Civil Law Review II Atty.

Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

LAGUNA TAYABAS BUS COMPANY and BATANGAS TRANSPORTATION COMPANY, petitioners,
vs.
FRANCISCO C. MANABAT, as assignee of Bian Transportation Company, Insolvent, respondent.
Domingo E. de Lara for petitioners. M. A. Concordia & V.A. Guevarra for respondent.

MAKASIAR, J.:

Facts:
-A contract was executed whereby the Bian Transportation Company leased to the Laguna-Tayabas Bus Company
its certificates of public convenience over the lines known as Manila-Bian, Manila-Canlubang and Sta. Rosa-
Manila, and to the Batangas Transportation Company its certificate of public convenience over the line known as
Manila-Batangas Wharf, together with one "International" truck, for a period of five years, renewable for another
similar period, to commence from the approval of the lease contract by the Public Service Commission. The Public
Service Commission provisionally approved the lease contract on condition that the lessees should operate on the
leased lines in accordance with the prescribed time schedule and that such approval was subject to modification or
cancellation and to whatever decision that in due time might be rendered in the case.
-Bian Transportation Company was judicially declared insolvent and Francisco C. Manabat was appointed as its
assignee. From time to time, the defendants paid the lease rentals up to December, 1957, with the exception of the
rental for August 1957, from which there was deducted the sum of P1,836.92 without the consent of the plaintiff. This
deduction was based on the ground that the employees of the defendants on the leased lines went on strike. The
assignee of the plaintiff objected to such deduction, claiming that the contract of lease would be suspended only if
the defendants could not operate the leased lines due to the action of the officers, employees or laborers of the
lessor but not of the lessees. The defendants neither refunded the deductions nor paid the rentals notwithstanding
demands therefor made from time to time. At first, the defendants assured the plaintiff that the lease rentals would
be paid, although it might be delayed, but in the end they failed to comply with their promise.
- Batangas Transportation Company and Laguna-Tayabas Bus Company separately filed with the Public Service
Commission a petition for authority to suspend the operation on the lines covered by the certificates of public
convenience leased to each of them by the Bian Transportation Company. They alleged as reasons the reduction
in the amount of dollars allowed by the Monetary Board of the Central Bank of the Philippines for the purchase of
spare parts needed in the operation of their trucks, the alleged difficulty encountered in securing said parts, and
their procurement at exorbitant costs, thus rendering the operation of the leased lines prohibitive. They further
alleged that the high cost of operation, coupled with the lack of passenger traffic on the leased lines resulted in
financial losses.
-Plaintiff's assignee opposed the petition on the ground that the Public Service Commission had no jurisdiction to
grant the relief prayed for as it should involve the interpretation of the lease contract, which act falls exclusively
within the jurisdiction of the ordinary courts; that the petitioners had not asked for the suspension of the operation
of the lines covered by their own certificates of public convenience; that to grant the petition would amount to an
impairment of the obligation of contract; and that the defendants have no legal personality to ask for suspension of
the operation of the leased lines since they belonged exclusively to the plaintiffwho is the grantee of the
corresponding certificate of public convenience.
- The Public Service Commission overruled all oppositions filed by the assignee and other creditors of the
insolvent, holding that upon its approval of the lease contract, the lessees acquired the operating rights of the
lessor and assumed full responsibility for compliance with all the terms and conditions of the certificate of public
convenience. The Public Service Commission further stated that the petition to suspend operation did not pertain
to any act of dominion or ownership but only to the use of the certificate of public convenience which had been
transferred by the plaintiff to the defendants, and that the suspension prayed for was but an incident of the
operation of the lines leased to the defendants.
- As a consequence of the continuing failure of the lessees to fulfill their earlier promise to pay the accruing rentals
on the leased certificates, Bian Transportation Company represented by Francisco C. Manabat, assignee, filed this
action against defendants Laguna Tayabas Bus Company and Batangas Transportation Company for the recovery
of the sum of P42,500 representing the accrued rentals for the lease of the certificates of public convenience.
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

-The defendants filed a motion to dismiss on the case of recovery of the sum of money alleging among others that
the Public Service Commission authorized the suspension of operation over the leased lines hence the lease
contract should be deemed suspended during that period; that plaintiff failed to place defendants in peaceful and
adequate enjoyment and possession of the things leased.

Issue:
Whether or not the court should relieve the lessee from the obligation to pay rent where there is failure to use or
enjoy the thing leased.

