Yam vs. CA Express condonation must comply the forms of donation.

303 SCRA 1 Where the value exceeds Php 5,000, the donation and
acceptance must be made in writing; otherwise, void.

FACTS:

Petitioners Victor Yam and Yek Sun obtained an IGLF loan

from respondent Manphil Invest Corporation in the amount of
Php 300,000 with interest. It was secured by chattel mortgage.
On April 2, 1985, respondent was placed under receivership of
Central Bank. Petitioners paid on July 31, 1986 which was
received by Central Bank. It contained a notation on the
voucher that there was already a full payment of IGLF loan.
However, respondent filed a collection case against petitioner
after it failed to pay the remaining balance. Petitioner
contended that through respondents president, Carlos
Sobrepeas, it was agreed to condone or waive the penalties
and service charges as well as a voucher showing the full
payment of the petitioners. The trial court rendered a decision
in favor of respondents which was sustained by CA.

ISSUE:

Whether or not there was condonation on petitioners loan

HELD:

NO. The appointment of a receiver operates to suspend the

authority of a corporation and of its directors and officers over
its property and effects, such authority being reposed in the
receiver. Sobrepeas has no authority to condone the debt.
The notation on the voucher covering the check payment that
a full payment of IGLF loan was made does not bind
respondent. It would have been different if the notated
appeared in the receipt issued by the corporation through its
receiver, which would be an admission against interest.
Silahis v. IAC
Summary:
De Leon delivered to Silahis various items with the aggregate
amount of 22k. De leon filed a claim in the CFI for the said
amounts. Silahis in its answer alleged that there are
commissions which were not given to him. The lower court
confirmed the liability of Silahis for the claim of de Leon but at
the same time ordered that it be partially offset by Silahis'
counterclaim. De leon appealed, it was granted by the IAC and
reversed the lower courts decision for having no basis. W/N
compensation (by the LC) was proper. No.
It must be remembered that compensation takes place when
two persons, in their own right, are creditors and debtors to
each other. Article 1279 of the Civil Code provides that: "In
order that compensation may be proper, it is necessary: [1]
that each one of the obligors be bound principally, and that he
be at the same time a principal creditor of the other; [2] that
both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same
quality if the latter has been stated; [3] that the two debts be
due; [4] that they be liquidated and demandable; [5] that over
neither of them there be any retention or controversy,
commenced by third persons and communicated in due time
to the debtor.
Article 1279 requires, among others, that in order that legal
compensation shall take place, "the two debts be due" and
"they be liquidated and demandable." Compensation is not
proper where the claim of the person asserting the set-off
against the other is not clear nor liquidated; compensation
cannot extend to unliquidated, disputed claim existing from
breach of contract.
Undoubtedly, petitioner admits the validity of its outstanding
accounts with private respondent in the amount of P 22,213.75
as contained in its answer. But whether private respondent is
liable to pay the petitioner a 20% margin or commission on the
subject sale to Dole Philippines, Inc. is vigorously disputed.
This circumstance prevents legal compensation from taking
place.
FACTS (A2014):
On various dates in October, November and December, 1975,
Gregorio de Leon doing business under the name and style of
Mark Industrial Sales sold and delivered to Silahis Marketing
Corporation, and its president Jose Taylo various items of
merchandise covered by several invoices in the aggregate
amount of P22,213.75 payable within thirty (30) days from
date of the covering invoices.
Allegedly due to Silahis' failure to pay its account upon
maturity despite repeated demands, de Leon filed a complaint
for the collection of the said accounts including accrued
interest thereon in the amount of P661.03 and attorney's fees
of P5,000.00 plus costs of litigation.
The answer admitted the allegations of the complaint insofar
as the invoices were concerned but presented as affirmative
defenses; [a] a debit memo for P22,200.00 as unrealized profit
for a supposed commission that Silahis should have received
from de Leon for the sale of sprockets in the amount of
P111,000.00 made directly to Dole Philippines, Incorporated by
the latter sometime in August 1975; and [b] Silahis' claim that it
is entitled to return the stainless steel screen which was found
defective by its client, Borden International, Davao City, and to
have the corresponding amount cancelled from its account
with de Leon.
ISSUE:
Whether or not private respondent is liable to the petitioner for mention therein of any commitment by the latter to pay any
the commission or margin for the direct sale which the former commission to the former involving the sale of sprockets to
concluded and consummated with Dole Philippines, Dole Philippines, Inc. in the amount of P111,000.00.
Incorporated without coursing the same through herein
petitioner. Indeed, such document can be taken as self-serving with no
probative value absent a showing or at the very least an
RULING: inference, that the party sought to be bound assented to its
It must be remembered that compensation takes place when contents or showed conformity thereto. Thus the questioned
two persons, in their own right, are creditors and debtors to decision of respondent appellate court is hereby affirmed.
each other. Article 1279 of the Civil Code provides that: "In
order that compensation may be proper, it is necessary: [1]
that each one of the obligors be bound principally, and that he
be at the same time a principal creditor of the other; [2] that
both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same
quality if the latter has been stated; [3] that the two debts be
due; [4] that they be liquidated and demandable; [5] that over
neither of them there be any retention or controversy,
commenced by third persons and communicated in due time
to the debtor."

