G.R. No. 48113 - Ngo Tian Tek and Ngo Hay vs. Philippine Education Co., Inc.

Philippine Education Co., Inc. (plaintiff) initiated an action in the Court of First Instance of Manila seeking the recovery of P16,070.14, representing the unpaid cost of merchandise purchased.
The transactions involved merchandise purchased by Lee Guan Box Factory from the plaintiff and five other corporate entities, which had previously assigned their credits to the plaintiff.
The claim also included additional sums for attorney’s fees, interest, and costs.

In 1925, the Modern Box Factory was established at 603 Magdalena Street, Manila.

Originally owned by Ngo Hay; later, Ngo Tian Tek joined as a junior partner.
The Modern Box Factory dealt in paper and related merchandise and maintained credit relationships with the plaintiff and its assignors.

The Lee Guan Box Factory was established around 1930 under the management of Vicente Tan (alias Chan Sy).

It was represented by Ngo Hay’s statements as being a subsidiary of the Modern Box Factory.
Evidence showed that goods ordered under the name Lee Guan Box Factory were sometimes delivered to the Modern Box Factory, with payment transactions evidenced by checks signed by Ngo Hay or Ngo Tian Tek.

During credit negotiations, Ngo Hay made representations indicating that he was the principal owner of the Modern Box Factory and that the Lee Guan Box Factory was its subsidiary.
Testimony later revealed that Ngo Hay admitted to owning the Lee Guan Box Factory until 1934 and claimed to have sold it in January 1935 to Vicente Tan under a contract (Exhibit 7).
The referee found Exhibit 7 to be simulated (i.e., untrue), thus confirming that the creditor’s reliance on Ngo Hay’s representations was justified.

The plaintiff’s action included credits assigned by five other entities, which were critical to establishing the debt.
The assignment was contested on the argument that it was made solely for collection purposes rather than an absolute transfer.
The petitioner (the partnership of Ngo Tian Tek and Ngo Hay) questioned both the validity of the assignment and the sufficiency of Vicente Tan’s act, since he signed the contracts in his own name without explicit reference to the Modern Box Factory.
The Court of First Instance, upon agreement with the parties, rendered a judgment based on the referee’s report, which was subsequently affirmed by the Court of Appeals.

Whether the evidence substantiates that Lee Guan Box Factory was a subsidiary of the Modern Box Factory owned by Ngo Hay and Ngo Tian Tek.
Whether the representations made by Ngo Hay effectively induced the plaintiff to extend credit.

Whether the assignment of credits from the five other corporates to the plaintiff was valid and conferred sufficient legal standing to sue for recovery.
Whether the fact that the contracts were signed by Vicente Tan in his own name undermines the liability of the owners given the context of his role as a factor.

Whether the contract purporting the sale of Lee Guan Box Factory from Ngo Hay to Vicente Tan was bona fide or a simulated transaction intended to deflect liability.

Whether the writ of attachment issued at the commencement of the action was proper and justified by the evidentiary record.
Whether awarding damages for wrongful attachment was warranted based on the circumstances of the case.

Whether an assignment made “for purposes of collection” versus an absolute and bona fide assignment affects the right of the assignee (plaintiff) to sue in its own name.
Whether the debtor (or petitioner) may raise set-offs or defenses under section 114 of the Code of Civil Procedure despite the assignment.