I.

TITLE OF THE CASE:

INCHAUSTI vs YULO No. 7721

II. PARTIES:

Plaintiff-Appellant: Inchausti & Co. Defendant-Appellee: Gregorio Yulo Inchausti vs

Yulo

G.R. No. L-7721, 25 March 1914

III. FACTS:

This suit is brought for the recovery of a certain sum of money, the balance of a current

account opened by the firm of Inchausti & Company with Teodor Yulo and after his death

continued by Gregorio Yulo as principal representative of his children. On Aug.12, 1909,

Gregorio Yulo, in representation of his 3 siblings, executed a notarial instrument, ratifying all the

contents of the prior document of Jan.26, 1908, severally and joint acknowledged their

indebtedness for P253, 445.42, 10 % per annum, 5 installments. Plaintiff brought an action

against a Gregorio for the payment of the said balance due. But on May 12, 1911, 3 siblings

executed another instrument in recognition of the debt, reduced to P225, 000; interest reduced to

6% per annum, installments increased to 8.

They obligated themselves to pay but failed to pay right at the first instalment. An action

was brought against Gregorio Yulo. However, another notarial instrument was executed by the

Yulos in recognition of the debt and the obligation of payment, and then asking plaintiff to

include in the filed suit Pedro Yulo, and in that case, they’d procure all means for the judgment

to be in favour of the plaintiff. However, the court ruled in favour of Gregorio instead. Court

reversed the judgment and held that plaintiff can sue Gregorio Yulo alone since the Yulos

obligated themselves in solidum.

 IV. ISSUE:

Whether or not the contract constitute novation.

V. DECISION OF THE COURT ON THE ISSUE:

The contract of May 12, 1911 does not constitute a novation of the former one of.

Aug.12, 1909, with respect to the other debtors who executed this contract. First, “in order that

an obligation may be extinguished by another which substitutes it, it is necessary that it should

be so expressly declared or that the old and the new be incompatible in all points (art. 1292). It is

always necessary to state that it is the intention of the contracting parties to extinguish the former

obligation by the new one.” The obligation to pay a sum of money is not novated in a new

instrument wherein the old is ratified, by changing only the term of payment and adding other

obligations not incompatible with the old one.

The obligation being solidary, the remission of any part of the debt made by a creditor in

favor of one or more of the solidary debtors necessarily benefits the others, and therefore there

can be no doubt that, in accordance with the provision of Art. 1215, 1222, the defendant has the

right to enjoy the benefits of the partial remission. At present judgment can be rendered only as

to P112, 500.

Judgments appealed from reversed Defendant to pay Inchausti & Co. P112,500 with the interest

stipulated in the instrument of May 12, 1911,from March 15, 1911, and the legal interest on this

interest due, from the time that it was claimed, without any special finding as to costs.

VI. REASON OF THE COURT ON THE DECISION:

When the obligation is constituted as a conjoint and solidary obligation each one of the

debtors is bound to perform in full the undertaking which is the subject matter of such

obligation." (Old Civil Code, articles1137 and 1144)Article 1148 of the Old Civil Code. “The
solidary debtor may utilize against the claims of the creditor all the defenses arising from the

nature of the obligation and those which are personal to him. Those personally pertaining to the

others may be employed by him only with regards to the share of the debt for which the latter

may be liable."