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Topic Contracts > Characteristics > Freedom to Contract

ISSUES
Case No. G.R. No. L-47806; April 14, 1941
Case
Gabriel vs Monte de Piedad 1. Is the chattel mortgage void on the ground that it is contrary to
Name
law, morals and public policy?
Full Case LEONCIO GABRIEL, petitioner,
Name vs. 2. Does the chattel mortgage have a valid consideration?
MONTE DE PIEDAD Y CAJA DE AHARROS and RATIO DECIDENDI
THE COURT OF APPEALS, respondents.
Ponente Laurel, J. 1. Is the chattel mortgage void on the ground that it is contrary to
Doctrine The freedom of contract is both a constitutional and law, morals and public policy?
statutory right and to uphold this right, courts should move
with all the necessary caution and prudence in holding
contracts void. NO. Examining the contract at bar, the Court is of the opinion that
Nature Petition for review by way of certiorari of the decision of the it does not in any way militate against the public good, neither
Court of Appeals which affirmed the judgment of the lower does it contravene the policy of the law nor the established
court, ruling in favor of Monte de Piedad. interests of society.

RELEVANT FACTS 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.
Petitioner Leoncio Gabriel was employed as an appraiser of jewels in
the pawnshop of Monte de Piedad from 1913 up to May 1933. On The freedom of contract is both a constitutional and statutory right and
December 31, 1932, he executed a chattel mortgage to secure the to uphold this right, courts should move with all the necessary caution
payment of the deficiencies which resulted from his erroneous appraisal and prudence in holding contracts void. A contract contrary to public
of the jewels pawned to the appellee, amounting to P14,679.07, with 6% policy is one that has a tendency to injure the public, is against the public
interest. Gabriel averred that the chattel mortgage was a part of a cheme good, or contravenes some established interests of society, or is
on the part of Monte de Piedad to cover up supposed losses incurred in inconsistent with sound policy and good morals, or tends clearly to
its pawnshop department and that it was based upon all non-existing undermine the security of individual rights, whether of personal liability
subject matter and non-existing consideration. With these, Gabriel or of private property.
contended that the provisions of the chattel mortgage contract were
contrary to law, morals and public policy, and hence, such contract was 2. Does the chattel mortgage have a valid consideration?
ineffective and the principal obligation secured by it is void.
YES. There is a sufficient consideration in the contract as it was
Respondent Monte de Piedad filed a complaint in the Court of First satisfactorily established that it was executed voluntarily by Gabriel
Instance to recover the aforementioned sum less what had been paid to guarantee the deficiencies resulting from his erroneous
amounting to P3,333.25 and in case of default, to effectuate the chattel appraisals of the jewels.
mortgage.
A consideration is some right, interest, benefit, or advantage conferred
Petitioners appealed to the Supreme Court by way of certiorari. 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.