Held:
No. Petitioners invoke article 1680 of the Civil Code, which grants lessees of rural lands a right to a reduction of
rentals whenever the harvest on the land leased is considerably damaged by an extraordinary fortuitous event.
Article 1680 is not applicable to the case at bar. Article 1680 of the Civil Code reads thus:
Art. 1680. The lessee shall have no right to a reduction of the rent on account of the sterility of the l and
leased, or by reason of the loss of fruits due to ordinary fortuitous events; but he shall have such right in case of the
loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous events, save always when
there is a specific stipulation to the contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or
others which are uncommon, and which the contracting parties could not have reasonably foreseen.
Article 1680, it will be observed is a special provision for leases of rural lands. No other legal provision makes it
applicable to ordinary leases. Had the intention of the lawmakers been so, they would have placed the article
among the general provisions on lease. Nor can the article be applied analogously to ordinary leases, for precisely
because of its special character, it was meant to apply only to special specie of lease. It is a provision of social
justice designed to relieve poor farmers from the harsh consequences of their contracts with rich landowners. And
taken in that light, the article provides no refuge to lessees whose financial standing or social position is equal to,
or even better than, the lessor as in the case at bar.
Even if the cited article were a general rule on lease, its provisions nevertheless do not extend to petitioners. One of
its requisites is that the cause of loss of the fruits of the leased property must be an "extraordinary and unforeseen
fortuitous event." The circumstances of the instant case fail to satisfy such requisite. As correctly ruled by the Court
of Appeals, the alleged causes for the suspension of operations on the lines leased, namely, the high prices of spare
parts and gasoline and the reduction of the dollar allocations, "already existed when the contract of lease was
executed. The cause of petitioners' inability to operate on the lines cannot, therefore, be ascribed to fortuitous
events or circumstances beyond their control, but to their own voluntary desistance.
The lease contract brought no material advantage to the lessor for the period of suspension. It must be recalled
that the lease contract not only stipulated for the transfer of the lessor's right to operate the lines covered by the
contract, but also for a forbearance on the part of the lessor to operate transportation business along the same
lines and to hold a certificate for that purpose. The commitment alone of the lessor under the contract would
enable the lessees to reap full benefits therefrom since the commuting public would, after all, be forced at their
inconvenience and prejudice to patronize petitioner's remaining buses.
Where a person by his contract charges himself with an obligation possible to be performed, he must perform it,
unless the performance is rendered impossible by the act of God, by the law, or by the other party, it being the rule
that in case the party desires to be excused from the performance in the event of contingencies arising, it is his duty
to provide therefor in his contract. Hence, performance is not excused by subsequent inability to perform, by
unforeseen difficulties, by unusual or unexpected expenses, by danger, by inevitable accident, by breaking of
machinery, by strikes, by sickness, by failure of a party to avail himself of the benefits to be had under the contract,
by weather conditions, by financial stringency or by stagnation of business. Neither is performance excused by the fact
that the contract turns out to be hard and improvident, unprofitable, or impracticable, ill-advised, or even foolish,
or less profitable, unexpectedly burdensome.

JAPAN AIRLINES, petitioner, vs. JESUS SIMANGAN, respondent.
G.R. No. 170141, April 22, 2008
3
rd
Division: REYES R.T., J.: 4, JJ., concur
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO


FACTS: In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in
UCLA School of Medicine in Los Angeles, California, U.S.A. Upon request of UCLA, respondent undertook a series of
laboratory tests at the National Kidney Institute in Quezon City to verify whether his blood and tissue type are
compatible with Loreto's. Fortunately, said tests proved that respondent's blood and tissue type were well-
matched with Loreto's. Respondent needed to go to the United States to complete his preliminary work-up and
donation surgery. Hence, to facilitate respondent's travel to the United States, UCLA wrote a letter to the American
Consulate in Manila to arrange for his visa. In due time, respondent was issued an emergency U.S. visa by the
American Embassy in Manila. Having obtained an emergency U.S. visa, respondent purchased a round trip plane
ticket from petitioner JAL and was issued the corresponding boarding pass. While inside the airplane, JAL's airline
crew suspected respondent of carrying a falsified travel document and imputed that he would only use the trip to
the United States as a pretext to stay and work in Japan. The stewardess asked respondent to show his travel
documents. Shortly after, the stewardess along with a Japanese and a Filipino haughtily ordered him to stand up
and leave the plane. Respondent protested, explaining that he was issued a U.S. Visa. However, He was still
constrained to go out of the plane. Hence, he filed a case against JAL airlines.
The appellants contends that the original obligation to carry appellee to Narita and Los Angeles on July 29, 1992
was extinguished by novation when appellant and appellant agreed that appellee will instead take appellant's flight
to Narita on the following day, July 30, 1992.
ISSUE:
Whether or not there is novation?
HELD:
No. Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to
be left behind. The latter was unceremoniously bumped off despite his protestations and valid travel documents
and notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was
offered to fly the next day on July 30, 1992. Said offer did not cure JAL's default.
Considering that respondent was forced to get out of the plane and left behind against his will, he could not have
freely consented to be rebooked the next day. In short, he did not agree to the alleged novation. 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 respondent had willingly done away with his right to fly on July 29, 1992.
Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL personnel
imputed that respondent would only use the trip to the United States as a pretext to stay and work in Japan.
ANAMER SALAZAR, Petitioner, vs.
J.Y. BROTHERS MARKETING CORPORATION, Respondent.
G.R. No. 171998, October 20, 2010
634 SCRA 95
2
nd
Division: PERALTA, J.: 4, JJ., concur

