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.

FACTS

Petitioner Sylvia Lichauco De Leon and private respondent Jose Vicente De Leon were married in 1969 but separated de facto in 1972. Sylvia subsequently obtained American citizenship and initiated divorce proceedings in California in 1973. To settle matters, Sylvia entered into a Letter-Agreement dated March 16, 1977, with her mother-in-law, respondent Macaria De Leon. Macaria bound herself jointly and severally with her son, Jose Vicente. The agreement stipulated that in consideration for a peaceful termination of marital relations, Macaria and Jose Vicente would deliver several real properties and sums of money to Sylvia. In return, Sylvia obligated herself to agree to a judicial separation of property under Philippine law and to amend her U.S. divorce complaint. Macaria complied partially by paying Sylvia P100,000 and US$35,000 on the same date.
Subsequently, Sylvia and Jose Vicente filed a joint petition for judicial approval of dissolution of their conjugal partnership, incorporating terms similar to the Letter-Agreement. However, Macaria later filed an action to annul the Letter-Agreement, claiming it was void for being contrary to law, morals, and public policy, and that her consent was vitiated by intimidation and mistake. The trial court dismissed her complaint, but the Court of Appeals reversed this decision, declaring the agreement void and ordering Sylvia to return the payments received.

ISSUE

The primary issue is whether the Letter-Agreement is void for being contrary to law and public policy, and whether Macaria can recover the payments made thereunder despite the principle of pari delicto.

RULING

The Supreme Court affirmed the Court of Appeals’ decision. The Letter-Agreement is void for being contrary to law and public policy. Its clear consideration was the “peaceful and amicable termination of relations” between the spouses, which essentially aimed to facilitate the dissolution of the marriage through foreign divorce proceedings initiated by Sylvia, who was then still a Filipino citizen. The agreement sought to circumvent Philippine laws on marriage and divorce, as it was designed to support Sylvia’s foreign divorce action and secure a property settlement in anticipation of that divorce. Such an object is illegal.
Regarding the vitiation of consent, the Court found Macaria’s claims of intimidation and mistake unsubstantiated. The alleged threats did not constitute the serious or irresistible force required by law, and her mistake pertained to an incidental condition rather than the principal cause of the contract. Although both parties acted in violation of the law, the pari delicto rule does not apply. Under Article 1414 of the Civil Code, when money is paid for an illegal purpose, the contract may be repudiated by one party before the purpose is accomplished. Macaria repudiated the agreement before its illegal purpose—the finalization of the divorce and property settlement—was fully achieved. Allowing recovery serves public interest by discouraging such circumvention of law and placing the parties in their original positions. Thus, Sylvia must return the payments to Macaria.