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FIRST DIVISION 873, the complaint alleged that on 23

December 1996[,] [petitioner and de Jesus]


[G.R. No. 154127. December 8, 2003] borrowed P400,000.00 from [respondent];
ROMEO C. GARCIA, petitioner, vs. DIONISIO that, on the same day, [they] executed a
V. LLAMAS, respondent. promissory note wherein they bound
themselves jointly and severally to pay the
DECISION
loan on or before 23 January 1997 with a
PANGANIBAN, J.: 5% interest per month; that the loan has
Novation cannot be presumed. It must be long been overdue and, despite repeated
clearly shown either by the express assent demands, [petitioner and de Jesus] have
of the parties or by the complete failed and refused to pay it; and that, by
incompatibility between the old and the reason of the[ir] unjustified refusal,
new agreements. Petitioner herein fails to [respondent] was compelled to engage the
show either requirement convincingly; services of counsel to whom he agreed to
hence, the summary judgment holding him pay 25% of the sum to be recovered from
liable as a joint and solidary debtor stands. [petitioner and de Jesus], plus P2,000.00 for
every appearance in court. Annexed to the
The Case
complaint were the promissory note above-
Before us is a Petition for Review under mentioned and a demand letter, dated 02
Rule 45 of the Rules of Court, seeking to May 1997, by [respondent] addressed to
nullify the November 26, 2001 Decision and [petitioner and de Jesus].
the June 26, 2002 Resolution of the Court of
“Resisting the complaint, [Petitioner
Appeals (CA) in CA-GR CV No. 60521. The
Garcia,] in his [Answer,] averred that he
appellate court disposed as follows:
assumed no liability under the promissory
“UPON THE VIEW WE TAKE OF THIS note because he signed it merely as an
CASE, THUS, the judgment appealed from, accommodation party for x x x de Jesus;
insofar as it pertains to [Petitioner] Romeo and, alternatively, that he is relieved from
Garcia, must be, as it hereby is, any liability arising from the note inasmuch
AFFIRMED, subject to the modification as the loan had been paid by x x x de Jesus
that the award for attorney’s fees and cost by means of a check dated 17 April 1997;
of suit is DELETED. The portion of the and that, in any event, the issuance of the
judgment that pertains to x x x Eduardo de check and [respondent’s] acceptance
Jesus is SET ASIDE and VACATED. thereof novated or superseded the note.
Accordingly, the case against x x x Eduardo
“[Respondent] tendered a reply to
de Jesus is REMANDED to the court of
[Petitioner] Garcia’s answer, thereunder
origin for purposes of receiving ex parte
asserting that the loan remained unpaid for
[Respondent] Dionisio Llamas’ evidence
the reason that the check issued by x x x
against x x x Eduardo de Jesus.”
de Jesus bounced, and that [Petitioner]
The challenged Resolution, on the other Garcia’s answer was not even accompanied
hand, denied petitioner’s Motion for by a certificate of non-forum shopping.
Reconsideration. Annexed to the reply were the face of the
The Antecedents check and the reverse side thereof.
The antecedents of the case are narrated “For his part, x x x de Jesus asserted in his
by the CA as follows: [A]nswer with [C]ounterclaim that out of
the supposed P400,000.00 loan, he
“This case started out as a complaint for received only P360,000.00, the P40,000.00
sum of money and damages by x x x having been advance interest thereon for
[Respondent] Dionisio Llamas against x x x two months, that is, for January and
[Petitioner] Romeo Garcia and Eduardo de February 1997; that[,] in fact[,] he paid the
Jesus. Docketed as Civil Case No. Q97-32- sum of P120,000.00 by way of interests;
that this was made when [respondent’s] issued by de Jesus did not discharge the
daughter, one Nits Llamas-Quijencio, loan since the check bounced.”
