Petitioners purchased a car from World Cars, Inc. at an agreed price of payable in 90 days and were being made to sign a promissory note, chattel mortgage, disclosures and other documents the dates of which were left blank and which showed that they would still be obliged to pay on installment in 12 months for the car if checks were not cleared. The chattel mortgage was executed in favor of World Cars which embodied a deed of assignment in favor of the respondent. Petitioner issued checks payable to a certain Joselito Perez, representative of World Cars, Inc. and World Cars, Inc. After some time, respondent contacted the petitioner about the latter’s overdue accounts. Petitioner filed a complaint for annulment of chattel mortgage plus damages against respondent and World Cars, Inc. in Quezon City RTC which ruled in favor of herein petitioner. The appellate court modified that of trial court giving effect to the promissory note and its derivative instruments.
Whether or not World Cars, Inc. is liable to pay the unpaid obligations of petitioners if the latter will be able to prove that they already fully paid the price of the subject car.
YES. Since the condition for the instruments to become effective was fulfilled, the obligation on the part of the [petitioners] to be bound thereby did not arise and World Cars did not thus acquire rights thereunder following Art. 1181 of the Civil Code. As no right against the [petitioner] was acquired by World Cars under the promissory note and chattel mortgage, it had nothing to assign to [respondent]. Consequently, [respondent] cannot enforce the instruments against the [petitioner], for an assignee cannot acquire greater rights than those pertaining to the assignor. World Cars, Inc. was ordered to pay the petitioner and the respondent relevant fees, damages and litigation expenses.