 They aver that the CA failed to see that the original contract between
SPOUSES JOSE T. VALENZUELA and GLORIA VALENZUELA, Petitioners,
vs.
KALAYAAN DEVELOPMENT & INDUSTRIAL CORPORATION, Respondent.
G.R. No. 163244 June 22, 2009
Ponente: Peralta, J.
Facts:
 Kalayaan Development & Industrial Corporation discovered that
Spouses Jose and Gloria Valenzuela had occupied and built a house
on a parcel of land it owned, and demanded that they vacate said
property. Upon negotiation, however, petitioners and Kalayaan
entered a Contract to Sell wherein the petitioners would purchase 236
square meters of the subject property for P1,416,000 in twelve equal
monthly installments.
 The contract further stated that upon failure to pay any of said
installments, petitioners would be liable for liquidated penalty at 3% a
month compounded monthly until fully paid. Kalayaan would also
execute the deed of absolute sale only upon full payment.
 Petitioners were only able to pay monthly installments amounting to a
total of P208, 000.00. They then requested Kalayaan to issue a deed of
sale for 118 square meters of the lot where their house stood, arguing
that since they had paid half the purchase price, or a total of
P708,000.00 representing 118 square meters of the property.
 Kalayaan, on the other hand, sent two demand letters asking
petitioners to pay their outstanding obligation including agreed
penalties.
 Gloria Valenzuela’s sister, Juliet Giron, assumed the remaining balance
for the 118 square meters of the subject property at P10,000.00 per
month to Kalayaan, which the latter accepted for and in behalf of
Gloria.
 Thereafter, Kalayaan demanded that petitioners pay their outstanding
obligation, but were unheeded. Kalayaan then filed a Complaint rthe
Rescission of Contract and Damages against petitioners.
 The RTC of Caloocan rendered a Decision in favor of Kalayaan,
rescinding the contract between the parties and ordering petitioners to
vacate the premises.
 Petitioners sought recourse from the CA.
petitioners and Kalayaan was altered, changed, modified and
restricted as a consequence of the change in the person of the
principal debtor (Sps. Valenzuela to Juliet). When Kalayaan agreed to
a monthly amortization of P10,000.00 per month the original contract
was changed, and that the same recognized Juliet’s capacity to pay
and her designation as the new debtor.
 Nevertheless, the CA affirmed the RTC ruling.
Issue: Whether or not the original contract was novated
Held: No. Novation is never presumed. Novation is the extinguishment of an
obligation by the substitution or change of the obligation by a subsequent one
which extinguishes or modifies the first, either by changing the object or
principal conditions, or by substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor.
 Parties to a contract must expressly agree that they are abrogating
their old contract in favor of a new one. In absence of an express
agreement, novation takes place only when the old and new
obligations are incompatible on every point.
 These are the indispensable requisites of novation:
A. There must be a previous valid obligation;
B. There must be an agreement of the parties concerned to a
new contract;
C. There must be the extinguishment of the old contract; and
D. There must be the validity of the new contract.
 In the instant case, none of the aforementioned requisites are present,
as Kalayaan never agreed to the creation of a new contract between
them or Juliet.
 Kalayaan’s acceptance of the late payments made by Juliet is, at
best, an act of tolerance on part of Kalayaan that could not have
modified the contract.
 The non-fulfillment by petitioners of their obligation to pay, which is a
suspensive condition for the obligation of Kalayaan to sell and deliver
the title to the property, rendered the Contract to Sell ineffective and
without force and effect.
 The parties stand as if the conditional obligation had never existed;
Kalayaan cannot be compelled to transfer ownership of the property
to petitioners.