510 Phil. 780
CARPIO MORALES, J.:
Check No. | Payable to | Amount | Dated |
112703[10] | Joselito Perez | P148,000.00 | May 30, 1992 |
112704[11] | World Cars | P16,000.00 | May 30, 1992 |
112705[12] | Joselito Perez | P111,000.00 | June 30, 1992 |
112706 | Joselito Perez | P111,000.00 | July 30, 1992 |
1. [World Cars] hereby agrees and covenants to discount with [Citytrust] subject to the terms and conditions hereinafter stipulated, installment papers evidencing actual sales made by [World Cars] of brand new automobiles, trucks, household appliances and other durable goods acceptable to [Citytrust]. Wheresoever used herein, the term "installment paper" shall refer to any document or documents evidencing sale of personalty on the installment plan including "Conditional Sale Contracts, Deed of Chattel Mortgages, Trust Receipts, Contracts of Lease and other evidences of indebtedness or choses in action, signed by the customers evidencing the unpaid obligations duly negotiated and/or assigned in favor of [Citytrust] by virtue of a Deed of Assignment duly notarized;Citytrust prayed in its Crossclaim against World Cars that "in the remote event that the complaint is not dismissed . . . [World Cars] be ordered to pay all and whatever unpaid obligation due to [it] arising from [the] promissory note . . ."[35]
2. Discounting of the installment papers by virtues hereof shall be on without-recourse and offer-and-acceptance basis, and that if [Citytrust] finds the same acceptable, it shall purchase and pay [World Cars] the balance due and outstanding on the respective installment papers so purchased after deducting the financing and other charges. Discounting and purchase of installment papers shall be at the sole option and discretion of [Citytrust];x x x
5. As further warranties, [World Cars] hereby agrees and shall be bound by the following:
a. World Cars guarantees to [Citytrust] its successors, and assigns, that it has full right and legal authority to make the assignment or discounting; that the installment papers so discounted by virtue of this agreement, are subsisting, valid, enforceable and in all respects what they purport to be; that the papers contain the entire agreement between the customers and [World Cars]; that said papers are not subject to any defense, offset or counterclaim; that the personalty covered by said papers have been delivered to and accepted by the customers in full compliance with the orders and specifications of the latter; that the required downpayment has been paid in full by the customer and that the balances appearing in said documents are net and accurate and there are no contra-accounts, set-offs, or counterclaims whatsoever against said amounts; that the payment thereof is not contingent or conditioned on the fulfillment of any contract, condition or warranty, past or future, express or implied; that it has absolute and good title to such contracts and the personalties covered thereby and the right to sell and transfer the same in favor of [Citytrust]; and that said contracts and personalties have not been previously sold, discounted, assigned or pledged to any other party nor will [World Cars] sell, assign, discount or pledge the same hereafter;x x x
6. In the event that it shall at any time appear that an installment paper which [Citytrust] purchased from [World Cars] do not conform to the warranties under this Agreement or to the qualifications given in paragraph 5, [Citytrust] shall reassign, and [World Cars] repurchase, the installment paper(s) and the latter shall pay [Citytrust] the unpaid balance of the account less any unearned service charges within ten (10) days from [World Car's] receipt of notice of reassignment. Said notice will contain a statement of the amount payable by [World Cars] as aforesaid. No tender or presentation of the paper reassigned shall be necessary.x x x (Emphasis and underscoring supplied)
By Decision[38] dated January 12, 1999, Branch 77 of the Quezon City RTC found Perez to be an agent of World Cars, hence, an extension of its personality as far as the sale of the car to the Aguilars was concerned.
- Whether or not [the Aguilars] have duly paid the purchase price of the car, and if so, whether or not [they] can still be held liable to pay under the promissory note and the chattel mortgage.
- Whether or not [Citytrust and World Cars] are liable to [the Aguilars] for damages and if so, how much.
- Whether or not [the Aguilars] have fully paid the balance installment price of the [car] which was purchased from [World Cars].
- Whether or not [the Aguilars] are entitled to the damages prayed for in the complaint.
- Whether or not [Citytrust] is entitled to the cross-claim prayed for against [World Cars].
- Whether or not [the Aguilars] are still liable for their unpaid obligations to [Citytrust].
- Whether or not [World Cars] is liable to pay the unpaid obligations of [the Aguilars] if the latter will be able to prove that they already fully paid the price of the subject car.
- Who among the parties is entitled to damages and attorney's fees, and if so, how much?
Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.The trial court thus disposed:
WHEREFORE, premises considered, judgment is hereby rendered:Citytrust appealed to the Court of Appeals on the following assigned errors:
- Finding [spouses Aguilar] to have fully paid the purchase price of the 1992 Nissan California car, which they bought from Worlds Cars, Inc. on May 30, 1992, through its agent, Joselito Perez;
- Annulling the Promissory Note (Exhibit "D"), the Chattel Mortgage (Exhibit "D-1"), the conforme in the undated Letter-Notice of Assignment of defendant World Cars, Inc., (Exhibit "D-2"), and the Disclosure Statement Loan/Credit Transaction (Exhibit "D-3"), for being void as they are simulated contracts, thereby releasing [spouses Aguilar] from any liability arising from these documents;
- Ordering [Citytrust and World Cars] to pay, jointly and severally, to [spouses Aguilar] the following sums: P500,000.00 as moral damages; P100,000.00 as exemplary damages; P50,000.00 as attorney'es fees' and P20,000.00 as litigation expenses;
- Dismissing the counterclaims and cross-claims of World Cars, Inc. and Citytrust Finance Corporation; and
- Directing the [Citytrust and World Cars] to pay the costs of suit.
World Cars appealed too, contending that the trial court erred in:I.
THE COURT A QUO COMMITTED SERIOUS ERRORS OF FACT AND OF LAW IN NOT HOLDING THAT [SPOUSES AGUILAR] ARE LIABLE TO [CITYTRUST] FOR THE PAYMENT OF THE PROMISSORY NOTE (PN) (EXH. "I") AND ARE BOUND BY THE TERMS AND CONDITIONS OF SAID PN AND CHATTEL MORTGAGE (EXH. "2").II.
THAT ASSUMING, THAT SPOUSES AGUILAR ARE NOT LIABLE ON THE PROMISSORY NOTE, THE COURT A QUO COMMITTED SERIOUS ERRORS OF FACT AND OF LAW IN NOT HOLDING THAT WORLD CARS IS LIABLE TO CITYTRUST AS GENERAL ENDORSER OF THE PROMISSORY NOTE AND FOR VIOLATION OF ITS WARRANTY UNDER THE RECEIVABLES FINANCING AGREEMENT (RFA).III.
THE COURT A QUO, COMMITTED SERIOUS ERRORS IN FACT AND IN LAW WHEN IT ADJUDGED CITYTRUST JOINTLY AND SEVERALLY LIABLE TO [SPOUSES AGUILAR].[39] (Emphasis supplied)
By Decision[41] of December 5, 2002, the appellate court modified that of the trial court, the dispositive portion of which reads verbatim:I.
. . . HOLDING WORLD CARS, INC., LIABLE FOR THE PERSONAL ACTIONS OR ACTIONS BEYOND THE SCOPE OF AUTHORITY OF ITS SALES AGENT JOSELITO PEREZ.II.
. . . HOLDING THAT THE SALE IS A CASH SALE AND NOT AN INSTALLMENT SALE AS EVIDENCED BY THE PROMISSORY NOTE AND CHATTEL MORTGAGE EXECUTED BY [SPOUSES AGUILAR] IN FAVOR OF [WORLD CARS] AND ASSIGNED TO [CITYTRUST].III.
. . . AWARDING DAMAGES TO [SPOUSES AGUILAR].[40]
WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED to read as follows:Hence, the present separate petitions of the Aguilars and World Cars.
1. Ordering [the Aguilars] to pay Citytrust the amount of P252,486.58 representing the unpaid balance of the promissory note.
2. Ordering [World Cars] to pay [the Aguilars] the following amount, to wit:(a) P252,486.58 representing the unpaid balance of the promissory note which [spouses Aguilar] were heretofore ordered to pay Citytrust;3. Ordering [World Cars] to pay [Citytrust] the following amount, to wit:
(b) P500,000.00 as moral damages; P100,000.00 as exemplary damages; P50,000.00 as attorney's fees; and P20,000.00 as litigation expenses.a) Penalty charges based on P252,486.58 at the rate of 5% per month from date of default until fully paid;
b) P50,000.00 as attorney's fees and appearance fee of P500.00 per hearing.
c) P50,000.00 as liquidated damages, cost of suit and other litigation expenses. (Underscoring supplied)
On the other hand, World Cars contend that:A.
. . . GIVING LEGAL EFFECT TO THE PROMISSORY NOTE (PN) AND ITS DERIVATIVE INSTRUMENTS WHEN IT RULED THE SAME NULL AND VOID SINCE IT IS NOT REALLY DESIRED OR INTENDED TO PRODUCE LEGAL EFFECT.B.
. . . RULING [CITYTRUST] A HOLDER IN DUE COURSE CONTRARY TO EVIDENCE ON RECORD.C.
. . . RULING [SPOUSES AGUILAR] LIABLE ON THE PN CONTRARY TO EVIDENCE ON RECORD.D.
