G.R. No. 154127 December 8, 2003 ROMEO C. GARCIA, Petitioner, DIONISIO V. LLAMAS, Respondent. Panganiban, J.
G.R. No. 154127 December 8, 2003 ROMEO C. GARCIA, Petitioner, DIONISIO V. LLAMAS, Respondent. Panganiban, J.
G.R. No. 154127 December 8, 2003 ₱20,000.00 [as] attorney’s fees, plus ₱1,000.00 for every court
ROMEO C. GARCIA, petitioner, appearance.
vs. "During the pre-trial conference, x x x de Jesus and his lawyer did
DIONISIO V. LLAMAS, respondent. not appear, nor did they file any pre-trial brief. Neither did
DECISION [Petitioner] Garcia file a pre-trial brief, and his counsel even
PANGANIBAN, J.: manifested that he would no [longer] present evidence. Given this
Novation cannot be presumed. It must be clearly shown either by development, the trial court gave [respondent] permission to
the express assent of the parties or by the complete present his evidence ex parte against x x x de Jesus; and, as
incompatibility between the old and the new agreements. regards [Petitioner] Garcia, the trial court directed [respondent] to
Petitioner herein fails to show either requirement convincingly; file a motion for judgment on the pleadings, and for [Petitioner]
hence, the summary judgment holding him liable as a joint and Garcia to file his comment or opposition thereto.
solidary debtor stands. "Instead, [respondent] filed a [M]otion to declare [Petitioner]
The Case Garcia in default and to allow him to present his evidence ex
Before us is a Petition for Review1 under Rule 45 of the Rules of parte. Meanwhile, [Petitioner] Garcia filed a [M]anifestation
Court, seeking to nullify the November 26, 2001 Decision2 and the submitting his defense to a judgment on the pleadings.
June 26, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR Subsequently, [respondent] filed a [M]anifestation/[M]otion to
CV No. 60521. The appellate court disposed as follows: submit the case for judgement on the pleadings, withdrawing in
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the the process his previous motion. Thereunder, he asserted that
judgment appealed from, insofar as it pertains to [Petitioner] [petitioner’s and de Jesus’] solidary liability under the promissory
Romeo Garcia, must be, as it hereby is, AFFIRMED, subject to note cannot be any clearer, and that the check issued by de
the modification that the award for attorney’s fees and cost of suit Jesus did not discharge the loan since the check bounced."5
is DELETED. The portion of the judgment that pertains to x x x On July 7, 1998, the Regional Trial Court (RTC) of Quezon City
Eduardo de Jesus is SET ASIDE and VACATED. Accordingly, (Branch 222) disposed of the case as follows:
the case against x x x Eduardo de Jesus is REMANDED to the "WHEREFORE, premises considered, judgment on the pleadings
court of origin for purposes of receiving ex parte [Respondent] is hereby rendered in favor of [respondent] and against [petitioner
Dionisio Llamas’ evidence against x x x Eduardo de Jesus."4 and De Jesus], who are hereby ordered to pay, jointly and
The challenged Resolution, on the other hand, denied petitioner’s severally, the [respondent] the following sums, to wit:
Motion for Reconsideration. ‘1) ₱400,000.00 representing the principal amount plus
The Antecedents 5% interest thereon per month from January 23, 1997
The antecedents of the case are narrated by the CA as follows: until the same shall have been fully paid, less the
"This case started out as a complaint for sum of money and amount of ₱120,000.00 representing interests already
damages by x x x [Respondent] Dionisio Llamas against x x x paid by x x x de Jesus;
[Petitioner] Romeo Garcia and Eduardo de Jesus. Docketed as ‘2) ₱100,000.00 as attorney’s fees plus appearance fee
Civil Case No. Q97-32-873, the complaint alleged that on 23 of ₱2,000.00 for each day of [c]ourt appearance, and;
December 1996[,] [petitioner and de Jesus] borrowed ‘3) Cost of this suit.’"6
₱400,000.00 from [respondent]; that, on the same day, [they] Ruling of the Court of Appeals
executed a promissory note wherein they bound themselves The CA ruled that the trial court had erred when it rendered a
jointly and severally to pay the loan on or before 23 January 1997 judgment on the pleadings against De Jesus. According to the
with a 5% interest per month; that the loan has long been appellate court, his Answer raised genuinely contentious issues.
overdue and, despite repeated demands, [petitioner and de Moreover, he was still required to present his evidence ex parte.
