G.R. No. 149040 - Ledonio vs. Capitol Development Corp.

On November 9, 1988, Edgar Ledonio executed a promissory note in favor of Patrocinio S. Picache for ₱30,000, payable in monthly installments of ₱3,000 beginning January 9, 1989; no interest was stipulated.
On November 10, 1988, Ledonio executed a second promissory note in favor of Picache for ₱30,000, with 36% annual interest, due December 1, 1988. Both notes provided:

A 20% penalty on the outstanding balance in case of default;
Capitalization of unpaid interest at the same rate;
Attorney’s fees and liquidated damages of 20% of the amount sought, but not less than ₱10,000, exclusive of costs.

On April 1, 1989, Picache executed a notarized Assignment of Credit transferring to Capitol Development Corporation (CDC) her rights under both promissory notes for consideration of ₱60,000, granting CDC full power “to sue for, collect and discharge” the debt.

Ledonio denied having obtained loans from Picache, alleged the notes were blank forms signed under duress to vacate leased premises, and claimed fraud and intimidation rendered them void.
He recounted leasing real property from Mission Realty & Management Corporation (MRMC), suffered an unannounced Meralco disconnection that scared off a foreign investor, discovered concealed arrears in electric bills, and claimed damages of US$60,000. To remove his machinery without interference by MRMC, he purportedly signed blank promissory notes later filled in by Picache. He pointed out Picache’s directorial ties to both MRMC and CDC to bolster his fraud claims.

CDC filed Civil Case No. Q-90-5247 in the RTC, Branch 91, Quezon City, for collection of the ₱60,000 debt. Demand letters signed by CDC’s VP and counsel were sent to Ledonio, who failed to pay.
Ledonio answered, moved to dismiss for lack of cause of action, and presented the above factual narrative.
On August 6, 1993, the RTC rendered judgment in favor of CDC, finding Ledonio’s testimony incredible, upholding the promissory notes and assignment, and ordering payment as follows:

₱30,000 under the November 9 note with 12% interest from April 18, 1990 and a 20% penalty;
₱30,000 under the November 10 note with 36% interest compounded at the same rate;
₱10,000 attorney’s fees and costs.

Ledonio appealed to the Court of Appeals (CA G.R. CV No. 43604). On March 20, 2001, the CA affirmed the RTC decision in toto and denied reconsideration on July 16, 2001.
Ledonio petitioned the Supreme Court for review on certiorari under Rule 45, challenging only the legal characterization of the transaction between Picache and CDC as a conventional subrogation requiring debtor’s consent.

Whether the Court of Appeals gravely abused its discretion in ruling that the transaction between Patrocinio Picache and CDC was an assignment of credit—not a conventional subrogation—thereby not requiring Edgar Ledonio’s consent as debtor.
Whether, assuming arguendo conventional subrogation, the absence of debtor’s consent renders the transaction void.
Whether Ledonio had sufficient knowledge of the assignment to be bound thereby.