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G.R. No. L-26115 November 29, 1971

CARLOS SANDICO, SR., and TEOPISTO P. TIMBOL, petitioners,

vs.
THE HONORABLE MINERVA R. INOCENCIO PIGUING, Judge of the Court of
First Instance of Pampanga, and DESIDERIO PARAS, respondents.

Facts:

Petitioners Sandico and Timbol obtained a judgment in their favor against respondent D.
Paras in an action for easement and damages. The courts awarded them the “recognition
of easement”, plus actual and exemplary damages, and attorney’s fees. The petitioners
then moved for the execution of the judgment.

Meanwhile, the petitioners and respondent reached a settlement, agreeing to the reduction
of money judgment. Respondents paid the petitioners a portion of the total sum, as
evidenced by a receipt. However, the receipt also stated that there should be a
“reconstruction of the irrigation canal”.

Subsequently, petitioners demanded compliance by the respondents with the judgment

relating to the reconstruction and reopening of the irrigation canal. The writ of execution
having been unsatisfied, the petitioners filed with the court (presided by respondent judge
Piguing) a motion to declare the respondent in contempt of court. Respondent opposed
the same, saying that he had dug a canal in its former place for the petitioners’ use; that
the digging constituted the “recognition of easement” as opposed to petitioner’s
allegation that there should be a reconstruction and reopening of the canal.

The respondent judge issued an order denying the petitioners’ motion to declare the
respondents in contempt of court, ruling that the earlier decision only ordered the
defendant to recognize the easement and the payment of damages; and that there is
nothing to show that the defendant was ordered to reconstruct the canal. Eventually, the
respondent judge stated that the agreement of the parties “novated the money judgment”.

Issue:

Whether or not the settlement of the parties after the court’s judgment novated the
obligation imposed by the judgment itself.

Held: YES (as to the payment of sum of money).

The appellate court’s judgment obliged 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. SC adjudged the respondent's judgment debt as having been fully satisfied.
SC saw no valid objection to the petitioners and the respondent entering into an
agreement regarding the monetary obligation of the latter under the judgment of the
Court of Appeals, reducing the same from P6,000 to P4,000. The payment by the
respondent of the lesser amount of P4,000, accepted by the petitioners without any
protest or objection and acknowledged by them as "in full satisfaction of the money
judgment" in civil case 1554, completely extinguished the judgment debt and released the
respondent from his pecuniary liability.

Novation results in two stipulations — one to extinguish an existing obligation, the other
to substitute a new one in its place. Fundamental it is that novation effects a substitution
or modification of an obligation by another or an extinguishment of one obligation in the
creation of another. In the case at hand, SC failed 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.

Sidenote: As to the obligation of reconstruction of irrigation canal, SC remanded the

case to lower court.