received from the Central Police District On July 7, 1998, the Regional Trial Court
Command at Bicutan, Taguig, Metro Manila (RTC) of Quezon City (Branch 222) disposed
(where x x x de Jesus worked), the sum of of the case as follows:
P40,000.00, representing the peso
equivalent of his accumulated leave “WHEREFORE, premises considered,
credits, another P40,000.00 as advance judgment on the pleadings is hereby
interest, and still another P40,000.00 as rendered in favor of [respondent] and
interest for the months of March and April against [petitioner and De Jesus], who are
1997; that he had difficulty in paying the hereby ordered to pay, jointly and
loan and had asked [respondent] for an severally, the [respondent] the following
extension of time; that [respondent] acted sums, to wit:
in bad faith in instituting the case, ‘1) P400,000.00 representing the
[respondent] having agreed to accept the principal amount plus 5% interest thereon
benefits he (de Jesus) would receive for his per month from January 23, 1997 until the
retirement, but [respondent] nonetheless same shall have been fully paid, less the
filed the instant case while his retirement amount of P120,000.00 representing
was being processed; and that, in defense interests already paid by x x x de Jesus;
of his rights, he agreed to pay his counsel ‘2) P100,000.00 as attorney’s fees
P20,000.00 [as] attorney’s fees, plus plus appearance fee of P2,000.00 for each
P1,000.00 for every court appearance. day of [c]ourt appearance, and;
“During the pre-trial conference, x x x de ‘3) Cost of this suit.’”
Jesus and his lawyer did not appear, nor did
they file any pre-trial brief. Neither did Ruling of the Court of Appeals
[Petitioner] Garcia file a pre-trial brief, and The CA ruled that the trial court had erred
his counsel even manifested that he would when it rendered a judgment on the
no [longer] present evidence. Given this pleadings against De Jesus. According to
development, the trial court gave the appellate court, his Answer raised
[respondent] permission to present his genuinely contentious issues. Moreover, he
evidence ex parte against x x x de Jesus; was still required to present his evidence
and, as regards [Petitioner] Garcia, the trial ex parte. Thus, respondent was not ipso
court directed [respondent] to file a motion facto entitled to the RTC judgment, even
for judgment on the pleadings, and for though De Jesus had been declared in
[Petitioner] Garcia to file his comment or default. The case against the latter was
opposition thereto. therefore remanded by the CA to the trial
“Instead, [respondent] filed a [M]otion to court for the ex parte reception of the
declare [Petitioner] Garcia in default and to former’s evidence.
allow him to present his evidence ex parte. As to petitioner, the CA treated his case as
Meanwhile, [Petitioner] Garcia filed a a summary judgment, because his Answer
[M]anifestation submitting his defense to a had failed to raise even a single genuine
judgment on the pleadings. Subsequently, issue regarding any material fact.
[respondent] filed a [M]anifestation/
The appellate court ruled that no novation
[M]otion to submit the case for judgment
-- express or implied -- had taken place
on the pleadings, withdrawing in the
when respondent accepted the check from
process his previous motion. Thereunder,
De Jesus. According to the CA, the check
he asserted that [petitioner’s and de Jesus’]
was issued precisely to pay for the loan
solidary liability under the promissory note
that was covered by the promissory note
cannot be any clearer, and that the check
jointly and severally undertaken by
petitioner and De Jesus. Respondent’s
acceptance of the check did not serve to the Philippine National
make De Jesus the sole debtor because, Police will answer for said
first, the obligation incurred by him and obligation.
petitioner was joint and several; and, “II
second, the check -- which had been
intended to extinguish the obligation -- Whether or not the Honorable Court of
bounced upon its presentment. Appeals seriously erred in not holding that
the defense of petitioner that he was
Hence, this Petition. merely an accommodation party, despite
Issues the fact that the promissory note provided
Petitioner submits the following issues for for a joint and solidary liability, should have
our consideration: been given weight and credence
considering that subsequent events
“I showed that the principal obligor was in
Whether or not the Honorable Court of truth and in fact x x x de Jesus, as
Appeals gravely erred in not holding that evidenced by the foregoing circumstances
novation applies in the instant case as x x x showing his assumption of sole liability
Eduardo de Jesus had expressly assumed over the loan obligation.
sole and exclusive liability for the loan “III
obligation he obtained from x x x
Respondent Dionisio Llamas, as clearly Whether or not judgment on the pleadings
evidenced by: or summary judgment was properly availed
of by Respondent Llamas, despite the fact
a) Issuance by x x x de that there are genuine issues of fact, which
Jesus of a check in the Honorable Court of Appeals itself
payment of the full admitted in its Decision, which call for the
amount of the loan of presentation of evidence in a full-blown
P400,000.00 in favor of trial.”
