160 Gabriel Vs Monte De Piedad(1).docx

Topic Case No. Case Name Full Case Name Ponente Doctrine

Nature

Contracts > Characteristics > Freedom to Contract G.R. No. L-47806; April 14, 1941 Gabriel vs Monte de Piedad LEONCIO GABRIEL, petitioner, vs. MONTE DE PIEDAD Y CAJA DE AHARROS and THE COURT OF APPEALS, respondents. Laurel, J. 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. Petition for review by way of certiorari of the decision of the Court of Appeals which affirmed the judgment of the lower court, ruling in favor of Monte de Piedad. RELEVANT FACTS

Petitioner Leoncio Gabriel was employed as an appraiser of jewels in the pawnshop of Monte de Piedad from 1913 up to May 1933. On December 31, 1932, 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 6% interest. Gabriel averred that the chattel mortgage was a part of a cheme on the part of Monte de Piedad to cover up supposed losses incurred in its pawnshop department and that it was based upon all non-existing subject matter and non-existing consideration. With these, Gabriel contended that the provisions of the chattel mortgage contract were contrary to law, morals and public policy, and hence, such contract was ineffective and the principal obligation secured by it is void. Respondent Monte de Piedad filed a complaint in the Court of First Instance to recover the aforementioned sum less what had been paid amounting to P3,333.25 and in case of default, to effectuate the chattel mortgage. Petitioners appealed to the Supreme Court by way of certiorari.

ISSUES 1. Is the chattel mortgage void on the ground that it is contrary to law, morals and public policy? 2. Does the chattel mortgage have a valid consideration? RATIO DECIDENDI 1. Is the chattel mortgage void on the ground that it is contrary to law, morals and public policy? NO. Examining the contract at bar, the Court is of the opinion that it does not in any way militate against the public good, neither does it contravene the policy of the law nor the established interests of society. A contract is to be judge by its character, and courts will look to the substance 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. A contract contrary to public policy is one that 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. 2. Does the chattel mortgage have a valid consideration? YES. There is a sufficient consideration in the contract as it was satisfactorily established that it was executed voluntarily by Gabriel to guarantee the deficiencies resulting from his erroneous appraisals of the jewels. A consideration 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 promise other than to such as he is at the time of consent bound to suffer. A pre-existing 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 the statutes require the consideration to be adequate. Reminder: Read the full text! Don’t be lazy. DISPOSITIVE The petition is hereby dismissed and the judgment sought to be reviewed is affirmed, with costs against the petitioner. So ordered.