No.

28
S.C. Megaworld Construction and Development Corporation, petitioner vs.
Engr. Luis Parada, represented by Engr. Leonardo Parada of Genlite Industries, respondent
G.R. No. 183804 September 11, 2013

DOCTRINE: The settled rule is that novation is never presumed, but must be clearly and unequivocally
shown. In order for a new agreement to supersede the old one, the parties to a contract must expressly
agree that they are abrogating their old contract in favor of a new one. Thus, the mere substitution of
debtors will not result innovation, and the fact that the creditor accepts payments from a third person, who
has assumed the obligation, will result merely in the addition of debtors and not novation, and the creditor
may enforce the obligation against both debtors. If there is no agreement as to solidarity, the first and new
debtors are considered obligated jointly.

FACTS:
1. S.C. Megaworld Construction and Development Corporation (petitioner) bought electrical
lighting materials from Gentile Industries, a sole proprietorship owned by Engineer Luis Parada
(respondent), for its Read-Rite project in Laguna.
2. The petitioner Megaworld was unable to pay for the above purchase on the due date, but blamed
it on its failure to collect under its sub-contract with the Enviro Kleen Technologies, Inc. (Enviro
Kleen).
3. Megaworld was however able to persuade Enviro Kleen to agree to settle its purchase, but after
paying Parada P250,000.00 on June 2, 1999, Enviro Kleen stopped making further payments,
leaving an outstanding balance of P816,627.00.
4. Megaworld also ignored the various demands of Parada, who then filed a suit in the RTC, to
collect the balance plus damages, costs and expenses.
5. Megaworld denied liability, claiming that it was released from its indebtedness to Parada by
reason of the novation of their contract, which, it reasoned, took place when the latter accepted
the partial payment of Enviro Kleen in its behalf, and thereby acquiesced to the substitution of
Enviro Kleen as the new debtor in Megaworld’s place.
6. RTC ruled in favor of Parada: No novation has taken place. Megaworld must pay the principal
obligation due to Parada.
7. The CA concurred with the RTC decision that there was no novation. The CA noted that there is
nothing in the 2 letters of the Parada to Enviro Kleen, dated April 14, 1999 and June 16, 1999,
which would imply that he consented to the alleged novation, and, particularly, that he intended
to release Megaworld from its primary obligation to pay him for its purchase of lighting
materials. The CA cited the RTC’s finding that Parada informed Enviro Kleen in his first letter
that he had served notice to Megaworld that he would take legal action against it for its overdue
account, and that he retained his option to pull out the lighting materials and Megaworld for any
damage they might sustain during the pull-out.
8. The CA concurred with the RTC that by retaining his option to seek satisfaction from
Megaworld, any acquiescence which Parada had made was limited to merely accepting Enviro
Kleen as an additional debtor from whom he could demand payment, but without releasing
Megaworld as the principal debtor from its debt to him.

ISSUE: Whether or not a novation of the contract had taken place when Parada accepted the partial
payment of Enviro Kleen in Megaworld’s behalf.

HELD: No.
Novation is never presumed but must be clearly and unequivocally shown.
Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by
substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the
creditor. It is "the substitution of a new contract, debt, or obligation for an existing one between the same
or different parties." Article 1293 of the Civil Code defines novation as follows: Art. 1293. Novation
which consists in substituting a new debtor in the place of the original one, may be made even without the
knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him rights mentioned in Articles 1236and 1237.
Thus, in order to change the person of the debtor, the former debtor must be expressly released from the
obligation, and the third person or new debtor must assume the former’s place in the contractual relation.
Article 1293 speaks of substitution of the debtor, which may either be in the form of expromision or
delegacion, as seems to be the case here. In both cases, the old debtor must be released from the
obligation, otherwise, there is no valid novation. As explained in Garcia vs. Llamas (2003): In general,
there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In
expromision, the initiative for the change does not come from—and may even be made without the
knowledge of—the debtor, since it consists of a third person’s assumption of the obligation. As such, it
logically requires the consent of the third person and the creditor. In delegacion, the debtor offers, and the
creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the
consent of these three persons are necessary. Both modes of substitution by the debtor require the consent
of the creditor.

No. 31 FIRST UNITED CONSTRUCTORS CORPORATION and BLUE

STARCONSTRUCTION CORPORATION, Petitioners,

vs.

BAYANIHAN AUTOMOTIVE CORPORATION, Respondent.

G.R. No. 164985 January 15, 2014

PONENTE: Bersamin, J.