Undoubtedly, petitioner admits the validity of its outstanding

accounts with private respondent in the amount of P22,213.75
as contained in its answer. But whether private respondent is
liable to pay the petitioner a 20% margin or commission on the
subject sale to Dole Philippines, Inc. is vigorously disputed.
This circumstance prevents legal compensation from taking
place.
The Court agrees with respondent appellate court that there is
no evidence on record from which it can be inferred that there
was any agreement between the petitioner and private
respondent prohibiting the latter from selling directly to Dole
Philippines, Incorporated. Definitely, it cannot be asserted that
the debit memo was a contract binding between the parties
considering that the same, as correctly found by the appellate
court, was not signed by private respondent nor was there any
METROBANK v. TONDA
Any compromise relating to the civil liability arising from PD
115 does not automatically terminate the criminal proceeding
against or extinguish the criminal liability of the malefactor.
Facts: Spouses Joaquin G. Tonda and Ma. Cristina U. Tonda,
hereinafter referred to as the TONDA, applied for and were
granted commercial letters of credit by petitioner Metropolitan
Bank and Trust Company, hereinafter referred to as
METROBANK for a period of eight (8) months beginning June
14, 1990 to February 1, 1991 in connection with the
importation of raw textile materials to be used in the
manufacturing of garments. The TONDA acting both in their
capacity as officers of Honey Tree Apparel Corporation (HTAC)
and in their personal capacities, executed eleven (11) trust
receipts to secure the release of the raw materials to HTAC.
The imported fabrics with a principal value of P2,803,000.00
were withdrawn by HTAC under the 11 trust receipts executed
by the TONDA. Due to their failure to settle their obligations
under the trust receipts upon maturity, METROBANK through
counsel, sent a letter dated August 10, 1992, making its final
demand upon the TONDA to settle their past due TR/LC
accounts on or before August 15, 1992. They were informed
that by said date, the obligations would amount to
P4,870,499.13. Despite repeated demands therefor, the
TONDA failed to comply with their obligations stated in the
trust receipts agreements, i.e. the TONDA failed to account to
METROBANK the goods and/or proceeds of sale of the
merchandise, subject of the trust receipts. The RTC convicted
the spouses. However, the Court of Appeals citing the case of
Tan Tiong Tick vs. American Apothecaries implied that in
making the deposit, the TONDA are entitled to set off, by way
of compensation, their obligations to METROBANK on their
trust receipt liability.
Issue: Whether or not the Spouses Tonda are liable for Estafa
notwithstanding that the
Held: Compensation is not proper when one of the debts
consists in civil liability arising from a penal offense, the raison
detre for this being that if one of the debts consists in civil
liability arising from a penal offense, compensation would be
improper and inadvisable because the satisfaction of such
obligation is imperative.The handwritten note by the
METROBANK officer acknowledging receipt of the checks
amounting to P2.8 Million made no reference to the TONDA
trust receipt obligations, and we cannot presume that it was
anything more than an ordinary bank deposit. The Court of
Appeals citing the case of Tan Tiong Tick vs. American
Apothecaries implied that in making the deposit, the TONDA
are entitled to set off, by way of compensation, their
obligations to METROBANK. However, Article 1288 of the Civil
Code provides that compensation shall not be proper when
one of the debts consists in civil liability arising from a penal
offense as in the case at bar. The raison detre for this is that,
if one of the debts consists in civil liability arising from a penal
offense, compensation would be improper and inadvisable
because the satisfaction of such obligation is imperative.
Any compromise relating to the civil liability arising from an
offense does not automatically terminate the criminal
proceeding against or extinguish the criminal liability of the
malefactor. Reliance on the negotiations for the settlement of
the trust receipts obligations between the TONDA and
METROBANK is simply misplaced. The negotiations pertain
and affect only the civil aspect of the case but does not
preclude prosecution for the offense already committed. It has
been held that [a]ny compromise relating to the civil liability
arising from an offense does not automatically terminate the
criminal proceeding against or extinguish the criminal liability
of the malefactor. All told, the P2.8 Million deposit could not
be considered as having settled the trust receipts obligations
of the TONDA to the end of extinguishing any incipient criminal
culpability arising therefrom.

