first united constructors v

8/9/2019 First United Constructors V

1/17

FIRST UNITED CONSTRUCTORS v.

BAYANIHANFacts:

Issue:

Held:

LICAROS v. GATMAITANFacts: 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 19!"s# As it

turned out, the grim outcome of Licaros" foray in overseas fund investment was not e$actly what he

envisioned it to be# %ore particularly, Licaros, after having invested in Anglo-Asean, encountered

tremendous and une$plained di&culties in retrieving, not only the interest or pro'ts, but even the very

investments he had put in Anglo-Asean#

(onfronted with the dire prospect of not getting back any of his investments, Licaros then decided to

seek the counsel of Antonio )# *atmaitan, a reputable banker and investment manager who had been

e$tending managerial, 'nancial and investment consultancy services to various 'rms and

corporations both here and abroad# +o Licaros" relief, *atmaitan was only too willing enough to

help# *atmaitan voluntarily oered to assume the payment of Anglo-Asean"s indebtedness to Licaros

subect to certain terms and conditions# .n order to eectuate and formali/e the parties" respective

commitments, the two e$ecuted a notari/ed %E%0A234% 0F A*EE%E2+ on 5uly 69, 19

HIGHLIGHTS OF THE MEMO OF

AGREEMENT:

(onformably with his undertaking under

paragraph 1 of the afore7uoted agreement,

*atmaitan e$ecuted in favor of Licaros a NON-

NEGOTIABLE ROMISSORY NOTE !ITH

ASSIGNMENT OF CASH DI"IDENDS8E$hs#

A:; also E$h# 6:


2/17

Held:+his matter is determinative of whether or not respondent became liable to petitioner under the

promissory note considering that its e&cacy is dependent on the %emorandum of Agreement, the note

being merely an anne$ to the said memorandum# @D

An ass#$%&e%t '( c)ed#t has been de'ned as t*e +)'cess '( t)a%s(e))#%$ t*e )#$*t '( t*e

ass#$%') t' t*e ass#$%ee ,*' ,'uld t*e% *ave t*e )#$*t t' +)'ceed a$a#%st t*e det'). T*e

ass#$%&e%t &a e d'%e $)atu#t'usl ') '%e)'usl/ #% ,*#c* case/ t*e ass#$%&e%t *as a%e0ect s#la) t' t*at '( a sale.123

0n the other hand, su)'$at#'%has been de'ned as t*e t)a%s(e) '( all t*e )#$*ts '( t*e c)ed#t')

t' a t*#)d +e)s'%/ ,*' sust#tutes *#& #% all *#s )#$*ts. It &a e#t*e) e le$al ')

c'%ve%t#'%al. Le$al su)'$at#'% #s t*at ,*#c* ta4es +lace ,#t*'ut a$)ee&e%t ut

'+e)at#'% '( la, ecause '( ce)ta#% acts. C'%ve%t#'%al su)'$at#'% #s t*at ,*#c* ta4es

+lace a$)ee&e%t '( +a)t#es.153

+he general tenor of the foregoing de'nitions of the terms 6su)'$at#'%7 a%d 6ass#$%&e%t '(

c)ed#t7 &a &a4e #t see& t*at t*e a)e '%e a%d t*e sa&e ,*#c* t*e a)e %'t. A %'ted

e8+e)t #% c#v#l la, %'tes t*e#) d#st#%ct#'%s t*us:

6U%de) 'u) C'de/ *',eve)/ c'%ve%t#'%al su)'$at#'% #s %'t #de%t#cal t' ass#$%&e%t '(

c)ed#t. I% t*e (')&e)/ t*e det')9s c'%se%t #s %ecessa) #% t*e latte) #t #s %'t

)e;u#)ed. Su)'$at#'% e8t#%$u#s*es t*e 'l#$at#'% a%d $#ves )#se t' a %e, '%e ass#$%&e%t

)e(e)s t' t*e sa&e )#$*t ,*#c* +asses ()'& '%e +e)s'% t' a%'t*e). T*e %ull#t '( a% 'ld

