8/3/2019 Novation -- Valenzuela vs Kalayaan

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LUCERO, CONSUELO MARIA G.L-1104471B

SPOUSES JOSE T. VALENZUELA and GLORIA VALENZUELA, Petitioners,vs.

KALAYAAN DEVELOPMENT & INDUSTRIAL CORPORATION, Respondent.

G.R. No. 163244 June 22, 2009

Ponente: Peralta, J.

Facts: Kalayaan Development & Industrial Corporation discovered that Spouses Jose and GloriaValenzuela had occupied and built a house on a parcel of land it owned, and demanded that theyvacate said property. Upon negotiation, however, petitioners and Kalayaan entered a Contract to Sellwherein the petitioners would purchase 236 square meters of the subject property for P1,416,000 intwelve equal monthly installments. The contract further stated that upon failure to pay any of saidinstallments, petitioners would be liable for liquidated penalty at 3% a month compounded monthlyuntil fully paid. Kalayaan would also execute the deed of absolute sale onlyupon full payment.

Petitioners were only able to pay monthly installments amounting to a total of P208, 000.00.They then requested Kalayaan to issue a deed of sale for 118 square meters of the lot where theirhouse stood, arguing that since they had paid half the purchase price, or a total of P708,000.00

representing 118 square meters of the property. Kalayaan, on the other hand, sent two demandletters asking petitioners to pay their outstanding obligation including agreed penalties.Gloria Valenzuelas sister, Juliet Giron, assumed the remaining balance for the 118 square

meters of the subject property at P10,000.00 per month to Kalayaan, which the latter accepted forand in behalf of Gloria. Thereafter, Kalayaan demanded that petitioners pay their outstandingobligation, but were unheeded. Kalyaan then filed a Complaint fot the Rescission of Contract andDamages against petitioners. The RTC of Caloocan rendered a Decision in favor of Kalayaan,rescinding the contract between the parties and ordering petitioners to vacate the premises.

Petitioners sought recourse from the CA. They aver that the CA failed to see that the originalcontract between petitioners and Kalayaan was altered, changed, modified and restricted as aconsequence of the change in the person of the principal debtor (Sps. Valenzuela to Juliet). WhenKalayaan agreed to a monthly amortization of P10,000.00 per month the original contract waschanged, and that the same recognized Juliets capacity to pay and her designation as the new debtor.Nevertheless, the CA affirmed the RTC ruling.

Issue: If the original contract was novated and the principal obligation to pay for the remaining halfof the subject property was transferred from petitioners to Juliet.

Held: No. Novation is never presumed. Novation is the extinguishment of an obligation by thesubstitution or change of the obligation by a subsequent one which extinguishes or modifies the first,either by changing the object or principal conditions, or by substituting another in place of thedebtor, or by subrogating a third person in the rights of the creditor. Parties to a contract mustexpressly agree that they are abrogating their old contract in favor of a new one. In absence of anexpress agreement, novation takes place only when the old and new obligations are incompatible onevery point.

These are the indispensable requisites of novation:1) There must be a previous valid obligation;2) There must be an agreement of the parties concerned to a new contract;3) There must be the extinguishment of the old contract; and4) There must be the validity of the new contract.

In the instant case, none of the aforementioned requisites are present, as Kalayaan neveragreed to the creation of a new contract between them or Juliet. Kalayaans acceptance of the latepayments made by Juliet is, at best, an act of tolerance on part of Kalayaan that could not havemodified the contract.

The non-fulfillment by petitioners of their obligation to pay, which is a suspensive condition forthe obligation of Kalayaan to sell and deliver the title to the property, rendered the Contract to Sellineffective and without force and effect. The parties stand as if the conditional obligation had neverexisted; Kalayaan cannot be compelled to transfer ownership of the property to petitioners.