[SANTOS] Ledonio v. Capitol Development Corporation

Santos [OBLICON]

LEDONIO v. CAPITOL DEVELOPMENT CORP. Topic: Kinds of Subrogation

3. When did the obligation arise: When Ms. Picache executed an assignment of credit in favor of Capitol Development Corp.

VOCABULARY:  Assignment of credit – an agreement by virtue of which the owner of a credit (known as the assignor) by legal cause – such as sale, dation in payment or exchange or donation – and without need of the debtor’s consent, transfers that credit and its accessory rights to another (known as the assignee), who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor.  Subrogation – is the transfer of all rights of the creditor to a third person, who substitutes him in all rights It may be either legal or conventional.  Legal Subrogation – takes place without agreement but by operation of law because of certain acts.  Conventional Subrogation – which takes place by agreement of parties.

FACTS:  Petitioner obtained two loans totaling P60, 000.00 from Ms. Picache, for which he executed promissory notes, dated 9 November 1988 and 10 November 1988.  He failed to pay any of the said loans;  Ms. Picache executed on 1 April 1989 an Assignment of Credit covering petitioner's loans in favor of respondent for the consideration of P60,000.00;  Petitioner had knowledge of the assignment of credit;  Petitioner still failed to pay his indebtedness despite repeated demands by respondent and its counsel.  The RTC ruled in favor of the respondent herein  The CA confirmed the ruling of the RTC  Petitioner argued that he never gave consent to such assignment of credit and therefore it should have no effect.

DOCTRINE: Distinction between an assignment of credit and a conventional subrogation: In an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce the legal effects. 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. A creditor may, therefore, validly assign his credit and its accessories without the debtor's consent. On the other hand, conventional subrogation requires an agreement among the 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. SHORT ANSWERS: 1. When did the problem start: When Ledonio failed and refused to settle his indebtedness to Capitol Development Corp. 2. Who was chasing who: Capitol Development Corp. was chasing Ledonio

ISSUE: WON consent of the debtor is required in an assignment of credit HELD:  No  The Court herein ruled that in an assignment of credit, consent is immaterial  Consent is not a requirement in assignment of credit in order for the said assignment to have full legal effects  What the law requires is that the debtor would be duly notified upon the issuance of an assignment of credit to a third person  The said assignment of credit takes effect only from the time he (the debtor) has knowledge thereof  In the case at bar, the petitioner cannot deny that he wasn’t notified by the respondent when the assignment of credit happened. It can be reasonably presumed that when the respondent, together with their counsel, sent demand letters to the petitioner herein, the same had received them. The

Santos [OBLICON]

 

letters were sent through registered mail and the return cards were signed by the petitioner’s agent. Further, petitioner never questioned why it was respondent seeking payment of the loans and not the original creditor. Foregoing the said circumstances, it can be concluded that the petitioner was duly notified and had knowledge of the assignment of credit that took place between respondent herein and Ms. Picache.