FABILLO V.

IAC

Juliana Fabillo, in her last will and testament dated Aug. 16, 1957, bequeathed to her brother,
Florencio, a house and lot in San Salvador, Palo, Leyte and to his husband Gregorio D. Brioso a piece of land in
Pugahanay, Palo, Leyte.

After Justinas death, Florencio filed a petition for the probate of said will.

Florencio sought the assistance of Atty. Alfredo M. Murillo in recovering the San Salvador property.

Florencio and Murillo entered into a contract, stipulating therein that Murillo shall represent Florencioin the
conclusion of the two cases, and in consideration of Murillos legal services, he shall be paid, in case of success 40%
of what he may acquire from the favorable judgment.
o
In case that the properties are sold, mortgaged or leased, Murillo shall be entitled to 40% of the purchase price,
proceeds of the mortgage, or rentals, respectively.

Pursuant to the said contract, Murillo filed a civil case against Gregorio D. Brioso to recover the SanSalvador
property. However, the case was terminated when the parties entered into a compromise agreement
declaring Florencio as the lawful owner of not only the San Salvador property but also of the parcel of land located
at Pugahanay.

As a result, Murillo proceeded to implement the contract of services between him and Florencio by taking
possession and exercising rights of ownership over 40% of said properties.

In 1966, Florencio claimed exclusive right of ownership over the two properties and refused to give to Murillo his
share of the properties.

Murillo filed in the CFI a complaint for ownership of the parcel of land.
ISSUE: WON THE CONTRACT OF SERVICES VIOLATED THE PROVISION OF ART. 1491, NCC.HELD:NO!
The contract of services did not violate Art. 1491, NCC.

The said prohibition applies only if the sale or assignment of the property takes place during
the pendency of the litigation involving the clients property.

Thus, the contract between the a lawyer and a client stipulating a contingent fee is not covered by said prohibition
under Art. 1491(5), CC because the payment of said fee is not made during the pendency of the litigation but only
after the judgment was rendered final.

As long as the lawyer did not exert undue influence on his client, that no fraud is committed
or implication applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for
contingent fee is valid and enforceable.

However, the Court disagrees that the contingent fee stipulated by the parties is 40% of the properties subject of
the litigation.
o
A careful scrutiny of the contract shows that the parties intended 40% of the
value
of the properties as Murillos contingent fee.
o
This is borne out by the stipulation that in case of success of any or both cases, Murillo shall be
paid the sum equivalent to 40% of whatever benefit Fasbillo would derive from favorable judgments.

Moreover, the herein contract was vague with respect to a situation wherein the properties are neither sold,
mortgaged nor leased because Murillo is allowed to have the option of occupying or leasing to any interested party
40% of the house and lot.
o
Had the parties intended that Murillo should be the lawful owner of 40% of the properties, it would have been
stipulated in the contract considering that the Fabillos would part with actual portions of their properties and cede
the same to Murillo.

The ambiguity of said provision should be resolved against Murillo as it was him who drafted the contract.
o
This is in consonance with the rule of interpretation that, in construing a contract of
professional services between a lawyer and a client, a construction as would be more favorable to the client should
be adopted even if it would prejudice the lawyer.

G.R. No. L-38120 June 27, 1988

FLAVIA SALATANDOL, assisted by her husband Jose Binondo, MANUELA SALATANDOL,
assisted by her husband Eliseo Repollo, FAUSTA SALATANDOL, assisted by her husband
Roberto Bacarra, DEMETRIO SALATANDOL, AGAPITO SALATANDOL, and GLICERIA
SALATANDOL, assisted by her husband Dioscoro Oca, plaintiffs-appellees,
vs.
CATALINA RETES defendant-appellant.
Victoriano B. De la Cruz for plaintiffs-appellees.
Lenin R. Victoriano for defendant-appellant.

PADILLA, J.:
This is an appeal interposed by the defendant from the decision

* of the Court of First Instance of Negros Oriental,

dated 31 May 1966, in Civil Case No. 4367, which allowed the plaintiffs, as co- owners, to exercise the right of legal pre-emption, provided
for in Art. 1623 of the Civil Code, and ordered the defendant to accept the pre-emption price, plus expenses of sale, to execute the
corresponding deed of conveyance or quitclaim in favor of the plaintiffs, to pay said plaintiffs the amount of P300.00 as attorney's fees, and to
pay the costs of suit.

