NGO TIAN TEK & NGO HAY, PETITIONER, VS. PHILIPPINE EDUCATION CO., INC., RESPONDENT.

The plaintiff, Philippine Education Co., Inc., instituted in the Court of
First Instance of Manila an action against the defendants, Vicente Tan
alias Chan Sy and the partnership of Ngo Tian Tek and Ngo Hay, for the
recovery of some P16,070.14, unpaid cost of merchandise purchased by Lee Guan
Box Factory from the plaintiff and five other corporate entities which, though
not parties to the action, had previously assigned their credits to the
plaintiff, together with attorney’s fees, interest and costs. By agreement of
the parties, the case was heard before a referee, Attorney Francisco Dalupan,
who in due time submitted his report holding the defendants jointly and
severally liable to the plaintiff for the sum of P16,070.14, plus attorney’s
fees and interest at the rates specified in the report. On March 6, 1939, the
Court of First Instance of Manila rendered judgment in accordance with said
report, except as to attorney’s fees which were reduced to a total of P1,596.39.
This judgment was affirmed by the Court of Appeals in its decision of January
31, 1941, now the subject of our review at the instance of the partnership Ngo
Tian Tek and Ngo Hay, petitioner herein.

“It appears that,” quoting from the decision of the Court of Appeals whose
findings of fact are conclusive, “as far back as the year 1925, the Modern Box
Factory was established at 603 Magdalena Street, Manila. It was at first owned
by Ngo Hay, who three years later was joined by Ngo Tian Tek as a junior
partner. The Modern Box Factory dealt in paper and similar merchandise and
purchased goods from the plaintiff and its assignors in the names of the Modern
Box Factory, Ngo Hay and Co., Go Hay Box Factory, or merely Go Hay. Then about
the year 1930, the Lee Guan Box Factory was established a few meters from the
Modern Box Factory, under the management of Vicente Tan. When that concern,
through Vicente Tan, sought credit with the plaintiff and its assignors, Ngo
Hay, in conversations and interviews withe their officers and employees,
represented that he was the principal owner of such factory, that the Lee Guan
Box Factory and the Modern Box Factory belonged to the same owner, and that the
Lee Guan Box Factory was a subsidiary of the Modern Box Factory. There is
evidence that many goods purchased in the name of the Lee Guan Box Factory were
delivered to the Modern Box Factory by the employees of the plaintiff and its
assignors upon the express direction of Vicente Tan. There is also evidence that
the collectors of the sellers were requested by Vicente Tan to collect—and did
collect—from the Modern Box Factory the bills against the Lee Guan Box Factory.
In fact the record shows many checks signed by Ngo Hay or Ngo Tian Tek in
payment of accounts of the Lee Guan box Factory. Furthermore,—and this seems to
be conclusive—Ngo Hay, testifying for the defense, admitted that ‘he’ was the
owner of the Lee Guan Box Factory in and before the year 1934, but that in
January, 1935, ‘he’ sold it, by the contract of sale Exhibit 7, to Vicente Tan,
who had been his manager of the business. Tan declared also that before January,
1935, the Lee Guan Box Factory pertained to Ngo Hay and Ngo Tian Tek. The
contract Exhibit 7 was found by the referee to be untrue and simulated, for
various convincing reasons that need no repetition here. And the quoted
statements serve effectively to confirm the evidence for the plaintiff that it
was Ngo Hay’s representations of ownership of, and responsibility for, Lee Guan
Box Factory that induced them to open credit for that concern. It must be stated
in this connection—to answer appellant’s fitting observation—that the plaintiff
and the assignors have considered Ngo Hay, the Modern Box Factory and Ngo Hay
and Co. as one and the same, through the acts of the partners themselves, and
that the proof as to Ngo Hay’s statements regarding the ownership of Lee Guan
Box Factory must be taken in that view. Ngo Hay was wont to say ‘he’ owned the
Modern Box Factory, meaning that he was the principal owner, his other partner
being Ngo Tian Tek. Now, it needs no demonstration—for appellant does not deny
it—that the obligations of the Lee Guan Box Factory must rest upon its known
owner. And that owner is Ngo Tian Tek and Ngo Hay.”