Respondent Llamas,
although the check Simply put, the issues are the following: 1)
subsequently bounced[;] whether there was novation of the
obligation; 2) whether the defense that
b) Acceptance of the petitioner was only an accommodation
check by the x x x party had any basis; and 3) whether the
respondent x x x which judgment against him -- be it a judgment
resulted in [the] on the pleadings or a summary judgment --
substitution by x x x de was proper.
Jesus or [the superseding
of] the promissory note; The Court’s Ruling

c) x x x de Jesus having The Petition has no merit.


paid interests on the loan First Issue:
in the total amount of Novation
P120,000.00; Petitioner seeks to extricate himself from
d) The fact that his obligation as joint and solidary debtor
Respondent Llamas by insisting that novation took place, either
agreed to the proposal of through the substitution of De Jesus as sole
x x x de Jesus that due to debtor or the replacement of the
financial difficulties, he promissory note by the check.
be given an extension of Alternatively, the former argues that the
time to pay his loan original obligation was extinguished when
obligation and that his the latter, who was his co-obligor, “paid”
retirement benefits from the loan with the check.
The fallacy of the second (alternative) changing the object or the principal
argument is all too apparent. The check conditions, referred to as objective or real
could not have extinguished the obligation, novation; or by substituting the person of
because it bounced upon presentment. By the debtor or subrogating a third person to
law, the delivery of a check produces the the rights of the creditor, an act known as
effect of payment only when it is encashed. subjective or personal novation. For
We now come to the main issue of whether novation to take place, the following
novation took place. requisites must concur:

Novation is a mode of extinguishing an 1) There must be a previous valid


obligation by changing its objects or obligation.
principal obligations, by substituting a new 2) The parties concerned must agree to
debtor in place of the old one, or by a new contract.
subrogating a third person to the rights of 3) The old contract must be
the creditor. Article 1293 of the Civil Code extinguished.
defines novation as follows:
4) There must be a valid new contract.
“Art. 1293. Novation which consists in
substituting a new debtor in the place of Novation may also be express or implied. It
the original one, may be made even is express when the new obligation
without the knowledge or against the will of declares in unequivocal terms that the old
the latter, but not without the consent of obligation is extinguished. It is implied
the creditor. Payment by the new debtor when the new obligation is incompatible
gives him rights mentioned in articles 1236 with the old one on every point. The test of
and 1237.” incompatibility is whether the two
obligations can stand together, each one
In general, there are two modes of with its own independent existence.
substituting the person of the debtor: (1)
expromision and (2) delegacion. In Applying the foregoing to the instant case,
expromision, the initiative for the change we hold that no novation took place.
does not come from -- and may even be The parties did not unequivocally declare
made without the knowledge of -- the that the old obligation had been
debtor, since it consists of a third person’s extinguished by the issuance and the
assumption of the obligation. As such, it acceptance of the check, or that the check
logically requires the consent of the third would take the place of the note. There is
person and the creditor. In delegacion, the no incompatibility between the promissory
debtor offers, and the creditor accepts, a note and the check. As the CA correctly
third person who consents to the observed, the check had been issued
substitution and assumes the obligation; precisely to answer for the obligation. On
thus, the consent of these three persons the one hand, the note evidences the loan
are necessary. Both modes of substitution obligation; and on the other, the check
by the debtor require the consent of the answers for it. Verily, the two can stand
creditor. together.