The decision is based upon facts stipulated by the parties, which are as follows:
1. That the parties have agreed or admitted that the late EUFEMIA OMOLE was the
registered owner of one-third (1/3) share of Lot No. 513 of the Cadastral Survey of
Ayuquitan as evidenced by Original Certificate of Title No. O-V 9307;
2. That plaintiffs are likewise the registered owners of one-third (1/3) share of Id Lot
No. 513 of the Cadastral Survey of Ayuquitan and the co-owners of said Eufemia
Omole;
3. That on January 17,1965, EUFEMIA OMOLE sold her one-third (1/3) share of said
Lot No. 513 for P l,000.00 to defendant CATALINA RETES as evidenced by a Deed
of Sale ratified by Notary Public Gumersindo B. Silorio and entered in his Notarial

Register as Doc. No. 7; Page No. 49; Book No. II; Series of 1965 (Annex 'A' of the
complaint);
4. That on January l8, 1965 theRegister of Deeds or the Province of Negros Oriental
wrote to plaintiff Flavia Salatandol which letter was received on January 21, 1965
informing her about the document presented for registration affecting the one-third
(1/3) share of Lot No. 513 in favor of Defendant Catalina Salatandol to surrender the
owner's Duplicate Certificate of Title (bearing No. 0-V-9307 (Annex 'B');
5. That Plaintiffs were never notified by the late EUFEMIA OMOLE nor by Defendant
Catalina Retes about the proposed sale;
6. That on January 30, 1965, Plaintiffs wrote to Defendant CATALINA RETES
informing her of their desire to repurchase the said one-third (1/3) share of Lot No.
513 which the late Eufemia Omole sold to her and failing to get a favorable action
from Defendant Catalina Retes, Plaintiffs on February 5, 1965 deposited the amount
of Pl,000.00 with the Clerk of the Court of First Instance of Negros Oriental and who,
on February 13, 1965 wrote Defendant Catalina Retes informing the latter about the
deposit and of Plaintiffs' desire to exercise their right of pre-emption as co-owners of
Eufemia Omole (See Annexes 'c,' and 'D');
7. That when Defendant Catalina Retes failed to get the deposit with the Clerk of
Court, on February 16, 1965 (plaintiffs) filed the instant action for Legal Pre-emption;
8. That on February 22, 1965 while this case was still pending, Defendant Catalina
Retes resold the said one-third (1/3) share of Lot No. 513 back to EUFEMIA OMOLE
which sale is evidenced by a public instrument ratified by Notary Public Alfonso B.
Arrieta and entered in his Notarial Register as Doc. No. 234; Page 60; Book No. VIII;
Series of 1965;
9. That on March 11, 1965 Eufemia Omole donated the said one-third (1/3) share of
Lot No. 513 to Defendant Catalina Retes as evidenced by a Deed of Donation ratified
by Notary Public Alfonso B. Arrieta and entered in his Notarial Register as Doc. No.
258; Page No. 65; Book No. VIII; Series of 1965, a copy of which is hereto attached
and made integral parts hereof;
10. That Plaintiffs incurred the amount of P 500.00 as attorney's fees by reason of
this case and other legal expenses;
11. That both the Plaintiffs and Defendant have agreed that the foregoing facts are
admitted and shall require no further evidence to prove the same;
12. That Plaintiffs and Defendant have agreed that the Court shall consider the
foregoing facts in addition to the facts already admitted in the pleadings; and
13. That Plaintiffs and Defendant have agreed to submit this case for the decision of
this Court with the admission of the foregoing stipulation of facts. 1
In certifying this case to the Court, the Court of Appeals, to which the appeal was originally
addressed, found that the issue raised is one of law and is:

It is the posture of the appellant that under the provisions of Art. 1623 Civil Code 'the
right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the
case may be ... and since it is admitted that no notice was given to the appellees or
by the vendor, Eufemia Omole, no right of legal preemption accrued in favor of the
appellees. 2
The appeal is impressed with merit. In Butte vs. Manuel Uy and Sons, Inc., 3 the Court ruled that Art.
1623 of the Civil Code clearly and expressly prescribes that the thirty (30) days for making the preemption or redemption are to be counted from notice in writing by the vendor. The Court said:
... The text of Article 1623 clearly and expressly prescribes that the thirty days for
making the redemption are to be counted from notice in writing by the vendor. Under
the old law (Civil Code of 1889, Art. 1524), it was immaterial who gave the notice; so
long as the redeeming co-owner leamed of the alienation in favor of the stranger, the
redemption period began to run. It is thus apparent that the Philippine legislature in
Article 1623 deliberately selected a particular method of giving notice, and that
method must be deemed exclusive (39 Am. Jur., 237; Payne vs. State, 12 S.W. (2d)
528). As ruled in Wampler vs. Lecompte, 150 Atl. 458(aff'd in 76 Law Ed. [U.S.] 275)

