Tickler: Void or Inexistent Contracts, Definition and classes

G.R. No. 80965 June 6, 1990

SYLVIA LICHAUCO DE LEON, petitioner, 

vs.
THE HON. COURT OF APPEALS, MACARIA DE LEON AND JOSE VICENTE DE
LEON, respondents.

DOCTRINE:
Under Article 1377 of NCC, “The interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity”.

FACTS:

The private respondent Jose Vicente De Leon and petitioner Sylvia Lichauco De Leon were united in
wedlock before the Municipal Mayor of Binangonan, Rizal on October 18, 1969. On August 28, 1971, a
child named Susana L. De Leon was born.Sometime in October, 1972, a de facto separation between
the spouses occurred due to irreconcilable marital differences. Sylvia went to the United States and
then filed with the Superior Court of California a petition for dissolution of marriage, support and
distribution of properties against Jose Vicente. On March 16, 1977, Sylvia succeeded in entering into a
Letter-Agreement with her mother-in-law, Macaria.

On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First Instance of Rizal a
joint petition for judicial approval of dissolution of their conjugal partnership and thereafter issued an
Order approving the petition.Macaria, assisted by her husband Juan De Leon, filed her complaint for
the validity and legality of the Letter-Agreement but was transferred to the-Regional Trial Court of
Pasig. The trial court rendered judgment, declaring null and void the letter agreement and the
conjugal partnership of the spouses Jose Vicente De Leon and Sylvia Lichauco De Leon dissolved. The
Court of Appeals affirmed the decision of the lower court. The motion for reconsideration was denied.
Hence, this petition.

ISSUE:

WON the Letter-Agreement is void or inexistent.

HELD:

Yes, the Letter-Agreement shows on its face that it was prepared by Sylvia, and the ambiguity in a
contract is to be taken contra proferentem - construed against the party who caused the ambiguity
and could have also avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code
provides: "The interpretation of obscure words of stipulations in a contract shall not favor the party
who caused the obscurity".

Art. 1409. The following contracts are inexistent and void from the beginning: Those whose cause,
object or purpose is contrary to law, morals, good customs, public order or public policy. Since the
Letter-Agreement was repudiated before the purpose has been accomplished and to adhere to
the pari delicto rule in this case is to put a premium to the circumvention of the laws, positive relief
should be granted to Macaria. Justice would be served by allowing her to be placed in the position in
which she was before the transaction was entered into.

De Leon v. CA –

Facts:Private respondent Jose VicenteDe Leon and petitioner Sylvia Lichauco De Leon were married
and had a child namedSusana but they later onde facto separateddue toirreconcilable
maritaldifferences. Sylvia left the conjugal home and went to the United States where she
obtainedAmerican citizenship.
Sylvia filed with the SuperiorCourt of Californiaa petition fordissolution of marriage against Jose
Vicente. In thedivorce proceedings, Sylvia also filed claims for support anddistribution of properties.
It appears, however, that sinceJose Vicente was then a Philippine resident and did nothave any assets

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in the United States, Sylvia chose to holdin abeyance the divorce proceedings, and in the
meantime,concentrated her efforts to obtain some sort of propertysettlements with Jose Vicente in
the Philippines.
Thus, on March 16, 1977, Sylvia succeeded in enteringinto a Letter-Agreement with her mother-in-
law, privaterespondent Macaria De Leon wherein the latter agreed to bind herself jointly and severally
toanswer for the following undertakings of Jose Vincent:

In consideration for a peaceful and amicabletermination of relations between the

undersigned andher lawfully wedded husband, Jose Vicente de Leon,your son, agrees to give
Sylvia:
(1) Ortigas Condominium; (2) Wack-Wack Condominium; (3) two AyalaAlabang
lots; (5) California property; (6) P100,000; (7) $35,000; (8) Monthly support; (9)
Exclusive custody of minor daughter
This contract is intended to be applicable bothin the Republic of the Philippines and
in theUnited States of America. It is agreed that thiswill constitute an actionable
document in bothjurisdictions and the parties herein waive theirright to object to the use of
this document inthe event a legal issue should arise relating tothe validity of this document. In
the event of adispute, this letter is subject to interpretationunder the laws of California, U.S.A.
On the same date, Macaria made cash payments to Sylviain the amount ofP100,000 and$35,000.00
in compliance with her obligations asstipulated in the Letter-Agreement.
Thereafter, the court approved the joint petition for judicial approval of dissolution of the conjugal
property of Sylvia and Jose.

Sylvia then moved for the execution of theabove-mentioned order. However, Jose Vicente moved for
areconsideration of the order alleging that Sylvia made averbal reformation of the petition as there
was no suchagreement for the payment of P4,500.00 monthly supportto commence from the alleged
date of separation.
While the said motion for reconsideration was pendingresolution, Macaria filed with the trialcourt a
motion for leave to intervene alleging that she isthe owner of the properties involved in the case.
Themotion was granted.
She assailed the validity and legality of theLetter-Agreement which had for its purpose,
according toher, the termination of marital relationship between Sylviaand Jose
Vicente.