Novation may also be extinctive or Neither could the payment of interests --
modificatory. It is extinctive when an old which, in petitioner’s view, also constitutes
obligation is terminated by the creation of a novation -- change the terms and
new one that takes the place of the conditions of the obligation. Such payment
former. It is merely modificatory when the was already provided for in the promissory
old obligation subsists to the extent that it note and, like the check, was totally in
remains compatible with the amendatory accord with the terms thereof.
agreement. Whether extinctive or Also unmeritorious is petitioner’s argument
modificatory, novation is made either by that the obligation was novated by the
substitution of debtors. In order to change be released from it only upon its
the person of the debtor, the old one must extinguishment. Respondent’s acceptance
be expressly released from the obligation, of his check did not change the person of
and the third person or new debtor must the debtor, because a joint and solidary
assume the former’s place in the relation. obligor is required to pay the entirety of the
Well-settled is the rule that novation is obligation.
never presumed. Consequently, that which It must be noted that in a solidary
arises from a purported change in the obligation, the creditor is entitled to
person of the debtor must be clear and demand the satisfaction of the whole
express. It is thus incumbent on petitioner obligation from any or all of the debtors. It
to show clearly and unequivocally that is up to the former to determine against
novation has indeed taken place. whom to enforce collection. Having made
In the present case, petitioner has not himself jointly and severally liable with De
shown that he was expressly released from Jesus, petitioner is therefore liable for the
the obligation, that a third person was entire obligation.
substituted in his place, or that the joint Second Issue:
and solidary obligation was cancelled and Accommodation Party
substituted by the solitary undertaking of
De Jesus. The CA aptly held: Petitioner avers that he signed the
promissory note merely as an
“x x x. Plaintiff’s acceptance of the bum accommodation party; and that, as such,
check did not result in substitution by de he was released as obligor when
Jesus either, the nature of the obligation respondent agreed to extend the term of
being solidary due to the fact that the the obligation.
promissory note expressly declared that
the liability of appellants thereunder is joint This reasoning is misplaced, because the
and [solidary.] Reason: under the law, a note herein is not a negotiable instrument.
creditor may demand payment or The note reads:
performance from one of the solidary “PROMISSORY NOTE
debtors or some or all of them “P400,000.00
simultaneously, and payment made by one
of them extinguishes the obligation. It “RECEIVED FROM ATTY. DIONISIO V.
therefore follows that in case the creditor LLAMAS, the sum of FOUR HUNDRED
fails to collect from one of the solidary THOUSAND PESOS, Philippine Currency
debtors, he may still proceed against the payable on or before January 23, 1997 at
other or others. x x x ” No. 144 K-10 St. Kamias, Quezon City, with
interest at the rate of 5% per month or
Moreover, it must be noted that for fraction thereof.
novation to be valid and legal, the law
requires that the creditor expressly consent “It is understood that our liability under this
to the substitution of a new debtor. Since loan is jointly and severally [sic].
novation implies a waiver of the right the “Done at Quezon City, Metro Manila this
creditor had before the novation, such 23rd day of December, 1996.”
waiver must be express. It cannot be
By its terms, the note was made payable to
supposed, without clear proof, that the
a specific person rather than to bearer or to
present respondent has done away with his
order -- a requisite for negotiability under
right to exact fulfillment from either of the
Act 2031, the Negotiable Instruments Law
solidary debtors.
(NIL). Hence, petitioner cannot avail
More important, De Jesus was not a third himself of the NIL’s provisions on the
person to the obligation. From the liabilities and defenses of an
beginning, he was a joint and solidary accommodation party. Besides, a non-
obligor of the P400,000 loan; thus, he can
negotiable note is merely a simple contract applied for by either a claimant or a
in writing and is evidence of such intangible defending party.
rights as may have been created by the On the other hand, under Section 1 of Rule
assent of the parties. The promissory note 34 of the Rules of Court, a judgment on the
is thus covered by the general provisions of pleadings is proper when an answer fails to
the Civil Code, not by the NIL. render an issue or otherwise admits the
Even granting arguendo that the NIL was material allegations of the adverse party’s
applicable, still, petitioner would be liable pleading. The essential question is whether
for the promissory note. Under Article 29 there are issues generated by the
of Act 2031, an accommodation party is pleadings. A judgment on the pleadings
liable for the instrument to a holder for may be sought only by a claimant, who is
value even if, at the time of its taking, the the party seeking to recover upon a claim,
latter knew the former to be only an counterclaim or cross-claim; or to obtain a
accommodation party. The relation declaratory relief.