FACTS:

J.Y. Brothers Marketing (J.Y. Bros., for short) is a corporation engaged in the business of selling sugar, rice and
other commodities. On October 15, 1996, Anamer Salazar, a freelance sales agent, was approached by Isagani
Calleja and Jess Kallos, if she knew a supplier of rice. Answering in the positive, Salazar accompanied the two to J.Y.
Bros. As a consequence, Salazar with Calleja and Kallos procured from J. Y. Bros. 300 cavans of rice worth
P214,000.00. As payment, Salazar negotiated and indorsed to J.Y. Bros. Prudential Bank Check No. 067481 dated
October 15, 1996 issued by Nena Jaucian Timario in the amount of P214,000.00 with the assurance that the check
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

is good as cash. On that assurance, J.Y. Bros. parted with 300 cavans of rice to Salazar. However, upon presentment,
the check was dishonored due to "closed account."

Informed of the dishonor of the check, Calleja, Kallos and Salazar delivered to J.Y. Bros. a replacement cross Solid
Bank Check No. PA365704 dated October 29, 1996 again issued by Nena Jaucian Timario in the amount of
P214,000.00 but which, just the same, bounced due to insufficient funds. When despite the demand letter dated
February 27, 1997, Salazar failed to settle the amount due J.Y. Bros.,

The latter charged Salazar and Timario with the crime of estafa before the RTC, RTC acquitted Salazar for the crime
of estafa but is hereby held liable for the value of the 300 bags of rice. Aggrieved, accused attempted a
reconsideration on the civil aspect of the order and to allow her to present evidence thereon. The motion was
denied. Accused went up to the Supreme Court on a petition for review on certiorari under Rule 45 of the Rules of
Court which was granted setting aside and nullifying the RTC decisions and directed for the continuation of the
trial for the reception of the evidence-in-chief of the petitioner on the civil aspect of the case and for the rebuttal
evidence of the private complainant and the sur-rebuttal evidence of the parties if they opt to adduce any.

The RTC then proceeded with the trial on the civil aspect of the criminal case dismissing Salazar the civil aspect.
Respondent filed an appeal to the CA. CA granted the appeal which reversed and set aside the decision of the RTC
and a new one entered ordering the appellee to pay the appellant the amount of P214,000.00, plus interest at the
legal rate from the written demand until full payment.

Hence the petition. Petitioner contends that the issuance of the Solid Bank check and the acceptance thereof by the
respondent, in replacement of the dishonored Prudential Bank check, amounted to novation that discharged the
latter check; that respondent's acceptance of the Solid Bank check, notwithstanding its eventual dishonor by the
drawee bank, had the effect of erasing whatever criminal responsibility, under Article 315 of the Revised Penal
Code, the drawer or indorser of the Prudential Bank check would have incurred in the issuance thereof in the
amount of P214,000.00; and that a check is a contract which is susceptible to a novation just like any other contract.

Petitioner also contends that the acceptance of the Solid Bank check, a non-negotiable check being a crossed check,
which replaced the dishonored Prudential Bank check, a negotiable check, is a new obligation in lieu of the old
obligation arising from the issuance of the Prudential Bank check, since there was an essential change in the
circumstance of each check.

ISSUE:

Whether the issuance of the Solidbank check in replacement of the Prudential bank check resulted to the novation
of the obligation?

HELD:

In this case, respondents acceptance of the Solid Bank check, which replaced the dishonored Prudential Bank
check, did not result to novation as there was no express agreement to establish that petitioner was already
discharged from his liability to pay respondent the amount of P214,000.00 as payment for the 300 bags of rice. As
we said, novation is never presumed, there must be an express intention to novate. In fact, when the Solid Bank
check was delivered to respondent, the same was also indorsed by petitioner which shows petitioners recognition
of the existing obligation to respondent to pay P214,000.00 subject of the replaced Prudential Bank check.

