Velez v. Ramas
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns a sum of money, P2,303.60, which was embezzled by Restituta Quirante, an employee of the plaintiffs, Teodoro Velez and Hermenegilda Chiong Veloso. To prevent Restituta Quirante's prosecution for estafa, her husband, Salomon Ramas, and her father, Roberto Quirante, executed a written obligation on July 30, 1917, jointly and severally binding themselves to repay the embezzled amount plus interest to the plaintiffs. Ramas admitted the obligation but claimed it was illegal, and he counterclaimed for the P300 he had already paid. 2. Procedural History: The plaintiffs instituted this action in the Court of First Instance of Cebu to recover the outstanding balance of the obligation. The trial court, however, sustained the defendants' defense of illegality, absolved both defendants from the complaint, and granted judgment on the counterclaim in favor of Salomon Ramas for P300 plus interest. The plaintiffs appealed this decision to the Supreme Court. 3. The Petition: The plaintiffs-appellants are seeking to overturn the trial court's judgment, arguing that the contract, while intended to prevent a criminal prosecution, should still be enforceable for the recovery of the embezzled funds. They contend that their agreement to suspend criminal proceedings, as evidenced by their acceptance of the written obligation and their subsequent civil action, does not render the underlying debt void. The core of their appeal is that the trial court erred in finding the contract illegal and in allowing the counterclaim.
Issue(s)
Whether a contract, the consideration for which is the agreement to suspend prosecution for a crime, is valid and enforceable. Whether the trial court erred in absolving the defendants from the complaint and in granting the counterclaim.
Ruling
The Supreme Court affirmed the judgment of the trial court, holding that the contract was void ad initio due to its illicit consideration and that no action could be maintained upon it. The Court also affirmed the trial court's decision to absolve both defendants and grant the counterclaim.
Ratio Decidendi
On the validity and enforceability of the contract: The Court held that the contract was void ad initio because its consideration was illicit, being designed to prevent a prosecution for crime. This is contrary to public policy and the universally recognized maxim ex turpi causa non oritur actio. The preliminary recitals and the obligatory clause clearly showed the purpose was to prevent prosecution, and the injured parties agreed to suspend criminal proceedings. Even if Salomon Ramas had a civil liability for his wife's embezzlement, that liability could not be enforced in an action based on this illegal contract, especially since the wife was not a party to the suit. The Court cited Article 1275 of the Civil Code, stating that contracts without cause or with an illicit cause produce no effect whatsoever. The illegality was apparent on the face of the contract, making it unenforceable. On the trial court's decision to absolve the defendants and grant the counterclaim: The Court found the trial court's conclusion that the action could not be maintained upon the contract to be correct. Regarding Roberto Quirante, the Court noted that even though he made no defense, his absolution was proper. The rule is that where a complaint states a common cause of action against several defendants, and some appear to defend on the merits while others default, the defense of those who appear inures to the benefit of those who default. If a good defense is made, all defendants must be absolved. The Court also noted that the point regarding the propriety of allowing Salomon Ramas to recover the P300 paid on the contract was not raised as an assignment of error and thus passed without discussion, but the trial court's action in this regard was implicitly affirmed by the overall affirmation of the judgment.
Main Doctrine
A contract whose consideration is illicit, being designed to prevent a prosecution for crime, is void ad initio and cannot be enforced, as it is contrary to public policy and the maxim ex turpi causa non oritur actio.