between an accommodation party and the Apropos thereto, it must be stressed that
party accommodated is, in effect, one of the trial court’s judgment against petitioner
principal and surety -- the accommodation was correctly treated by the appellate court
party being the surety. It is a settled rule as a summary judgment, rather than as a
that a surety is bound equally and judgment on the pleadings. His Answer
absolutely with the principal and is deemed apparently raised several issues -- that he
an original promissor and debtor from the signed the promissory note allegedly as a
beginning. The liability is immediate and mere accommodation party, and that the
direct. obligation was extinguished by either
Third Issue: payment or novation. However, these are
Propriety of Summary Judgment not factual issues requiring trial. We quote
or Judgment on the Pleadings with approval the CA’s observations:
The next issue illustrates the usual “Although Garcia’s [A]nswer tendered some
confusion between a judgment on the issues, by way of affirmative defenses, the
pleadings and a summary judgment. Under documents submitted by [respondent]
Section 3 of Rule 35 of the Rules of Court, a nevertheless clearly showed that the issues
summary judgment may be rendered after so tendered were not valid issues. Firstly,
a summary hearing if the pleadings, Garcia’s claim that he was merely an
supporting affidavits, depositions and accommodation party is belied by the
admissions on file show that (1) except as promissory note that he signed. Nothing in
to the amount of damages, there is no the note indicates that he was only an
genuine issue regarding any material fact; accommodation party as he claimed to be.
and (2) the moving party is entitled to a Quite the contrary, the promissory note
judgment as a matter of law. bears the statement: ‘It is understood that
A summary judgment is a procedural our liability under this loan is jointly and
device designed for the prompt disposition severally [sic].’ Secondly, his claim that his
of actions in which the pleadings raise only co-defendant de Jesus already paid the loan
a legal, not a genuine, issue regarding any by means of a check collapses in view of
material fact. Consequently, facts are the dishonor thereof as shown at the dorsal
asserted in the complaint regarding which side of said check.”
there is yet no admission, disavowal or From the records, it also appears that
qualification; or specific denials or petitioner himself moved to submit the
affirmative defenses are set forth in the case for judgment on the basis of the
answer, but the issues are fictitious as pleadings and documents. In a written
shown by the pleadings, depositions or Manifestation, he stated that “judgment on
admissions. A summary judgment may be the pleadings may now be rendered
without further evidence, considering the Molino v. Security Diners International Corporation,
allegations and admissions of the parties.” 415 Phil. 587, August 16, 2001.
Petitioner’s Memorandum, p. 17; rollo, p. 104.
In view of the foregoing, the CA correctly Reyes v. CA, supra; citing Ajax Marketing and
considered as a summary judgment that Development Corporation v. CA, 248 SCRA 222,
which the trial court had issued against September 14, 1995.
Ibid.; Agro Conglomerates, Inc. v. CA, supra;
petitioner. Security Bank and Trust Company, Inc. v. Cuenca,
WHEREFORE, this Petition is hereby supra.
Ibid.
DENIED and the assailed Decision
CA Decision, p. 5; rollo, p. 45.
AFFIRMED. Costs against petitioner. Article 1293 of the Civil Code.
SO ORDERED. Babst v. CA, supra; citing Testate Estate of Mota v.
Serra, 47 Phil. 464, February 14, 1925.
Davide, Jr., C.J., (Chairman), Ynares- Article 1216 of the Civil Code provides:
Santiago, Carpio, and Azcuna, JJ., concur. “Art. 1216. The creditor may proceed against any
one of the solidary debtors or some or all of them
Rollo, pp. 11-39.
simultaneously. The demand made against one of
Id., pp. 41-46. Tenth Division. Penned by Justice them shall not be an obstacle to those which may
Renato C. Dacudao, with the concurrence of Justices
subsequently be directed against the others, so long
Ruben T. Reyes (Division chairman) and Mariano C. as the debt has not been fully collected.”
del Castillo (member).
PH Credit Corporation v. CA, 370 SCRA 155,
Rollo, pp. 48-49. November 22, 2001; Industrial Management
CA Decision, p. 6; rollo, p. 46.
