G.R. No. 26247 , March 18, 1927
JUAN YSMAEL & CO., INC., plaintiff-appellant, vs. NAGEEB T. HASHIM and AFIFE ABDO CHEYBAN GORAYEB, defendants. AFIFE ABDO CHEYBAN GORAYEB, appellant.

FACTS

Juan Ysmael & Co., Inc. (plaintiff) filed a complaint against spouses Nageeb T. Hashim and Afife Abdo Cheyban Gorayeb (defendants) for two causes of action: (1) to recover the unpaid balance of a chattel mortgage debt executed by Hashim in 1916, and (2) to collect an assigned credit originally owed by Hashim to Hashim Commercial & Trading Co., Ltd., which the plaintiff claimed was assigned to it. The defendant Hashim admitted the allegations, while Gorayeb denied them and alleged a conspiracy to defraud her of alimony. The trial court rendered judgment in favor of the plaintiff for the first cause of action but dismissed the second cause of action, finding that the credit had been assigned to Asia Banking Corporation, not to the plaintiff. Both the plaintiff and Gorayeb appealed.

ISSUES:
1. Whether the trial court erred in dismissing the second cause of action for lack of a valid assignment of the credit to the plaintiff.
2. Whether the trial court erred in not allowing Gorayeb to present evidence on her special defense of conspiracy.
3. Whether the trial court erred in excluding prior testimony of witnesses for impeachment purposes without laying a proper foundation.
4. Whether the amount awarded under the first cause of action should be limited to the balance shown in the plaintiff’s ledger, excluding claimed interest.

RULING

1. On the second cause of action: The Supreme Court affirmed the dismissal. The resolution of October 3, 1921, authorizing an assignment to the plaintiff was revoked by a subsequent resolution dated November 2, 1921, which ratified an actual assignment to Asia Banking Corporation. No formal assignment to the plaintiff was executed. Under applicable laws (Code of Commerce, Civil Code, and Code of Civil Procedure), a formal written assignment is required for credits exceeding P300 to maintain an action against the debtor. A mere equitable right to an assignment is insufficient; the plaintiff must be the real party in interest with a valid title to the credit.

2. On the special defense of conspiracy: The Supreme Court found that the trial court did not err in its handling of this defense. While the Court acknowledged that the circumstances raised suspicions about the transaction’s bona fides, it did not find reversible error in the trial court’s procedure regarding this defense.

3. On the exclusion of prior testimony: The Supreme Court sustained the trial court’s exclusion. The defendant-appellant sought to introduce prior testimony of witnesses to impeach their current testimony. However, for impeachment purposes, a foundation must first be laid by confronting the witnesses with their prior statements during cross-examination to allow them an opportunity to explain. This foundation was not laid.

4. On the amount recoverable under the first cause of action: The Supreme Court modified the judgment. The Court limited the recovery to the principal amount of P12,238.02 as shown in the plaintiff’s ledger account as of December 31, 1924, with legal interest at 6% per annum from the filing of the complaint (January 13, 1925). The Court disallowed the additional interest claimed (at 8% per annum from 1916) because the ledger, which included the chattel mortgage debt, had been balanced periodically without reflecting such interest, making its existence improbable. The chattel mortgage debt was considered merged into the open book account.

DISPOSITIVE PORTION:
The judgment was modified by reducing the plaintiff’s recovery to P12,238.02 with legal interest at 6% per annum from January 13, 1925. In all other respects, the judgment was affirmed. No costs were awarded.