'l#$at#'% &a e cu)ed su)'$at#'%/ suc* t*at a %e, 'l#$at#'% ,#ll e +e)(ectl val#d

ut t*e %ull#t '( a% 'l#$at#'% #s %'t )e&ed#ed t*e ass#$%&e%t '( t*e c)ed#t')9s )#$*t t'

a%'t*e).71


3/17

det')/ A%$l'-Asea% Ba%4/ (') #ts val#d#t.e note with approval the following pronouncement of

the (ourt of AppealsH

6I&&ed#atel d#sce)%#le ()'& a've #s t*e c'&&'% (eatu)e '( c'%t)acts #%v'lv#%$

c'%ve%t#'%al su)'$at#'%/ %a&el/ t*e a++)'val '( t*e det') t' t*e su)'$at#'% '( a t*#)d

+e)s'% #% +lace '( t*e c)ed#t'). T*at Gat&a#ta% a%d L#ca)'s *ad #%te%ded t' t)eat t*e#)

a$)ee&e%t as '%e '( c'%ve%t#'%al su)'$at#'% #s +la#%l ')%e a st#+ulat#'% #% t*e#)Me&')a%du& '( A$)ee&e%t/ t' ,#t:

6!HEREAS/ t*e +a)t#es *e)e#% *ave c'&e t' a% a$)ee&e%t '% t*e %atu)e/ (')& a%d e8te%t

'( t*e#) &utual +)estat#'%s ,*#c* t*e %', )ec')d *e)e#% ,#t* t*e e8+)ess c'%(')t '(

t*e t*#)d +a)t#es c'%ce)%ed7 e&+*as#s su++l#ed/

,*#c* t*#)d +a)t #s adttedl A%$l'-Asea% Ba%4.

Had t*e #%te%t#'% ee% &e)el t' c'%(e) '% a++ella%t t*e status '( a &e)e 6ass#$%ee7 '(

a++ellee9s c)ed#t/ t*e)e #s s#&+l %' se%se (') t*e& t' *ave st#+ulated #% t*e#) a$)ee&e%t

t*at t*e sa&e #s c'%d#t#'%ed '% t*e 6e8+)ess c'%(')t7 t*e)et' '( A%$l'-Asea%

Ba%4. T*at t*e d#d s' '%l acce%tuates t*e#) #%te%t#'% t' t)eat t*e a$)ee&e%t as '%e '(c'%ve%t#'%al su)'$at#'%. A%d #t #s as#c #% t*e #%te)+)etat#'% '( c'%t)acts t*at t*e

#%te%t#'% '( t*e +a)t#es &ust e t*e '%e +u)sued Rule =>/ Sect#'% =?/ Rules '( C'u)t.

*iven our 'nding that the %emorandum of Agreement 8E$h# G:; also E$h# 1:


4/17

.n this petition, petitioner assails the ruling of the (ourt of Appeals that what was entered into by the

parties was a conventional subrogation of petitioner"s rights as creditor of the Anglo-Asean Gank which

necessarily re7uires the consent of the latter# .n support, petitioner alleges thatH 81< the %emorandum

of Agreement did not create a new obligation and, as such, the same cannot be a conventional

subrogation; 86< the consent of Anglo-Asean Gank was not necessary for the validity of the

%emorandum of Agreement; 8I< assuming that such consent was necessary, respondent failed to

secure the same as was incumbent upon him; and 8J< respondent himself admitted that thetransaction was one of assignment of credit#

)etitioner argues that the parties to the %emorandum 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 Gank to pay under (ontract 2o# !!19I was not e$tinguished

and in fact, it was the basic intention of the parties to the %emorandum of Agreement to enforce the

same obligation of Anglo-Asean Gank under its contract with petitioner# (onsidering that the old

obligation of Anglo-Asean Gank under (ontract 2o# !!19I was never e$tinguished under the

