G.R. No. L-47806, 14 April1941

FACTS:

Petitioner Gabriel was employed as an appraiser of jewels in the pawnshop of Monte de Piedad. He executed a chattel mortgage to secure the payment of the deficiencies which resulted from his erroneous appraisal of the jewels pawned to the appellee, amounting to P14,679.07, with six percent (6%) interest from said date. In this chattel mortgage, Gabriel promised to pay to Monte de Piedad P300 per month until the sum of P14,679.07, with interest, is fully paid. In case of default to effectuate the chattel mortgage, an action was instituted against Gabriel by Monte de Piedad in the CFI. Gabriel denied the genuineness of the execution of the said chattel mortgage. By way of special defense, he alleged:(1) the chattel mortgage was void because a) it is contrary to law, morals and public policy; (b) he was made to sign it against his will and through misrepresentation where E. Marco(Director-General) signed in behalf of Monte de Piedad without the latter’s authority,(c) the subject matter and considerations of the mortgage do not exist, and(d) the payments already made allegedly for the mortgage were in fact his salaries;(2) his acquittal in a criminal case that used the chattel mortgage as evidence of his liability was a bar to the present civil case.

ISSUE:

Whether or not, the chattel mortgage executed by Gabriel is against public policy, law, or morals?

RULING:

No. The Chattel Mortgage does not violate the law, morals or public policy.

A contract is to be judge by its character, and courts will look to the substances and not to the mere form of the transaction. The freedom of contract is both a constitutional and statutory right and to uphold this right, courts should move with all the necessary caution and prudence in holding contracts void. The term “public policy” is vague and uncertain in meaning, floating and changeable in connotation. It may be said, however, that, in general, a contract which is neither prohibited by law nor condemned by judicial decision, nor contrary to public morals, contravenes no public policy. In the absence of express legislation or constitutional prohibition, a court, in order to declare a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of personal liability or of private property.

Petitioner also contends that the chattel mortgage in question is void because it lacks consideration. A consideration, in the legal sense of the word, is some right, interest, benefit, or advantage conferred upon the promisor, to which he is otherwise not lawfully entitled, or any detriment, prejudice, loss, or disadvantage suffered or undertaken by the promisee other than to such as he is at the time of consent bound to suffer.

Examining the contract at bar, it was executed voluntarily to guarantee the deficiencies resulting from the erroneous appraisals of the petitioner. A pre-existing admitted liability is a good consideration for a promise. The fact that the bargain is a hard one will not deprived it of validity. The exception to this rule in modern legislation is where the inadequacy is so gross as to amount to fraud, oppression or undue influence, or when statutes require the consideration to be adequate. The instant case does not fall within the exception.

Hence, the petition is hereby dismissed and the judgment sought to be reviewed is affirmed, with costs against the petitioner.

 * Case digest by  Aisha Mie Faith M. Fernandez, LLB-1, Andres Bonifacio Law School, SY 2017-2018