G.R. No. L-15412, December 15, 1920
CAGAYAN VALLEY TOBACCO COMPANY, plaintiff-appellee, vs. JUAN MOLINA MARTELL, ET AL., defendant-appellants.

FACTS:
The Cagayan Valley Tobacco Company filed an action to compel defendants Juan Molina Martell and Fernando Molina Martell to pay a promissory note dated April 29, 1910, for P900 with 12% annual interest. The defendants admitted signing the note and receiving P900 from C.F. Humphrey but claimed they were misled into believing the document was merely a receipt for the money, which represented a partial payment of the purchase price for land they had sold to Humphrey. The trial court found the defendants’ contention supported by evidence, declared the note null, but ordered the defendants to restore the P900 with interest under Article 1303 of the Civil Code. The defendants appealed.

ISSUE:
Whether the defendants are liable to pay the promissory note or to restore the amount received under Article 1303 of the Civil Code.

RULING:
The Supreme Court reversed the trial court’s decision. It held that the promissory note was void because it did not reflect the true agreement between the parties. The defendants, unfamiliar with English, were misled by Humphrey into signing the note under the belief it was a receipt. The real transaction was between the defendants and Humphrey, and the Cagayan Valley Tobacco Company was a stranger to it. No juridical relation was created between the company and the defendants. Article 1303 of the Civil Code was deemed inapplicable, as the note created no valid obligation. The defendants were absolved from the complaint, with costs against the appellee.