The mere failure to deliver the proceeds of the sale or the

goods if not sold, constitutes a criminal offense that causes
prejudice not only to another, but more to the public interest.
The finding that there was no fraud and deceit is likewise
misplaced considering that the offense is punished as a malum
prohibitum regardless of the existence of intent or malice. A
mere failure to deliver the proceeds of the sale or the goods if
not sold, constitutes a criminal offense that causes prejudice
not only to another, but more to the public interest.
COCHINGYAN VS. R & B SURETY AND INSURANCE
Joseph Cochingyan Jr. and Jose K. Villanueva, petitioners, vs.
R & B Surety and Insurance Company Inc., respondent
Ponente: Feliciano, J.
Legal Doctrine: Novation is never presumed. It is imperative
that the new obligation expressly declare that the old
obligation is thereby extinguished, or that the new obligation
be on every point incompatible with the old one.
Facts:
Pacific Agricultural Suppliers, Inc. (PAGRICO) applied for and
was granted an increase in its line of credit from P400, 000 to
P800, 000 with the Philippine National Bank (PNB). To secure
the latters approval, PAGRICO had to give a good and
sufficient bond of P400, 000 (principal obligation) to secure its
faithful compliance. PAGRICO submitted an R & B Surety
Bond in the specified amount in favor of PNB.
R & B Surety entered into two identical Indemnity Agreements
in consideration of its issuance of the surety bond. One was
executed by the Catholic Church Mart (CCM) and by petitioner
Cochingyan Jr. not only in his capacity as president of CCM,
but also in his personal capacity. The other agreement was
executed by PAGRICO, Pacific Copra Export Inc. (PACOCO),
Jose K. Villanueva and Lu Tua Ben. Villanueva signed both as
president of PACOCO and in his personal capacity. Under both
indemnity agreements, the indemnitors bound themselves
jointly and severally to R & B Surety to pay an annual premium
of P5, 103. 05 and for the compliance of the terms and
agreements set forth in the said surety bond.
When PAGRICO failed to fulfill its principal obligation to PNB,
a Trust Agreement was executed between 1) Jose and Susana
Cochingyan Sr., doing business and style of the CCM
represented by Cochingyan Jr. as Trustors, 2)
P extinguished, or that the new obligation be on every point
Tomas Besa, a PNB official, as Trustee, and 3) the PNB as
Beneficiary. Under the Trust Agreement, the Trustor undertook
to assume the obligation due in order to forestall impending
suits by PNB against R & B Surety. However, R & B Surety
made a series of payments amounting to P70, 000 when PNB
demanded payment from it the sum of P400, 000 (principal
obligation).
Hence, R & B Surety sent formal demand letters to petitioners
for reimbursement. When petitioners failed to heed its
demands, R & B Surety brought suit against them.
Issue: WON the Trust Agreement had extinguished, by
novation, the obligation of R & B Surety to the PNB under the
Surety Bond which, in turn, extinguished the obligation of the
petitioners under the Indemnity Agreements
Held: The Surety Bond was not novated by the Trust
Agreement. Both agreements can co-exist. The Trust
Agreement merely furnished to PNB another party obligor
to the principal obligation in addition to PAGRICO and R & B
Surety
Ratio:
The Trust Agreement does not expressly terminate the
obligation of R & B Surety under the Surety Bond. On the
contrary, the Trust Agreement expressly provides for the
continuing subsistence of that obligation by stipulating that the
Trust Agreement shall not in any manner release R & B Surety
from the obligation under the Surety Bond.
Petitioner cannot anchor their defense on implied novation.
Novation is never presumed. It is imperative that the new
obligation expressly declare that the old obligation is thereby
incompatible with the old one.
The Trustor (CCM) in the Trust Agreement was already
previously bound to R & B Surety under the Indemnity
Agreement. Under the Trust Agreement, CCM became directly
liable to PNB. In effect, there are now three obligors directly
and solidarily bound to PNB: PAGRICO, R & B Surety and the
Trustor.
PP
CALIFORNIA BUS LINE VS. STATE INVESTMENT
California Bus Lines, Inc., petitioner, vs. State Investment
House, Inc., respondent Ponente: Quisumbing, J.
Legal Doctrine: An obligation is not novated by an instrument
that expressly recognizes the old, changes only the terms of
payment, and adds other obligations not incompatible with the
old ones, or where the new contract merely supplements the
old one.
Facts:
1979 Delta applied for financial assistance from respondent
SIHI, a domestic corporation engaged in the business of
quasi-banking.
April 1979 to May 1980 California executed 16 promissory
notes to Delta to secure the payment of the 35 buses that
California purchased.
Oct. 7, 1981 When California defaulted on all payments due,
it entered into a restructuring agreement with Delta to cover its
obligations under the promissory notes. The restructuring
agreement provided for a new schedule of payments of
Californias past due installments, extending the period to pay,
