1. Slight alterations or modifications in construction plans of buildings.
2. New contract merely contains supplementary agreement 3. When additional interest is agreed upon
4. When additional security is given
5. When after a final judgment, a contract was entered into precisely to provide a method of payment other than that stated in judgment.
6. When a guarantor enters into an agreement with creditor that he (guarantor) will also be a principal debtor.
7. When creditor in the meantime refrains from suing debtor or even when creditor merely extends the term of payment for here the period merely affects performance, not the creation of the obligation.
8. Place of payment is changed or there is variation in amount of partial payments.
9. When a public instrument is executed to confirm a valid contract.
10. When payment of purchase price for certain trucks is made by execution of promissory note for said price.
CASES
SUENO vs. LANDBANK OF THE PHILS
The elements of novation clearly do not exist in the instant case. While it is true that there is a previous valid obligation (i.e., the obligation of LBP to honor Sueno’s right to redeem the subject property within a period of one year), such obligation expired at the same time as the redemption period on 6 March 2001. There is, however, no clear agreement between the parties to a new contract, again imposing upon LBP the obligation of honoring Sueno’s right to redeem the subject properties within an extended period of six months. Without a new contract, the old contract cannot be considered extinguished.
The condition of LBP for the extension of the redemption period for the subject properties was plain and simple, that Sueno pay an initial amount of P115,000.00 for the extension of the redemption period. Sueno tendered a check for P50,000.00 in partial payment of the amount demanded by LBP. By accepting the check payment, LBP merely accepted partial compliance of Sueno with its demand, but it does not mean that LBP had conceded to the extension of the redemption period for such reduced amount. In fact, LBP promptly sent Sueno a letter dated 6 March 2001, which was duly received by the latter, explicitly and consistently requiring payment of the full amount of P115,000.00 for the extension of the redemption period. It is without doubt that LBP was still expecting Sueno to pay the balance ofP65,000.00. Hence, not until full payment of the amount it demanded, for LBP had not yet agreed to extend the period for redemption of the subject properties.
The consent of LBP to an extension of the period to redeem is subject to the suspensive condition that Sueno shall pay the initial amount of P115,000.00 in full. With Sueno’s failure to remit the balance of P65,000.00 to LBP, then there is non-perfection of a new contract. As aptly declared by the Court of Appeals:
The parties are bound to fulfill the stipulations in a contract only upon its perfection. At anytime prior to the perfection of a contract, unaccepted offers and proposals remain as such and cannot be
considered binding commitments, hence, not demandable. Since [Sueno] failed to perform what was incumbent upon her then, [LBP]
cannot be faulted in not granting the extension sought. x x x.
What further belies Sueno’s assertion that LBP consented to her request for extension is its letter dated 7 March 2006, again duly received by Sueno, categorically denying her request to lengthen the redemption period. The language and intent of the letter is too clear and simple to be misinterpreted, to wit:
We wish to inform you that the management denied your request to extend the redemption period of your foreclosed property for six (6) months since you failed to comply with the Bank’s requirement, upfront payment of P115,000.00.
Hence, the Bank is now consolidating the transfer of its ownership in the name of Land Bank. Enclosed is the P50,000.00 Manager’s Check re: your upfront payment refunded to you. (Emphasis supplied).
Irrefragably, there is no mutual agreement to extend the original period for the redemption of the subject properties. There is no common intent by the parties to novate the old obligation by extending the period thereof.
For this Court to sustain Sueno’s position - that the LBP agreed to extend the redemption period upon her payment of an amount substantially less than what it demanded - offends the elementary principle enunciated in our jurisdiction that novation can never be presumed. As elucidated by this Court in Philippine Savings Bank v.
Mañalac, Jr.
Novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unmistakable. The extinguishment of the old obligation by the new one is a necessary element of novation, which may be effected either expressly or impliedly. The term "expressly" means that the contracting parties incontrovertibly disclose that their object in executing the new contract is to extinguish the old one. Upon the other hand, no specific form is required for an implied novation, and all that is prescribed by law would be an incompatibility between the two contracts. While there is really no hard and fast rule to determine what might constitute to be a sufficient change that can bring about novation, the touchstone for contrariety, however, would be an irreconcilable incompatibility between the old and the new obligations. (Emphasis supplied.)
