Licarios V Gatmaitan

Case Digest Obligations and Contracts Dean Ulpiano Planes Sarmiento III
GOI vs. COURT OF APPEALS G.R. NO. L-27434 SEPTEMBER 23, 1986 FACTS: The three (3) haciendas known as San Sebastian, Sarria and Dulce Nombre de Maria situated in the Municipality of Bais, Negros Oriental, were originally owned by the Compania General de Tabacos de Filipinas [TABACALERA]. Sometime in 1949, the late Praxedes T. Villanueva, predecessor-in-interest of petitioners, negotiated with TABACALERA for the purchase of said haciendas. However, as he did not have sufficient funds to pay the price, Villanueva with the consent of TABACALERA, offered to sell Hacienda Sarria to one Santiago Villegas, who was later substituted by Joaquin Villegas. Allegedly because TABACALERA did not agree to the transaction between Villanueva and Villegas, without a guaranty private respondent Gaspar Vicente stood as guarantor, for Villegas in favor of TABACALERA. The guarantee was embodied in a document denominated as "Escritura de Traspaso de Cuenta." Villanueva contracted or promised to sell to the latter fields nos. 3, 4 and 13 of Hacienda Dulce Nombre de Maria for the sum of P13,807.00. This agreement was reduced to writing and signed by petitioner Genaro Goni as attorney-in-fact of Villanueva. Private respondent Vicente thereafter advised TABACALERA to debit from his account the amount of P13,807.00 as payment for the balance of the purchase price. However, as only the amount of P12,460.24 was actually needed to complete the purchase price, only the latter amount was debited from private respondent's account. The difference was supposedly paid by private respondent to Villanueva, but as no receipt evidencing such payment was presented in court, this fact was disputed by petitioners. Subsequent to the execution of the contract/promise to sell, Villanueva was able to raise funds by selling a property in Ayungon, Negros Oriental. He thus went to private respondent Vicente for the purpose of rescinding the contract/promise to sell However, as the amount of P12,460.24 had already been debited from private respondent's account, it was agreed that lots 4 and 13 of the Hacienda Dulce Nombre de Maria would merely be leased to private respondent Vicente for a period of five (5) years starting with crop-year 1950-51 at an annual rental of 15% of the gross income, said rent to be deducted from the money advanced by private respondent and any balance owing to Villanueva would be delivered by Vicente together with the lots at the end of the stipulated period of lease. On December 10, 1949, TABACALERA executed a formal deed of sale covering the three haciendas in favor of Villanueva. Fields Nos. 3, 4 and 13 of the Hacienda Dulce Nombre de Maria were thereafter registered in the name of Villanueva under TCT No. T-4780 of the Register of Deeds of Negros Oriental. The fields were likewise mortgaged by Villanueva to the Rehabilitation Finance Corporation (RFC), later transferred to the Philippine National Bank on
Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli
December P334,400.00.