Moreover, respondents acceptance of the Solid Bank check did not result to any incompatibility, since the two
checks Prudential and Solid Bank checks were precisely for the purpose of paying the amount of P214,000.00,
i.e., the credit obtained from the purchase of the 300 bags of rice from respondent. Indeed, there was no substantial
change in the object or principal condition of the obligation of petitioner as the indorser of the check to pay the
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

amount of P214,000.00. It would appear that respondent accepted the Solid Bank check to give petitioner the
chance to pay her obligation.

Among the different types of checks issued by a drawer is the crossed check. The Negotiable Instruments Law is
silent with respect to crossed checks,18 although the Code of Commerce makes reference to such instruments.19
We have taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner
means that it could only be deposited and could not be converted into cash.20 Thus, the effect of crossing a check
relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful
person, i.e., the payee named therein.21 The change in the mode of paying the obligation was not a change in any of
the objects or principal condition of the contract for novation to take place.

Considering that when the Solid Bank check, which replaced the Prudential Bank check, was presented for
payment, the same was again dishonored; thus, the obligation which was secured by the Prudential Bank check
was not extinguished and the Prudential Bank check was not discharged. Thus, we found no reversible error
committed by the CA in holding petitioner liable as an accommodation indorser for the payment of the dishonored
Prudential Bank check.

Metrobank vs Rural Bank of Gerona
Legal subrogation. The present case exemplifies the circumstance contemplated under paragraph 2, of Article 1302
of the Civil Code which provides:
It is presumed that there is legal subrogation:
(1) When a creditor pays another creditor who is preferred, even without the debtors knowledge;
(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latters share.
Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a conduit, and was not
legally answerable for the IBRD loans. Despite this, it was Metrobanks demand deposit account, instead of RBGs,
which the Central Bank proceeded against, on the assumption perhaps that this was the most convenient means of
recovering the cancelled loans. That Metrobanks payment was involuntarily made does not change the reality that
it was Metrobank which effectively answered for RBGs obligations.
Was there express or tacit approval by RBG of the payment enforced against Metrobank?
After Metrobank received the Central Banks debit advices in November 1978, it (Metrobank) accordingly debited
the amounts it could from RBGs special savings account without any objection from RBG. RBGs President and
Manager, Dr. Aquiles Abellar, even wrote Metrobank, on August 14, 1979, with proposals regarding possible means
of settling the amounts debited by Central Bank from Metrobanks demand deposit account. These instances are
all indicative of RBGs approval of Metrobanks payment of the IBRD loans. That RBGs tacit approval came after
payment had been made does not completely negate the legal subrogation that had taken place.

Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with all the
rights thereto appertaining, either against the debtor or against third persons. As the entity against which the
collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a cause of action to
recover from RBG the amounts it paid to the Central Bank, plus 14% per annum interest. Metropolitan Bank and
Trust Company vs. Rural Bank of Gerona, Inc., G.R. No. 159097, July 5, 2010.
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