Why these provisions were inserted in the statute we are not

informed, but we may assume until the contrary is shown, that a state
of facts in respect thereto existed, which warranted the legislature in
so legislating.'
The reasons for requiring that the notice should be given by the seller, and not by the
buyer, are easily divined. The seller of an undivided interest is in the best position to
know who are his co-owners that under the law must be notified of the sale. Also, the
notice by the seller removes all doubts as to fact of the sale, its perfection, and its
validity, the notice being a reaffirmation thereof; so that the party notified need not
entertain doubt that the seller may still contest the alienation. This assurance would
not exist if the notice should be given by the buyer.
In the case at bar, the plaintiffs have not been furnished any written notice of sale or a copy
thereof 4 by Eufemia Omole, the vendor. Said plaintiffs' right to exercise the legal right of preemption or
redemption, given to a co-owner when any one of the other co-owners sells his share in the thing owned
in common to a third person, as provided for in Article 1623 of the Civil Code, has not yet accrued. 5
But, even assuming ex gratia argurmenti, that the notice from the Register of Deeds of Negros
Oriental to co-plaintiff Flavia Salatandol of the document transferring the one-third (1/3) share of
Eufemia Omole to defendant, was equivalent to notice from the vendor, still, it appears that, while
the disputed one-third (1/3) portion of Eufemia Omole and the one-third (1/3) share of the plaintiffs,
(there is no mention of the other third portion) are embraced in one certificate of title, there had been
an actual partition of the land described in the certificate of title and each co-owner is in possession
of his respective share. This is deduced from the order of the trial court, dated 30 July 1966, where
the court restrained the parties from harvesting the nuts on the "and in question," 6referring to the
one-third (1/3) share of Eufemia Omole. As expressed in Article 484 of the Civil Code, a co-ownership
exists whenever the ownership of an undivided thing or right belongs to different persons. Under such
concept, a co-owner cannot point to a particular portion of the property owned in common as his own,
because his portion thereof is intangible rather than identifiable. Here, the portion of Eufemia Omole as
well as those of the plaintiffs had been identified and localized, so that co-ownership, in its real sense, no

longer exists. Hence, the right of redemption or pre-emption under Article 1620 of the Civil Code can no
longer be invoked by the plaintiffs over the portion appertaining to Eufemia Omole. 7

WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and another one
entered dismissing the complaint. Without costs. SO ORDERED

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 a 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.

G.R. No. L-30150 August 31, 1971

NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, petitioner,
vs.
HONORABLE WALFRIDO DE LOS ANGELES, in his capacity as Judge of the Court of First
Instance of Rizal, Branch IV (Quezon City), THE SPOUSES BASILISA ROQUE and
FRANCISCO BAUTISTA; LEONILA SANCHEZ and BENJAMIN N. BONUS; AURORA SANCHEZ
and BONIFACIO EUGENIO; CARMELITA SANCHEZ and FRANCISCO IGNACIO; BIENVENIDO
SANCHEZ, LEONARDO SANCHEZ, ROQUE VILLAGE SUBDIVISION and THE REGISTER OF
DEEDS OF QUEZON City, respondents.
Carreon, Taada and Taada for petitioner.
Eliseo M. Tenza and Nestor Fernandez, for private respondents.

