[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:
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.
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.
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.
In line w/ this agreement, Gatmaitan executed a NON-NEGOTIABLE 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.
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.
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.

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:
WON the MOA is one of assignment of credit or one of conventional subrogation?

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 AngloAsean 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.