16,
1955,
for
total
indebtedness
of
Meanwhile, Fields nos. 4 and 13 were delivered to Vicente after the 1949-1950 milling season in January and February, 1950. On June 17, 1950, Villanueva executed a "Documento de la Venta Definitive" in favor of Joaquin Villegas, covering Lot No. 314 of the Cadastral Survey of Bais with an area of 468,627 square meters, more or less. (Hacienda Sarria). A supplemental instrument was later executed by Villanueva in favor of Villegas to include in the sale of June 17, 1950 the sugar quota of the land. On November 12, 1951, Villanueva died and thereafter, intestate proceedings were instituted. However, the day before the intestate proceedings were ordered closed and the estate of the late Praxedes Villanueva delivered to his heirs, private respondent Vicente instituted an action for recovery of property and damages before the then Court of First Instance of Negros Oriental against petitioner Goi in his capacity as administrator of the intestate estate of Praxedes Villanueva. Vicente sought to recover field no. 3 of the Hacienda Dulce Nombre de Maria, basing his entitlement thereto on the contract/promise to sell executed by the late Praxedes Villanueva in his favor on October 24, 1949. ISSUE: Whether of not the written promise to sell was novated into a verbal agreement of lease HELD: Novation takes place when the object or principal condition of an obligation is changed or altered. In order, however, that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. "Novation is never presumed. It must be established that the old and the new contracts are incompatible in all points, or that the will to novate appear by express agreement of the parties or in acts of equivalent import. The novation of the written contract/promise to sell into a verbal agreement of lease was clearly and convincingly proven not only by the testimony of petitioner Goi, but likewise by the acts and conduct of the parties subsequent to the execution of the contract/promise to sell. Both the trial and appellate courts chose to believe in the contract/promise to sell rather than the lease agreement, simply because the former had been reduced to writing, while the latter was merely verbal. It must be observed, though, that the contract/promise to sell was signed by petitioner Goi as attorney-in-fact of the late Praxedes Villanueva, an indication, to our mind, that final arrangements were made by petitioner Goi in the absence of Villanueva. It was therefore natural for private respondent Vicente to have demanded that the agreement be in writing to erase any doubt of its binding effect upon Villanueva. On the other hand, the verbal
lease agreement was negotiated by and between Villanueva and private respondent Vicente themselves. Being close friends and relatives it can be safely assumed that they did not find it necessary to reduce the same into writing. Petitioners, having clearly and sufficiently shown that the contract/promise to sell was subsequently novated into a verbal lease agreement, it follows that they are entitled to a favorable decision on their counterclaim.
KWONG vs GARGANTOS G.R. NO. 152984 NOVEMBER 22, 2006 FACTS: Petitioner William G. Kwong is the owner of fifteen (15) lots located in the province of Pampanga. In an unnotarized Deed of Conditional Sale, petitioner, for himself and in behalf of William G. Kwong Management, sold said lots to respondents Anacleto Gargantos, Remy Santos and Lorna Arceo for the sum of $137,255.00 payable in two installments, with $10,000.00 being paid by respondents at the time of the execution of the contract, and the balance of $127,255.00 to be paid on or before December 15, 1986. When respondents failed to pay the balance on the expected date, it was subsequently agreed that the same shall be paid on a staggered basis starting March 1989. Respondents, however, again failed to comply with their obligation. This compelled petitioner to write a letter of demand, through counsel, on November 16, 1989, asking respondents compliance with th eir monetary obligation; otherwise, the contract shall be rescinded. The letter was addressed to respondent Gargantos. There being no reply, another letter of demand dated February 21, 1990 was sent. On May 1, 1990, Atty. Ramon Gargantos (brother of respondent Anacleto Gargantos), armed with a Special Power of Attorney executed by respondents, paid the amount of P1,776,200.00.[ Thereafter, petitioner and Atty. Gargantos executed a notarized Deed of Absolute Sale, wherein petitioner sold to respondent Gargantos 11 out of the 15 lots for the sum of P500,000.00, and Atty. Gargantos signed a Promissory Note for the payment of the amount of P373,074.95, on or before June 30, 1990, representing the unpaid balance of the purchase covering the remaining four lots. Again, respondent Gargantos failed to pay the agreed amount, forcing petitioner to write subsequent demand letters on November 12, 1990, November 10, 1994, October 15, 1995, and July 29, 1996. Respondent Gargantos, through counsel, finally answered, claiming that it was petitioner who did not comply with his undertaking to transfer 11 of the 15 titles to respondents prior to the payment of the balance, with the remaining four titles to be transferred afterwards. Petitioner then wrote respondents on September 15, 1996 asking for a conference in order to settle the matter. In a letter dated November 12, 1996, respondent Gargantoss counsel reiterated his demand for the delivery of the 11 titles, failing which a complaint for specific performance with damages and a criminal case for estafa will be filed against petitioner. On November 14, 1996, petitioner filed before the Regional Trial Court (RTC) of Angeles City, Branch 62, a complaint for the rescission of the Deed of Conditional Sale and forfeiture of all the payments made by respondents against herein respondents.