CASTRO, J.:

By the instant petition for certiorari and mandamus with preliminary injunction, the petitioner National
Investment and Development Corporation (hereinafter referred to as the NIDC) impugns three
orders issued by the respondent Court of First Instance of Rizal in civil case Q-8407, namely, (1) an
order dated May 28, 1968 dismissing the appeal of the NIDC from that court's order dated March 31,
1967 which directed the cancellation of the annotation, on several certificates of title involved in the
said case, of the assignment of mortgage rights made by the Philippine Commercial and Industrial
Bank (hereinafter referred to as the PCIB), a defendant in the said civil case, in favor of the NIDC,
the respondent Judge stating that since the NIDC had not been properly substituted for PCIB and
latter had failed to perfect an appeal from the order of March 31, 1967, therefore, the appeal which
was taken by the NIDC was ineffective, and moreover filed out of time; (2) an order dated November
9, 1968 directing the NIDC to surrender to the Register of Deeds of Quezon City the certificates of
title over parcels of land involved in the said civil case which the lower court, in a judgment rendered
therein which had already become final and executory, ordered reconveyed to the herein private
respondents (the spouses Basilisa Roque and Francisco Bautista, Leonila Sanchez and Benjamin N.
Bonus, Aurora Sanchez and Bonifacio Eugenio, Carmelita Sanchez and Francisco Ignacio,
Bienvenido Sanchez, Leonardo Sanchez and Roque Village Subdivision), plaintiffs in the case
below, subject, however, to the mortgage executed in favor of the PCIB by the defendant therein,
Araceli W. Vda. de Del Rosario; and (3) an order dated January 27, 1969 declaring as cancelled and
null and void the certificates of title involved in the mentioned civil case which were then held by the
NIDC, for failure of the latter to comply with the respondent Judge's order of November 9, 1968
requiring the NIDC to surrender the said title certificates to the Register of Deeds of Quezon City. 1
The essential facts are undisputed.
Sometime in July, 1963 the private respondents herein sold several lots registered in their names to
Araceli W. Vda. de Del Rosario who, after securing registration of the said lots in her name,
mortgaged them to the PCIB. Del Rosario failed to complete payment of the purchase price agreed
upon, for which reason, on November 17, 1964, the herein private respondents filed a complaint
against her and the PCIB for reconveyance to them of the said lots or rescission of the contracts of
sale executed thereon and the cancellation of the mortgages held by the PCIB.
On January 25, 1965 the court a quo rendered summary judgment directing the rescission of the
contracts of sale adverted to above and the reconveyance of the lots in dispute covered by TCTs
70809, 70813, 70814 and 76401 to 76472. The rescission of the purchase contracts on the lots was,
however, declared to be without prejudice to the rights of the PCIB thereon which was adjudged as
mortgaged in good faith. The lower court reserved for a separate hearing the parties' respective
claims for damages.
This decision of the trial court was appealed to this Court by del Rosario in
L-24873. The appeal was, however, dismissed on September 23, 1966 because it was taken out of
time. No appeal was interposed by the private respondents herein with respect to the portion of the
lower court's decision in favor of the PCIB.
On June 16, 1965 the PCIB foreclosed its mortgage on the lots covered by TCTs 70809, 70813 and
70814. At the auction sale, it appeared as the highest bidder; on December 2, 1965 the certificate of
sale issued in its favor was duly registered.
On May 4, 1966 the PCIB assigned its mortgage rights over the lots covered by TCTs 70809, 70813,
70814 and 76401 to 76472 to the NIDC, as well as its rights as highest bidder for the lots covered by
the first three titles mentioned. This assignment was duly inscribed and annotated at the back of the
certificates of the title concerned on May 16, 1966.