Fua vs. Yap (novation)
Facts: By virtue of a judgment for P1,538.04 which Fua obtained against Yap, a writ of execution was issued in
pursuance of which a parcel of land belonging to Yap was levied upon and its sale at public auction duly advertised.
The sale was, however, suspended as a result of an agreement between the parties, by the terms of which the
obligation under the judgment was reduced to P1,200 payable in four installments, and to secure the payment of
this amount, the land levied upon with its improvement was mortgaged to appellee with the condition that in the
event of appellants' default in the payment of any installment, they would pay 10 per cent of any unpaid balance as
attorney's fees as well as the difference between the full judgment credit and the reduced amount thus agreed.
Appellants failed to comply with the terms of the settlement, whereupon, appellee sought the execution of the
judgment, and by virtue of an alias writ of execution, the land was sold at public auction to appellee and a final
deed was executed in his favor. Appellants refused, however, to vacate the land and to recognize appellee's title
thereto; hence, the latter instituted the present action for recovery.
Issue: Whether or not liability under the judgment in civil case No. 42125 had been extinguished by the settlement
evidenced by the mortgage executed?
Held: Yaps liability under the judgment has been extinguished by the new agreement. Although the mortgage did
not expressly cancel the old obligation, this was impliedly novated by reason of incompatibility resulting from the
fact that, whereas the judgment was for P1,538.04 payable at one time, did not provide for attorneys fees, and was
not secured, the new obligation is for P1,200.00 payable in installments, stipulates for attorneys fees and is
secured by a mortgage. The later agreement did not merely extend the time to pay judgment the judgment, because
it was therein recited that appellants promised to pay p1,200 to appellee as a settlement of the said judgment. Said
judgment cannot be said to have been settled, unless it was extinguished.
Millar vs. CA (novation)
Held: No substantial incompatibility between the mortgage obligation and the judgment liability of the respondent
sufficient to justify a conclusion of implied novation. The stipulation for the payment of the obligation under the
terms of the deed of chattel mortgage serves only to provide an express and specific method for its extinguishment
payment in two equal installments. The chattel mortgage simply gave the respondent a method and more time
to enable him to fully satisfy the judgment indebtedness. The chattel mortgage agreement in no manner introduced
any substantial modification or alteration of the judgment. Instead of extinguishing the obligation of the
respondent arising from the judgment, the deed of chattel mortgage expressly ratified and confirmed the existence
of the same, amplifying only the mode and period for compliance by the respondent.
The defense of implied novation requires clear and convincing proof of complete incompatibility between the two
obligations. The law requires no specific form for an effective novation by implication. The test is whether the two
obligations can stand together. If they cannot, incompatibility arises, and the second obligation novates the first. If
they can stand together, no incompatibility results and novation does not take place.
Facts: Millar obtained a favorable condemning Antonio P. Gabriel to pay him the sum of P1,746.98 with interest at
12% per annum from the date of the filing of the complaint, the sum of P400 as attorney's fees, and the costs of suit.
The lower court issued the writ of execution on the basis of which the sheriff seized the respondent's Willy's Ford
jeep. The respondent, however, pleaded with the petitioner to release the jeep under an arrangement whereby the
respondent, to secure the payment of the judgment debt, agreed to mortgage the vehicle in favor of the petitioner.
The petitioner agreed to the arrangement; thus, the parties executed a chattel mortgage on the jeep. Resolution of
the controversy posed by the petition at bar hinges entirely on a determination of whether or not the subsequent
agreement of the parties as embodied in the deed of chattel mortgage impliedly novated the judgment obligation.
Sandico vs. Piguing (novation)
Held: Reduction of the amount of money to be paid does not amount to novation. The payment by the respondent
of the lesser amount of P4,000, accepted by the petitioners without any protest or objection and acknowledged by
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

them as "in full satisfaction of the money judgment", completely extinguished the judgment debt and released the
respondent from his pecuniary liability.
In the case at hand, we fail to see what new or modified obligation arose out of the payment by the respondent of
the reduced amount of P4,000 and substitute the monetary liability for P6,000 of the said respondent under the
appellate court's judgment. Additionally, to sustain novation necessitates that the same be so declared in
unequivocal terms clearly and unmistakably shown by the express agreement of the parties or by acts of
equivalent import or that there is complete and substantial incompatibility between the two obligations. 5
Facts: The appellate court's judgment obliges the respondent to do two things: (1) to recognize the easement, and
(2) to pay the petitioners the sums of P5,000 actual and P500 exemplary damages and P500 attorney's fees, or a
total of P6,000. The full satisfaction of the said judgment requires specific performance and payment of a sum of
money by the respondent. The parties entered into an agreement reducing the payment to P4000, and was
subsequently paid by respondent. Was there a novation?

G.R. Nos. L-62845-46 November 25, 1983
NATIONAL POWER CORPORATION, petitioner, vs. JUDGE ABELARDO M. DAYRIT, Court of First Instance of
Manila, Branch 39, and DANIEL R. ROXAS, doing business as United Veterans Security Agency and Foreign
Boats Watchmen, respondents.
FACTS: In Civil Case No. 133528 of the defunct Court of First Instance of Manila, DANIEL E. ROXAS, doing business
under the name and style of United Veterans Security Agency and Foreign Boats Watchmen, sued the NATIONAL
POWER CORPORATION (NPC) and two of its officers in Iligan City. The purpose of the suit was to compel the NPC
to restore the contract of Roxas for security services which the former had terminated.
After several incidents, the litigants entered into a Compromise Agreement on October 14, 1981, and they asked
the Court to approve it. The compromise agreement states the following:
The parties, DANIEL E. ROXAS, etc. and NATIONAL POWER CORPORATION, ET AL., represented by its President Mr.
Gabriel Y. Itchon with due and proper authority under NP Board Resolution No. 81-224, assisted by their
respective counsel, to this Honorable Court respectfully submit the following compromise agreement:
1. The defendant National Power Corporation shall pay to plaintiff the sum of P7,277.45, representing the
amount due to plaintiff for the services of one of plaintiff's supervisors;
2. The defendant shall pay plaintiff the value of the line materials which were stolen but recovered, by
plaintiff's agency which value is to be determined after a joint inventory by the representatives of both parties;
3. The parties shall continue with the contract of security services under the same terms and conditions as
the previous contract effective upon the signing thereof.
x x x
On May 14, 1982, the NPC executed another contract for security services with Josette L. Roxas whose relationship
to Daniel is not shown. At any rate Daniel has owned the contract. The NPC refused to implement the new contract
for which reason Daniel filed a Motion for Execution in the aforesaid civil case which had been re-numbered R-82-
10787.
Acting on the motion for execution dated July 14, 1982, visibly over the objection and/or opposition to the motion
for execution dated July 19, 1982, the Court, considering that the decision of October 30, 1981 was based on a
Compromise Agreement entered into by and between the parties which decidedly, become final and executory, is
inclined to grant said action.
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

