"Mr. Ernest Berg
1340 Oregon St.
Manila
Red Star Stores, Inc.
Dear Mr. Berg:chanrob1es virtual 1aw library
This will confirm our conversation of this afternoon when you agreed to reimburse us in full for our Advance Bills local amounting to US$19,956.75 against which we are prepared to waive interest up to date.
It is our understanding that you have disposed of some property and when the deal is consummated, which is expected next week, you will liquidate the subject’s pre-war indebtedness to us.
We take this opportunity to convey our thanks for the splendid cooperation you have displayed in discharging this obligation.
Very truly yours.
(Sgd.) FRED W. HENDER
Sub-Manager
I hereby acknowledge the above indebtedness and confirm that it will be fully liquidated.
(Sgd.) ERNEST BERG
Note that the letter says that it was a confirmation of a conversation had between plaintiff and defendant regarding the settlement of the account previously had by the former the term of which was that plaintiff would pay his account in full and defendant would waive the payment of interest. Note also that at the foot of the letter there appears the following under the signature of plaintiff: "I hereby acknowledge the above indebtedness and confirm that it will be fully liquidated." That this agreement has the nature of a compromise cannot be denied for it was entered into to avoid "the provocation of a suit" which defendant was then contemplating to take against plaintiff and his brother in the belief that the payment made to the Bank of Taiwan was not valid (Article 1809, old Civil Code). Note that at that time the decision of the Supreme Court in the Haw Pia case has not as yet been rendered. It being a compromise, it is binding upon the parties (Article 1809, old Civil Code), and as such it has "the same authority as res judicata" (Article 1816, Idem.) .
It is true that plaintiff claims that the agreement was forced upon him through deceit, fraud, threat or intimidation, but the trial court did not predicate its decision on any of said grounds. Apparently, the trial court was of the belief that a compromise can only be effected if the claim to be settled was enforceable, which is not correct, for, as a rule, a compromise is entered into not because it settles a valid claim but because it settles a controversy between the parties. And here there was a real compromise when defendant waived the payment of interest amounting to over $4,000.
"‘The compromise of any matter is valid and binding, not because it is the settlement of a valid claim, but because it is the settlement of a controversy.’ (Page 877.)
‘In order to effect a compromise there must be a definite proposition and an acceptance. As a question of law it does not matter from whom the proposition of settlement comes; if one is made and accepted, it constitutes a contract, and in the absence of fraud it is binding on both parties.’ (Page 879.)
‘Hence it is a general rule in this country, that compromises are to be favored, without regard to the nature of the controversy compromised, and that they cannot be set aside because the event shows all the gain to have been on one side, and all the sacrifice on the other, if the parties have acted in good faith, and with a belief of the actual existence of the rights which they have respectively waived or abandoned; and if a settlement be made in regard to such subject, free from fraud or mistake, whereby there is a surrender or satisfaction, in whole or in part, of a claim upon one side in exchange for or in consideration of a surrender or satisfaction of a claim in whole or in part, or of something of value, upon the other, however baseless may be the claim upon either side or harsh the terms as to either of the parties, the other cannot successfully impeach the agreement in a court of justice . . . . Where the compromise is instituted and carried through in good faith, the fact that there was a mistake as to the law or as to the facts, except in certain cases where the mistake was mutual and correctable as such in equity, cannot afford a basis for setting a compromise aside or defending against a suit brought thereon . . . . Furthermore, and as following the rule stated, a compromise of conflicting claims asserted in good faith will not be disturbed because by a subsequent judicial decision in an analogous case it appears that one party had no rights to forego.’ (Pages 883, 884.)" (McCarthy v. Barber Steamship Lines, 45 Phil., 488, 498-499)
But plaintiff insists that the compromise is null and void as the same has been extorted from him by the officials of the Bank through deceit, fraud and intimidation. In this respect, counsel for defendant says: "Mr. Berg claims that the compromise agreement was secured from him by deceit, fraud and unlawful action by the bank. The bank is referred to as an extortionist, and as a blackmailer, as being guilty of making illegal demands, of coercing Mr. Berg, of resorting to misrepresentation, illegal distortion, deceit and insidious machinations. Its acts are likened to those of a traffic policeman soliciting a bribe, on one hand, and to a highwayman extracting money from a wayfarer at the point of a gun, on the other. Mr. Berg’s counsel states that Mr. Berg was compelled to settle because of fear for his life, of life imprisonment or a heavy fine, and fear of financial ruin, the implication being that the bank would cause these dire contingencies should Mr. Berg not pay the sums demanded" (p. 4, Defendant’s Memorandum).
