LICAROS v GATMAITAN

FACTS:
Abelardo Licaros invested his money worth$150,000 with Anglo-Asean Bank, a
money market placement by way of deposit, based in the Republic of Venatu.
Unexpectedly, he had a hard time getting back his investments as well as the interest
earned. He then sought the counsel of Antonio Gatmaitan, a reputable banker and
investor. They entered into an agreement,where a non-negotiable promissory note was
to be executed in favor of Licaros worth $150,000, and that Gatmaitan would take over
the value of the investment made by Licaros with the Anglo-Asean Bank at the former's
expense. When Gatmaitan contacted the foreign bank, it said they will look into it, but it
didn't prosper. Because of the inability to collect,Gatmaitan did not bother to pay Licaros
the value of the promissory note. Licaros, however, believing that he had a right to
collect from Gatmaitan regardless of the outcome, demanded payment, but was ignore.
Licaros filed a complaint against Gatmaitan for the collection of the note. The trial court
ruled in favor of Licaros, but CA reversed.
ISSUE:
Whether the memorandum of agreement between petitioner and respondent is
one of assignment of credit or one of conventional subrogation
RULING:
It is a conventional subrogation. An assignment of credit has been defined as the
process of transferring the right of the assignor to the assignee who would then have a
right to proceed against the debtor. Consent of the debtor is not required is not
necessary to product its legal effects, since notice of the assignment would be enough.
On the other hand, subrogation of credit 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 requires
that all the related parties thereto,the original creditor, the new creditor and the
debtor,enter into a new agreement, requiring the consent of the debtor of such transfer
of rights. In the case at hand, it was clearly stipulated by the parties in the memorandum
of agreement that the express conformity of the third party (debtor) is needed. The
memorandum contains a space for the signature of the Anglo-Asean Bank written
therein "with our conforme". Without such signature, there was no transfer of rights. The
usage of the word "Assignment" was used as a general term, since Gatmaitan was not
a lawyer, and therefore was not well-versed with the language of the law.
[G.R. NO. 177120 : July 14, 2008]
PAUL T. IRAO, Petitioner, v. BY THE BAY, INC., Respondent.
DECISION
CARPIO MORALES, J.:

In 2002, the Estate of Doa Trinidad de Leon Roxas represented by Ruby Roxas as
lessor, respondent represented by Ronald M. Magbitang as lessee, forged a contract of
lease over a three-storey building at Roxas Boulevard, Pasay City, for a term of five (5)
years commencing on July 1, 2002 until June 30, 2007, for a monthly rental
of P200,000.00, to be increased annually by P50,000.00.5
It appears that in November 2003, respondent's restaurant business at the leased
premises was "closed down by the City Government."
Respondent defaulted in the payment of rentals. Despite demands to pay the amount,
respondent failed and refused to do so.
The lessor's counsel demanded, by letter 8 of January 16, 2004, the payment by
respondent of P2,517,333.36 within five (5) days from notice "otherwise the Contract of
Lease would be terminated without notice."
Respondent failed to heed the demand, however, drawing the lessor to terminate the
contract without notice, in accordance with Section 31 of the contract.
Subsequently or on February 4, 2004, the lessor executed a lease contract 11 over the
same property with petitioner, Paul T. Irao, effective February 1, 2004 until January 30,
2009. Paragraph 6 of this contract empowers petitioner to enter and take over the
possession of the leased premises.
Consequently, on or about February 6, 2004, petitioner entered and took possession of
the leased premises.
Respondent filed with the Metropolitan Trial Court (MeTC) a complaint 13 for forcible
entry with prayer for preliminary mandatory injunction and damages against petitioner
and all persons claiming rights under him.
In its complaint, respondent alleged that its lease contract had not been terminated
because the lessor's demand letter was merely a demand to pay the rental
arrears,without a notice to terminate the contract, hence, it "has the right to occupy the
leased premises until June 30, 2007," 15 the expiry date of the lease; and that, therefore,
petitioner's taking over the possession of the leased premises on February 6, 2004 was
illegal.
MeTC dismissed respondent's complaint, it holding that by respondent's failure to pay
monthly rentals, it "violated its contractual obligations and therefore come to Court with
unclean hands."
Regional Trial Court (RTC) affirmed the MeTC Decision. On appeal, CA granted the
petition.