Jesus] have failed and refused to pay it; and that, by reason of Thus, respondent was not ipso facto entitled to the RTC
the[ir] unjustified refusal, [respondent] was compelled to engage judgment, even though De Jesus had been declared in default.
the services of counsel to whom he agreed to pay 25% of the The case against the latter was therefore remanded by the CA to
sum to be recovered from [petitioner and de Jesus], plus the trial court for the ex parte reception of the former’s evidence.
₱2,000.00 for every appearance in court. Annexed to the As to petitioner, the CA treated his case as a summary judgment,
complaint were the promissory note above-mentioned and a because his Answer had failed to raise even a single genuine
demand letter, dated 02 May 1997, by [respondent] addressed to issue regarding any material fact.
[petitioner and de Jesus]. The appellate court ruled that no novation -- express or implied --
had taken place when respondent accepted the check from De
"Resisting the complaint, [Petitioner Garcia,] in his [Answer,] Jesus. According to the CA, the check was issued precisely to
averred that he assumed no liability under the promissory note pay for the loan that was covered by the promissory note jointly
because he signed it merely as an accommodation party for x x x and severally undertaken by petitioner and De Jesus.
de Jesus; and, alternatively, that he is relieved from any liability Respondent’s acceptance of the check did not serve to make De
arising from the note inasmuch as the loan had been paid by x x Jesus the sole debtor because, first, the obligation incurred by
x de Jesus by means of a check dated 17 April 1997; and that, in him and petitioner was joint and several; and, second, the check
any event, the issuance of the check and [respondent’s] -- which had been intended to extinguish the obligation --
acceptance thereof novated or superseded the note. bounced upon its presentment.
"[Respondent] tendered a reply to [Petitioner] Garcia’s answer, Hence, this Petition.7
thereunder asserting that the loan remained unpaid for the Issues
reason that the check issued by x x x de Jesus bounced, and that Petitioner submits the following issues for our consideration:
[Petitioner] Garcia’s answer was not even accompanied by a "I
certificate of non-forum shopping. Annexed to the reply were the Whether or not the Honorable Court of Appeals gravely erred in
face of the check and the reverse side thereof. not holding that novation applies in the instant case as x x x
Eduardo de Jesus had expressly assumed sole and exclusive
"For his part, x x x de Jesus asserted in his [A]nswer with liability for the loan obligation he obtained from x x x Respondent
[C]ounterclaim that out of the supposed ₱400,000.00 loan, he Dionisio Llamas, as clearly evidenced by:
received only ₱360,000.00, the P40,000.00 having been advance a) Issuance by x x x de Jesus of a check in payment of
interest thereon for two months, that is, for January and February the full amount of the loan of ₱400,000.00 in favor of
1997; that[,] in fact[,] he paid the sum of ₱120,000.00 by way of Respondent Llamas, although the check subsequently
interests; that this was made when [respondent’s] daughter, one bounced[;]
Nits Llamas-Quijencio, received from the Central Police District b) Acceptance of the check by the x x x respondent x x x
Command at Bicutan, Taguig, Metro Manila (where x x x de which resulted in [the] substitution by x x x de Jesus or
Jesus worked), the sum of ₱40,000.00, representing the peso [the superseding of] the promissory note;
equivalent of his accumulated leave credits, another ₱40,000.00 c) x x x de Jesus having paid interests on the loan in the
as advance interest, and still another ₱40,000.00 as interest for total amount of ₱120,000.00;
the months of March and April 1997; that he had difficulty in d) The fact that Respondent Llamas agreed to the
paying the loan and had asked [respondent] for an extension of proposal of x x x de Jesus that due to financial
time; that [respondent] acted in bad faith in instituting the case, difficulties, he be given an extension of time to pay his
[respondent] having agreed to accept the benefits he (de Jesus) loan obligation and that his retirement benefits from the
would receive for his retirement, but [respondent] nonetheless Philippine National Police will answer for said obligation.