ISSUE: Whether or not the said deed of conditional sale has been superseded or novated by the subsequent execution of the deed of absolute sale dated May 1, 1990. HELD: Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. Under Article 1292 of the Civil Code, in order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. The parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. In the absence of an express agreement, novation takes place only when the old and the new obligations are incompatible on every point. The test of incompatibility between two obligations or contracts is whether or not they can stand together, each one having an independent existence. If they cannot, they are incompatible, and the later obligation novates the first. In this case, an examination of the Deed of Absolute Sale and the Promissory Note, as well as the surrounding circumstances of this case, shows that it was meant to novate and replace the Deed of Conditional Sale. Logically, the Deed of Conditional Sale and the Deed of Absolute Sale cannot co-exist as these are of different nature and provide for separate and distinct obligations. It is well-settled that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control; however, if the contract appears to be contrary to the evident intentions of the parties, the latter shall prevail over the former. Moreover, the agreement of the parties may be embodied in only one contract or in two or more separate writings. In such event, the writings of the parties should be read and interpreted together in such a way as to render their intention effective.
FORTUNE MOTORS (PHILS.) CORPORATION vs. THE HONORABLE COURT OF APPEALS G.R. NO. 112191 FEBRUARY 7, 1997 FACTS: On or about August 4, 1981, Joseph L. G. Chua and Petitioner Edgar Lee Rodrigueza (Petitioner Rodrigueza) each executed an undated Surety Undertaking whereunder they absolutely, unconditionally and solidarily guarantee(d) to Respondent Filinvest Credit Corporation (Respondent Filinvest) and its affiliated and subsidiary companies the full, faithful and prompt performance, payment and discharge of any and all obligations and agreements of Fortune Motors (Phils.) Corporation (Petitioner Fortune) under or with respect to any and all such contracts and any and all other agreements (whether by way of guaranty or otherwise) of the latter with Filinvest and its affiliated and subsidiary companies now in force or hereafter made. The following year or on April 5, 1982, Petitioner Fortune, Respondent Filinvest and Canlubang Automotive Resources Corporation (CARCO) entered into an Automotive Wholesale Financing Agreement (Financing Agreement) under which CARCO will deliver motor vehicles to Fortune for the purpose of resale in the latters ordinary course of business; Fortune, in turn, will execute trust receipts over said vehicles and accept drafts drawn by CARCO, which will discount the same together with the trust receipts and invoices and assign them in favor of Respondent Filinvest, which will pay the motor vehicles for Fortune. Under the same agreement, Petitioner Fortune, as trustee of the motor vehicles, was to report and remit proceeds of any sale for cash or on terms to Respondent Filinvest immediately without necessity of demand. Subsequently, several motor vehicles were delivered by CARCO to Fortune, and trust receipts covered by demand drafts and deeds of assignment were executed in favor of Respondent Filinvest. However, when the demand drafts matured, not all the proceeds of the vehicles which Petitioner Fortune had sold were remitted to Respondent Filinvest. Fortune likewise failed to turn over to Filinvest several unsold motor vehicles covered by the trust receipts. Thus, Filinvest through counsel, sent a demand letter dated December 12, 1983 to Fortune for the payment of its unsettled account in the amount of P1,302,811.00. Filinvest sent similar demand letters separately to Chua and Rodrigueza as sureties. Despite said demands, the amount was not paid. Hence, Filinvest filed in the Regional Trial Court of Manila a complaint for a sum of money with preliminary attachment against Fortune, Chua and Rodrigueza. In an order dated September 26, 1984, the trial court declared that there was no factual issue to be resolved except for the correct balance of defendants account with Filinvest as agreed upon by the parties during pre-trial. Subsequently, Filinvest presented testimonial and documentary evidence. Defendants (petitioners herein), instead of presenting their evidence, filed a Motion for Judgment on Demurrer to Evidence anchored principally on the ground