%emorandum of Agreement, it is contended that the same could not be considered as a conventional

subrogation#

e are not persuaded#

It #s t)ue t*at c'%ve%t#'%al su)'$at#'% *as t*e e0ect '( e8t#%$u#s*#%$ t*e 'ld 'l#$at#'%

a%d $#v#%$ )#se t' a %e, '%e. H',eve)/ t*e e8t#%$u#s*&e%t '( t*e 'ld 'l#$at#'% #s t*e

e0ect '( t*e estal#s*&e%t '( a c'%t)act (') c'%ve%t#'%al su)'$at#'%. It #s %'t a )e;u#s#te

,#t*'ut ,*#c* a c'%t)act (') c'%ve%t#'%al su)'$at#'% &a %'t e c)eated. As suc*/ #t #s

%'t dete)%at#ve '( ,*et*e) ') %'t a c'%t)act '( c'%ve%t#'%al su)'$at#'% ,as

c'%st#tuted.

M')e've)/ #t #s '( %' &'&e%t t*at t*e suect '( t*e Me&')a%du& '( A$)ee&e%t ,as t*e

c'llect#'% '( t*e 'l#$at#'% '( A%$l'-Asea% Ba%4 t' +et#t#'%e) L#ca)'s u%de) C'%t)act N'.

>>=


5/17

has laid down the rule that c'%t)acts s*'uld e s' c'%st)ued as t' *a)&'%#e a%d $#ve e0ect

t' t*e d#0e)e%t +)'v#s#'%s t*e)e'(.1=23

.n the case at bench, t*e Me&')a%du& '( A$)ee&e%t e&'d#es ce)ta#% +)'v#s#'%s t*at a)e

c'%s#ste%t ,#t* e#t*e) a c'%ve%t#'%al su)'$at#'% ') ass#$%&e%t '( c)ed#t. It *as %'t ee%

s*',% t*at a% clause ') +)'v#s#'% #% t*e Me&')a%du& '( A$)ee&e%t #s #%c'%s#ste%t ')

#%c'&+at#le ,#t* a c'%ve%t#'%al su)'$at#'%. O% t*e 't*e) *a%d/ t*e t,' c#ted +)'v#s#'%s)e;u#)#%$ c'%se%t '( t*e det') t' t*e &e&')a%du& #s #%c'%s#ste%t ,#t* a c'%t)act '(

ass#$%&e%t '( c)ed#t. T*us/ #( ,e ,e)e t' #%te)+)et t*e sa&e as '%e '( ass#$%&e%t '(

c)ed#t/ t*e% t*e a(')e&e%t#'%ed st#+ulat#'%s )e$a)d#%$ t*e c'%se%t '( A%$l'-Asea% Ba%4

,'uld e )e%de)ed #%ut#le a%d useless c'%s#de)#%$ t*at/ as +)ev#'usl d#scussed/ t*e

c'%se%t '( t*e det') #s %'t %ecessa) #% a% ass#$%&e%t '( c)ed#t.

)etitioner ne$t argues that assuming that the conformity of Anglo-Asean was necessary to the validity

of the %emorandum of Agreement, respondent only had himself to blame for the failure to secure such

conformity as was, allegedly, incumbent upon him under the memorandum#

As to this argument regarding the party responsible for securing the conformity of Anglo-Asean Gank,

we fail to see how this 7uestion would have any relevance on the outcome of this case . Hav#%$ )uled

t*at t*e c'%se%t '( A%$l'-Asea% ,as %ecessa) (') t*e val#d#t '( t*e Me&')a%du& '(

A$)ee&e%t/ t*e dete)%at#ve (act #s t*at suc* c'%se%t ,as %'t secu)ed e#t*e)

+et#t#'%e) ') )es+'%de%t ,*#c* c'%se;ue%tl )esulted #% t*e #%val#d#t '( t*e sa#d

&e&')a%du&.