and stipulating daily remittance instead of the previously
agreed monthly remittance of payments.
Dec. 23, 1981 Delta executed a Continuing Deed of
Assignment of Receivables in favor of SIHI as security for the
payment of its obligations to SIHI per the credit agreements.
May 3, 1982 California filed a complaint for injunction,
docketed as Civil Case No. 0023-P, to pre-empt Deltas
management takeover per restructuring agreement. Delta filed
its amended answer with applications for the issuance of a writ
of preliminary mandatory injunction to enforce the
management takeover clause and a writ of
preliminary attachment over the buses it sold to California. The
trial court granted Deltas prayer.
Sept. 15, 1983 Delta executed a Deed of Sale assigning to
SIHI 5 of the 16 promissory notes from California.
Dec. 13, 1983 SIHI sent a demand letter to California
requiring the latter to remit the payments due on the 5
promissory notes directly to it. California replied informing SIHI
of Civil Case No. 0023-P and of the fact that Delta had taken
over its management and operations.
July 24, 1984 Delta and California entered into a
compromise agreement in Civil Case No. 0023-P. Following
this, California vehemently refused to pay SIHI the value of the
5 promissory notes, contending that the compromise
agreement was in full settlement of all its obligations to Delta
including its obligations under the promissory notes.
RTC discharged California from liability on the 5 promissory
notes. It held that the restructuring agreement dated October
7, 1981, between Delta and California novated the 5
promissory notes; hence, at the time Delta assigned the 5
promissory notes to SIHI, the notes were already merged in
the restructuring agreement and cannot be enforced against
California.
CA reversed RTCs decision and held California liable for the 5
notes.
Issue: W/N the restructuring agreement between California
and Delta novated the 5 promissory notes Delta assigned to
SIHI.
Held: NO.
Ratio:
The obligation is not novated by an instrument that expressly
recognizes the old, changes only the terms of
payment, and adds other obligations not incompatible with the
old ones, or where the new contract merely supplements the
old one.
Inchausti & Co. v. Yulo: an obligation to pay a sum of money is
not novated in a new instrument wherein the old is ratified, by
changing only the term of payment and adding other
obligations not incompatible with the old one.
The restructuring agreement between Delta and California
executed on October 7, 1981, shows that the parties did not
expressly stipulate that the restructuring agreement novated
the promissory notes.
The restructuring agreement, instead of containing provisions
absolutely incompatible with the obligations of the judgment,
expressly ratifies such obligations and contains provisions for
satisfying them. There was no change in the object of the prior
obligations. The restructuring agreement merely provided for a
new schedule of payments and additional. Where the parties
to the new obligation expressly recognize the continuing
existence and validity of the old one, there can be no novation.
The restructuring agreement can stand together with the
promissory notes.
As regards the compromise agreement, having previously
assigned the 5 promissory notes to SIHI, Delta had no more
right to compromise the same.
SIHIs demand letter dated December 13, 1983, requiring
California to remit the payments directly to SIHI effectively
revoked Deltas limited right to collect in behalf of SIHI.
As a result of the assignment, Delta relinquished all its rights
to the subject promissory notes in favor of SIHI. This had the
effect of separating the 5 promissory notes from the 16
promissory notes subject of Civil Case No. 0023-P .
The compromise agreement covered the rights and obligations
only of Delta and California and only with respect to the 11
other promissory notes that remained with Delta.
Millar vs. CA (novation) the arrangement; thus, the parties executed a chattel
mortgage on the jeep. Resolution of the controversy posed by
Held: No substantial incompatibility between the mortgage the petition at bar hinges entirely on a determination of
obligation and the judgment liability of the respondent sufficient whether or not the subsequent agreement of the parties as
to justify a conclusion of implied novation. The stipulation for embodied in the deed of chattel mortgage impliedly novated
the payment of the obligation under the terms of the deed of the judgment obligation.
chattel mortgage serves only to provide an express and
specific method for its extinguishment payment in two equal
installments. The chattel mortgage simply gave the respondent
a method and more time to enable him to fully satisfy the
judgment indebtedness. The chattel mortgage agreement in no
manner introduced any substantial modification or alteration of
the judgment. Instead of extinguishing the obligation of the
respondent arising from the judgment, the deed of chattel
mortgage expressly ratified and confirmed the existence of the
same, amplifying only the mode and period for compliance by
the respondent.

