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404 SUPREME COURT REPORTS ANNOTATED

United General Industries, Inc. vs. Paler

*
No. L-30205. March 15, 1982.

UNITED GENERAL INDUSTRIES, INC., plaintiff-appellee, vs.

JOSE PALER and JOSE DE LA RAMA, defendants-appellants.

Criminal Procedure; Judgment Contracts; An agreement to stifle

criminal prosecution will not be enforced in a court of law.—There is some
merit in this contention. 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).
Same; Same; Same; Negotiable Instruments Law; There can be no
recovery against an accommodation party on a promissory note vitiated by
illegality of cause—agreement not to prosecute estafa case if accused execute
promissory note.—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.
Same; Same; Same; Even if promissory note is vitiated by fact that it
was executed to estafa charge will not be pressed by complainant, recovery
unpaid amount can still be enforced independently of said promissory note
—fact that appellant bought a T.V. set and mortgaged it without consent of
unpaid seller-mortgagee..—But it is different with Jose Paler who bought a
television set from the appellee, did not pay for it and even sold the set
without the written consent of the mortgagee which accordingly brought
about the filing of the estafa case. He has an obligation to the appellee
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. This we cannot in conscience
allow.
Contracts, Damages; Attorneys; Every person must act with justice in
the exercise of his rights liability to pay attorney’s fees in case of wilful non-
payment of loan.—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

________________

* SECOND DIVISION

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VOL. 112, MARCH 15, 1982 405

United General Industries, Inc. vs. Paler

observe honesty and good faith.” And 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.) Here Paler wilfully refused to pay a debt which he clearly ought to
have paid. He had even imposed a burden on this Court by filing an
unnecessary and frivolous appeal. The award of P250.00 in favor of the
appellee who had to file a printed brief is manifestly inadequate.

APPEAL from a decision of the Court of First Instance of Manila,

Br. IX.

The facts are stated in the opinion of the Court.

ABAD SANTOS, J.:

This is an appeal from a decision of the Court of First Instance of

Manila, Branch IX, in Civil Case No. 60418, United General
Industries, Inc. vs. Jose Paler and Jose de la Rama. Since the
appeal deals with a question of law only, We reproduce the decision
which reads as follows:

“When this case was called for pre-trial today, neither the defendants, nor
their counsel appeared, notwithstanding the fact that said defendants were
notified of the pre-trial. Upon motion of the plaintiff, said defendants were
declared as in default. Likewise, upon motion of counsel for the plaintiff,
this case was submitted for judgment on the pleadings.
“Plaintiff’s complaint alleges that on January 20, 1962, the defendant,
Jose Paler and his wife Purificacion Paler, purchased from the plaintiff (1)
Zenith 23” TV set with serial No. 3493594 on installment basis; that to
secure the payment of the purchase price, the defendant, Jose Paler and his
wife executed in favor of the plaintiff a promissory note in the amount of
P2,690.00; that, to further guarantee the payment of the aforementioned
promissory note, defendant Jose Paler and his wife constituted a chattel
mortgage over the above-described television set in favor of the plaintiff
which mortgage was duly registered in the chattel mortgage registry; that
by virtue of the violation by defendant Jose Paler and his wife of the terms
and conditions of the chattel mortgage, the plaintiff filed a criminal action
against the above-named persons for estafa under

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406 SUPREME COURT REPORTS ANNOTATED

United General Industries, Inc. vs. Paler

Art. 319 of the Revised Penal Code with the City Fiscal’s Office of Pasay
City; that to settle extra-judicially the criminal case aforementioned
against the defendant, Jose Paler and his wife, the said defendant Jose
Paler and his co-defendant, Jose de la Rama, executed in favor of plaintiff a
promissory note dated April 11, 1964 in the amount of P3,083.58 (exhibit
A); and that; notwithstanding repeated demands, said defendants have
failed to pay plaintiff the sum of P3,083.58 with 1% interest per month

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from April 11, 1964 until full payment is made, pursuant to the terms of
the promissory note marked Exhibit A.
“In their answer, the defendants admit the fact that they executed a
promissory note dated April 11, 1964 in favor of plaintiff in the amount of
P3,083.58, with 12% interest per annum. They further admit the fact that
said obligation has not been paid the plaintiff notwithstanding repeated
demands made.
“Considering the admissions of the defendants in their answer,
judgment on the pleadings, as prayed for may, therefore, be rendered.
“WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendants, sentencing said defendants to pay to the
plaintiff the sum of P3,083.58, with 12% interest thereon per annum from
the date the complaint was filed on October 14, 1965 until full payment is
made, and attorney’s fees in the sum of P250.00. With costs against the
defendants.” (Record on Appeal, pp. 20-22.)