GARCIA vs. LLAMAS
Applying the foregoing to the instant case, we hold that no novation took place.
The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check, or that the check would take the place of the note. There is no incompatibility between the promissory note and the check. As the CA correctly observed, the check had been issued precisely to answer for the obligation. On the one hand, the note evidences the loan obligation; and on the other, the check answers for it. Verily, the two can stand together.
Neither could the payment of interests -- which, in petitioner’s view, also constitutes novation -- change the terms and conditions of the obligation. Such payment was already provided for in the promissory note and, like the check, was totally in accord with the
terms thereof.
Also unmeritorious is petitioner’s argument that the obligation was novated by the substitution of debtors. In order to change the person of the debtor, the old one must be expressly released from the obligation, and the third person or new debtor must assume the former’s place in the relation. Well-settled is the rule that novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus incumbent on petitioner to show clearly and unequivocally that novation has indeed taken place.
In the present case, petitioner has not shown that he was expressly released from the obligation, that a third person was substituted in his place, or that the joint and solidaryobligation was cancelled and substituted by the solitary undertaking of De Jesus. The CA aptly held:
“x x x. Plaintiff’s acceptance of the bum check did not result in substitution by de Jesus either, the nature of the obligation being solidary due to the fact that the promissory note expressly declared that the liability of appellants thereunder is joint and [solidary.] Reason: under the law, a creditor may demand payment or performance from one of the solidary debtors or some or all of them simultaneously, and payment made by one of them extinguishes the obligation. It therefore follows that in case the creditor fails to collect from one of the solidary debtors, he may still proceed against the other or others. x x x”
Moreover, it must be noted that for novation to be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor. Since novation implies a waiver of the right the creditor had before the novation, such waiver must be express. It cannot be supposed, without clear proof, that the present respondent has done away with his right to exact fulfillment from either of the solidary debtors.
More important, De Jesus was not a third person to the obligation. From the beginning, he was a joint and solidary obligor of the P400,000 loan; thus, he can be released from it only upon its extinguishment. Respondent’s acceptance of his check did not change the person of the debtor, because a joint and solidary obligor is required to pay the entirety of the obligation.
It must be noted that in a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly and severally liable with De Jesus, petitioner is therefore liable for the entire obligation.
BERNABE vs. CA
The document that spells out the nature of the transaction of the parties is the Deed of Conditional Sale. Stemming from the compromise agreement entered into by Titan and petitioners, the Deed of Conditional Sale has superseded the Deed of Sale of Real Estate which is the original contract. The whole essence of a compromise is that by making reciprocal concessions, the parties avoid litigation or put an end to one already commenced. A compromise agreement can be entered into without novating or supplanting existing contracts, but in this case, the irreconcilable incompatibility between the Deed of Sale of Real Estate and the Deed of Conditional Sale inevitably resulted in extinctive novation.
The first contract or the Deed of Sale of Real Estate embodies a perfected contract of sale. There is no stipulation in the said deed that title to the properties would remain with defendants until full
payment of the consideration, or that the right to unilaterally resolve the contract upon Titan's failure to pay within a fixed period is given to defendants. Patently, the contract executed by the parties is a contract of sale and not a contract to sell.
When the parties entered into a compromise, they executed new contracts involving the shares of Patricio, Cecilia and Antonio in the properties. These new contracts are the three deeds of conditional sale entered into by Titan with Patricio, Cecilia and Antonio, the last represented by his attorneys-in-fact. These contracts, all entitled Deed of Conditional Sale, are contracts to sell.
The difference between contracts of sale and contracts to sell is relevant. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.
A careful reading of the stipulations in the Deed of Conditional Sale conveys the intent of the parties to enter into a contract to sell.
The fourth paragraph of the contract explicitly states that only when full payment of the purchase price is made shall Antonio execute the deed of absolute sale transferring and conveying his shares in the subject properties. Clearly, the intent is to reserve ownership in the seller, Antonio, until the buyer, Titan, pays in full the purchase price. The full payment of the purchase price does not automatically vest ownership in Titan. A deed of absolute sale still has to be executed by Antonio.
