- Petitioner
- State Investment House
- Respondent
- Court of Appeals
- Citation
- G.R. No. 106795
- Court
- Supreme Court
- Division
- Third Division
- Ponente
- Gonzaga-Reyes, J.
- Decided
- November 16, 1999
Summary
State Investment House, Inc. (SIHI) sought to substitute its assignee Fil-Nippon as plaintiff in a mortgage foreclosure case against Cheng Ban Yek Co., Inc. Allied Banking Corporation opposed, citing its P50 million counterclaim against SIHI for alleged mismanagement while controlling CBY. The Supreme Court affirmed the Court of Appeals ruling that substitution was improper. The Court held that Allied's permissive counterclaim for damages from SIHI's personal acts of mismanagement was independent of the foreclosure action and could not be pursued against assignee Fil-Nippon without Allied's consent. Under Article 1293 of the Civil Code, substitution of debtor requires creditor's consent. SIHI must remain as party to defend the counterclaim as the real party-in-interest, with Fil-Nippon joining as co-plaintiff. The decision establishes that assignment of rights does not automatically discharge the assignor from independent counterclaims arising from personal acts.