ith 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# Res+'%de%t #s %'t a la,e) a%d as

suc*/ *e #s %'t s' ,ell ve)sed #% la, t*at *e ,'uld e ale t' d#st#%$u#s* et,ee% t*e

c'%ce+ts '( c'%ve%t#'%al su)'$at#'% a%d '( ass#$%&e%t '( c)ed#t. M')e've)/ eve%

assu%$ t*at t*e)e ,as a% adss#'% '% *#s +a)t/ suc* adss#'% #s %'t c'%clus#ve '% t*#s

c'u)t as t*e %atu)e a%d #%te)+)etat#'% '( t*e Me&')a%du& '( A$)ee&e%t #s a ;uest#'% '(

la, ,*#c* &a %'t e t*e suect '( st#+ulat#'%s a%d adss#'%s.1=53

(onsidering the foregoing, #t ca%%'t t*e% e sa#d t*at t*e c'%se%t '( t*e det') A%$l'-Asea%

Ba%4 #s %'t %ecessa) t' t*e val#d#t '( t*e Me&')a%du& '( A$)ee&e%t. As a've stated/

t*e Me&')a%du& '( A$)ee&e%t e&'d#es a c'%t)act (') c'%ve%t#'%al su)'$at#'% a%d #%

suc* a case/ t*e c'%se%t '( t*e ')#$#%al +a)t#es a%d t*e t*#)d +e)s'% #s )e;u#)ed. 1=


6/17

#%as&uc* as t*e l'a% *ad ee% +a#d 8 8 8 de esus &ea%s '( a c*ec4 dated =2 A+)#l

=


7/17

T*e 'ld c'%t)act &ust e e8t#%$u#s*ed.

T*e)e &ust e a val#d %e, c'%t)act.1=J3

2ovation may also be e8+)ess or #&+l#ed. .t is e8+)ess when the new obligation declares in

une7uivocal terms that the old obligation is e$tinguished# .t is #&+l#ed when the new obligation is

incompatible with the old one on every point# @1DT*etest '( #%c'&+at##l#t #s ,*et*e) t*e t,''l#$at#'%s ca% sta%d t'$et*e)/ eac* '%e ,#t* #ts ',% #%de+e%de%t e8#ste%ce.1=23

Applying the foregoing to the instant case, we hold that %' %'vat#'% t''4 +lace.

+he parties d#d %'t u%e;u#v'call decla)e that the old obligation had been e$tinguished by the

issuance and the acceptance of the check, or that the check would take the place of the note# +here is

%' #%c'&+at##l#tbetween the promissory note and the check# As the (A correctly observed, t*e

c*ec4 *ad ee% #ssued +)ec#sel t' a%s,e) (') t*e 'l#$at#'%. O% t*e '%e *a%d/ t*e %'te

ev#de%ces t*e l'a% 'l#$at#'% a%d '% t*e 't*e)/ t*e c*ec4 a%s,e)s (') #t. "e)#l/ t*e t,'

ca% sta%d t'$et*e).

Ne#t*e) c'uld t*e +a&e%t '( #%te)ests -- ,*#c*/ #% +et#t#'%e)9s v#e,/ als'c'%st#tutes %'vat#'%@1-- change the terms and conditions of the obligation# =uch payment was

already provided for in the promissory note and, like the check, was totally in accord with the terms

thereof#

Also unmeritorious is petitioner"s argument that the obligation was novated by the substitution of

debtors# I% ')de) t' c*a%$e t*e +e)s'% '( t*e det')/ t*e 'ld '%e &ust e e8+)essl

)eleased ()'& t*e 'l#$at#'%/ a%d t*e t*#)d +e)s'% ') %e, det') &ust assu&e

t*e (')&e)9s+lace #% t*e )elat#'%.1=3C'%se;ue%tl/ t*at ,*#c* a)#ses ()'& a +u)+')ted c*a%$e #% t*e +e)s'% '( t*e

det') &ust e clea) a%d e8+)ess.1?=3It #s t*us #%cu&e%t '% +et#t#'%e) t' s*', clea)l a%d

u%e;u#v'call t*at %'vat#'% *as #%deed ta4e% +lace.

