Altered only

A valid existing obligation may be changed by any subsequent agreement between the parties which may either merely modify the prior existing obligation or extinguish the same and give rise to a new valid obligation. Under the Civil Code, this change is called novation and it may be partial when there is only a change in some principal conditions of the obligation, or total, when the obligation is completely extinguished and substituted by a new one. This case between Ria and Pepe, who are siblings, is an example of a partial novation.

The case involved an eight-door apartment belonging to their parents which was donated to Ria with the condition that during the parents’ lifetime, they shall control the property and Ria shall be the administrator thereof.

In order to renovate the apartments particularly Unit H which she intended to use as her home, Ria tried to obtain a loan from PAG-IBIG but failed. Hence Pepe offered to extend her a credit line on the conditions that Ria shall: (1) keep a record of all the advances; (2) start paying the loan upon completion of the renovation; (3) thereafter sign a loan agreement and mortgage with Pepe containing (4) the same comfortable terms/conditions which Ria could have obtained from PAG-IBIG.

After Ria accepted the terms, renovation started. However, when renovations of Units B to G were completed and renovation on Unit A was starting, an altercation broke out between Pepe and Ria. After a family meeting, the conflict was resolved as brother and sister entered into a new agreement whereby Ria was to start making monthly payments on her loan already. Ria also turned over all the records of the cash advances to Pepe upon the latter’s demand and started monthly payments of P18,700.

But five months later, when Ria had paid a total of P93,500, another quarrel ensued between siblings which even reach the Barangay where Pepe reminded Ria of her monthly payments. Apparently Ria resented such reminder and answered “kalimutan mo na ang pera mo, wala akong pinirmahan. Hindi ako natatakot sa iyo”. Thereafter, Ria left Unit H and could no longer be located. Hence, further renovations and monthly payments were discontinued. This prompted Pepe to go to court and sue Ria for recovery of a total of P3,989,802.25 plus 12 percent interest.

For her defense, Ria contended that the loan is not yet due and demandable because the suspensive condition — the completion of the apartment units—has not yet been fulfilled. Was Ria correct?

No. Evidently after the renovation of the seven out of the eight units Pepe and Ria agreed that Ria shall already start making monthly payments on the loan even if renovation on the last Unit H and Unit A was still pending. Indeed Ria began to make monthly payments for five months totaling P93,500. Hence by virtue of the subsequent agreement, the parties mutually dispensed with the condition that Ria shall only begin paying upon completion of all renovations. There was in effect a partial novation of Ria’s obligation by a change of the principal condition.

Novation is merely partial where the change brought about by any subsequent agreement is merely incidental to the main obligation (e.g., a change in the interest rates or an extension of time to pay); in this instance, the new agreement will not have the effect of extinguishing the first but would merely supplement it or supplant some but not all of its provisions.

Ria’s partial performance of her obligation by beginning monthly payments is unmistakable proof that indeed the original agreement between her and Pepe had been novated by the deletion of the condition that payment shall be made only after completion of the renovation. Hence there can be no other conclusion that Ria’s obligation is already due and demandable. Thus she has to pay the sum of P3,909,302.25 plus legal rate of interest of 12 percent per annum (Tomimbang vs. Tomimbang, G.R. 165116, August 4, 2009)

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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