29 Licaros v. Gatmaitan
29 Licaros v. Gatmaitan
29 Licaros v. Gatmaitan
SYNOPSIS
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.
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
1980's. After having invested in Anglo-Asean, he encountered tremendous and unexplained
di culties in retrieving, not only the interest or pro ts, but also the very investments he
had put in Anglo-Asean. He decided to seek the counsel of Antonio P. Gatmaitan, a
reputable banker and investment manager who had been extending managerial, nancial
and investment consultancy services to various rms and corporations both here and
abroad. Gatmaitan voluntarily offered to assume the payment of Anglo-Asean's
indebtedness to Licaros subject to certain terms and conditions. In order to effectuate
and formalize the parties' respective commitments, the two executed a notarized
memorandum of agreement. Thereafter, Gatmaitan presented to Anglo-Asean the said
memorandum of agreement for the purpose of collecting Licaros' placement thereat. No
formal response was ever made by said bank to either Licaros or Gatmaitan. Evidently,
because of his inability to collect from Anglo-Asean, Gatmaitan 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, Licaros,
thru counsel, addressed successive demand letters to Gatmaitan; demanding payment of
the latter's obligations under the promissory note. Gatmaitan, however, did not accede to
these demands. Licaros led a complaint in the Regional Trial Court of Makati and prayed
that Gatmaitan should pay him the principal obligation, attorney's fees, and legal interest.
After trial on the merits, the court a quo rendered judgment in favor of petitioner Licaros.
Respondent Gatmaitan appealed the trial court's decision to the Court of Appeals. In a
decision promulgated on February 10, 2000, the appellate court reversed the decision of
the trial court and held that respondent Gatmaitan did not at any point become obligated
to pay to petitioner Licaros the amount stated in the promissory note. The Court of
Appeals also denied petitioner's Motion for Reconsideration. Hence this petition for
review. The threshold issue for the determination of the Supreme Court is whether the
memorandum of agreement between petitioner and respondent was one of assignment of
credit or one of conventional subrogation.
The Supreme Court agreed with the nding of the Court of Appeals that the
Memorandum of Agreement was in the nature of a conventional subrogation which
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requires the consent of the debtor, Anglo-Asean Bank, for its validity. The Memorandum of
Agreement never came into effect due to the failure of the parties to get the consent of
Anglo-Asean Bank and, as such, respondent never became liable for the amount stipulated
therein. The absence of such conformity by Anglo-Asean Bank prevented the
Memorandum of Agreement from becoming valid and effective. Accordingly, the Court of
Appeals did not err when it ruled that the Memorandum of Agreement was never
perfected. The Supreme Court denied the petition and affirmed the decision of the Court of
Appeals.
SYLLABUS
DECISION
GONZAGA-REYES , J : p
This is a petition for review on certiorari under Rule 45 of the Rules of Court. The
petition seeks to reverse and set aside the Decision 1 dated February 10, 2000 of the Court
of Appeals and its Resolution 2 dated April 7, 2000 denying petitioner's Motion for
Reconsideration thereto. The appellate court decision reversed the Decision 3 dated
November 11, 1997 of the Regional Trial Court of Makati, Branch 145 in Civil Case No. 96-
1211.
The facts of the case, as stated in the Decision of the Court of Appeals dated
February 10, 2000, are as follows:
"The Anglo-Asean Bank and Trust Limited (Anglo-Asean, for brevity), 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 pro table capital ventures in
Hongkong, Europe and the United States for the purpose of maximizing the
returns on those investments.
Confronted with the dire prospect of not getting back any of his
investments, Licaros then decided to seek the counsel of Antonio P. Gatmaitan, a
reputable banker and investment manager who had been extending managerial,
nancial and investment consultancy services to various rms and corporations
both here and abroad. To Licaros' relief, Gatmaitan was only too willing enough
to help. Gatmaitan voluntarily offered to assume the payment of Anglo-Asean's
indebtedness to Licaros subject to certain terms and conditions. In order to
effectuate and formalize the parties' respective commitments, the two executed a
notarized MEMORANDUM OF AGREEMENT on July 29, 1988 (Exh. "B"; also
Exhibit "1"), the full text of which reads:
'Memorandum of Agreement
WITNESSETH THAT:
WHEREAS, ANGLO-ASEAN BANK & TRUST , a company incorporated
by the Republic of Vanuatu, hereinafter referred to as the OFFSHORE
BANK, is indebted to the PARTY OF THE FIRST PART in the amount of US
dollars; ONE HUNDRED FIFTY THOUSAND ONLY (US$150,000) which debt
is now due and demandable.