On November 16, 1966 the private respondents filed with the trial court, in the same civil case Q8407, a motion to cancel time encumbrance held by the NIDC appearing at the back of TCTs 76401
to 76472 and 70809. The private respondents alleged in their motion that del Rosario had negotiated
a loan with the NIDC by virtue of which the latter assumed the payment of, and did pay, del Rosario's
mortgage indebtedness to the PCIB. For this reason, and for the further reason that there was no
privity of contract between them and del Rosario and the PCIB concerning the said indebtedness,
the private respondents maintained that the mortgage lien of the PCIB over the lots subject of their
motion was thereby discharged. They further argued that the mortgage lien has been extinguished
because when it assumed payment of the indebtedness of del Rosario to the PCIB, the NIDC was
aware of the respondents' claim over the lots in question which was annotated at the back of the
certificates of title in dispute. Lastly, the respondents contended that their claim is superior to that of
the NIDC under the provisions of articles 2242(2) and 2243 of the new Civil Code. The respondents
served a copy of this motion on the NIDC.
On November 19, 1966, at the hearing on the above motion, the NIDC, through counsel, having
been notified thereof, entered its appearance. The respondent Judge at the said hearing gave the
NIDC opportunity to file its written opposition to the motion.
On December 20, 1966 the NIDC filed its written opposition, claiming that it merely stepped into the
shoes of the PCIB as an assignee and that the private respondents must respect its rights as such
assignee in the same manner that they would respect the rights of the PCIB the adjudication
regarding which, it was alleged, had already long become final when they were acquired by the
NIDC, citing article 1625 of the new Civil Code.
On January 5, 1967 the private respondents filed a rejoinder to the above opposition, furnishing the
NIDC a copy of the same.
On March 31, 1967 the respondent Judge issued an order granting the private respondents' motion
to cancel the encumbrance of the NIDC from the certificates of title in dispute, reasoning as follows:
... There is no question that the deed of assignment in question is valid between the
defendant Bank and the National Investment & Development Corporation. But this
Court, however, is not inclined to sustain incumbrancer's view; first, it should have
submitted the deed of assignment for approval of the Court knowing that the subjectmatter of the said deed of assignment is in custodia legis, and so that the consent of
all the parties plaintiffs could be taken; second, the payment of the mortgage debt of
defendant Del Rosario by the National Investment & Development Corporation to the
PCI Bank extinguished the plaintiff's obligation to respect the mortgage lien of the
PCI Bank; and third, the NIDC could ask for reimbursement of its expenses and the
amount it has paid to the PCI Bank from defendant Del Rosario. Moreover, it is more
on equity and justice as well as in law that the incumbrancer should not enforce its
rights against the plaintiffs who, in the first place; were not benefited by the mortgage
debt incurred by defendant Del Rosario.
A copy of this order was, however, not furnished the NIDC, although the PCIB was served a copy
thereof.
On April 22, 1967 the respondent Judge issued another order directing the NIDC to surrender the
certificates of title in dispute to the Register of Deeds of Quezon City in order that its order of March
31, 1967 could be implemented. The NIDC filed a motion for reconsideration on the ground that the
issuance of the order was premature for it had not yet received a copy of the court's order of March
31, 1967. The private respondents opposed the said motion.

On September 19, 1967 the NIDC received a copy of the respondent court's order dated March 31,
1967. The NIDC then filed, on October 16, 1967, or 27 days from its receipt of the said order, a
motion for reconsideration thereof. On January 8, 1968 the NIDC received another order from the
respondent court dated December 29, 1967 denying its motion for reconsideration "for lack of merit."
On January, 9 1968 the NIDC filed with the court below a notice of appeal on "purely questions of
law" from the order of March 31, 1967 and an appeal bond; on January 11, 1968 it filed its record on
appeal.
On February 7, 1968 the private respondents filed with the lower court a motion to dismiss the
appeal of the NIDC stating (a) that the appeal was filed out of time since the PCIB did not appeal
from the appealed order and the NIDC had not been properly substituted for the PCIB as a party in
the case (citing section 20, Rule 3 of the Rules of Court and Oria Hermanos vs. Gutierrez
Hermanos, 52 Phil. 156 [1928] and Feltalino vs. Sanz , 44 Phil. [1923]); and (b) that the appeal is
frivolous and dilatory because the trial court's decision ordering reconveyance to the private
respondents of the lots in dispute by del Rosario had long become final and executory. The NIDC
opposed this motion, contending that it had acquired the necessary personality in civil case Q-8407
by virtue of the respondents' and the lower court's recognition thereof.
On May 28, 1968 the respondent Judge issued an order dismissing the appeal interposed by the
NIDC for reasons substantially identical to those adduced by the private respondents in their motion
to dismiss the appeal.
On July 3, 1968 the NIDC filed a motion for reconsideration of the dismissal of its appeal. This
motion was denied on December 18, 1968.
Meanwhile, on September 12, 1968, the NIDC received a copy of a petition of the private
respondents to declare TCTs 70809, 70813, 70814 and 76401 to 76472 null and void for failure of
the NIDC to surrender the certificates of title in question to the Register of Deeds of Quezon City "in
order that the deeds of reconveyance executed by the Clerk of Court and orders of this Honorable
Court may be given due course for registration ..."
The NIDC opposed this petition, alleging that to grant it will amount to enforcement of the lower
court's order of March 31, 1967 which had not yet become final and executory as the NIDC had
appealed within the prescribed period. It was also pointed out by the NIDC that its motion for
reconsideration of the order dismissing its appeal had not as yet been resolved.
On November 9, 1968 the respondent Judge issued another order requiring the NIDC to surrender
the certificates of title in dispute to the Register of Deeds of Quezon City within five days, otherwise
the said certificates would be declared null and void. The NIDC filed a motion for reconsideration of
this order on the ground that its motion for reconsideration of the order dismissing its appeal had not
up to that time been resolved.
On January 27, 1969, the NIDC received a copy of a "Manifestation" dated January 21, 1969
wherein the private respondents prayed for the cancellation of the mentioned certificates of title on
the ground that the NIDC had already received a copy of the order of the respondent Judge dated
December 18, 1968 denying the motion for reconsideration of the NIDC dated November 19, 1968. It
turned out, however (as explained by the NIDC in one of its pleadings filed with this Court), that
while the NIDC did receive on January 13, 1969 the said order dated December 18, 1968, the same
was overlooked because the copy of the said order sent by the respondent Judge was stapled
beneath two other orders also dated December 18, 1968. One of these orders which was stapled on
top of the others, was in connection with another case (civil case 10636) involving the same parties