filed the instant case while his retirement was being processed;
and that, in defense of his rights, he agreed to pay his counsel
2
"II check, or that the check would take the place of the note. There
Whether or not the Honorable Court of Appeals seriously erred in is no incompatibility between the promissory note and the check.
not holding that the defense of petitioner that he was merely an As the CA correctly observed, the check had been issued
accommodation party, despite the fact that the promissory note precisely to answer for the obligation. On the one hand, the note
provided for a joint and solidary liability, should have been given evidences the loan obligation; and on the other, the check
weight and credence considering that subsequent events showed answers for it. Verily, the two can stand together.
that the principal obligor was in truth and in fact x x x de Jesus, Neither could the payment of interests -- which, in petitioner’s
as evidenced by the foregoing circumstances showing his view, also constitutes novation18 -- change the terms and
assumption of sole liability over the loan obligation. conditions of the obligation. Such payment was already provided
"III for in the promissory note and, like the check, was totally in
Whether or not judgment on the pleadings or summary judgment accord with the terms thereof.
was properly availed of by Respondent Llamas, despite the fact
that there are genuine issues of fact, which the Honorable Court Also unmeritorious is petitioner’s argument that the obligation
of Appeals itself admitted in its Decision, which call for the was novated by the substitution of debtors. In order to change the
presentation of evidence in a full-blown trial."8 person of the debtor, the old one must be expressly released
Simply put, the issues are the following: 1) whether there was from the obligation, and the third person or new debtor must
novation of the obligation; 2) whether the defense that petitioner assume the former’s place in the relation.19 Well-settled is the rule
was only an accommodation party had any basis; and 3) whether that novation is never presumed.20 Consequently, that which
the judgment against him -- be it a judgment on the pleadings or arises from a purported change in the person of the debtor must
a summary judgment -- was proper. be clear and express.21 It is thus incumbent on petitioner to show
The Court’s Ruling clearly and unequivocally that novation has indeed taken place.
The Petition has no merit. In the present case, petitioner has not shown that he was
First Issue: expressly released from the obligation, that a third person was
Novation substituted in his place, or that the joint and solidary obligation
Petitioner seeks to extricate himself from his obligation as joint was cancelled and substituted by the solitary undertaking of De
and solidary debtor by insisting that novation took place, either Jesus. The CA aptly held:
through the substitution of De Jesus as sole debtor or the
replacement of the promissory note by the check. Alternatively, "x x x. Plaintiff’s acceptance of the bum check did not result in
the former argues that the original obligation was extinguished substitution by de Jesus either, the nature of the obligation being
when the latter, who was his co-obligor, "paid" the loan with the solidary due to the fact that the promissory note expressly
check. declared that the liability of appellants thereunder is joint and
The fallacy of the second (alternative) argument is all too [solidary.] Reason: under the law, a creditor may demand
apparent. The check could not have extinguished the obligation, payment or performance from one of the solidary debtors or
because it bounced upon presentment. By law,9 the delivery of a some or all of them simultaneously, and payment made by one of
check produces the effect of payment only when it is encashed. them extinguishes the obligation. It therefore follows that in case
We now come to the main issue of whether novation took place. the creditor fails to collect from one of the solidary debtors, he
Novation is a mode of extinguishing an obligation by changing its may still proceed against the other or others. x x x "22
objects or principal obligations, by substituting a new debtor in
place of the old one, or by subrogating a third person to the rights Moreover, it must be noted that for novation to be valid and legal,
of the creditor.10 Article 1293 of the Civil Code defines novation as the law requires that the creditor expressly consent to the
follows: substitution of a new debtor.23 Since novation implies a waiver of
"Art. 1293. Novation which consists in substituting a new debtor the right the creditor had before the novation, such waiver must
in the place of the original one, may be made even without the be express.24 It cannot be supposed, without clear proof, that the
knowledge or against the will of the latter, but not without the present respondent has done away with his right to exact
consent of the creditor. Payment by the new debtor gives him fulfillment from either of the solidary debtors.25
rights mentioned in articles 1236 and 1237."