But these imputations only find support in the testimony of plaintiff which were denied by the officials of the Bank. In fact, they have not been substantiated. What plaintiff in effect wanted to convey is that the officials of the Bank intimidated to him that unless the account is settled, the Bank would bring an action against him or against his brother, Alfred Berg; that it would not extend any further credit facilities to him or his business enterprises; and that it would make use of its influence to prevent him from engaging in business in the Philippines. The question then that arises is: Do these threats constitute duress under the law?
With regard to the first charge, we see nothing improper. It is a practice followed not only by banks but even by individuals to demand payment of their accounts with the threat that upon failure to do so an action would be instituted in court. Such a threat is proper within the realm of the law as a means to enforce collection. Such a threat cannot constitute duress even if the claim proves to be unfounded so long as the creditor believes that it was his right to do so. This charge has no legal basis.
"One element of the early law of duress continues to exist, however its boundaries may be otherwise extended. The pressure must be wrongful, and not all pressure is wrongful. The law provides certain means for the enforcement of their claims by creditors. It is not duress to threaten to take these means. Therefore, a threat to bring a civil action or to resort to remedies given by the contract is not such duress as to justify recission of a transaction induced thereby, even though there is no legal right to enforce the claim, provided the threat is made in good faith; that is, in the belief that a possible cause of action exists. But, if the threat is made with the consciousness that there is no real right of action and the purpose is coercion, a payment or contract induced thereby is voidable. In the former case, it may be said that the threatened action was rightful; in the letter case, it was not." (Section 1606, Williston on Contracts, Vol. V, pp. 4500-4502.)
Plaintiff also contends that the Bank had intimated that it would not extend to him or his enterprise further credit facilities unless he settles the former debt of the Red Star Stores, Inc. Even if this were true, the same cannot constitute duress that might invalidate the settlement, for there is nothing improper for a bank to decline further credit to any person or entity as a means to enforce the collection of its accounts if such is necessary to protect its investment. In fact, such is the practice followed by most banking institutions for it goes a long way in the determination of the paying capacity of those who deal with them. Moreover, the banking business in the Philippines is extremely competitive. There are other banks that are opened for business whose facilities plaintiff may avail of in case the threat is carried out and if plaintiff is a good business risk he could certainly find accommodation in any one of them if he so desires. The fact that plaintiff was then under indictment for treason does not change the situation. This is rather a further reason for defendant to adopt a more stringent measure against plaintiff because of the belief, grounded or otherwise, that the collection of the account might be frustrated. Such circumstance should not be considered as a desire on the part of defendant to harrass or aggravate the alleged political or financial difficulties of plaintiff.
Plaintiff likewise contends that the officials of the Bank have threatened him with reprisals in the sense that unless he settles his account they would make use of their influence to prevent him from engaging in business in the Philippines. Not only is this claim inherently untenable but it was flatly denied by the officials of the Bank. Certainly, plaintiff has not been able to indicate in what manner does defendant or its officials expect to carry out the threat imputed to them.
All things considered, we find the charges of plaintiff unfounded. And considering that, under our law, intimidation can only exist "when one of the contracting parties is inspired with a reasonable and well-grounded fear of suffering an imminent and serious injury to his person or property" (Article 1267, old Civil Code), we are persuaded to conclude that the compromise in question has been entered into voluntarily and, as such, is valid and binding.
Having reached this conclusion, we find it unnecessary to discuss the appeal taken by plaintiff-appellant.
Wherefore, the decision appealed from is reversed, with out pronouncement as to costs.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Reyes, J. B. L., Endencia and Felix, JJ., concur.
Endnotes:
* 80 Phil., 604; 45 Off. Gaz., [Supp. No. 9] 229.