International Development Corp. v. National Labor
Id., pp. 2-3 & 42-43. Relations Commission, 387 Phil. 659, May 11, 2000;
RTC Decision, p. 4; rollo, p. 68. Penned by Judge
Inciong Jr. v. CA, 327 Phil. 364, June 26, 1996. See
Eudarlio B. Valencia. also Article 1216 of the Civil Code.
Only Petitioner Garcia appealed the CA Decision. His
Inciong v. CA, 327 Phil. 364, June 26, 1996.
Petition was deemed submitted for decision on Ibid.; PH Credit Corporation v. CA, supra; Industrial
January 30, 2003, upon the Court’s receipt of
Management International Development Corp. v.
respondent’s Memorandum signed by Atty. Felipe N. National Labor Relations Commission, supra.
Egargo Jr. Petitioner’s Memorandum, which was
See Articles 1217 and 1218 of the Civil Code.
signed by Atty. Carlos G. Nery Jr., was received by Records, p. 7.
the Court on January 16, 2003.
Section 1 of the Negotiable Instruments Law
Petitioner’s Memorandum, pp. 10-11; rollo, pp. 97- provides the requisites for the negotiability of an
98. Original in upper case.
instrument, as follows:
Article 1249 of the Civil Code provides in part: “Section 1. Form of negotiable instruments. An
“The delivery of promissory notes payable to order,
instrument to be negotiable must conform to the
or bills of exchange or other mercantile documents following requirements:
shall produce the effect of payment only when they
It must be in writing and signed by the maker or
have been cashed, or when through the fault of the drawer;
creditor they have been impaired.
Must contain an unconditional promise or order to
“x x x xxx x x x” pay a sum certain in money;
Idolor v. CA, 351 SCRA 399, 407, February 7, 2001;
Must be payable on demand, or at a fixed or
Agro Conglomerates, Inc. v. CA, 348 SCRA 450, 458, determinable future time;
December 12, 2000; De Cortes v. Venturanza, 79
Must be payable to order or to bearer; and
SCRA 709, 722-723, October 28, 1977; PNB v. Where the instrument is addressed to a drawee, he
Mallari and The First Nat’l. Surety & Assurance Co.,
must be named or otherwise indicated therein with
Inc., 104 Phil. 437, 441, August 29, 1958. reasonable certainty.”
Tolentino, Civil Code of the Philippines, Vol. IV (1991
Agbayani, Commentaries and Jurisprudence on the
ed.), p. 390; De Cortes v. Venturanza, supra, p. 723. Commercial Laws of the Philippines, Vol. 1 (1992
Garcia v. Khu Yek Chiong, 65 Phil. 466, 468, March
ed.), p. 100.
31, 1938; De Cortes v. Venturanza, supra, p. 723. Spouses Gardose v. Tarroza, 352 Phil. 797, May 19,
Babst v. CA, 350 SCRA 341, January 26, 2001.
1998, citing Caneda Jr. v. CA, 181 SCRA 762,
Spouses Bautista v. Pilar Development Corporation, February 5, 1990; Prudencio v. CA, 227 Phil. 7, July
371 Phil. 533, August 17, 1999.
14, 1986.
Agro Conglomerates, Inc. v. CA, supra, pp. 458-459; Palmares v. CA, 351 Phil. 664, March 31, 1998.
Security Bank and Trust Company, Inc. v. Cuenca,
Puyat v. Zabarte, 352 SCRA 738, February 26, 2001.
341 SCRA 781, 796, October 3, 2000; Reyes v. CA, Narra Integrated Corporation v. CA, 344 SCRA 781,
332 Phil. 40, 50, November 4, 1996.
November 15, 2000.
Spouses Bautista v. Pilar Development Corporation, See §§1 and 2 of Rule 35 of the Rules of Court.
supra. See also Article 1292 of the Civil Code.
Diman v. Alumbres, 359 Phil. 796, November 27,
1998.
Ibid.
Dated February 2, 1998; records, pp. 21-22.
CA Decision, p. 5; rollo, p. 45.
Dated May 12, 1998; records, pp. 44-45.
Petitioner’s Manifestation dated May 12, 1998, p. 1;
id., p. 44.