herein. According to the NIDC, it was thought that the papers stapled beneath were mere copies of
the order in the said civil case. The third order, similarly dated, was an order denying the NIDC's
motion for reconsideration of the respondent Judge's order dismissing its appeal from the order of
March 31, 1967.
On January 30, 1969 the counsel of the NIDC went to the lower court to inquire if it had already
acted upon the said "Manifestation"; and there and then he was served a copy of an order dated
January 27, 1969, declaring TCTs 70809, 70813, 70814 and 76401 to 76472 null and void and
cancelled.
The submission of the parties for resolution by this Court involves mainly the question of whether the
petitioner has legal personality to appeal the order a quo dated March 31, 1967. If the answer be in
the affirmative, then the order of the respondent Judge dismissing the appeal and all subsequent
orders adverse to the petitioner will not avail the private respondents any.
We do not think, however, that this is the real issue that should first be resolved in order to bundle
properly the contending claims of the parties. Of basic crucial importance, in our opinion, is an
inquiry into, and resolution of, whether, in the first place, the lower court had jurisdiction to entertain
the motion of the private respondents that led to the issuance of the order of March 31, 1967.
Obviously, it will not be necessary to resolve the question posited by the parties if, from the facts
which the instant petition opened for inquiry by this Court, it will be determined that the lower court
was devoid of jurisdiction to take cognizance of the mentioned motion of the private respondents.
After a painstaking study of the matter, we reach the view and we so hold that the respondent
Judge's assumption of jurisdiction over the private respondents' motion that led to the order of March
31, 1967 dismissing the appeal of the NIDC, is completely devoid of legal authority. The judgment of
the court a quo in civil case Q-8407, on the matter of the recognition of the mortgage rights of the
PCIB over the lots in question, had already become final and executory when the said bank
assigned its rights to the NIDC. It had, in fact, foreclosed its mortgage rights over some of the lots
and had purchased them at an auction sale before it executed the deed of assignment to the NIDC.
Such being the case, the lower court no longer had jurisdiction in the said case to resolve, by a mere
motion therein, issues having to do with the disposition made by the PCIB of its rights over the lots in
question, which rights were then no longer in litigation as they had been adjudged with finality.
An independent action, or any other appropriate remedy, securing to all the real parties in interest
the proceses and due opportunities afforded by the Rules of Court will be of the essence if the
private respondents, as the judicially declared owners of the lots in question by final judgment prior
to the present controversy, believe that they have a right of action to cause the extinguishment by
judicial fiat of the mortgage constituted over those lots on account of the assignment by the
mortgagee and/or purchaser at public auction of its rights to the parcels in question.
The necessity for such an independent action or other appropriate remedy becomes more patent, as
a matter of due process, when it is considered that the NIDC, as assignee after a final adjudication
of the rights of the PCIB over the said lots, will be the real party to be affected directly by any action
which the private respondents will commence whose object is to render inutile the legal efficacy of
the PCIB's assignment of its rights thereon. In such an action, the NIDC will clearly be an
indispensable party, which it will be the duty of the private respondent to include as a party in the
case, otherwise, it will not be bound by any adjudication which will adversely affect its rights over the
lots in dispute.
It would appear, however, from the facts admitted by the parties, that a valid assignment, binding
upon the private respondents, has been made by the PCIB to the NIDC of its mortgage rights as well