The defense of implied novation requires clear and convincing

proof of complete incompatibility between the two obligations.
The law requires no specific form for an effective novation by
implication. The test is whether the two obligations can stand
together. If they cannot, incompatibility arises, and the second
obligation novates the first. If they can stand together, no
incompatibility results and novation does not take place.

Facts: Millar obtained a favorable condemning Antonio P.

Gabriel to pay him the sum of P1,746.98 with interest at 12%
per annum from the date of the filing of the complaint, the sum
of P400 as attorney's fees, and the costs of suit. The lower
court issued the writ of execution on the basis of which the
sheriff seized the respondent's Willy's Ford jeep. The
respondent, however, pleaded with the petitioner to release
the jeep under an arrangement whereby the respondent, to
secure the payment of the judgment debt, agreed to mortgage
the vehicle in favor of the petitioner. The petitioner agreed to
GARCIA VS. LLAMAS
Legal Doctrine: Novation cannot be presumed. It must
be clearly shown either by the express assent of the
parties or by the complete incompatibility between the old
and the new agreements.
Facts:
23 December 1996 - [Petitioner] Romeo Garcia and
Eduardo de Jesus borrowed P400, 000.00 from
[respondent] Dionisio Llamas. On the same day, [they]
executed a promissory note wherein they bound
themselves jointly and severally to pay the loan on or
before 23 January 1997 with a 5% interest per month;
that the loan has long been overdue and, despite
repeated demands, petitioner and de Jesus have failed
and refused to pay it; and that, by reason of the
unjustified refusal, respondent was compelled to engage
the services of counsel to whom he agreed to pay 25% of
the sum to be recovered from the petitioner and de
Jesus, plus P2,000.00 for every appearance in court.
Defense of the petitioner Garcia- Petitioner seeks to
extricate himself from his obligation as joint and solidary
debtor by insisting that novation took place, either
through the substitution of De Jesus as sole debtor or the
replacement of the promissory note by the check.
Alternatively, petitioner argues that the original obligation
was extinguished when de Jesus, who was his co-obligor,
paid the loan with the check; and that, in any event, the
issuance of the check and respondents acceptance
thereof novated or superseded the note.
Defense of de Jesus- He asserted in his Answer with
Counterclaim that out of the supposed P400,000.00 loan,
he received only P360,000.00, the P40,000.00 having
been advance interest thereon for two months, that is, for
January and February 1997; that he paid to respondents
daughter, one Nits Llamas-Quijencio, the sum of
P120,000.00 representing the peso equivalent of his
accumulated leave credits plus the advance interest, and
the interest for the months of March and April 1997; that
he had difficulty in paying the loan and had asked
respondent for an extension of time; that respondent
acted in bad faith in instituting the case, respondent
having agreed to accept the benefits he (de Jesus) would
receive for his retirement, but respondent nonetheless
filed the instant case while his retirement was being
processed;
Respondent filed a Manifestation/Motion to submit the
case for judgment on the pleadings, and asserted that
petitioners and de Jesus solidary liability under the
promissory note cannot be any clearer, and that the
check issued by de Jesus did not discharge the loan
since the check bounced. The loan remained unpaid.
RTC ruled against petitioner and De Jesus, and ordered
them to pay, jointly and severally, the respondent the
