GR 53623; (March, 1990) (Digest)
G.R. No. 53623 March 22, 1990
INTERNATIONAL HARVESTER MACLEOD, INC., petitioner, vs. MARIANO MEDINA, JR. and HON. TOMAS P. MADDELA, JR., in his capacity as Presiding Judge of the Court of First Instance of Manila, respondents.
FACTS
Petitioner International Harvester Macleod, Inc. (IHMI), a seller of automotive products, sold twenty-four truck engines on installment to private respondent Mariano Medina, Jr. between 1971 and 1973. IHMI imposed and collected finance charges totaling P325,596.79 from Medina, as evidenced by documents it prepared using terms like “Finance Income Unearned” and “Finance Rate.” IHMI’s correspondence with Medina also referenced its “Finance Operations Committee” and contained language about discontinuing “financing” his accounts.
Medina filed a complaint, alleging that by imposing these finance charges, IHMI engaged in the business of a financing company without the requisite authority from the Securities and Exchange Commission, in violation of Republic Act No. 5980 (The Financing Company Act). The trial court ruled in favor of Medina, ordering IHMI to reimburse the finance charges with interest, pay moral damages and attorney’s fees, and costs. The court held IHMI’s acts were ultra vires and constituted a criminal offense under R.A. 5980.
ISSUE
Whether IHMI, by imposing and collecting finance charges in connection with its installment sales, engaged in the business of a financing company under R.A. 5980 without SEC authorization.
RULING
No. The Supreme Court granted the petition and reversed the trial court’s decision. The legal logic centered on the statutory definition of a “financing company” under R.A. 5980. The Court clarified that the business of a financing company, as defined in Section 3 of the law, involves transactions typically with three parties: the buyer, the seller, and the financing company that discounts, factors, or purchases the credit instruments from the seller. In contrast, IHMI’s transaction with Medina was purely bilateral. IHMI sold its own products directly to Medina on installment and collected payments from him. There was no assignment, discounting, or sale of the installment paper or accounts receivable to any third-party financing entity. IHMI simply extended credit incidental to its primary business of sale.
The use of the term “finance charge” was correctly attributed to compliance with the disclosure requirements of the Truth in Lending Act (R.A. 3765), which mandates clear disclosure of credit costs. This did not transform the seller into a financing company. The Court further held that R.A. 3765 and R.A. 5980 are not repugnant; they govern different subjects—credit disclosure and financing company regulation, respectively—and one does not impliedly repeal the other. Since IHMI’s activities did not fall within the ambit of R.A. 5980, it did not need SEC authorization, and its collection of finance charges was not illegal. The complaint was dismissed, and Medina was ordered to pay attorney’s fees to IHMI.