De Leon v CA (Obligations and Contracts)

De Leon v CA 

GR No. 80965 

June 6, 1990  

FREEDOM OF STIPULATION OF CONTRACTS  

FACTS: 

(1) On October 18, 1969, private respondent Jose Vicente De Leon and petitioner Sylvia Lichauco De Leon were united in wedlock before the Municipal Mayor of Binangonan, Rizal. On August 28, 1971, a child named Susana L. De Leon was born from this union. 

(2) Sometime in October, 1972, a de facto separation between the spouses occured due to irreconcilable marital differences, with Sylvia leaving the conjugal home. 

(3) Sometime in March, 1973, Sylvia went to the United States where she obtained American citizenship. 

(4) On November 23, 1973, Sylvia filed with the Superior Court of California, County of San Francisco, a petition for dissolution of marriage against Jose Vicente. In the said divorce proceedings, Sylvia also filed claims for support and distribution of properties. It appears, however, that since Jose Vicente was then a Philippine resident and did not have any assets in the United States, Sylvia chose to hold in abeyance the divorce proceedings, and in the meantime, concentrated her efforts to obtain some sort of property settlements with Jose Vicente in the Philippines. 

(5) On March 16, 1977, Sylvia succeeded in entering into a Letter-Agreement with her mother-in-law, private respondent Macaria De Leon, 

(6) On the same date, Macaria made cash payments to Sylvia in the amount of P100,000 and US$35,000.00 or P280,000.00, in compliance with her obligations as stipulated in the aforestated Letter-Agreement. 

(7) On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First Instance of Rizal a joint petition for judicial approval of dissolution of their conjugal partnership  

Applicable Laws:  

(1) Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)  

(2) Article 1409. The following contracts are inexistent and void from the beginning:  

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; 

(2) Those which are absolutely simulated or fictitious; 

(3) Those whose cause or object did not exist at the time of the transaction; 

(4) Those whose object is outside the commerce of men; 

(5) Those which contemplate an impossible service; 

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; 

(7) Those expressly prohibited or declared void by law.  

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.  

(3) Article 52. Marriage is not a mere contract but an inviolable social institution. Its nature, consequences and incidents are governed by law and not subject to stipulation, except that the marriage settlements may to a certain extent fix the property relations during the marriage. (n)  

(4) Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed when the spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction, or has been declared absent, or when legal separation has been granted.  

In case of abuse of powers of administration of the conjugal partnership property by the husband, or in case of abandonment by the husband, separation of property may also be ordered by the court, according to the provisions of articles 167 and 178, No. 3.   

In all these cases, it is sufficient to present the final judgment which has been entered against the guilty or absent spouse. (1433a)  The husband and the wife may agree upon the dissolution of the conjugal partnership during the marriage, subject to judicial approval. All the creditors of the husband and of the wife, as we l as of the conjugal partnership shall be notified of any petition for judicial approval or the voluntary dissolution of the conjugal partnership, so that any such creditors may appear at the hearing to safeguard his interests. Upon approval of the petition for dissolution of the conjugal partnership, the court shall take such measures as may protect the creditors and other third persons.  

After dissolution of the conjugal partnership, the provisions of articles 214 and 215 shall apply. The provisions of this Code concerning the effect of partition stated in articles 498 to 501 shall be applicable. (1433a)  

(5) Article 221.The following shall be void and of no effect:  

(1) Any contract for personal separation between husband and wife; 

(2) Every extra-judicial agreement, during marriage, for the dissolution of the conjugal partnership of gains or of the absolute community of property between husband and wife; 

(3) Every collusion to obtain a decree of legal separation, or of annulment of marriage; 

(4) Any simulated alienation of property with intent to deprive the compulsory heirs of their legitime.  

(6) Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a)  

(7) Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract.  

A simple mistake of account shall give rise to its correction. (1266a)  

(8) Article 1414. When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts may, if the public interest will thus be subserved, allow the party repudiating the contract to recover the money or property.  

(9) Article 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. (1288)  

(10)  Article 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.   

There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.  

To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind.  

A threat to enforce one's claim through competent authority, if t he claim is just or legal, does not vitiate consent. (1267a) 

RTC:  WHEREFORE, it is hereby declared that the conjugal partnership of the Spouses is DISSOLVED  

ISSUE: Whether or not the Letter-Agreement is valid  

HELD: The letter-agreement is invalid.  

The cause or consideration for the intervenor Macaria De Leon in having executed Exhibits 'E' to 'E-2' was the termination of the marital relationship between her son Jose Vicente De Leon and Sylvia Lichauco de Leon. 

Intervenor's undertaking under Exhibit 'E' premised on the termination of marital relationship is not only contrary to law but contrary to Filipino morals and public Policy. As such, any agreement or obligations based on such unlawful consideration and which is contrary to public policy should be deemed null and void.  

... the agreement nevertheless is void because it contravenes the following provisions of the Civil Code:
Art. 221. The following shall be void and of no effect:
(1) Any contract for personal separation between husband and wife;
(2) Every extra-judicial agreement, during marriage, for the dissolution of the conjugal partnership of gains or of the absolute community of property between husband and wife; 

Article 1414 of the Civil Code, which is an exception to the pari delicto rule, is the proper law to be applied. It provides:
When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts may, if the public interest wig thus be subserved, allow the party repudiating the contract to recover the money or property.
Since the Letter-Agreement was repudiated before the purpose has been accomplished and to adhere to the pari delicto rule in this case is to put a premium to the circumvention of the laws, positive relief should be granted to Macaria. Justice would be served by allowing her to be placed in the position in which she was before the transaction was entered into. 

OTHER NOTES: 

(1) Applying the foregoing to the present case, the claim of Macaria that Sylvia threatened her to bring Jose Vicente to court for support, to scandalize their family by baseless suits and that Sylvia would pardon Jose Vicente for possible crimes of adultery and/or concubinage subject to the transfer of certain properties to her, is obviously not the intimidation referred to by law.    

In order that intimidation may vitiate consent and render the contract invalid, the following requisites must concur:  

(1) that the intimidation must be the  determining cause of the contract, or must have caused the consent to be given; 

(2) that the threatened act be unjust or unlawful;  

(3) that the threat be real and serious, there being an evident disproportion between the evil and the resistance which all men can offer, leading to the choice of the contract as the lesser evil; and  

(4) that it produces a reasonable and well-grounded fear from the fact that the person from whom it comes has the necessary means or ability to inflict the threatened injury.