GR 159592; (October, 2005) (Digest)
G.R. No. 159592 & 159706. October 25, 2005.
Spouses Ferdinand Aguilar and Josephine C. Aguilar, Petitioners, vs. Citytrust Finance Corporation, Respondent. / World Cars, Inc., Petitioner, vs. Spouses Ferdinand and Josephine C. Aguilar, Respondents.
FACTS
Spouses Ferdinand and Josephine Aguilar agreed to purchase a car from World Cars, Inc. for ₱370,000.00, payable within 90 days. World Cars’ representatives had the Aguilars sign a promissory note and chattel mortgage, with some dates left blank, indicating a 12-month installment plan. The representatives assured the Aguilars these documents were a mere formality and would be cancelled upon full payment. The Aguilars issued checks totaling the purchase price, mostly payable to the representative, Joselito Perez, who issued provisional receipts. Despite full payment, Citytrust Finance Corporation, as assignee of the chattel mortgage, later demanded installment payments from the Aguilars.
The Aguilars filed a complaint for sum of money and damages against World Cars and Citytrust. The trial court ruled in favor of the Aguilars, declaring the promissory note and chattel mortgage void and ordering World Cars to pay damages. The Court of Appeals reversed this decision, holding the Aguilars liable under the financing documents assigned to Citytrust.
ISSUE
Whether the Aguilars are liable to Citytrust under the promissory note and chattel mortgage, despite having fully paid the purchase price to World Cars’ agent.
RULING
No. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision with modification. The legal logic centers on the nature of the transaction and the liability of a financing company as an assignee. The contract between the Aguilars and World Cars was a simple sale, not a credit sale financed by Citytrust. The Aguilars paid the full purchase price directly to World Cars’ authorized agent, Perez, thereby extinguishing their obligation. The promissory note and chattel mortgage, procured through misrepresentation that they were mere formalities, were void. Consequently, Citytrust, as assignee, merely stepped into the shoes of World Cars and acquired no better right than its assignor. Since World Cars had already received full payment, Citytrust had no right to collect from the Aguilars. The Court awarded moral and exemplary damages, plus attorney’s fees, due to the fraudulent scheme employed by World Cars’ agents, which caused the Aguilars to litigate to protect their interests.