ISSUE: WoN the lessor's demand letter to respondent contains a notice of termination
of the lease contract and a demand to vacate the leased premises to justify the taking
over of possession thereof by the lessor and/or its representative-herein petitioner
HELD:YES
The letter made it clear to respondent that the therein stated adverse consequences
would ensue "without further notice," an unmistakable warning to respondent that upon
its default, the lease contract would be deemed terminated and that its continued
possession of the leased premises would no longer be permitted.
The notice of impending termination was not something strange to respondent since it
merely implemented the stipulation in Section 31 of their contract that "if default or
breach be made of any of such covenants and conditions, then this lease, at the
discretion of the LESSOR, may be terminated and cancelled forthwith."
The appellate court's ruling that the lessor's letter did not demand respondent to vacate
is flawed. A notice or demand to vacate does not have to expressly use the word
"vacate," as it suffices that the demand letter puts the lessee or occupant on notice that
if he does not pay the rentals demanded or comply with the terms of the lease contract,
it should move out of the leased premises. 25
It bears reiteration that the demand letter priorly warned respondent that upon its default
the lease contract would not only be terminated, but the lessor would "take the
necessary legal measures against [respondent] to protect [its] interest, without further
notice" and "without resorting to court action" as stipulated in their lease contract. The
"necessary legal measures" are those expressly stipulated in Section 31 of the lease
contract.
Contractual stipulations empowering the lessor and/or his representative to repossess
the leased property extrajudicially from a deforciant lessee, as in the present case, have
been held to be valid.26 Being the law between the parties, they must be respected.
Respondent cannot thus feign ignorance that the repossession of the leased property
by the lessor and/or its representative-herein petitioner was the appropriate legal
measure it (respondent) itself authorized under their contract.chanrobles virtual law
library
G.R.

No.

182148:

June

8,

2011

SIME DARBY PILIPINAS, INC., Petitioner, v. GOODYEAR PHILIPPINES, INC. and

MACGRAPHICS CARRANZ INTERNATIONAL CORPORATION, Respondents.
MENDOZA,

J.:

FACTS:
Macgraphics owned several billboards across Metro Manila and other surrounding
municipalities, one of which was a 35 x 70 neon billboard located at the Magallanes
Interchange in Makati City.The Magallanes billboard was leased by Macgraphics to
Sime Darby in April 1994 at a monthly rental of P120,000.00. The lease had a term of
four years and was set to expire on March 30, 1998. Upon signing of the contract, Sime
Darby paid Macgraphics a total ofP1.2 million representing the ten-month deposit which
the latter would apply to the last ten months of the lease. Thereafter, Macgraphics
configured the Magallanes billboard to feature Sime Darby's name and logo.
On April 22, 1996, Sime Darby executed a Memorandum of Agreement[(MOA)with
Goodyear, whereby it agreed to sell its tire manufacturing plants and other assets to the
latter
for
a
total
ofP1.5
billion.
Just a day after, on April 23, 1996, Goodyear improved its offer to buy the assets of
Sime Darby from P1.5 billion toP1.65 billion. The increase of the purchase price was
made in consideration, among others, of the assignment by Sime Darby of the
receivables in connection with its billboard advertising in Makati City and Pulilan,
Bulacan.
On May 9, 1996, Sime Darby and Goodyear executed a deed entitled "Deed of
Assignment in connection with Microwave Communication Facility and in connection
with Billboard Advertising in Makati City and Pulilan, Bulacan"(Deed of
Assignment),through which Sime Darby assigned, among others, its leasehold rights
and deposits made to Macgraphics pursuant to its lease contract over the Magallanes
billboard.
Sime Darby then notified Macgraphics of the assignment of the Magallanes billboard in
favor
of
Goodyear
through
a
letter-notice
datedMay
3,
1996.
After submitting a new design for the Magallanes billboard to feature its name and logo,
Goodyear requested that Macgraphics submit its proposed quotation for the production
costs of the new design. In a letterdated June 21, 1996 Macgraphics informed
Goodyear that the monthly rental of the Magallanes billboard isP250,000.00 and
explained that the increase in rental was in consideration of the provisions and technical
aspects
of
the
submitted
design.
Goodyear replied on July 8, 1996 stating that due to budget constraints, it could not
accept Macgraphics offer to integrate the cost of changing the design to the monthly
rental. Goodyear stated that it intended to honor the P120,000.00 monthly rental rate
given by Macgraphics to Sime Darby. It then requested that Macgraphics send its