We must overrule petitioner’s contention that the Court of Appeals erred in
holding that Lee Guan Box Factory was a subsidiary of the Modern Box Factory and
in disregarding the fact that the contracts evidencing the debts in question
were signed by Vicente Tan alias Chan Sy, without any indication that
tended to involve the Modern Box Factory or the petitioner. In the first place,
we are concluded by the finding of the Court of Appeals regarding the ownership
by the petitioner of Lee Guan Box Factory. Secondly, the circumstance that
Vicente Tan alias Chan Sy acted in his own name cannot save the
petitioner, in view of said ownership, and because contracts entered into by a
factor of a commercial establishment known to belong to a well-known enterprise
or association, shall be understood as made for the account of the owner of such
enterprise or association, even when the factor has not so stated at the time of
executing the same, provided that such contracts involve objects comprised in
the line and business of the establishment. (Article 286, Code of Commerce.) The
fact that Vicente Tan did not have any recorded power of attorney executed by
the petitioner will not operate to prejudice third persons, like the respondent
Philippine Education Co., Inc., and its assignors. (3 Echavarri, 133.)

Another defense set up by the petitioner is that prior to the transactions
which gave rise to this suit, Vicente Tan had purchased Lee Guan Box Factory
from Ngo Hay under the contract, Exhibit 7; and the petitioner assails, under
the second assignment of error, the conclusion of the court of Appeals that said
contract is simulated. This contention is purely factual and must also be
overruled.

The petitioner questions the right of the respondent Philippine Education
Co., Inc., to sue for the credits assigned by the five entities with which Lee
Guan Box Factory originally contracted, it being argued that the assignment,
intended only for purposes of collection, did not make said respondent the real
party in interest. The petitioner has cited 5 Corpus Juris, section 144, page
958, which points out that “under statutes authorizing only a bona fide
assignee of choses in action to sue thereon in his own name, an assignee for
collection merely is not entitled to sue in his own name.”

The finding of the Court of Appeals that there is nothing “simulated in the
assignment,” precludes us from ruling that the respondent company is not a
bona fide assignee. Even assuming, however, that said assignment was only
for collection, we are not prepared to say that, under section 114 of the Code
of Civil Procedure, in force at the time this action was instituted, ours is not
one of those jurisdictions following the rule that “when a chose, capable of
legal assignment, is assigned absolutely to one, but the assignment is made for
purpose of collection, the legal title thereto vests in the assignee, and it is
no concern of the debtor that the equitable title is in another, and payment to
the assignee discharges the debtor.” (5 C. J., section 144, p. 958.) No
substantial right of the petitioner could indeed be prejudiced by such
assignment, because section 114 of the Code of Civil Procedure reserves to it
“any set-off or other defense existing at the time of or before notice of the
assignment.’ “

Petitioner’s allegations that “fraud in the inception of the debt is personal
to the contracting parties and does not follow assignment,” and that the
contracts assigned to the respondent company “are immoral and against public
policy and therefore void,” constitute defenses on the merits, but do not affect
the efficacy of the assignment. It is obvious that, apart from the fact that the
petitioner cannot invoke fraud of its authorship to evade liability, the
appealed decision is founded on an obligation arising, not from fraud, but from
the very contracts under which merchandise had been purchased by Lee Guan Box
Factory, a subsidiary of petitioner’s Modern Box Factory.

The fourth and fifth assignments of error relate to the refusal of the court
of Appeals to hold that the writ of attachment issued at the commencement of
this action by the Court of First Instance is illegal, and to award in favor of
the petitioner damages for such wrongful attachment. For us to sustain
petitioner’s contention will amount to an unauthorized reversal of the following
conclusion of fact of the Court of Appeals: “The stereotyped manner in which
defendants obtained goods on credit from the six companies, Vicente Tan’s sudden
disappearance, the execution of the fake sale Exhibit 7 to throw the whole
responsibility upon the absent or otherwise insolvent Tan, defendant’s mercurial
and unbelievable theories as tolthe ownership of the Modern Box Factory and” Lee
Guan Box Factory—obviously adopted in a vain effort to meet or explain away the
evidentiary force of plaintiff’s documentary evidence—are much too significant
to permit a declaration that the attachment was not justified.”