The NPC assails the Order on the ground that it directs execution of a contract which had been novated by that of
May 14, 1982. Upon the other hand, Roxas claims that said contract was executed precisely to implement the
compromise agreement for which reason there was no novation.
ISSUE: Whether or not there was a novation when the parties executed the contract dated May 14, 1982
HELD:
The Court sustain the private respondent. Article I of the May 14, 1982, agreement supports his contention. Said
article reads: t.hqw
ARTICLE I
DOCUMENTS COMPRISING THE CONTRACT
The letter proposal dated September 5, 1981; CORPORATION'S counter- proposal dated September 11, 1981;
Board Resolution No. 81-244 dated September 28, 1981; the Compromise Agreement and Court Decision dated
October 30, 1981 in Civil Case No. 133528 CFI-Manila; other subsequent letters and the performance bond of
AGENCY to be flied in favor of CORPORATION in the manner hereinafter provided, are hereby expressly made
integral parts of this contract by reference. (Rollo, pp. 59-60.)
It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest
incompatibility between the old and the new obligations in every aspect. Thus the Civil Code provides:
Art. 1292. In order that an obligation may be extinguished by another which substitutes 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.
In the case at bar there is nothing in the May 14, 1982, agreement which supports the petitioner's contention.
There is neither explicit novation nor incompatibility on every point between the "old" and the "new" agreements.
WHEREFORE, the petition is denied for lack of merit with costs against the petitioner.
G.R. No. L-41117 December 29, 1986
INTEGRATED CONSTRUCTION SERVICES, INC., and ENGINEERING CONSTRUCTION, INC., petitioners, vs.THE
HONORABLE LORENZO RELOVA, as Judge of the Court of First Instance of Manila, and METROPOLITAN
WATERWORKS & SEWERAGE SYSTEM, respondents.
PARAS, J.:
Facts: Petitioners on July 17, 1970 sued the respondent Metropolitan Waterworks and Sewerage System (MWSS),
formerly the National Waterworks and Sewerage Authority (NAWASA), in the Court of First Instance of Manila for
breach of contract, docketed as Civil Case No. 80390 in that Court. Meanwhile, the parties submitted the case to
arbitration.
The Arbitration Board, after extensive hearings, rendered its decision-award on August 11, 1972. Respondent
Judge confirmed the Award on September 9, 1972 and the same has long since become final and executory.
The decision-award ordered MWSS to pay petitioners P15,518,383.61-less P2,329,433.41, to be set aside as a trust
fund to pay creditors of the joint venture in connection with the projector a net award of P13,188,950.20 with
interest thereon from the filing of the complaint until fully paid.
Subsequently, however, petitioners agreed to give MWSS some discounts in consideration of an early payment of
the award. Thus, on September 21, 1972, MWSS adopted Board Resolution No. 132-72, embodying the terms and
conditions of their agreement. On October 2, 1972, MWSS sent a letter-agreement to petitioners, quoting Board
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