quotation for the simple background repainting and re-lettering of the neon tubing for the
Magallanes
billboard.
Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing the latter
that it could not give its consent to the assignment of lease to Goodyear. Macgraphics
explained that the transfer of Sime Darbys leasehold rights to Goodyear would
necessitate drastic changes to the design and the structure of the neon display of the
Magallanes billboard and would entail the commitment of manpower and resources that
it
did
not
foresee
at
the
inception
of
the
lease.
Attaching a copy of this letter to a correspondence dated July 15, 1996, Macgraphics
advised Goodyear that any advertising service it intended to get from them would have
to wait until after the expiration or valid pre-termination of the lease then existing with
Sime
Darby.
On September 23, 1996, due to Macgraphics refusal to honor the Deed of Assignment,
Goodyear sent Sime Darby a letter,via facsimile, demanding partial rescission of the
Deed of Assignment and the refund ofP1,239,000.00, the pro-rata value of Sime Darby's
leasehold
rights
over
the
Magallanes
billboard.
As Sime Darby refused to accede to Goodyears demand for partial rescission, the latter
commenced Civil Case No. 97-561 with the RTC. In its complaint, Goodyear alleged
that Sime Darby [1] was unable to deliver the object of the Deed of Assignment and [2]
was in breach of its warranty under Title VII, Section B, paragraph 2 of the MOA, stating
that "no consent of any third party with whom Sime Darby has a contractual relationship
is required in connection with the execution and delivery of the MOA, or the
consummation
of
the
transactions
contemplated
therein."
Including Macgraphics as an alternative defendant, Goodyear argued that should the
court find the partial rescission of the Deed of Assignment not proper, it must be
declared to have succeeded in the rights and interest of Sime Darby in the contract of
lease and Macgraphics be ordered to pay it the amount ofP1,239,000.00.
ISSUE:

Whether

partial

rescission

of

the

Deed

of

Assignment

is

proper.

HELD:
CIVIL

LAW

The petition of Sime Darby remains bereft of any merit. Article 1649 of the New Civil
Code
provides:
Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless

there

is

stipulation

to

the

contrary.

(n)

In an assignment of a lease, there is a novation by the substitution of the person of one

of the parties the lessee.The personality of the lessee, who dissociates from the lease,
disappears. Thereafter, a new juridical relation arises between the two persons who
remain the lessor and the assignee who is converted into the new lessee. The objective
of the law in prohibiting the assignment of the lease without the lessors consent is to
protect
the
owner
or
lessor
of
the
leased
property.
Broadly, a novation may either be extinctive or modificatory. It is extinctive when an old
obligation is terminated by the creation of a new obligation that takes the place of the
former; it is merely modificatory when the old obligation subsists to the extent it remains
compatible with the amendatory agreement. An extinctive novation results either by
changing the object or principal conditions (objective or real), or by substituting the
person of the debtor or subrogating a third person in the rights of the creditor (subjective
or personal). Under this mode, novation would have dual functions one to extinguish an
existing obligation, the other to substitute a new one in its place.This requires a conflux
of four essential requisites: (1) a previous valid obligation; (2) an agreement of all
parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4)
the
birth
of
a
valid
new
obligation.
While there is no dispute that the first requisite is present, the Court, after careful
consideration of the facts and the evidence on record, finds that the other requirements
of a valid novation are lacking.A review of the lease contract between Sime Darby and
Macgraphics discloses no stipulation that Sime Darby could assign the lease without the
consent
of
Macgraphics.
Moreover, contrary to the assertions of Sime Darby, the records are bereft of any
evidence that clearly shows that Macgraphics consented to the assignment of the lease.
As aptly found by the RTC and the CA, Macgraphics was never part of the negotiations
between Sime Darby and Goodyear.Neither did it give its conformity to the assignment
after
the
execution
of
the
Deed
of
Assignment.
The consent of the lessor to an assignment of lease may indeed be given expressly or
impliedly. It need not be given simultaneously with that of the lessee and of the
assignee. Neither is it required to be in any specific or particular form. It must, however,
be clearly given. In this case, it cannot be said that Macgraphics gave its implied
consent to the assignment of lease.