As earlier noted, the Deed of Sale of Real Estate is substituted by the subsequent deeds of conditional sale. The Deed of Sale of Real Estate and the deeds of conditional sale involve different parties and different amounts, and impose different obligations. The original deed, on one hand, and the latter three, on the other, are incompatible and cannot subsist all at the same time
KWONG vs. GARGANTOS
In Iloilo Traders Finance, Inc, v. Heirs of Soriano, Jr., the nature of novation was explained, thus:
Novation may either be extinctive or modificatory, much being dependent on the nature of the change and the intention of the parties. Extinctive novation is never presumed; there must be an express intention to novate; in cases where it is implied, the acts of the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration for the emergence of the new one. Implied novation necessitates that the incompatibility between the old and new obligation be total on every point such that the old obligation is completely superseded by the new one. The test of incompatibility is whether they can stand together, each one having an independent existence; if they cannot and are irreconcilable, the subsequent obligation would also extinguish the first. (Emphasis supplied)
The test of incompatibility between two obligations or contracts is whether or not they can stand together, each one having an independent existence. If they cannot, they are incompatible, and the later obligation novates the first.
In this case, an examination of the Deed of Absolute Sale and the Promissory Note, as well as the surrounding circumstances of this case, shows that it was meant to novate and replace the Deed of Conditional Sale. Logically, the Deed of Conditional Sale and the Deed of Absolute Sale cannot co-exist as these are of different nature and provide for separate and distinct obligations, to wit:
A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold. A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price. The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.
The fact that the Deed of Absolute Sale of the 11 lots was executed even without respondents having fully paid the purchase price for the entire 15 parcels of land covered by the Deed of Conditional Sale enforces the conclusion that the parties intended to enter into a new agreement and discard the old one; otherwise, petitioner could have enforced his right to rescind the contract by filing a complaint instead of dealing anew with respondents and entering into the succeeding agreements. What subsequently occurred was a segregated sale of the 11 lots, while the Promissory Note covered the remaining four lots.
The Court notes that respondents had already paid a substantial amount for the subject lots. Petitioner admitted that a down payment of $10,000.00 was made upon the execution of the Deed of Conditional Sale, and respondents also made further payments in the amount of $20,000.00. Thereafter, Atty. Gargantos, in behalf of respondents, paid P1,776,200.00 on May 1, 1990. It was after such payment was made that the parties entered into the Deed of Absolute Sale and the Promissory Note. Obviously, the Deed of Absolute Sale was intended by the parties to close the transaction involving the 11 lots. What remained for enforcement is the Promissory Note, which covers the four remaining lots.
The Court also notes that the Deed of Conditional Sale reflected the amount of $137,255.00 or its peso equivalent at the rate of P20.40 per US dollar (orP2,800,002.00), as purchase price for the entire 15 lots. On the other hand, the Deed of Absolute Sale provided that the 11 parcels of land were being sold forP500,000.00, while the Promissory Note reflects the intention of petitioner to sell the other four lots for an undisclosed amount the balance of which is P373,074.95. Apparently, these two subsequent agreements do not show the true value of the subject lots.
Nevertheless, it is well-settled that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control; however, if the contract appears to be contrary to the evident intentions of the parties, the latter shall prevail over the former. Moreover, the agreement of the parties may be embodied in only one contract or in two or more separate writings. In such event, the writings of the parties should be read and interpreted together in such a way as to render their intention effective.
REYES vs. BPI
The only issue for our consideration is whether there was a novation of the mortgage loan contract between petitioners and BPI-FSB that
would result in the extinguishment of petitioners� liability to the bank.
We agree with the CA that there was none.
Novation is defined as the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates the first, either by changing the object or principal conditions, or by substituting the person of the debtor, or subrogating a third person in the rights of the creditor.
Article 1292 of the Civil Code on novation further provides:
Article 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.
The cancellation of the old obligation by the new one is a necessary element of novation which may be effected either expressly or impliedly. While there is really no hard and fast rule to determine what might constitute sufficient change resulting in novation, the touchstone, however, is irreconcilable incompatibility between the old and the new obligations.
In Garcia, Jr. v. Court of Appeals, we held that:
In every novation there are four essential requisites:(1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; and (4) validity of the new one. There must be consent of all the parties to the substitution, resulting in the extinction of the old obligation and the creation of a valid new one. The acceptance of the promissory note
In every novation there are four essential requisites:(1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; and (4) validity of the new one. There must be consent of all the parties to the substitution, resulting in the extinction of the old obligation and the creation of a valid new one. The acceptance of the promissory note