Sgd. Sgd.
ABELARDO B. LICAROS ANTONIO P. GATMAITAN
PARTY OF THE FIRST PART PARTY OF THE FIRST PART
P3,150,000.
On or before July 15, 1993, I promise to pay to Abelardo B. Licaros
the sum of Philippine Pesos 3,150,000 (P3,150,000) without interest as
material consideration for the full settlement of his money claims from
ANGLO-ASEAN BANK, referred to in the Memorandum of Agreement as the
'OFFSHORE BANK'.
As security for the payment of this Promissory Note, I hereby
ASSIGN, CEDE and TRANSFER, Seventy Percent (70%) of ALL CASH
DIVIDENDS, that may be due or owing to me as the registered owner of
________________ (________) shares of stock in the Prudential Life Realty, Inc.
This assignment shall likewise include SEVENTY PERCENT (70%)
of cash dividends that may be declared by Prudential Life Realty, Inc. and
due or owing to Prudential Life Plan, Inc., of which I am a stockholder, to
the extent of or in proportion to my aforesaid shareholding in Prudential
Life Plan, Inc., the latter being the holding company of Prudential Life
Realty, Inc.
In the event that I decide to sell or transfer my aforesaid shares in
either or both the Prudential Life Plan, Inc. or Prudential Life Realty, Inc.
and the Promissory Note remains unpaid or outstanding, I hereby give Mr.
Abelardo B. Licaros the first option to buy the said shares. SEDICa
Manila, Philippines
July ____, 1988
(SGD.)
Antonio P. Gatmaitan
7 Mangyan St., La Vista, QC
After trial on the merits, the court a quo rendered judgment in favor of petitioner
Licaros and found respondent Gatmaitan liable under the Memorandum of Agreement and
Promissory Note for P3,150,000.00 plus 12% interest per annum from July 16, 1993 until
the amount is fully paid. Respondent was likewise ordered to pay attorney's fees of
P200,000.00. 5
Respondent Gatmaitan appealed the trial court's decision to the Court of Appeals. In
a decision promulgated on February 10, 2000, the appellate court reversed the decision of
the trial court and held that respondent Gatmaitan did not at any point become obligated
to pay to petitioner Licaros the amount stated in the promissory note. In a Resolution
dated April 7, 2000, the Court of Appeals denied petitioner's Motion for Reconsideration of
its February 10, 2000 Decision.
Hence this petition for review on certiorari where petitioner prays for the reversal of
the February 10, 2000 Decision of the Court of Appeals and the reinstatement of the
November 11, 1997 decision of the Regional Trial Court. EIDTAa
The threshold issue for the determination of this Court is whether the Memorandum
of Agreement between petitioner and respondent is one of assignment of credit or one of
conventional subrogation. This matter is determinative of whether or not respondent
became liable to petitioner under the promissory note considering that its e cacy is
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dependent on the Memorandum of Agreement, the note being merely an annex to the said
memorandum. 6
An assignment of credit has been de ned 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. 7
On the other hand, subrogation has been de ned 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. 8
The general tenor of the foregoing de nitions of the terms "subrogation" and
"assignment of credit" may make it seem that they are one and the same which they are
not. A noted expert in civil law notes their distinctions thus:
"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 creditor's right to another." 9
For our purposes, the crucial distinction deals with the necessity of the consent of
the debtor in the original transaction. In an assignment of credit, the consent of the debtor
is not necessary in order that the assignment may fully produce legal effects. 1 0 What the
law requires in an assignment of credit is not the consent of the debtor but merely notice
to him as the assignment takes effect only from the time he has knowledge thereof. 1 1 A
creditor may, therefore, validly assign his credit and its accessories without the debtor's
consent. 1 2 On the other hand, conventional subrogation requires an agreement among the
three parties concerned — the original creditor, the debtor, and the new creditor. It is a new
contractual relation based on the mutual agreement among all the necessary parties. Thus,
Article 1301 of the Civil Code explicitly states that "(C)onventional subrogation of a third
person requires the consent of the original parties and of the third person."
The trial court, in nding for the petitioner, ruled that the Memorandum of
Agreement was in the nature of an assignment of credit. As such, the court a quo held
respondent liable for the amount stated in the said agreement even if the parties thereto
failed to obtain the consent of Anglo-Asean Bank. On the other hand, the appellate court
held that the agreement was one of conventional subrogation which necessarily requires
the agreement of all the parties concerned. The Court of Appeals thus ruled that the
Memorandum of Agreement never came into effect due to the failure of the parties to get
the consent of Anglo-Asean Bank to the agreement and, as such, respondent never
became liable for the amount stipulated.