In general, there are two modes of substituting the person of the More important, De Jesus was not a third person to the
debtor: (1) expromision and (2) delegacion. In expromision, the obligation. From the beginning, he was a joint and solidary obligor
initiative for the change does not come from -- and may even be of the ₱400,000 loan; thus, he can be released from it only upon
made without the knowledge of -- the debtor, since it consists of a its extinguishment. Respondent’s acceptance of his check did not
third person’s assumption of the obligation. As such, it logically change the person of the debtor, because a joint and solidary
requires the consent of the third person and the creditor. In obligor is required to pay the entirety of the obligation.
delegacion, the debtor offers, and the creditor accepts, a third It must be noted that in a solidary obligation, the creditor is
person who consents to the substitution and assumes the entitled to demand the satisfaction of the whole obligation from
obligation; thus, the consent of these three persons are any or all of the debtors.26 It is up to the former to determine
necessary.11Both modes of substitution by the debtor require the against whom to enforce collection.27Having made himself jointly
consent of the creditor.12 and severally liable with De Jesus, petitioner is therefore
Novation may also be extinctive or modificatory. It is extinctive liable28 for the entire obligation.29
when an old obligation is terminated by the creation of a new one
that takes the place of the former. It is merely modificatory when Second Issue: Accommodation Party
the old obligation subsists to the extent that it remains compatible Petitioner avers that he signed the promissory note merely as an
with the amendatory agreement.13 Whether extinctive or accommodation party; and that, as such, he was released as
modificatory, novation is made either by changing the object or obligor when respondent agreed to extend the term of the
the principal conditions, referred to as objective or real novation; obligation.
or by substituting the person of the debtor or subrogating a third This reasoning is misplaced, because the note herein is not a
person to the rights of the creditor, an act known as subjective or negotiable instrument. The note reads:
personal novation.14 For novation to take place, the following "PROMISSORY NOTE
requisites must concur: "₱400,000.00
1) There must be a previous valid obligation. "RECEIVED FROM ATTY. DIONISIO V. LLAMAS, the sum of
2) The parties concerned must agree to a new contract. FOUR HUNDRED THOUSAND PESOS, Philippine Currency
3) The old contract must be extinguished. payable on or before January 23, 1997 at No. 144 K-10 St.
4) There must be a valid new contract.15 Kamias, Quezon City, with interest at the rate of 5% per month or
Novation may also be express or implied. It is express when the fraction thereof.
new obligation declares in unequivocal terms that the old "It is understood that our liability under this loan is jointly and
obligation is extinguished. It is implied when the new obligation is severally [sic].
incompatible with the old one on every point.16 The test of "Done at Quezon City, Metro Manila this 23rd day of December,
incompatibility is whether the two obligations can stand together, 1996."30
each one with its own independent existence.17
Applying the foregoing to the instant case, we hold that no By its terms, the note was made payable to a specific person
novation took place. rather than to bearer or to order31 -- a requisite for negotiability
The parties did not unequivocally declare that the old obligation under Act 2031, the Negotiable Instruments Law (NIL). Hence,
had been extinguished by the issuance and the acceptance of the petitioner cannot avail himself of the NIL’s provisions on the
3
Third Issue:
Propriety of Summary Judgment or Judgment on the Pleadings
SO ORDERED.