12. AGRO CONGLOMERATES, INC.

v COURT OF APPEALS  Petitioners raised the defense of novation and insisted that there was a
GR NO. 117660 valid substation of debtor, which is Wonderland.
December 18, 2000  RTC: Petitioners are liable.
By: Gayares  CA: Affirmed RTC.
Topic: Compensation; Novation.
Petitioners: Agro Conglomerates, Inc. (AC) and Mario Soriano ISSUE:
Respondents: Court of Appeals and Regent Savings and Loan Bank, Inc. (RSLB) W/N the petitioners successfully invoked novation and substituted Wonderland as
Ponente: Quisumbing J. the new debtor to the credit?

HELD/RATIO:
RECIT-READY/SUMMARY: Petitioner sold a land to Wonderland. Before the
NO - The conflict started from a contract of sale of a farmland between petitioners
contract was executed, the respondent bank was added into the relationship.
and Wonderland. However, no such sale materialized. A contract of sale is a
Petitioner will receive a loan from respondent bank and Wonderland will pay the
reciprocal transaction. In this case, the original plan was that the initial payments
loan. However, the contract of sale between petitioner and Wonderland was
would be paid in cash. Subsequently, the parties executed an addendum with
rescinded. Petitioner also received the loan from the bank. Petitioner claims that
respondent bank, wherein petitioners would secure a loan in the name of AC while
Wonderland should still pay the loan based on the concept of novation. However,
the settlement of the loan would be assumed by Wonderland. Thereafter,
the first requisite of novation is meaning, hence, petitioner is still liable for the
petitioner signed several promissory notes and received the proceeds in behalf of
loan.
AC. The Court, however, rules that the facts herein do not make a case of novation.
DOCTRINE: Novation must never be presumed. It must be clearly and unequivocally
Novation is the extinguishment of an obligation by the substitution or change of the
shown.
obligation by a subsequent one, which extinguishes or modifies the first. The
following requisites are indispensible: (1) previous valid obligation; (2) agreement
FACTS:
of the parties concerned to a new contract; (3) extinguishment of old contract; (4)
 This case springs from three complaints for sums of money filed by
validity of new contract.
respondent bank against petitioners.
 AC, as vendor, sold two parcels of land to Wonderland Food. In their
In this case, the first requisite is lacking. No novation by substitution because there
agreement, the parties agreed to the purchase price of P5M, which would
was no prior obligation which was substituted by a new contract. The promissory
be paid in installments.
notes, which bound petitioners to pay, were executed after the addendum. The
 AC, Wonderland, and respondent bank, RSLB, executed an addendum to
addendum modified the contract of sale, not the stipulations in the promissory
their previous agreement. The new arrangement pertained to the
notes, which pertain to the surety contract. Novation must never be presumed. It
revision of settlement of initial payments of P1M and prepaid interest of
must be clearly and unequivocally shown.
P360K.
 Parties agreed but the addendum was not notarized.
The contract of surety between Wonderland and the petitioners was extinguished
 Petitioner Mario Soriano signed as maker for several promissory notes, by the rescission of the contract of sale of the farmland. With the rescission, there
payable to the respondent bank. The bank released the proceeds of the was confusion or merger in the persons of the obligor and the surety. The
loan to petitioners but the latter failed to meet their obligations. addendum dependent on it was likewise lost.
 During their failure, the bank was experiencing financial turmoil and was
under the supervision of the Central Bank. The contract between petitioners and Wonderland did not materialize but the
 Central Bank endorsed the subject promissory notes to the bank’s former still received the proceeds of the promissory notes obtained from
counsel for collection. Soriano showed his intent to re-structure the loan respondent bank.
but did not show up nor submit his formal request.
 Hence, RSLB filed three separate complaints before the RTC. WHEREFORE, petition is denied for lack of merit.