that the Surety Undertakings were null and void because, at the time they were executed, there was no principal obligation existing. The trial court denied the motion and scheduled the case for reception of defendants evidence. On two scheduled dates, however, defendants failed to present their evidence, prompting the court to deem them to have waived their right to present evidence. On December 17, 1985, the trial court rendered its decision earlier cited ordering Fortune, Chua and Rodrigueza to pay Filinvest, jointly and severally, the sum of P1,348,033.83 plus interest at the rate of P922.53 per day from April 1, 1985 until fully paid, P50,000.00 in attorneys fees, anotherP50,000.00 in liquidated damages and costs of suit. ISSUE: Whether or not there was a novation. HELD: There are only two ways to effect novation and thereby extinguish an obligation. First, novation must be explicitly stated and declared in unequivocal terms. Novation is never presumed. Second, the old and new obligations must be incompatible on every point. The test of incompatibility is whether the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible and the latter obligation novates the first. Novation must be established either by the express terms of the new agreement or by the acts of the parties clearly demonstrating the intent to dissolve the old obligation as a consideration for the emergence of the new one. The will to novate, whether totally or partially, must appear by express agreement of the parties, or by their acts which are too clear and unequivocal to be mistaken. Under the surety undertakings however, the obligation of the sureties referred to absolutely, unconditionally and solidarily guaranteeing the full, faithful and prompt performance, payment and discharge of all obligations of Petitioner Fortune with respect to any and all contracts and other agreements with Respondent Filinvest in force at that time or thereafter made. There were no qualifications, conditions or reservations stated therein as to the extent of the suretyship. The Financing Agreement, on the other hand, merely detailed the obligations of Fortune to CARCO (succeeded by Filinvest as assignee). The allegation of novation by petitioners is, therefore, misplaced. There is no incompatibility of obligations to speak of in the two contracts. They can stand together without conflict.
ESPINA vs. COURT OF APPEALS G.R. NO. 116805 JUNE 22, 2000 FACTS: Mario S. Espina is the registered owner of a Condominium Unit No. 403, Victoria Valley Condominium, Valley Golf Subdivision, Antipolo, Rizal. On November 29, 1991, Mario S. Espina, the private respondent as seller, and Rene G. Diaz, the petitioner as buyer, executed a Provisional Deed of Sale, whereby the former sold to the latter the aforesaid condominium unit for the amount of P100,000.00 to be paid upon the execution of the contract and the balance to be paid through PCI Bank postdated checks . Subsequently, in a letter dated January 22, 1992, petitioner informed private respondent that his checking account with PCI Bank has been closed and a new checking account with the same drawee bank is opened for practical purposes. The letter further stated that the postdated checks issued will be replaced with new ones in the same drawee bank. On January 25, 1992, petitioner through Ms. Socorro Diaz, wife of petitioner, paid private respondent Mario Espina P200,000.00, acknowledged by him as partial payment for the condominium unit subject of this controversy. On July 26, 1992, private respondent sent petitioner a "Notice of Cancellation" of the Provisional Deed of Sale. However, despite the Notice of Cancellation from private respondent, the latter accepted payment from petitioner per Metrobank Check No. 395694 dated and encashed on October 28, 1992 in the amount of P 100,000.00. On February 24, 1993, private respondent filed a complaint docketed as Civil Case No. 2104 for Unlawful Detainer against petitioner before the Municipal Trial Court of Antipolo, Branch 1. ISSUE: Whether or not the provisional deed of sale novated the existing contract of lease and that petitioner had no cause of action for ejectment against respondent Diaz. HELD: The novation must be clearly proved since its existence is not presumed. "In this light, novation is never presumed; it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between old and new obligations or contracts." Novation takes place only if the parties expressly so provide. Otherwise, the original contract remains in force. In other words, the parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. Where there is no clear agreement to create a new contract in place of the existing one, novation cannot be presumed to take place, unless the terms of the new contract are fully incompatible with the former agreement on every point. Thus, a deed of cession of the right to repurchase a piece of land does not supersede a contract of lease over the same property.
Unless the application of payment is expressly indicated, the payment shall be applied to the obligation most onerous to the debtor. In this case, the unpaid rentals constituted the more onerous obligation of the respondent to petitioner.