Resolution No. 13272, granting MWSS some discounts from the amount payable under the decision award
(consisting of certain reductions in interests, in the net principal award and in the trust fund), provided that MWSS
would pay the judgment, less the said discounts, within fifteen days therefrom or up to October 17, 1972. MWSS,
however, paid only on December 22, 1972, the amount stated in the decision but less the reductions provided for
in the October 2, 1972 letter-agreement.
Three years thereafter, or on June, 1975, after the last balance of the trust fund had been released and used to
satisfy creditors' claims, the petitioners filed a motion for execution in said civil case against MWSS for the balance
due under the decision-award. Respondent MWSS opposed execution setting forth the defenses of payment and
estoppel. (p. 174, Rollo)
On July 10, 1975, respondent judge denied the motion for execution on the ground that the parties had novated the
award by their subsequent letter-agreement.
ISSUE: Whether or not there is novation and whether it will render the initial judgement unenforceable.
HELD: While the tenor of the subsequent letter-agreement in a sense novates the judgment award there being a
shortening of the period within which to pay (Kabangkalan Sugar Co. vs. Pacheco, 55 Phil. 555), the suspensive and
conditional nature of the said agreement (making the novation conditional) is expressly acknowledged and
stipulated in the 14th whereas clause of MWSS' Resolution No. 132-72.
MWSS' failure to pay within the stipulated period removed the very cause and reason for the agreement, rendering
some ineffective. Petitioners, therefore, were remitted to their original rights under the judgment award.
G.R. No. L-47369 June 30, 1987
JOSEPH COCHINGYAN, JR. and JOSE K. VILLANUEVA, petitioners,
vs.
R & B SURETY AND INSURANCE COMPANY, INC., respondent.
FACTS: In November 1963, Pacific Agricultural Suppliers, Inc. (PAGRICO) was granted an increase in its line of
credit from P400,000.00 to P800,000.00 (the "Principal Obligation"), with the Philippine National Bank (PNB).
PAGRICO submitted Surety Bond No, issued by the respondent R & B Surety and Insurance Co., Inc. (R & B Surety")
in the amount of P400,000.00 in favor of the PNB. In consideration of R & B Surety's issuance of the Surety Bond,
two identical indemnity agreements were entered into with R & B Surety executed by the Catholic Church Mart
(CCM) and by petitioner Joseph Cochingyan, Jr, and (b) another agreement dated 24 December 1963 was executed
by PAGRICO.
When PAGRICO failed to comply with its Principal Obligation to the PNB, the PNB demanded payment from R & B
Surety of the sum of P400,000.00, the full amount of the Principal Obligation. R & B Surety made a series of
payments to PNB by virtue of that demand totalling P70,000.00 evidenced by detailed vouchers and receipts.
R & B Surety in turn sent formal demand letters to petitioners Joseph Cochingyan, Jr. and Jose K. Villanueva for
reimbursement of the payments made by it to the PNB and for a discharge of its liability to the PNB under the
Surety Bond. When petitioners failed to heed its demands, R & B Surety brought suit against Joseph Cochingyan, Jr.,
Jose K. Villanueva and Liu Tua Ben.
ISSUES: Whether the Trust Agreement extended the term of the Surety Bond so as to release petitioners from their
obligation as indemnitors thereof as they did not give their consent to the execution of the Trust Agreement; and
HELD: The Indemnity Agreement speaks of the several indemnitors "apply[ing] jointly and severally (in solidum)
to the R & B Surety] to become SURETY upon a SURETY BOND demanded by and in favor of [PNB] in the sum of
[P400,000.00] for the faithful compliance of the terms and conditions set forth in said SURETY BOND ." This part
Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

of the Agreement suggests that the indemnitors (including the petitioners) would become co-sureties on the
Security Bond in favor of PNB.
The record, however, is bereft of any indication that the petitioners-indemnitors ever in fact became co-sureties of
R & B Surety vis-a-vis the PNB. The petitioners, so far as the record goes, remained simply indemnitors bound to R
& B Surety but not to PNB, such that PNB could not have directly demanded payment of the Principal Obligation
from the petitioners. Thus, we do not see how Article 2079 of the Civil Code-which provides in part that "[a]n
extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty"
could apply in the instant case.
The petitioner-indemnitors are, as, it were, second-tier parties so far as the PNB was concerned and any extension
of time granted by PNB to any of the first-tier obligators (PAGRICO, R &B Surety and the trustors[s]) could not
prejudice the second-tier parties.
The theory behind Article 2079 is that an extension of time given to the principal debtor by the creditor without
the surety of his right to pay the creditor and to be immediately subrogate ed to the creditor's remedies against the
principal debtor upon the original maturity date. The surety is said to be entitled to protect himself against the
principal debtor upon the orginal maturity date. The surety is said to be entitled to protect himself against the
contingency of the principal debtor or the indemnitors becoming insolvent during the extended period