.n the present case, +et#t#'%e) *as %'t s*',% t*at *e ,as e8+)essl )eleased ()'& t*e

'l#$at#'%/ t*at a t*#)d +e)s'% ,as sust#tuted #% *#s +lace/ ') t*at t*e '#%t

a%d s'l#da) 'l#$at#'% ,as ca%celled a%d sust#tuted t*e s'l#ta) u%de)ta4#%$ '( De

esus. +he (A aptly heldH

$ $ $# )lainti"s acceptance of the bum check did not result in substitution by de 5esus either, the

nature of the obligation being solidary due to the fact that the promissory note e$pressly declared that

the liability of appellants thereunder is oint and @solidary# easonH u%de) t*e la,/ a c)ed#t') &a

de&a%d +a&e%t ') +e)(')&a%ce ()'& '%e '( t*e s'l#da) det')s ') s'&e ') all '( t*e&

s#&ulta%e'usl/ a%d +a&e%t &ade '%e '( t*e& e8t#%$u#s*es t*e 'l#$at#'%. It

t*e)e(')e ('ll',s t*at #% case t*e c)ed#t') (a#ls t' c'llect ()'& '%e '( t*e s'l#da) det')s/

*e &a st#ll +)'ceed a$a#%st t*e 't*e) ') 't*e)s. 8 8 8 71??3

%oreover, it must be noted t*at (') %'vat#'% t' e val#d a%d le$al/ t*e la, )e;u#)es t*at t*e

c)ed#t') e8+)essl c'%se%t t' t*e sust#tut#'% '( a %e, det'). 1?3 S#%ce %'vat#'% #&+l#es a

,a#ve) '( t*e )#$*t t*e c)ed#t') *ad e(')e t*e %'vat#'%/ suc* ,a#ve) &ust e e8+)ess.1?3 It

ca%%'t e su++'sed/ ,#t*'ut clea) +)''(/ t*at t*e +)ese%t )es+'%de%t *as d'%e a,a ,#t*

*#s )#$*t t' e8act (ulll&e%t ()'& e#t*e) '( t*e s'l#da) det')s.1?J3

%ore important, De esus ,as %'t a t*#)d +e)s'% t' t*e 'l#$at#'%. F)'& t*e e$#%%#%$/ *e

,as a '#%t a%d s'l#da) 'l#$') '( t*e>>/>>> l'a% t*us/ *e ca% e )eleased ()'& #t '%l
http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn15http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn15http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/154127.htm#_ftn25


8/17

u+'% #ts e8t#%$u#s*&e%t. Res+'%de%t9s acce+ta%ce '( *#s c*ec4 d#d %'t c*a%$e t*e +e)s'%

'( t*e det')/ ecause a '#%t a%d s'l#da) 'l#$') #s )e;u#)ed t' +a t*e e%t#)et '( t*e

'l#$at#'%.

It &ust e %'ted t*at #% a s'l#da) 'l#$at#'%/ t*e c)ed#t') #s e%t#tled t' de&a%d t*e

sat#s(act#'% '( t*e ,*'le 'l#$at#'% ()'& a% ') all '( t*e det')s.1?K3It #s u+ t' t*e (')&e)

t' dete)%e a$a#%st ,*'& t' e%(')ce c'llect#'%.1?23

Hav#%$ &ade *#&sel( '#%tl a%dseve)all l#ale ,#t* De esus/ +et#t#'%e) #s t*e)e(')e l#ale1?53(') t*e e%t#)e 'l#$at#'%.1?


9/17

2ovation is never presumed,@JDand the animus novandi, whether totally or partially, must appear by

e$press agreement of the parties, or by their acts that are too clear and une7uivocal to be mistaken# @JK

T*e e8t#%$u#s*&e%t '( t*e 'ld 'l#$at#'% t*e %e, '%e #s a %ecessa) ele&e%t

'( %'vat#'% ,*#c* &a e e0ected e#t*e) e8+)essl ') #&+l#edl. 153T*e te)& e8+)essl

&ea%s t*at t*e c'%t)act#%$ +a)t#es #%c'%t)'ve)t#l d#scl'se t*at t*e#) 'ect #% e8ecut#%$

t*e %e, c'%t)act #s t' e8t#%$u#s* t*e 'ld '%e.1


10/17

6# .nterestH 1J per annum;

I# Failure to pay any of the installments would render the entire remaining balance due

and payable at the option of the holder of the notes;

