EUSEBIO S.

MILLAR, petitioner,
vs.
THE HON. COURT OF APPEALS and ANTONIO P. GABRIEL, respondents.

FACTS:
- On February 11, 1956, petitioner Eusebio S. Millar obtained a favorable judgment from CFI
condemning private respondent Antonio P. Gabriel to pay him a sum of money.
- Petitioner moved for the issuance of writ of execution of the respondent's Willy's Ford jeep.
- However, the respondent pleaded with the petitioner to release the jeep, and just setup a mortgage
of the vehicle in favor of the petitioner.
- The mortgage fixed the amount due, and indicated the installment payment of the debt, secured
by the mortgage.
- Upon failure of the respondent to pay and several unreturned writ of execution, the sheriff levied
on certain personal properties belonging to the respondent.
- Subsequently, the respondent filed a motion to suspend the execution sale on the ground of
payment of the judgment obligation.
- The Lower Court ruled that novation had not taken place, and that the parties had executed the
chattel mortgage only "to secure or get better security for the judgment.”
- Upon petitioner’s appeal, the CA set aside the above order, and held that the subsequent
agreement of the parties impliedly novated the judgment obligation.
- It ruled that the deed of chattel mortgage stipulates the payment of the principal
obligation, as well as liquidated damages.
- Hence, the petition.

ISSUE:
- W/N the deed of chattel mortgage impliedly novated the judgment obligation.

RULING:
- NO, implied novation has not been constituted.
- In the case at bar, the ​mere reduction of the amount due does not constitute a sufficient
indictum of incompatibility​, especially in the light of (a) the explanation by the petitioner that
the reduced indebtedness was the result of the partial payments made by the respondent; and (b)
the latter's admissions bearing thereon.
- Where the new obligation merely reiterates or ratifies the old obligation, although the former
effects, but ​minor alterations or slight modifications with respect to the cause or object or
conditions ​of the latter, ​such changes do not effectuate any substantial incompatibility
between the two obligations
- Only those essential and principal changes introduced by the new obligation producing an
alteration or modification of the essence of the old obligation result in implied novation.
- In holding by the CA that the montage obligation superseded, through implied novation, the
judgment debt, ​we hold that the appellate court considered said circumstances in a way not
in accordance with law or accepted jurisprudence​.
- We see no substantial incompatibility between the mortgage obligation and the judgment
liability​ of the respondent sufficient to justify a conclusion of implied novation.
- The chattel mortgage agreement in no manner introduced any substantial modification or
alteration of the judgment.
- The ​deed of chattel agreement clearly shows that the parties agreed upon the chattel
mortgage solely to secure,​ not the payment of the reduced amount as fixed in the aforesaid deed,
but ​the payment of the judgment obligation and other incidental expenses​.
- As a security for the payment of the judgment obligation, the ​chattel mortgage agreement
effectuated no substantial alteration in the liability of 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.
- ACCORDINGLY, the decision of the Court of Appeals is SET ASIDE, and the order of the CFI
is AFFIRMED,