G.R. No. L-48113. April 7, 1947.
NGO TIAN TEK and NGO HAY, petitioners, vs. PHILIPPINE EDUCATION CO., INC., respondent.

FACTS

The respondent, Philippine Education Co., Inc., filed an action in the Court of First Instance of Manila against Vicente Tan alias Chan Sy and the partnership of Ngo Tian Tek and Ngo Hay to recover the unpaid cost of merchandise amounting to P16,070.14, purchased by the Lee Guan Box Factory from the plaintiff and five other corporate entities. These five entities had previously assigned their credits to the plaintiff. The case was heard by a referee, whose report held the defendants jointly and severally liable. The Court of First Instance rendered judgment accordingly on March 6, 1939, which was affirmed by the Court of Appeals on January 31, 1941. The partnership Ngo Tian Tek and Ngo Hay appealed.
The Court of Appeals’ findings, which are conclusive, established that the Modern Box Factory was owned by Ngo Hay and later by the partnership with Ngo Tian Tek. Around 1930, the Lee Guan Box Factory was established nearby under Vicente Tan’s management. When the Lee Guan Box Factory sought credit from the plaintiff and its assignors, Ngo Hay represented that he was its principal owner, that it and the Modern Box Factory belonged to the same owner, and that it was a subsidiary of the Modern Box Factory. Evidence showed goods purchased in the name of Lee Guan were delivered to the Modern Box Factory, collectors were directed to and did collect payments from the Modern Box Factory for Lee Guan’s bills, and checks signed by the partners paid Lee Guan’s accounts. Ngo Hay testified that he was the owner of Lee Guan Box Factory before 1934, selling it to Vicente Tan in January 1935 via a contract (Exhibit 7). The referee found Exhibit 7 to be simulated and untrue. The Court of Appeals concluded that the Lee Guan Box Factory was owned by the petitioner partnership, Ngo Tian Tek and Ngo Hay.

ISSUE

1. Whether the petitioner partnership is liable for the debts incurred by the Lee Guan Box Factory.
2. Whether the assignment of credits to the respondent Philippine Education Co., Inc., made it the real party in interest to sue.
3. Whether the writ of attachment issued at the commencement of the action was illegal.
4. Whether the case should be dismissed due to the death of partner Ngo Hay.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, holding the petitioner partnership liable.
1. On the Liability of the Partnership: The Court ruled that the petitioner partnership is liable for the debts. The finding of the Court of Appeals that the partnership owned the Lee Guan Box Factory is conclusive. Furthermore, under Article 286 of the Code of Commerce, contracts entered into by a factor (Vicente Tan) of a commercial establishment known to belong to a well-known enterprise shall be understood as made for the account of the owner, provided the contracts involve objects within the establishment’s line of business. The lack of a recorded power of attorney from the petitioner does not prejudice third parties like the respondent and its assignors. The defense based on the simulated sale contract (Exhibit 7) was rejected as it involved a factual finding by the Court of Appeals.
2. On the Assignment of Credits: The Court overruled the petitioner’s challenge to the respondent’s standing to sue. The Court of Appeals found the assignment was not simulated. Even assuming the assignment was for collection only, under the then-governing Section 114 of the Code of Civil Procedure, the legal title vests in the assignee, and payment to the assignee discharges the debtor. The assignment did not prejudice the petitioner’s substantive rights, as Section 114 preserved any set-off or defense existing before notice of the assignment. Defenses alleging fraud or immorality in the original contracts go to the merits of the obligation, not the validity of the assignment.
3. On the Writ of Attachment: The Court sustained the Court of Appeals’ factual conclusion that the attachment was justified based on the defendants’ conduct, including the stereotyped manner of obtaining credit, Vicente Tan’s disappearance, the execution of a fake sale, and the defendants’ shifting theories of ownership.
4. On the Death of Ngo Hay: The suggestion to dismiss the case due to Ngo Hay’s death was rejected. The petitioner was sued as a partnership, which possesses a juridical personality distinct from its individual partners.
Separate Opinion: Justice Feria concurred except on the point regarding the assignee’s right to sue. He dissented from the majority’s reasoning on that issue, arguing it was based on a misapplication of the legal authority cited by the petitioner.