The trial court ruled in favor of Macaria and declared the letter-agreement null and void.
Nevertheless, the court affirmed the dissolution of the conjugal property of the spouses and ordered
the distribution of the properties in accordance with the agreement excluding the properties actually
owned by Macaria De Leon.
Sylvia appealed to the respondent Court of Appeals contending that the trial court erred in finding
that the cause or consideration of the Letter Agreement is thetermination of marital relations.
The respondent court affirmed the decision in toto. Themotion for reconsideration was denied.
Hence, the presentpetition.

Issue:

The only basis by which Sylvia may lay claim to theproperties which are the subject matter of the
LetterAgreement, is the Letter-Agreement itself. The main issue,therefore, is “Whether or not the
Letter-Agreement is valid.”

Held:

No, the Letter-Agreement is invalid. Sylvia must return Macaria’s properties.

The third paragraph of the Letter-Agreementreads:
“In consideration for a peaceful and amicable termination of relationsbetween the
undersigned and her lawfully wedded husband, Jose Vicente De Leon, your son, the following
are agreed upon:”
It is clear that the use of the word “relations” isambiguous so it is necessarily subject to interpretation.
The intent of the whole agreement must be interpreted together, attributing to thedoubtful ones that
sense which may result from all of themtaken jointly.

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Sylvia insists that the consideration for her execution ofthe Letter-Agreement was the termination of
propertyrelations with her husband. On the otherhand, Macaria and Jose Vicente assert that
theconsideration was the termination of marital relationship.
The Court agrees with the conclusion made by thelower court that with the apparently ambiguous
provisions regarding termination of “relations”, the parties clearly contemplated not only the
termination of property relationship but likewise of marital relationship in its entirety.

Article 1306 of the New Civil Code provides that parties may stipulate terms and conditions as they
may deem convenient provided they are not contrary to law, morals or public policy. Otherwise,
thecontract is void and inexistent from the beginning.
But marriage is not a mere contract but a sacred socialinstitution. Thus, Article 52 of the Civil Code
provides that its nature, consequences and incidents are governed by lawand not subject to
stipulations.
From the foregoing provisions, the court held that theLetter-Agreement is deemed null and
void because it ispremised on the termination ofmarital relationship whichis not only contrary to law
but contrary toFilipino morals and public policy.

Additionally, Article 191 of the Civil Code (dissolution of conjugal property) contemplates properties
belonging to the spouses and not those belonging to a third party, who in this case, is Macaria. In the
petition for the dissolution of the conjugal partnership, it was made to appear that the said properties
are conjugal in nature. However, Macaria was able to prove that the questioned properties are owned
by her. Neither Sylvia nor Jose Vicente adduced any contrary evidence.

Sylvia then alleged that that since the nullity of the Letter-Agreement proceeds from the unlawful
considerationof Macaria, applying the pari delicto rule, she should not be able to recover what she
has given by reason of theLetter-Agreement nor ask for the fulfillment of what hasbeen promised her.
On the other hand, Macaria raises thedefenses of intimidation (Sylvia threatened to scandalize the
family in court)and mistake (she was led to believe Sylvia would and could eliminate her inheritance
rights in accordance with California law) which led her toexecute the Letter-Agreement.
The agreement shows that Sylvia was willing to consent to and pardon Jose Vicente for possible
crimes of adultery and/or concubinage if the subject properties were transferred to her. There appears
some truth to the apprehensions of intervenor for in Sylvia’s testimony she confirms that Macaria was
worried that her son has already remarried and had a child.

The claim of Macaria that Sylvia threatened her tobring Jose Vicente to court for support, to
scandalize theirfamily by baseless suits is obviouslynot the intimidation referred to by law.
Likewise, Macaria’s alleged mistake in having signed the Letter-Agreement because of her belief that
Sylvia will eliminate inheritance rights from her and JoseVicente, is not the mistake referred to
in Article 1331 of the CivilCodebecausesuchcondition was but an incident of the consideration of
the “termination of maritalrelations.”
In the ultimate analysis, both parties acted inviolation of the laws. However, the pari delicto rule
which refuses remedy to either party to an illegal agreement andleaves them where they are, does not
apply in this case.
Article 1414 of the Civil Code, which is an exception to thepari delicto rule, is the proper law to be
applied. Itprovides:
When money is paid or property delivered for an illegal purpose,the contract may be
repudiated by one of the parties before thepurpose has been accomplished, or
before any damage has beencaused to a third person. In such case, the courts may, if the
publicinterest will thus be subserved, allow the party repudiating thecontract to recover the
money or property.
Since the Letter-Agreement was repudiated before thepurpose has been accomplished, to adhere to
the paridelicto rule in this case is to put a premium to thecircumvention of the laws.Positive relief
should be grantedto Macaria. Justice would be served by allowing her to beplaced in the position in
which she was before thetransaction was entered into.

ACCORDINGLY, the petition is hereby DENIED.

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