Regarding the suggestion in petitioner’s memorandum that this case should be
dismissed because of the death of Ngo Hay, it is sufficient to state that the
petitioner Ngo Tian Tek and Ngo Hay is sued as a partnership possessing a
personality distinct from any of the partners.

The appealed decision is affirmed, with costs against the petitioner. So
ordered.

Moran, C.J., Pablo, Perfecto, Hilado, Briones, Hontiveros,
and Tuason, JJ., concur.

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FERIA, J.:

I concur in the majority opinion except that portion thereof which deals with
the question whether an assignee for collection merely is entitled to sue in his
own name, whioh needs not be discussed, in view of the finding of the Court of
Appeals that there is nothing “simulated in the assignment” which according to
the very opinion of the majority “precludes us from ruling that the respondent
company is not a bona fide assignee;” because such being the conclusion
of fact of the Court of Appeals, this Supreme Court can not modify or reverse
that conclusion and find that respondent Philippine Education was not a bona
fide assignee, and the assignment was not absolute, but made merely for
collection in order that said respondent may sue in its own name.

But I dissent from the majority opinion when it further says:

“Even assuming, however, that said assignment was only for collection, we ere
not prepared to say that, under seotion 114 of the Code of Civil Procedure, in
force at the time this action was instituted, ours is not one of those
jurisdiction following the rule that ‘when a ohose, capable of legal assignment,
is assigned absolutely to one, but the assignment is made for purpose of
collection, the legal title thereto vests in the assignee, and it is no concern
of the debtor that the equitable title is in another, and payment to the
assignee discharges the debtor.’ (5 C. J., section 144, p. 958.) No substantial
right of the petitioner could indeed be prejudiced by such assignment, because
section 114 of the Code of Civil Procedure reserves to it ‘any set-off or other
defense existing at the time of or before notice of the assignment.’
“

The reason for my dissenting is that, after quoting tne finding of the Court
of Appeals and stating that said conclusion precludes this Court “from ruling
that the respondent company is not a bona fide assignee,” the majority
should have stopped then and there. But having preferred to adduce an additional
ratio decidendi, and assume that the assignment was for collection only
and not an absolute and bona fide one, in order to meet the latter’s
argument, because the Court of Appeals’ conclusion is that the assignment was
not simulated, that is, absolute and bona fide, the majority should have
quoted and discussed the second and third sentence of paragraph 144, page 958,
of the Corpus Juris, quoted and relied on by the petitioner, which refers to an
assignment that is not absolutely and bona fide made. However the
majority opinion did not do so, and quotes and bases its conclusion to the
contrary on the first sentence of said paragraph, not relied on by the
petitioner, and which deals with absolute and bona fide assignment, and
to the provision of section 114 of the Code of Civil Procedure on set-off and
defenses which defendant may set up to an action instituted by a bona
fide assignee.

To clearly show the error, we transcribe below section 144, page 958, of
Corpus Juris quoted and underlined by the petitioner in his brief:

“144. G. Assignments for Collection.—When a chose, capable of legal
assignment, is assigned absolutely to one, but the assignment is made for
purpose of collection, tne legal title thereto vests in the assignee, and it is
no concern of the debtor that the equitable title is in another, and payment to
the assignee discharges the debtor, Under the statutes of most jurisdictions,
the assignee may prosecute an action thereon in his own name as the real party
in interest or as a trustee of an express trust; but, under statutes
authorizing only a bona fide assignee of choses in action to sue thereon in his
own name, an assignee for collection merely is not entitled to sue in his own
name. An assignment merely for collection does not transfer the beneficial
ownership to the assignee.”

It is not only convenient but
necessary to point this error in the present concurring and dissenting opinion,
for the conclusion set forth in the above quoted portion of the majority
decision is misleading; because it apparently lays down the ruling that an
assignee not bona fide to whom a credit was assigned, not absolutely, but
for collection merely may sue in his own name (a debatable question which has
not yet been passed upon squarely by this Court [Annotation: 64 L. R. A., 585]),
but the premise on whioh the majority’s conclusion or ruling is predicated in
said portion of the Corpus Juris quoted in the opinion, which is a wrong premise
laid down, not by the petitioner, but by the writer himself of the majority
opinion.