We agree with the nding of the Court of Appeals that the Memorandum of
Agreement dated July 29, 1988 was in the nature of a conventional subrogation which
requires the consent of the debtor, Anglo-Asean Bank, for its validity. We note with
approval the following pronouncement of the Court of Appeals:
"Immediately discernible from above is the common feature of contracts
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involving conventional subrogation, namely, the approval of the debtor to the
subrogation of a third person in place of the creditor. 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" (italics
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 appellee's 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 Anglo-Asean 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 (Rule 130, Section 12, Rules of Court). IAEcCT
Given our nding that the Memorandum of Agreement (Exh. "B"; also Exh.
"1"), is not one of "assignment of credit" but is actually a "conventional
subrogation", the next question that comes to mind is whether such agreement
was ever perfected at all. Needless to state, the perfection — or non-perfection —
of the subject agreement is of utmost relevance at this point. For, if the same
Memorandum of Agreement was actually perfected, then it cannot be denied that
Gatmaitan still has a subsisting commitment to pay Licaros on the basis of his
promissory note. If not, Licaros' suit for collection must necessarily fail.
Here, it bears stressing that the subject Memorandum of Agreement
expressly requires the consent of Anglo-Asean to the subrogation. Upon whom the
task of securing such consent devolves, be it on Licaros or Gatmaitan, is of no
signi cance. What counts most is the hard reality that there has been an abject
failure to get Anglo-Asean's nod of approval over Gatmaitan's being subrogated
in the place of Licaros. 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." 1 3
Aside for the "whereas clause" cited by the appellate court in its decision, we
likewise note that on the signature page, right under the place reserved for the signatures
of petitioner and respondent, there is, typewritten, the words "WITH OUR CONFORME."
Under this notation, the words "ANGLO-ASEAN BANK AND TRUST" were written by hand. 1 4
To our mind, this provision which contemplates the signed conformity of Anglo-Asean
Bank, taken together with the aforementioned preambulatory clause leads to the
conclusion that both parties intended that Anglo-Asean Bank should signify its agreement
and conformity to the contractual arrangement between petitioner and respondent. 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.
In this petition, petitioner assails the ruling of the Court of Appeals that what was
entered into by the parties was a conventional subrogation of petitioner's rights as
creditor of the Anglo-Asean Bank which necessarily requires the consent of the latter. In
support, petitioner alleges that: (1) the Memorandum of Agreement did not create a new
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obligation and, as such, the same cannot be a conventional subrogation; (2) the consent of
Anglo-Asean Bank was not necessary for the validity of the Memorandum of Agreement;
(3) assuming that such consent was necessary, respondent failed to secure the same as
was incumbent upon him; and (4) respondent himself admitted that the transaction was
one of assignment of credit.
Petitioner argues that the parties to the Memorandum of Agreement could not have
intended the same to be a conventional subrogation considering that no new obligation
was created. According to petitioner, the obligation of Anglo-Asean Bank to pay under
Contract No. 00193 was not extinguished and in fact, it was the basic intention of the
parties to the Memorandum of Agreement to enforce the same obligation of Anglo-Asean
Bank under its contract with petitioner. Considering that the old obligation of Anglo-Asean
Bank under Contract No. 00193 was never extinguished under the Memorandum of
Agreement, it is contended that the same could not be considered as a conventional
subrogation.
We are not persuaded.
It is true that conventional subrogation has the effect of extinguishing the old
obligation and giving rise to a new one. However, the extinguishment of the old obligation
is the effect of the establishment of a contract for conventional subrogation. It is not a
requisite without which a contract for conventional subrogation may not be created. As
such, it is not determinative of whether or not a contract of conventional subrogation was
constituted.
Moreover, it is of no moment that the subject of the Memorandum of Agreement
was the collection of the obligation of Anglo-Asean Bank to petitioner Licaros under
Contract No. 00193. Precisely, if conventional subrogation had taken place with the
consent of Anglo-Asean Bank to effect a change in the person of its creditor, there is
necessarily created a new obligation whereby Anglo-Asean Bank must now give payment
to its new creditor, herein respondent. aEcHCD
Petitioner next argues that the consent or conformity of Anglo-Asean Bank is not
necessary to the validity of the Memorandum of Agreement as the evidence on record
allegedly shows that it was never the intention of the parties thereto to treat the same as
one of conventional subrogation. He claims that the preambulatory clause requiring the
express conformity of third parties, which admittedly was Anglo-Asean Bank, is a mere
surplusage which is not necessary to the validity of the agreement.