PEOPLES BANK AND TRUST CO. vs. SYVELS INCORPORATED G.R. NO. L-29280 AUGUST 11, 1988 FACTS: A chattel mortgage was executed in favor of the plaintiff by the defendant Syvel's Incorporated on its stocks of goods, personal properties and other materials owned by it and located at its stores or warehouses. The chattel mortgage was duly registered in the corresponding registry of deeds of Manila and Pasay City. The chattel mortgage was in connection with a credit commercial line in the amount of P900,000.00 granted the said defendant corporation, the expiry date of which was May 20, 1966. On May 20, 1965, defendants Antonio V. Syyap and Angel Y. Syyap executed an undertaking in favor of the plaintiff whereby they both agreed to guarantee absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness to be incurred on account of the said credit line. Against the credit line granted the defendant Syvel's Incorporated the latter drew advances in the form of promissory notes. In view of the failure of the defendant corporation to make payment in accordance with the terms and conditions agreed upon in the Commercial Credit Agreement the plaintiff started to foreclose extrajudicially the chattel mortgage. However, because of an attempt to have the matter settled, the extra-judicial foreclosure was not pushed thru. As no payment had been paid, this case was even tually filed in this Court. On petition of the plaintiff based on the affidavits executed by Mr. Leopoldo R. Rivera, Assistant Vice President of the plaintiff bank and Atty. Eduardo J. Berenguer on January 12, 1967, to the effect, among others, that the defendants are disposing of their properties with intent to defraud their creditors, particularly the plaintiff herein, a preliminary writ of attachment was issued. As a consequence of the issuance of the writ of attachment, the defendants, in their answer to the complaint set up a compulsory counterclaim for damages. After the filing of this case in this court and during its pendency defendant Antonio v. Syyap proposed to have the case settled amicably and to that end a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of the Bank, plaintiff, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case because he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. De las Alas consented, and so the Real Estate Mortgage, marked as Exhibit A, was executed by the defendant Antonio V. Syyap and his wife Margarita Bengco Syyap on June 22, 1967. In that deed of mortgage, defendant Syyap admitted that as of June 16, 1967, the indebtedness of Syvel's Incorporated was P601,633.01, the breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. Complying with the promise of the plaintiff thru its Vice President to ask for the dismissal of this case, a motion to dismiss this case without prejudice was prepared,
Exhibit C, but the defendants did not want to agree if the dismissal would mean also the dismissal of their counterclaim Against the plaintiff. Hence, trial proceeded. ISSUE: Whether or not the obligation secured by the Chattel Mortgage sought to be foreclosed in the above-entitled case was novated by the subsequent execution between appellee and appellant Antonio V, Syyap of a real estate mortgage as additional collateral to the obligation secured by said chattel mortgage. HELD: Novation takes place when the object or principal condition of an obligation is changed or altered. It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect. In the case at bar, there is nothing in the Real Estate Mortgage which supports appellants'submission. The contract on its face does not show the existence of an explicit novation nor incompatibility on every point between the "old and the "new" agreements as the second contract evidently indicates that the same was executed as new additional security to the chattel mortgage previously entered into by the parties. Moreover, records show that in the real estate mortgage, appellants agreed that the chattel mortgage "shall remain in full force and shall not be impaired by this (real estate) mortgage." It is clear, therefore, that a novation was not intended. The real estate mortgage was evidently taken as additional security for the performance of the contract.