as its rights as purchaser of the lots in question. There does not appear to be anything in our
statutes or jurisprudence which prohibits a creditor without the consent of the debtor from making an
assignment of his credit and the rights accessory thereto; and, certainly, an assignment of credit and
its accessory rights does not at all obliterate the obligation of the debtor to pay, but merely puts the
assignee in the place of his assignor. Indeed, article 1634 of the new Civil Code definitely recognizes
the likelihood that credits and other incorporeal rights in litigation may be assignedpendente lite, and,
in such event, provides that the debtor may extinguish his obligation by making appropriate
reimbursement to the assignee. 2 In other words, an assignment of credit pendente lite, contrary to the
respondent Judge's opinion of March 31, 1967, under which it was construed that the mortgage rights and
rights as purchaser of the PCIB over the lots in question were still in custodia legis at the time of their
assignment to the NIDC, does not extinguish the credit or accessory rights assigned, but simply changes
the bag into which the debtor must empty his money in payment.
ACCORDINGLY, the order of the court a quo dated March 31, 1967, and its subsequent orders
dated May 28, 1968, November 9, 1968 and January 27, 1969, and all related orders are hereby
declared null and void and without legal effect, for having been issued without jurisdiction. The
preliminary injunction issued by this Court on March 11, 1970 is hereby made permanent. No
pronouncement as to costs.

[G.R. No. 142838. August 9, 2001] ABELARDO B. LICAROS, petitioner, vs. ANTONIO P.
GATMAITAN, respondent. GONZAGA-REYES, J.: PROVISION: NCC: 1301: Conventional Subrogation
DOCTRINE: Conventional subrogation is that which takes place by agreement of parties.
DEFINITIONS: assignment of credit: 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.
Subrogation: 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.
FACTS: 1. 1980s: Abelardo Licaros, a Fil. Businessman thought that it would be good to make a fund
placement with the Anglo-Asean Bank and Trust Limited (Anglo-Asean) which is a private bank that
works under the laws of the Republic of Vanuatu. Its main business is in receiving fund placements
from investors around the world and thereafter investing such deposits in money market
placements and potentially profitable capital ventures in H.K, Europe and the U.S. for maximization
of returns. 2. Eventually, Licaros investment didnt turn out well as he had difficulties in
retrieving not only his profits but also his investments. Thus, he sought the counsel of Antonio
Gatmaitan, a reputable banker and investment manager to help get back his investments. 3.
Gatmaitan voluntarily offered to assume the payment of Anglo-Aseans indebtedness to Licaros
subject to terms and conditions. They made it formal and effective through a MEMORANDUM OF
AGREEMENT (MOA) on July 29, 1988. 4. In line w/ this agreement, Gatmaitan executed a NONNEGOTIABLE PROMISSORY NOTE WITH ASSIGNMENT OF CASH DIVIDENDS in favor of Licaros. Here,
its stated that: Gatmatian promises to pay Licaros P3,150,000 w/o interest as material

consideration for the full settlement of his money claims from Anglo-Asean. Also, 70% of all cash
dividends from his shares of stock in the Prudential Life Realty Inc. to the extent of his shareholding
in Prudential Life Plan, Inc. (holding company of Prudential Realty) was assigned as a security for the
payment of the promissory note. 5. Nothing happened when Gatmaitan tried to claim the S150, 000
from Anglo-Asean. Thus, he didnt bother to fulfil his promise to pay Licaros the amount states in
the promissory note. 6. However, Licaros 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. 7. Licaros then filed a complaint to the RTC where he won. But CA reversed it saying that
the MOA is of a conventional subrogation which needs the consent of Anglo-Asean for its validity.
ISSUES: 1. WON the MOA is one of assignment of credit or one of conventional subrogation? 2. WON
the MOA was perfected?
HELD: 1. MOA is a conventional subrogation. - The intent for it to be one of conventional
subrogation is clear in its stipulations. 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. - If the intent was just to make Gatmaitan the assignee of
Licaros credit, it woudve been senseless to stipulate in the MOA that same is conditioned on
the express conformity of Anglo-Asean Bank. 2. NO The consent of Anglo-Asean wasnt
obtained and since consent is a requirement of subrogation, the MOA wasnt perfected. Thus,
theres no cause of action. DISPOSITION: CA decision affirmed.