following sums, P400,000.00 plus interests less the
amount of P120,000.00 representing interests already
paid by de Jesus; plus attorneys fees plus appearance
fee for each day of court appearance, and cost of this
suit.
CA AFFIRMED, subject to the modification that the award
for attorneys fees and cost of suit is DELETED. The
portion of the judgment that pertains to Eduardo de Jesus
is SET ASIDE and VACATED. Accordingly, the case
against Eduardo de Jesus is REMANDED to RTC to
receive ex parte respondents evidence against Eduardo
de Jesus.
Issues: Whether there was novation of the obligation and
therefore extricated the petitioner from liability.
Held: There was no novation.
Ratio:
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.
Article 1293 of the Civil Code defines novation as follows:
Romeo C. Garcia, petitioner, vs. Dionisio V. Llamas,
respondent Ponente: Panganiban, J.
Art. 1293. Novation which consists substituting a new
debtor in the place of original one, may be made even
without 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 1236 and
1237.
Novation may be express or implied. It is express when
the new obligation declares in unequivocal terms that the
old obligation is extinguished. It is implied when the new
obligation is incompatible with the old one on every point.
The test of incompatibility is whether the two obligations
can stand together, each one with its own independent
existence.
In the case at bar, the parties did not unequivocally
declare that the old obligation had been extinguished by
the issuance and the acceptance of the check, or that the
check would take the place of the note. There is no
incompatibility between the promissory note and the
check. As the CA correctly observed, the check had been
issued precisely to answer for the obligation. On the one
hand, the note evidences the loan obligation; and on the
other, the check answers for it. Verily, the two can stand
together.
The petitioner has not shown that he was expressly
released from the obligation, that a third person was
substituted in his place, or that the joint and solidary
obligation was cancelled and substituted by the solitary
undertaking of De Jesus.
in the the
Neither could the payment of interests change the terms
and conditions of the obligation. Such payment was
already provided for in the promissory note and, like the
check, was totally in accord with the terms thereof.
Moreover, it must be noted that for novation to be valid
and legal, the law requires that the creditor expressly
consent to the substitution of a new debtor. Since
novation implies a waiver of the right the creditor had
before the novation, such waiver must be express. It
cannot be supposed, without clear proof, that the present
respondent has done away with his right to exact
fulfillment from either of the solidary debtors. More
important, De Jesus was not a third person to the
obligation. From the beginning, he was a joint and
solidary obligor of the P400, 0 00 loan; thus, he can be
released from it only upon its extinguishment.
Respondents acceptance of his check did not change
the person of the debtor, because a joint and solidary
obligor is required to pay the entirety of the obligation.
It must be noted that in a solidary obligation, the creditor
is entitled to demand the satisfaction of the whole
obligation from any or all of the debtors. It is up to the
former to determine against whom to enforce collection.
Having made himself jointly and severally liable with De
Jesus, petitioner is therefore liable for the entire
obligation.
Dispositive: WHEREFORE, this Petition is hereby
DENIED and the assailed Decision AFFIRMED