J# .n case of udicial collection on the notes, the maker 8(GL.< and co-maker 8its president,

%r# 3ionisio 0# Llamas, 5r< were solidarily liable of attorney"s fees and e$penses of 6?of the amount due in addition to the costs of suit#

+he restructuring agreement, for its part, had the following provisionsH

BEEA=, (GL and LLA%A= admit their past due installment on the following promissory notesH

a# )2 2os# 1D to 6D 811 units das. !*e)e t*e +a)t#es t' t*e %e, 'l#$at#'% e8+)essl)ec'$%#e t*e c'%t#%u#%$ e8#ste%ce a%d val#d#t '( t*e 'ld '%e/ t*e)e ca% e %' %'vat#'%.@D1%oreover, this (ourt has ruled that a% a$)ee&e%t suse;ue%tl e8ecuted et,ee% a selle)

a%d a ue) t*at +)'v#ded (') a d#0e)e%t sc*edule a%d &a%%e) '( +a&e%t/ t' )est)uctu)e

t*e &'de '( +a&e%ts t*e ue) s' t*at #t c'uld settle #ts 'utsta%d#%$ 'l#$at#'% #%

s+#te '( #ts del#%;ue%c #% +a&e%t/ #s %'t ta%ta&'u%t t' %'vat#'%.1K?3

+he addition of other obligations likewise did not e$tinguish the promissory notes# .n Young v. CA@DI,

this (ourt ruled that ac*a%$e #% t*e #%c#de%tal ele&e%ts '(/ ') a% add#t#'% '( suc* ele&e%t t'/

a% 'l#$at#'%/ u%less 't*e),#se e8+)essed t*e +a)t#es ,#ll %'t )esult #% #ts

e8t#%$u#s*&e%t.

.n 'ne, t*e )est)uctu)#%$ a$)ee&e%t ca% sta%d t'$et*e) ,#t* t*e +)'ss') %'tes.

AUINTEY v. TIBONGFacts:

Issue:

Held: 4nder Article 16I18b< of the 2ew (ivil (ode, novation is enumerated as one of the ways by

which obligations are e$tinguished# 0bligations may be modi'ed by changing their obect or principal

creditor or by substituting the person of the debtor#DI+he burden to prove the defense that an
http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn60http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn61http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn62http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn63http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt63http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn60http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn61http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn62http://sc.judiciary.gov.ph/jurisprudence/2003/dec2003/147950.htm#_ftn63http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt63


13/17

obligation has been e$tinguished by novation falls on the debtor#DJ+he nature of novation was

e$tensively e$plained in Iloilo Traders Finance, Inc. v. eirs o! "#s. $scar "oriano, %r#,D?as followsH

2ovation may either be e$tinctive or modi'catory, much being dependent on the nature of the

change and the intention of the parties# E$tinctive novation is never presumed; there must be

an e$press intention to novate; in cases where it is implied, the acts of the parties must clearly

demonstrate their intent to dissolve the old obligation as the moving consideration for theemergence of the new one# .mplied novation necessitates that the incompatibility between the

old and new obligation be total on every point such that the old obligation is completely

superseded by the new one# +he test of incompatibility is whether they can stand together,

each one having an independent e$istence; if they cannot and are irreconciliable, the

subse7uent obligation would also e$tinguish the 'rst#

An e$tinctive novationwould thus have the twin eects of, 'rst, e$tinguishing an e$isting

obligation and, second, creating a new one in its stead# +his kind of novation presupposes a

conPuence of four essential re7uisitesH 81< a previous valid obligation; 86< an agreement of all

parties concerned to a new contract; 8I< the e$tinguishment of the old obligation; and 8J< the

birth of a valid new obligation# 2ovation is merely modi'catory where the change brought

about by any subse7uent agreement is merely incidental to the main obligation 8e#g#, a change

in interest rates or an e$tension of time to pay


14/17

e 'nd in this case that the (A correctly found that respondentsC obligation to pay the balance of their

account with petitioner was e$tinguished,#ro tanto, by the deeds of assignment of credit e$ecuted by

