did not pay for it and even sold the set without the written consent of the mortgagee, has an obligation to UGI independently of the promissory note which was co-signed by Jose de la Rama. For Paler to escape payment of a just obligation will result in an unjust enrichment at the expense of another.

4. Award of attorney’s fees and litigation expenses warranted; Articles 19 and 2208 of the NCC
Article 19 of the Civil Code mandates "Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." Article 2208 of the same Code states that attorney's fees and expenses of litigation, other than judicial costs, can be recovered "Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim" (Par 5). In the present case, Paler wilfully refused to pay a debt which he clearly ought to have paid. He has even imposed a burden on the Court by filing an unnecessary and frivolous appeal. The award of P250.00 in favor of UGI who had to file a printed brief is manifestly inadequate.

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