[No. 13919-R. July 20, 1955.]
PHILIPPINE NATIONAL BANK, plaintiff and appellee, vs.SANTIAGO H. GRANADA, defendant and appellant.
Gaudencio Occeño for defendant and appellant.
Ramon B. de los Reyes and Antonio P. Ruiz for plaintiff and appellee.
SYLLABUS
OBLIGATION; EXTINGUISHMENT; NOVATION NEVER PRESUMED; EXPRESS DECLARATION TO EXTINGUISH OLD OBLIGATION NECESSARY. — In order that an obligation may be extinguished (through novation) 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 in every point incompatible with each other (Article 1204, now Article 1292, Civil Code). Novation is never presumed. The intention must clearly result from the terms of the agreement or by a full discharge of the original debt. Novation takes place only when the contracting parties expressly disclose that the object in making the new contract is to extinguish the old one, otherwise the old contract remains in force and the new one added to it, and each gives rise to an obligation still in force (Martinez vs. Cavives, 25 Phil., 581; Tiu Suico vs. Habana, 45 Phil., 707). Mere substitution of one document by another for the same debt does not constitute novation (Padilla vs. Levy Hermanos, Inc., 40 Off. Gaz., (7S), No. 11, p. 77).
DECISION
MAKALINTAL, J p:
This is an appeal by defendant Santiago H. Granada from the judgment of the Court of First Instance of Manila ordering him "to pay the plaintiff the balance of his indebtedness amounting to P29,286.07 with interest at the legal rate from the date of the filing of the complaint on February 14, 1953, until said amount is paid in full," with costs.
It appears from the evidence that on February 3, 1928 the Philippine National Bank obtained a money judgment against Santiago H. Granada in Civil Case No. 4318 of the Court of First Instance of Occidental Negros. In 1933 Granada proposed to the bank that he be allowed to pay the judgment debt gradually, as a result of which proposition a written agreement was entered into between the parties, dated April 22, 1933 (Exhibit A), whereby the account was fixed at P54,100 "to be covered by his (debtor's) non-interest bearing not payable P2,000 annually beginning April 1, 1934, and every year thereafter until his obligation is fully paid, provided that whatever balance is left at the 20th year shall be fully liquidated." (Parenthesis and underlining supplied). In the month of March 1934 defendant-appellant paid the sum of P24,714.09 by means of his shares of stock in the Binalbagan Estate and his bonus in the Binalbagan Sugar Central, leaving an admitted balance of P29,286.07. Since then no other payment was made. In 1946 the manager of the Bacolod Branch of the Philippine National Bank showed to defendant-appellant his outstanding account and on October 28 of the same year the latter wrote to the bank giving a number of reasons why he believed he "could not accept nor promise to make any partial payment" of the same (Exhibit B). Another letter of the same tenor was written by him on May 10, 1947 (Exhibit C).
On February 14, 1953 the Philippine National Bank filed the present action. In the answer of defendant-appellant to the complaint he raised two special defenses, namely: (1) that the agreement entered into by the parties on April 22, 1933 had been novated by the liquidation made in March 1934, when defendant-appellant paid the sum of P24,714.09 and when he signed, according to him, a renewal promissory note for the balance of P29,286.07; and (2) that the action had already prescribed. The same special defenses, both of which were turned down by the Court a quo in its decision, are now taken up in two of the three errors assigned by defendant-appellant in his brief. Another error assigned by him is corollary to the question of prescription and refers to the failure of the Court a quo to hold that from 1934 to February 14, 1953 plaintiff-appellee made no demand for payment upon defendant-appellant.
There is no merit in the contention that the written agreement entered into by the parties on April 22, 1933 (Exhibit A) was novated when defendant-appellant paid the sum of P24,714.09 in March 1934. In the first place it is not true that defendant-appellant was made to sign another promissory note for the balance of P29,286.07. No evidence concerning such note has been presented. What document was made at that time was in the form of a receipt stating the amount of the original indebtedness, the amount of payment made and then the outstanding balance. This was testified to by defendant-appellant himself.
But even if he did sign a promissory note for the balance of his indebtedness it does not mean that the previous obligation had been novated. The parties, debtor and creditor, were the same, and there was no change in the object or principal conditions of the obligation. (See Article 1203, now Article 1291, Civil Code.) In order that an obligation may be extinguished (through novation) 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 in every point incompatible with each other (Article 1204, now Article 1292, Civil Code). Novation is never presumed. The intention must clearly result from the terms of the agreement or by a full discharge of the original debt. Novation takes place only when the contracting parties expressly disclose that the object in making the new contract is to extinguish the old one, otherwise the old contract remains in force and the new one is added to it, and each gives rise to an obligation still in force (Martinez vs. Cavives, 25 Phil., 581; Tiu Suico vs. Habena, 45 Phil., 707). Mere substitution of one document by another for the same debt does not constitute novation (Padilla vs. Levy Hermanos, Inc., 40 Off. Gaz., (7S), No. 11, p. 77). Here, assuming that defendant-appellant had signed a promissory note in 1934 for the balance of his indebtedness, that note did not extinguish the agreement of April 22, 1933, wherein the terms of payment were expressly stipulated. Those terms, therefore, governed the manner of liquidation of the said balance. This is confirmed by defendant-appellant himself, when he testified, first, that the note he signed in 1934 did not state just when or within what time the amount covered thereby was to be paid and, secondly, that with the payment of P24,714.09 he expected the bank not to demand any other payment from him for the next ten years at least, inasmuch as the said amount was good for more than that period, at the rate of P2,000 a year, as stipulated in the agreement Exhibit A.
Now then, that agreement expressly provided that whatever balance should be outstanding after the 20th year, counted from April 1, 1934, should be fully liquidated. In other words, the debtor had until April 1, 1954 within which to pay. The amount as of that date was P29,286.07, the same as that existing after the payment made in 1934, since the debt was non-interest bearing. Inasmuch as defendant-appellant had until April 1, 1954 within which to pay, the period of prescription did not begin to run except from that date. Of course, after defendant-appellant denied liability in his two letters of October 28, 1946 and May 10, 1947, respectively, he lost the benefit of the period thus granted to him and rendered himself immediately open to an action for recovery.
Even in the hypothesis (which by the way is not discussed by the parties) that, payment by defendant-appellant under Exhibit A being in annual installments of P2,000 each installment consequently matured and became demandable at the end of every year and the period of prescription commenced to run in the same manner, the defense would still be unavailable. As stated by defendant-appellant himself the payment of P24,714.09 in 1934 was good for 10 years at least — 12 years to be accurate — so therefore the next installment did not become due until 1946. From then plaintiff-appellee had still 10 years within which to file the action, which is one upon a written contract.
With respect to the interest at the legal rate imposed by the Court a quo, the same should begin only from April 1, 1954, for until then the indebtedness was non-interest bearing, according to the terms of Exhibit A.
With the only modification above mentioned, the judgment appealed from is affirmed, with costs against defendant-appellant. So ordered.
Felix and Peña, JJ., concur.