SERVICEWIDE SPECUALISTS, INC. VS INTERMEDIATE APPELLATE COURT G.R. NO. 74553 JUNE 8, 1989 FACTS: Galicano Siton, private respondent purchased Mitsubishi Celeste two door with air conditioning, Engine 2M-62799 with serial no. A73-2652. Siton paid the downpayment amounting to Php25,000 and executed a promissory note in favor of Car Traders Philippines with an agreement of monthly instalment of the remaining balance of Php68,000 starting on August 14, 1979, with interest and payment of the insurance premium. Aside from this, Siton secured the indebtedness through a Chattel Mortgage waiving his right of application of payment. On November 2, 1981, December 2, 1981 and January 2, 1982, Siton failed to pay the monthly instalments. Petitioner filed a collection of money against Siton. But according to Siton, the car was sold to a third party named, Justiniano de Dumo John Doe on November 24, 1979 claiming that the former is freed from the liability to Car Traders Philippines. ISSUE: Whether or not Sitons liability is extinguished through the occurrence of Atty. De Dumo as third party resulting to novation of the obligation. HELD: No. The occurrence of the third party, Atty. de Dumo doesnt results in novation. Novation is the substitution or change of an obligation by another, resulting in its extinguishment or modification, either by changing its object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order that the modification results into novation, the four requisites must be present. First, a previous valid obligation; second, agreement of the parties to the new obligation; third, extinguishment of the old obligation; and fourth, validity of the new obligation. In the case at bar, the sale of the motor vehicle to Atty. de Dumo by Siton doesnt falls within the enumerated requisites in order to have a valid novation. The absence of agreement of the parties between Siton and Car Traders Philippines with regards to the sale of the motor vehicle to Atty. de Dumo, is evidenced by the filing for the sum of money against Siton by CTP. This fact strongly shows that CTP is not consented to the sale of the motor vehicle to Atty. de Dumo. Hence, the old valid obligation is not extinguished and will not result to a validity of the new obligation. According to the Supreme Court. The nature of the obligation is basically based on the promissory note that Siton executed. Since the presence of third person doesnt releases Siton from liability and doesnt constitute a novation by substitution of the debtors under Article 1293 of the Civil Code. Likewise, the fact that petitioner company accepts payments from a third person who has assumed the obligation, will result merely to the addition of debtor and not novation. Therefore, the Court ruled in favor of the petitioner and ordering the respondents jointly to pay to petitioner the sum of the remaining balance.
INTERGRATED CONSTRUCTION SERVICES, INC. vs. RELOVA G.R. NO. L 41117 DECEMBER 29, 1986 FACTS: Petitioners sued the respondent MWSS formerly NAWASA, breach of contract. Meanwhile, the parties submitted the case to arbitration. The Arbitration Board, released the decision-award which ordered MWSS to pay petitioners P15,518,383.61 - less P2,329,433.41, to be set aside as a trust fund to pay creditors of the joint venture in connection with the project or a net award of P13,188,950.20 with interest. Subsequently, however, petitioners agreed to give MWSS some discounts in consideration of an early payment of the award. Upon MWSS' request, the petitioners signed their "Conforme" to the said letter-agreement, and extended the period to pay the judgment less the discounts. MWSS, however, paid only on December 22, 1972, the amount stated in the decision but less the reductions provided for in the letteragreement. Three years thereafter, after the last balance of the trust fund had been released and used to satisfy creditors' claims, the petitioners filed a motion for execution against MWSS for the balance due under the decision-award. Respondent MWSS opposed execution setting forth the defenses of payment and estoppels. ISSUE: Whether or not petitioners are now in estoppel to question the subsequent agreement, suffice it to state that petitioners never acknowledged full payment. HELD: No. Petitioners refused MWSS' request for a conforme or quitclaim. Accordingly, the award is still subject to execution by mere motion, which may be availed of as a matter of right any time within (5) years from entry of final judgment in accordance with Section 5, Rule 39 of the Rules of Court.