As previously discussed, the intention of the parties to treat the Memorandum of
Agreement as embodying a conventional subrogation is shown not only by the "whereas
clause" but also by the signature space captioned "WITH OUR CONFORME" reserved for
the signature of a Anglo-Asean Bank. These provisions in the aforementioned
Memorandum of Agreement may not simply be disregarded or dismissed as superfluous.
It is a basic rule in the interpretation of contracts that "(t)he various stipulations of a
contract shall be interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly." 1 5 Moreover, under our Rules of Court, it is
mandated that "(i)n the construction of an instrument where there are several provisions or
particulars, such a construction is, if possible, to be adopted as will give effect to all." 1 6
Further, jurisprudence has laid down the rule that contracts should be so construed as to
harmonize and give effect to the different provisions thereof. 1 7
As to this argument regarding the party responsible for securing the conformity of
Anglo-Asean Bank, we fail to see how this question would have any relevance on the
outcome of this case. Having ruled that the consent of Anglo-Asean was necessary for the
validity of the Memorandum of Agreement, the determinative fact is that such consent was
not secured by either petitioner or respondent which consequently resulted in the invalidity
of the said memorandum.
With respect to the argument of petitioner that respondent himself allegedly
admitted in open court that an assignment of credit was intended, it is enough to say that
respondent apparently used the word "assignment" in his testimony in the general sense.
Respondent is not a lawyer and as such, he is not so well versed in law that he would be
able to distinguish between the concepts of conventional subrogation and of assignment
of credit. Moreover, even assuming that there was an admission on his part, such
admission is not conclusive on this court as the nature and interpretation of the
Memorandum of Agreement is a question of law which may not be the subject of
stipulations and admissions. 1 8
Considering the foregoing, it cannot then be said that the consent of the debtor
Anglo-Asean Bank is not necessary to the validity of the Memorandum of Agreement. As
above stated, the Memorandum of Agreement embodies a contract for conventional
subrogation and in such a case, the consent of the original parties and the third person is
required. 1 9 The absence of such conformity by Anglo-Asean Bank prevented the
Memorandum of Agreement from becoming valid and effective. Accordingly, the Court of
Appeals did not err when it ruled that the Memorandum of Agreement was never
perfected.
Having arrived at the above conclusion, the Court nds no need to discuss the other
issues raised by petitioner.
WHEREFORE, the instant petition is DENIED and the Decision of the Court of Appeals
dated February 10, 2000 and its Resolution dated April 7, 2000 are hereby AFFIRMED.
Melo, Vitug and Panganiban, JJ., concur.
Sandoval-Gutierrez, J., is on leave.
Footnotes
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1. Penned by Associate Justice Cancio Garcia and concurred in by Associate Justices
Romeo J. Callejo and Presbitero J. Velasco, Jr.; Rollo, pp. 38-53.
4. Court of Appeals Decision dated February 10, 2000, pp. 1-7; Rollo, pp. 39-45.
5. Rollo, p. 92.
6. Rollo, p. 78.
7. Rodriguez vs. Court of Appeals, 207 SCRA 533; Nyco Sales Corp. vs. BA Finance Corp.,
200 SCRA 637.
8. Chemphil Import and Export Corp. vs. Court of Appeals, 251 SCRA 257 citing Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume IV, pp.
401-402.
9. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 1991
Edition, Volume IV, p. 401.
10. Rodriguez vs. Court of Appeals, supra, citing Sison and Sison vs. Yap Tico and
Avancena, 37 Phil. 587.
11. Article 1626, New Civil Code.
12. National Investment and Development Co. vs. De los Angeles, 40 SCRA 489.
13. Court of Appeals Decision dated February 10, 2000, pp. 12-13; Rollo, pp. 50-51.
14. Rollo, p. 81.
15. Article 1374, New Civil Code; China Banking Corporation vs. Court of Appeals, 265
SCRA 327.
16. Section 11, Rule 130, Revised Rules of Court.
17. Phil-Am General Insurance vs. Court of Appeals, 114 SCRA 4; Reparations Commission
vs. Northern Lines, Inc., 34 SCRA 203.
18. PCI Automation Center vs. NLRC, 252 SCRA 493; Tabas vs. California Manufacturing
Corp., 169 SCRA 497.
19. Art. 1301, New Civil Code.