The appellants, Paler and de la Rama, claim in their appeal 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.” Obviously, the appellants are referring to
the portion of the decision which states: “x x x the plaintiff filed a
criminal action against the above-named persons [Jose Paler and
his wife] for estafa under Art. 319 of the Revised Penal Code with
the City Fiscal’s Office of Pasay City; that to settle extra-judicially
the criminal case aforementioned against the defendant, Jose Paler
and his wife, the said defendant Jose Paler and his co-defendant,
Jose de la Rama, executed in favor of plaintiff a promissory note
dated April 11, 1964 in the amount of P3,083.58 (Exhibit A).”
There is some merit in this contention. In Arroyo vs. Berwin, 36
Phil. 386 (1917), it was held that an agreement to stifle
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United General Industries, Inc. vs. Paler

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).
Under the law and jurisprudence, there can be no recovery
against Jose de la Rama who incidentally apppears to have been an
accommodation signer only of the promissory note which is vitiated
by the illegality of the cause.
But it is different with Jose Paler who bought a television set
from the appellee, did not pay for it and even sold the set without
the written consent of the mortgagee which accordingly brought
about the filing of the estafa case. He has an obligation to the
appellee 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. This
we cannot in conscience allow.
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.”
And Article 2208 of the same Code states that attorney’s fees and
expenses of litigation, other than judicial costs, can be recovered
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“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.) Here Paler willfully refused to pay a debt which he
clearly ought to have paid. He has even imposed a burden on this
Court by filing an unnecessary and frivolous appeal. The award of
P250.00 in favor of the appellee who had to file a printed brief is
manifestly inadequate.
WHEREFORE, the judgment of the court a quo is modified to
excluding Jose de la Rama therefrom and increasing the award for
attorney’s fees to P1,000.00; it is affirmed in all other respects.
Triple costs.
SO ORDERED.

     Barredo (Chairman), Aquino, Concepcion, Jr., De Castro and

Ericta, JJ., concur.
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408 SUPREME COURT REPORTS ANNOTATED

United General Industries, Inc. vs. Paler

     Escolin, J., took no part

Judgment affirmed with modification.

Notes.—Where receipts issued by petitioners-accused bore the

title “Promissory Note” and their contents clearly spelled out that
they received loans from complainants and not that the money
should be used to buy copra, there is no estafa. (Bernardo vs.
Mendoza, 90 SCRA 214).
No estafa, where there was no obligation to return the same
money. (Chee Kiong Yam vs. Malik, 94 SCRA 30).
Person who refuses to pay his debt or denies its existence is not
liable for estafa. (Chee Kiong Yam vs. Malik, 94 SCRA 30).
Under Article 315 (2) (d) of the Revised Penal Code as amended
by Republic Act No. 4885, the false pretense or fraudulent act must
be executed prior to or simultaneously with the commission of the
fraud to constitute estafa by the issuance of a postdated check,
Republic Act No. 4885 did not change the rule established by Article
315 (2) (d) as interpreted in People vs. Lilius, 59 Phil. 339 and
People vs. Fortuno, 73 SCRA 407. (People vs. Sabio, Sr., 86 SCRA
568).
In estafa cases, it is the amount involved, not the imposable
penalty, which is to be considered in determining whether
jurisdiction thereon belong, to the Court of First Instance or an
ordinary municipal court, i.e., other than a city or provincial capital
court. (Tan vs. People, 84 SCRA 207).
A contract that states a false consideration is one that has in fact
a real consideration but the same is not the one stated in the
document. (Mapalo vs. Mapalo, 17 SCRA 114).
While parol evidence is admissible to prove failure of
consideration, nevertheless, oral testimony cannot nullify the
recitals of a duly notarized deed of mortgage. (Calderon vs. Medina,
18 SCRA 583).
An instrument may be cancelled on the ground of lack of
sufficient consideration. (Tidewater Oil Co. vs. Dionisio, 25 SCRA
867).
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A party that complied with and availed of the provisions of a

compromise agreement is in estoppel to raise the validity of
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People vs. Gutierrez

the agreement. (Vda. de Corpuz vs. Phodaca-Ambrocio, 32 SCRA

279).
An accused cannot adopt a posture of double-dealing without
running afoul of the doctrine of estoppel. (People vs. Archilla, 1
SCRA 698).

——o0o——

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