LICARIOS V GATMAITAN G.R. NO. 142838 AUGUST 9, 2001 FACTS: The Anglo-Asean Bank and Trust Limited (Anglo-Asean) is a private bank registered and organized to do business under the laws of the Republic of Vanuatu but not in the Philippines. Its business consists primarily in receiving fund placements by way of deposits from institutions and individual investors from different parts of the world and thereafter investing such deposits in money market placements and potentially profitable capital ventures in Hongkong, Europe and the United States for the purpose of maximizing the returns on those investments. Enticed by the lucrative prospects of doing business with Anglo-Asean, Abelardo Licaros, a Filipino businessman, decided to make a fund placement with said bank sometime in the 1980s. However, this overseas fund investment was not exactly what he envisioned it to be. He encountered difficulties in retrieving his interests/profits and even his very investment. Fearing that he might not get back nay of his investments, Licaros decided to seek the counsel of Antonio P. Gatmaitan who was a reputable banker and investment manager. He had been extending managerial, financial and investment consultancy services to various firms and corporations both here and abroad. - So willing to help, Gatmaitan voluntarily offered to assume the payment of Anglo-Aseans indebtedness to Licaros subject to certain terms and conditions. Gatmaitan In order to effectuate and formalize their respective commitments, they executed a notarized MEMORANDUM OF AGREEMENT on July 29,88 - In line w/ this agreement, Gatmaitan executed a NON-NEGOTIABLE PROMISSORY NOTE WITH ASSIGNMENT OF CASH DIVIDENDS in favor of Licaros. In the promissory note, Gatmatian promises to pay Abelardo an amount of P3,150,000 without interest as material consideration for the full settlement of his money claims from ANGLO-ASEAN BANK. As a security for the payment of this promissory note, he assinged 70% of all cash dividends from his shares of stock in the Prudential Life Realty, Inc. and Prudential Life Plan, Inc. Gatmaitan then tried to claim the S150,000 from Anglo-Asean. They said they will look into the matter but nothing was heard from the bank since. Because of Gatmaitans inability to collect, he did not bother anymore to make good his promise to pay Licaros the amount stated in his promissory note. Licaros, however, thought differently. He felt that he had a right to collect on the basis of the promissory note regardless of the outcome of Gatmaitan's recovery efforts. Thus, in July 1996, Licaros, thru counsel, addressed successive demand letters to Gatmaitan, demanding payment of the latters obligations under the promissory note. Gatmaitan, however, did not accede to these demands. Licaros then filed a complaint to the RTC. RTC ruled in favor of Licaros. But the appellate court reversed the decision, hence this petition. ISSUES: 1. Whether the memorandum of Agreement between petitioner and respondent is one of assignment of credit or one of conventional subrogation. 2. Whether or not such agreement (MOA) was perfected
HELD: 1. It is a conventional subrogation. That Gatmaitan and Licaros had intended to treat their agreement as one of conventional subrogation is plainly borne by a stipulation in their Memorandum of Agreement, to wit: WHEREAS, the parties herein have come to an agreement on the nature, form and extent of their mutual prestations which they now record herein with the express conformity of the third parties concerned (emphasis supplied), which third party is admittedly Anglo-Asean Bank. Had the intention been merely to confer on appellant the status of a mere assignee of appellees credit, there is simply no sense for them to have stipulated in their agreement that the same is conditioned on the express conformity thereto of AngloAsean Bank. That they did so only accentuates their intention to treat the agreement as one of conventional subrogation. And it is basic in the interpretation of contracts that the intention of the parties must be the one pursued 2. NO. The subject Memorandum of Agreement expressly requires the consent of Anglo-Asean to the subrogation and the two failed to obtain such. Doubtless, the absence of such conformity on the part of Anglo-Asean, which is thereby made a party to the same Memorandum of Agreement, prevented the agreement from becoming effective, much less from being a source of any cause of action for the signatories thereto. The fact that Anglo-Asean Bank did not give such consent rendered the agreement inoperative considering that, as previously discussed, the consent of the debtor is needed in the subrogation of a third person to the rights of a creditor. Assignment of credit has been defined as the process of transferring the right of the assignor to the assignee who would then have the right to proceed against the debtor. The assignment may be done gratuitously or onerously, in which case, the assignment has an effect similar to that of a sale. On the other hand, subrogation has been defined as the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts. Conventional subrogation is that which takes place by agreement of parties. Under our Code, however, conventional subrogation is not identical to assignment of credit. In the former, the debtors consent is necessary; in the latter it is not required. Subrogation extinguishes the obligation and gives rise to a new one; assignment refers to the same right which passes from one person to another. The nullity of an old obligation may be cured by subrogation, such that a new obligation will be perfectly valid; but the nullity of an obligation is not remedied by the assignment of the creditors right to another.

Licarios V Gatmaitan

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Licarios V Gatmaitan

Uploaded by

Copyright:

Available Formats

Case Digest Obligations and Contracts Dean Ulpiano Planes Sarmiento III

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

Digested by: Lopez, Stephanie / Pugao, Johnlery / Lucero, Janelle Winli

You might also like