respondent Felicidad in favor of petitioner#

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the

assignor, by a legal cause, such as sale, dationin payment, e$change or donation, and without the

consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, whoac7uires the power to enforce it to the same e$tent as the assignor could enforce it against the

debtor#KI.t may be in the form of sale, but at times it may constitute a dationin payment, such as

when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit he has against

a third person#KJ

.n +da. de %a'me v. Court o! A##eals,K?the (ourt held that dacion en #agois the delivery and

transmission of ownership of a thing by the debtor to the creditor as an accepted e7uivalent of the

performance of the obligation# .t is a special mode of payment where the debtor oers another thing to

the creditor who accepts it as e7uivalent of payment of an outstanding debt# +he undertaking really

partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of

the debtor, payment for which is to be charged against the debtorCs obligation# As such, the essential

elements of a contract of sale, namely, consent, obect certain, and cause or consideration must be

present# .n its modern concept, what actually takes place in dacion en #agois an obective novation of

the obligation where the thing oered as an accepted e7uivalent of the performance of an obligation is

considered as the obect of the contract of sale, while the debt is considered as the purchase price# .n

any case, common consent is an essential prere7uisite, be it sale or novation, to have the eect of

totally e$tinguishing the debt or obligation#KD

+he re7uisites for dacion en #agoareH 81< there must be a performance of the prestation in lieu of

payment 8animo solvendi< which may consist in the delivery of a corporeal thing or a real right or a

credit against the third person; 86< there must be some dierence between the prestation due and that

which is given in substitution 8aliud #ro alio


15/17

assignee# +he law does not re7uire any formal notice to bind the debtor to the assignee, all that the

law re7uires is *noledgeof the assignment# Even if the debtor had not been noti'ed, but came to

know of the assignment by whatever means, the debtor is bound by it# .f the document of assignment

is public, it is evidence even against a third person of the facts which gave rise to its e$ecution and of

the date of the latter# +he transfer of the credit must therefore be held valid and eective from the

moment it is made to appear in such instrument, and third persons must recogni/e it as such, in view

of the authenticity of the document, which precludes all suspicion of fraud with respect to the date ofthe transfer or assignment of the credit#1

As gleaned from the deeds e$ecuted by respondent Felicidad relative to the accounts of her other

debtors, petitioner was authori/ed to collect the amounts of )D,!!!#!! from (abang, and )DI,D!!#!!

from (irilo# +hey obliged themselves to pay petitioner# espondent Felicidad, likewise, une7uivocably

declared that (abang and (irilo no longer had any obligation to her#

E7ually signi'cant is the fact that, since 199!, when respondent Felicidad e$ecuted the deeds,

petitioner no longer attempted to collect from respondents the balance of their accounts# .t was only in

1999, or after nine 89< years had elapsed that petitioner attempted to collect from respondents# .n the

meantime, petitioner had collected from respondentsC debtors the amount of )I!1,!!!#!!#

hile it is true that respondent Felicidad likewise authori/ed petitioner in the deeds to collect the

debtorsC accounts, and for the latter to pay the same directly, it cannot thereby be considered that

respondent merely authori/ed petitioner to collect the accounts of respondentsC debtors and for her to

apply her collections in partial payments of their accounts# .t bears stressing that petitioner, as

assignee, ac7uired all the rights and remedies passed by Felicidad, as assignee, at the time of the

assignment#6=uch rights and remedies include the right to collect her debtorsC obligations to her#

)etitioner cannot 'nd solace in the (ourtCs ruling in -agdalena states# .n that case, the (ourt ruled

that the mere fact that novation does not follow as a matter of course when the creditor receives a

guaranty or accepts payments from a third person who has agreed to assume the obligation when

there is no agreement that the 'rst debtor would be released from responsibility# +hus, the creditor can

still enforce the obligation against the original debtor#

.n the present case, petitioner and respondent Felicidad agreed that the amounts due from

respondentsC debtors were intended to Qmake good in partQ the account of respondents# (ase law is

that, an assignment will, ordinarily, be interpreted or construed in accordance with the rules of

construction governing contracts generally, the primary obect being always to ascertain and carry out

