ROWENA R.

CABAS
Obligations and Contracts
G.R. No. 154127. December 8, 2003
Romeo C. Garcia, petitioner.

vs.
Dionisio V. Llamas, respondent.

FACTS OF THE CASE:

On December 23, 1996 Romeo Garcia and Eduardo de
Jesus borrowed 400,000.00 from Dionisio V. Llamas. On the
same day, they executed a promissory note wherein they
bound themselves jointly and severally to pay the loan on or
before Janaury 23, 1997 with a 5% interest per month. The
loan has long been overdue and despite repeated demands,
Garcia and de Jesus refused to pay the same. Garcia reasoned
out that he has no liability under the promissory note because
he signed it merely as an accommodation party for de Jesus
and alternatively, he is relieved from any liability arising from
the note inasmuch as the loan had been paid by de Jesus by
means of a check dated 17 April 1997. Garcia contended that
the issuance of the check by de Jesus and the acceptance by
Llamas novated or superseded the note. Llamas said that the
loan remained unpaid because the checks issued by de Jesus
bounced.
De Jesus mentioned in his answer that our of the
400,000.00 loan he received, only 360,000.00. was received
by him. The 40,000.00 was for the advance interest for 2
months (January to February 1997). He had paid 120,000.00
(40,000.00, the equivalent value of his leave credits,
40,000.00 as advance interest, 40,000.00 as interest for the

month of March and April 1997). He had difficulty paying the

loan and asked Llamas for time but Llamas acted in bad faith
in filing the case against them despite having agreed to accept
the benefits de Jesus would receive from his retirement.
On July 7, 1998, the Regional Trial Court of Quezon City
Branch 222 rendered judgment in favor of Llamas and against
de Jesus and Garcia ordering them to pay jointly and severally
the following sums:
1. 400,000.00 representing the principal amount
plus 5% interest thereon per month from January
23, 1997 until the same shall have been fully
paid,
less
the
amount
of
120,000.00
representing interests already paid by x x x de
Jesus;
2. 100,000.00 as attorneys fees and 2,000.00 for
each day of court appearance; and
3. Cost of the suit.
The Court of Appeals ordered the remanding of records
and presentation of evidence as against de Jesus on the
grounds that he has yet to present evidence while with respect
to Garcia, the said court rules that no novation had taken
place, thus, he is liable to Llamas in the manner stated in the
promissory note. Feeling aggrieved, he filed the appeal.

ISSUE:
1. Whether or not the Court of Appeals erred in holding
that no novation had taken place.
RULING:

No. Applying x x x, we hold that no novation took place. 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 place of the note. x x
x As the Court of Appeals 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.
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 1291 of the Civil Code states that: Obligations may
be modified by:
(1)
(2)
(3)

Changing their object or principal conditions;

Substituting the person of the debtor;
Subrogating a third person in the right of the creditor.

The petition was denied and the assailed Court of Appeals

decision affirmed with costs against the petitioner.