Balila vs People
Facts: Amicable settlement of this dispute was arrived at and made basis of decision of the trial court. Defendants
admitted having sold under a pacto de retro sale the parcels of land described in the complaint in the amount of
P84,000.00 and that they hereby promise to pay the said amount within the period of four months but not later
than May 15, 1981. Subsequently, private respondent Guadalupe Vda. De Del Castillo, represented by her son
Waldo del Castillo as for attorney-in-fact, accepted payments from petitioners and gave petitioners several
extensions of time to pay their remaining obligation.
Issue: Whether or not the decision of the trial court in its judgment by compromise was novated and amended by
the subsequent mutual agreements and actions of petitioners and private respondents?
Ruling: The fact therefore remains that the amount of 84,000 payable on or before May 15, 1981 decreed by the
trial court in its judgment by compromise was novated and amended by the subsequent mutual agreements and
actions of petitioners of private respondents. Petitioners paid the aforesaid amount on an installment basis and
they were given by private respondents no less than 8 extensions of time to pay their obligation. These
transactions took place during the pendency of the motion for reconsideration of the order of the trial court dated
April 26, 1983, during the pendency of the petition for certiorari before the IAC and after the filing of the petition
between. This answers the claims of the respondents on the failure of the petitioners to present evidence or proofs
of payment in the lower court and the appellate court.
Peoples Bank vs. Syvels
Facts: Action for forclosure of chattel mortgage executed in favor of the plaintiff by the defendant Syvels Inc. on its
stocks of goods, personal properties and other materials owned by it and located as its stores or warehouses. This
chattel mortgage was duly registered in Registry of deeds Manila and Pasay City, in connection with a credit
commercial line in the amount of 900k granted to Syvels; defendants Antonio and Angel V. Syyap guaranteed
absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any
indebtedness to be incurred on account of the said credit line.

Civil Law Review II Atty. Uribe
CASES FOR WEEK 6 Part 2 -GABRONINO.LOPEZ.MARCO.MENDOZA.OPLE.VENTURA.SINGSON.TOLEDO

Issue: Whether or not on the ground that by the execution of said real estate mortgage, the obligation secured by
the chattel mortgage subject of this case was novated, and therefore, appellees cause of action thereon was
extinguished?
Ruling: Novation takes place when the object or principal condition of an obligation is changed or altered. It is
elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility
between the old and the new obligations in every aspect. In the case at bar, there is nothing in the Real Estate
Mortgage which supports appellants submission. The contract on its face does not show the existence of an explicit
novation nor incompatibility on every point between the old and the new agreements as the second contract
evidently indicates that the same was executed as new additional security to the chattel mortgage previously
entered into by the parties.
Records show that in the real estate mortgage, appellants agreed that the chattel mortgage shall remain in full
force and shall not be impaired by this real estate mortgage.
It is clear, therefore, that a novation was not intended. The real estate mortgage was evidently taken as additional
security for the performance of the contract.
Rodriguez vs Reyes
Facts: On July 6, 2011, the Father filed the petition for modification of child support which is at issue in this appeal.
He contended his child support obligation should be lowered because his income had been substantially reduced
since the time when the obligation was last determined. The trial judge referred the matter to General Magistrate
Yadira Pedraza, who conducted an evidentiary hearing on February 23, 2012.
At the hearing, the parties fiercely contested the issue of whether the Father had suffered a reduction in income.
The Father, who is an officer on the City of Miami Police Force, testified his income was reduced because he retired
from the Special Weapons And Tactics unit; he no longer worked in the Field Training Program or Crisis
Intervention Program; the City changed its policies to require him to deduct more from his paycheck for retirement
and certain gasoline expenses; the City cut back on overtime pay; and he was effectively prevented from working
off-duty based on new City policies. He submitted financial affidavits showing that his net monthly income fell from
$5,115.42 in 2008 to $3,985.96 in 2012.
The Mother, however, pointed to the existence of certain substantial deposits made into the Father's checking
account from sources other than the Father's paycheck. A witness also testified for the Mother that he had seen the
Father working off-duty. The Mother asserted that the deposits indicated that the Father's income was not reduced.
The Father responded that the deposits were the results of (1) transfers from his savings account; (2) money lent
to him by his father; (3) an Internal Revenue Service refund; and (4) cash that his parents received from a dry
cleaning business that they operated out of their home, which monies they deposited into the Father's account
because they were not permitted to earn money while collecting Social Security benefits.
Issue: Whether or not the buyer obligated himself to replaced the debtor in the principal obligation?
Ruling: By buying the property covered by TCT no. 48979 with notice that it was mortgaged, respondent Dualan
only undertook either to pay or else allow the lands being sold if the mortgage creditor could not or did not obtain
payment from the principal debtor when the debt matured. Nothing else. Certainly, the buyer did not obligated
himself to replaced the debtor in the principal obligation, and he could not do so in law without the creditors
consent. The obligation to discharge the mortgage indebtedness therefore, remained on the shoulders of the
original debtors and their heirs, petitioners herein, since the record is devoid of any evidence of contrary intent.