TOPIC: Compensation

FACTS:

Petitioner FUCC and petitioner Blue Star were associate construction firms
sharing financial resources, equipment and technical personnel on a case-to-case basis.
From May 27, 1992 to July 8, 1992, they ordered six units of dump trucks from
respondent Bayanihan.

On September 19, 1992, FUCC ordered from the respondent one unit of Hino
Prime Mover that the respondent delivered on the same date. On September 29, 1992,
FUCC again ordered from the respondent one unit of Isuzu Transit Mixer that was also
delivered to the petitioners. For the two purchases, FUCC partially paid in cash, and the
balance through post-dated checks.

Upon presentment of the checks for payment, the respondent learned that
FUCC had ordered the payment stopped. The respondent immediately demanded the
full settlement of their obligation from the petitioners, but to no avail. Instead, the
petitioners informed the respondent that they were withholding payment of the checks
due to the breakdown of one of the dump trucks they had earlier purchased from
respondent, specifically the second dump truck delivered on May 27, 1992.

Due to the refusal to pay, the respondent commenced this action for collection
on April 29, 1993, seeking payment of the unpaid balance in the amount of P735,000.00
represented by the two checks.
 Petitioners averred that they had stopped the payment on the two checks worth
P735,000.00 because of the respondent’s refusal to repair the second dump truck; and
that they had informed the respondent of the defects in that unit but the respondent had
refused to comply with its warranty, compelling them to incur expenses for the repair
and spare parts. They prayed that the respondent return the price of the defective dump
truck worth P830,000.00 minus the amounts of their two checks worth P735,000.00,
with 12% per annum interest on the difference of P90,000.00 from May 1993 until the
same is fully paid; that the respondent should also reimburse them the sum of
P247,950.00 as their expenses for the repair of the dump truck, with 12% per annum
interest from December 16, 1992, the date of demand, until fully paid

ISSUE:

Whether or not petitioners could avail themselves of legal compensation.

HELD:

YES. As to whether petitioners could avail themselves of compensation, both the

RTC and CA ruled that they could not because the claims of petitioners against respondent
were not liquidated and demandable. The Court cannot uphold the CA and the RTC.

A debt is liquidated when its existence and amount are determined. Accordingly, an
unliquidated claim set up as a counterclaim by a defendant can be set off against the
plaintiff’s claim from the moment it is liquidated by judgment. Article 1290 of the Civil
Code provides that when all the requisites mentioned in Article 1279 of the Civil Code
are present, compensation takes effect by operation of law, and extinguishes both debts
to the concurrent amount. With petitioners’ expenses for the repair of the dump truck
being already established and determined with certainty by the lower courts, it follows
that legal compensation could take place because all the requirements were present.
Hence, the amount of P71,350.00 should be set off against petitioners’ unpaid obligation
of P735,000.00, leaving a balance of P663,650.00, the amount petitioners still owed to
respondent.

G.R. No. 208802 October 14, 2015

G.V. FLORIDA TRANSPORT, INC., v HEIRS OF ROMEO L. BATTUNG, JR.,

represented by ROMEO BATTUNG, SR.,

PERLAS- BERNABE J.:

FACTS: The case started on a shooting incident wherein the victim Battung, was shot by a co-
passenger while riding the petitioner’s bus on a trip going to Manila. While on their way, the bus
driver stopped the vehicle, alighted and checked the tires. It is at this moment when a co- passenger
shot the victim who was sitting at the first row and immediately went down the bus. The conductor,
after seeing what happened, informed the driver and they immediately brought Battung to the
hospital but was declared dead on arrival. Hence, a complaint was filed by the respondents against
the driver, conductor and the petitioner corporation for civil liability alleging breach on the contract
of carriage on the part of the latter thereby causing the death of Battung. The respondents alleged
that being a common carrier, the petitioner is bound to observe extraordinary care and diligence in
ensuring the safety of passenger. The RTC ruled in favor of the respondents and affirmed by the
CA. Hence, this appeal.
ISSUE: Whether or not the diligence required in the case at bar is extraordinary diligence.

HELD: NO. Since Battung’s death was caused by a co-passenger, the applicable provision
is Article 1763 of the Civil Code, which states that “a common carrier is responsible for
injuries suffered by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier’s employees through the exercise
of the diligence of a good father of a family could have prevented or stopped the act or
omission.” Notably, for this obligation, the law provides a lesser degree of diligence, i.e.,
diligence of a good father of a family, in assessing the existence of any culpability on the
common carrier’s part.