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[ G.R. No. 134465. March 24, 1999]
WONDERLAND FOOD INDUSTRIES, et al. vs. INSULAR BANK OF ASIA & AMERICA
FIRST DIVISION
Gentlemen:
Quoted hereunder, for your information is a resolution of this Court dated MAR 24, 1999.
G.R. No. 134465 (Wonderland Food Industries, Benjamin Basilio, Ofelia Basilio, Jose Basilio and Aiditha Basilio vs. Insular Bank of Asia and America [now Philippine Commercial International Bank].)
On October 22, 1982, November 11, 1982, December 17, 1982, January 4, 1983, January 17, 1983, February 9, 1983, and March 1, 1983, petitioner Wonderland Food Industries thru Benjamin Basilio, then executive vice-president and general manager of Wonderland, and Ofelia Basilio executed seven (7) trust receipts in favor of then respondent Insular Bank of Asia and America (IBAA), now merged with Philippine Commercial Industrial Bank (PCIB).
Prior thereto, on June 29, 1981, the spouses Benjamin and Ofelia Basilio and Jose and Aiditha Basilio executed a surety agreement in favor or IBAA in the amount of P1,600,000.00.
The obligation matured and petitioner Wonderland failed to pay the outstanding balance of P895,720.63 despite demand.
On July 7, 1983 and July 19, 1983, respondent IBAA sent demand letters to petitioner Wonderland and to petitioner spouses.
Upon receipt of the letters, petitioner Wonderland submitted a proposal dated February 3, 1984 for the restructuring of the loan and for an offer of additional security, which IBAA allegedly accepted. Pursuant thereto, petitioner Wonderland executed a chattel mortgage over its machinery and equipment valued at about P700,000.00 in favor of respondent.
On May 21, 1985, respondent IBAA filed a complaint for a sum of money with a prayer for the issuance of a writ of attachment against the petitioners before the RTC, Branch 145, Makati, alleging that petitioner Wonderland owes it P895,720.63 plus interest of 18% per annum from February 14, 1985 and penalty fee of 2% per month from January 7, 1985.
The RTC issued an order granting the writ of attachment.
In due course, an answer was filed which alleged, among others, that by virtue of the chattel mortgage agreement to restructure the loan, the obligation covered by the trust receipts was NOVATED.
On March 23, 1993, the RTC rendered a decision, the decretal portion of which reads:
WHEREFORE, judgment is rendered dismissing the complaint for lack of merit and declaring the restructured obligation as fully paid and, therefore extinguished.
The counterclaim of defendant is likewise dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED. 1 [Rollo, p. 49.]
The RTC ruled that the original obligation on the trust receipts was extinguished by virtue of novation.2 [Id., at 42-49.]
Believing otherwise, the Court of Appeals ruled that no novation took place because petitioner Wonderland failed to prove the validity of the alleged new contract reasoning that the "proposal" does not establish the alleged new undertaking. It likewise ruled that the promissory note allegedly issued by Benjamin Basilio as a result of the restructuring of the loan was not presented in court.
The CA decision, rendered on March 31, 1998, dispositively reads as follows:
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and a new one rendered, ordering the defendants-appellees to pay plaintiff-appellant the amount of P2,826,595.72 as of February 14, 1990, with an interest of 18% per annum until fully paid.
SO ORDERED. 3 [Id., at 38-39.]
A motion for reconsideration of the same was denied, hence, the instant petition for review on certiorari.
Here, petitioners insist that the original contract was novated when the loan was restructured and when petitioner Wonderland executed a chattel mortgage over its machinery, equipment and vehicles.
We do not agree.
As correctly held by the Court of Appeals, novation is never presumed, and in the absence of an express agreement, it takes place only when the old and new obligation are incompatible in every point.4 [Uraca v. Court of Appeals, 278 SCRA 702 [1997]; Rillo v. Court of Appeals, 274 SCRA 461 [1997]; Reyes v. Court of Appeals, 264 SCRA 35 [1996].] Novation must be established either by the express terms of the new agreement or by the acts of the parties clearly demonstrating the intent to dissolve the old obligation as a consideration for the emergence of the new one.5 [Fortune Motors (Phils.) Corporation v. Court of Appeals, 267 SCRA 653 [1997].]
Consequently, in order that novation can take place, the concurrence of the following requisites is indispensable: (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; and (4) there must be the validity of the new contract.6 [Reyes v. Court of Appeals, supra; Garcia, Jr. v. Court of Appeals, 191 SCRA 493 [1990].]
In the instant case, petitioners failed to establish the existence of the foregoing requisites. Besides, the fact (1) that the loan was allegedly restructured, that is, the period for paying the loan was extended and (2) that a chattel mortgage was executed by petitioner Wonderland for additional security, does not constitute as novation because the same does not alter the essence of the original obligation.7 [Garcia, Jr. v. Court of Appeals, supra and Du�go v. Lopena, 6 Phil. 1007 [1962].]
ACCORDINGLY, the petition is hereby DENIED.
Very truly yours,
(Sgd.) VIRGINIA ANCHETA-SORIANO
Clerk of Court
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