the intention of the parties# +his intention is to be derived from a consideration of the whole

instrument, all parts of which should be given eect, and is to be sought in the words and language

employed#I

.ndeed, the (ourt must not go beyond the rational scope of the words used in construing an

assignment, words should be construed according to their ordinary meaning, unless something in the

assignment indicates that they are being used in a special sense# =o, if the words are free from

ambiguity and e$pressed plainly the purpose of the instrument, there is no occasion for interpretation;but where necessary, words must be interpreted in the light of the particular subect matter# JAnd

surrounding circumstances may be considered in order to understand more perfectly the intention of

the parties# +hus, the obect to be accomplished through the assignment, and the relations and

conduct of the parties may be considered in construing the document#

Although it has been said that an ambiguous or uncertain assignment should be construed most

strictly against the assignor, the general rule is that any ambiguity or uncertainty in the meaning of an

assignment will be resolved against the party who prepared it; hence, if the assignment was prepared
http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt81http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt82http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt83http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt83http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt84http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt81http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt82http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt83http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html#fnt84


16/17

by the assignee, it will be construed most strictly against him or her# ?0ne who chooses the words by

which a right is given ought to be held to the strict interpretation of them, rather than the other who

only accepts them#D

(onsidering all the foregoing, we 'nd that respondents still have a balance on their account to

petitioner in the principal amount of )II,J1#!!, the dierence between their loan of )KKI,!!!#!!

less )??,D?9#!!, the payment of respondentsC other debtors amounting to )1!I,?!!#!!, andthe )?!,!!!#!! payment made by respondents#

RICARQE v. CAFacts:

Issue:

Held: )etitioner ne$t argues that in no way was )(.G subrogated to the rights of (alte$, considering

that he has no knowledge of the subrogation much less gave his consent to it# Alternatively, he posits

that if subrogation was proper, then the charges against him should be dismissed, the two

.nformations being Qdefective and void due to false allegations#Q

)etitioner was charged of the crime of estafa comple$ with falsi'cation document# .n estafa one of theessential elements Qto preudice of anotherQ as mandated by article I1? of the evise )enal (ode#

+he element of Qto the preudice of anotherQ being as essential element of the felony should be clearly

indicated and charged in the information with +4+B A23 LE*AL )E(.=.02#

+his is not so in the case of petitioner, the twin information 'led against him alleged the felony

committed Qto the damage and preudice of (alte$#Q +his allegation is 42+4E and FAL=E for there is

no 7uestion that as early as %arch 6J, 199 or +BEE 8I< L02* %02+B= before the twin information

were 'led on 5une 69, 199, the preudice party is already )(.Gank since the latter e-(redit the value

of the checks to (alte$ as early as %arch 6J, 199# I% e0ect/ assu%$ t*e)e #s val#d su)'$at#'%

as t*e suect dec#s#'% c'%cluded/ t*e su)'$at#'% t''4 +lace a% 'ccu))ed '% Ma)c* ?/

=


17/17

by operation of law because of certain acts#69 .nstances of legal subrogation are those provided in

Article 1I!6I!of the (ivil (ode# (onventional subrogation, on the other hand, is that which takes place

by agreement of the parties#=T*us/ +et#t#'%e)9s ac;u#esce%ce #s %'t %ecessa) (')

su)'$at#'% t' ta4e +lace ecause t*e #%sta%t case #s '%e '( le$al su)'$at#'% t*at 'ccu)s

'+e)at#'% '( la,/ a%d ,#t*'ut %eed '( t*e det')9s 4%',led$e.

(ontrary to petitioner"s asseverations, the case of )eople v# Ru (hai BoI6

relied upon by the appellatecourt is in point# +he (ourt declared M

e do not however, think that the 'scal erred in alleging that the commission of the crime resulted to

the preudice of m# B# Anderson S (o# .t is true that originally the .nternational Ganking (orporation

was the preudiced party, but m# B# Anderson S (o# compensated it for its loss and thus became

subrogated to all its rights against the defendant 8article 1I9, (ivil (ode

first united constructors v

Documents