. . . RULING [CITYTRUST NOT JOINTLY AND SEVERALLY LIABLE WITH WORLD CARS FOR DAMAGES AND ATTORNEY'S FEES CONTRARY TO EVIDENCE ON RECORD.[42] (Underscoring supplied)
A. THE ASSAILED DECISIONS OF THE HONORABLE COURT OF APPEALS ARE CONTRARY TO LAW AND PREVAILING JURISPRUDENCE.Clearly, Perez was the agent of World Cars and was duly authorized to accept payment for the car. Josephine's testimony that before issuing the checks in the name of Perez, she verified from his supervisor and the latter confirmed Perez' authority to receive payment remains unrefuted by World Cars. In fact, World Cars admitted in its Answer with Counterclaim that "[w]hat was actually paid [by the Aguilars] and received by [it] was [Josephine's] check in the amount of P148,000.00 as downpayment for the said car."[44] Parenthetically, as earlier stated, when Josephine spoke to World Cars' Vice President Domondon, the latter informed her that the last payment had not been received.[45] This information of Domondon does not jibe with the claim of World Cars that it received only Josephine's first check in the amount of P148,000.00 as downpayment.
B. CONSIDERING THAT THE ASSAILED DECISIONS OF THE HONORABLE COURT OF APPEALS ARE CONTRARY TO LAW AND PREVAILING JURISPRUDENCE THE AWARDS OF MORAL DAMAGES AGAINST WORLD CARS, INC. ARE ALSO CONTRARY TO LAW.
C. LIKEWISE, THE AWARDS OF EXEMPLARY DAMAGES, ATTORNEY'S FEES AND APPEARANCE FEES, LITIGATION EXPENSES AND THE COST OF SUIT AGAINST [WORLD CARS] ARE ALSO CONTRARY TO LAW.[43] (Underscoring supplied)
ARTICLE 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. (Emphasis supplied)As no right against the Aguilars was acquired by World Cars under the promissory note and chattel mortgage, it had nothing to assign to Citytrust. Consequently, Citytrust cannot enforce the instruments against the Aguilars, for an assignee cannot acquire greater rights than those pertaining to the assignor.[46]
ARTICLE 1626. The debtor who, before having knowledge of the assignment, pays his creditor, shall be released from the obligation.While Citytrust cannot enforce the instruments against the Aguilars, since under the RFA, specifically paragraph 5(a) thereof, World Cars guaranteed as follows:
5. As further warranties, [World Cars] hereby agrees and shall be bound by the following:Citytrust's allegations in its Crossclaim against World Cars Inc., to wit:
a. World Cars guarantees to [Citytrust] its successors, and assigns, that it has full right and legal authority to make the assignment or discounting; that the installment papers so discounted by virtue of this agreement, are subsisting, valid, enforceable and in all respects what they purport to be; that the papers contain the entire agreement between the customers and [World Cars]; x x x that it has absolute and good title to such contracts and the personalties covered thereby and the right to sell and transfer the same in favor of [Citytrust]; x x x (Emphasis and underscoring supplied),
are well-taken.x x x
6. That under the terms and conditions of the RFA, upon violation of the dealer's warranties and undertakings, defendant Citytrust Finance Corporation is entitled to recourse the discounted/assigned installments papers to the former;
7. That assuming that plaintiff's complaint is correct, defendant World Cars, Inc., appears to have violated the terms and conditions of the RFA it executed with Citytrust Finance Corporation;
Moreover, if it is proven that said plaintiffs have already paid the amount on said promissory note, then defendant World Cars Inc. would appear to have received twice the considerations thereof because it likewise received the proceeds of discounting thereof, from defendant Citytrust at the time said note was endorsed and assigned thus, unjustly enriching itself;x x x
9. Assuming that plaintiffs' claims are proven to be true and that defendant World Cars, Inc. violated its warranties and undertakings to the defendant Citytrust, defendant World Cars, Inc. should likewise be made liable to herein defendant Citytrust for all the unpaid obligations arising from said promissory note above alleged, plus damages and attorney's fees as maybe proven during the trial.[47] (Emphasis and underscoring supplied),
(a) CitytrustCosts against petitioner, World Cars, Inc.(1) whatever unpaid obligation due to it arising from the assignment of the promissory note;(b) spouses Aguilar
(2) P50,000.00 as attorney's fees and P500.00 per hearing; and
(3) P50,000.00 as liquidated damages, cost of suit and other litigation expenses.(1) P500,000.00 as moral damages;
(2) P100,000.00 as exemplary damages;
(3) P50,000.00 as attorney's fees; and
(4) P20,000.00 as litigation expenses.
ARTICLE 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:[50] Paragraph (2) of Article 2208 of the Civil Code provides that there is basis to award attorney's fees and expenses of litigation, other than judicial costs, when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.
(1) When exemplary damages are awarded;x x x
ARTICLE 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.x x x
ARTICLE 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. (Emphasis supplied)