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Garcia Jr. vs. CA Digest

Antonio Garcia Jr. was a surety for a loan Western Minolco Corporation (WMC) obtained from Philippine Investments Systems Organization (PISO). WMC failed to pay after demands. A memorandum of agreement was entered into where WMC's creditors would be issued new promissory notes guaranteed by the Philippine government, extending the payment period and compounding interest. Lasal Development Corporation, PISO's assignee, sued Garcia. Garcia claimed novation, releasing him from obligation. The Court held there was no novation, as an obligation is not novated by merely extending payment terms or adding compatible obligations, and novation requires unequivocal declaration or complete incompatibility between obligations.

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658 views1 page

Garcia Jr. vs. CA Digest

Antonio Garcia Jr. was a surety for a loan Western Minolco Corporation (WMC) obtained from Philippine Investments Systems Organization (PISO). WMC failed to pay after demands. A memorandum of agreement was entered into where WMC's creditors would be issued new promissory notes guaranteed by the Philippine government, extending the payment period and compounding interest. Lasal Development Corporation, PISO's assignee, sued Garcia. Garcia claimed novation, releasing him from obligation. The Court held there was no novation, as an obligation is not novated by merely extending payment terms or adding compatible obligations, and novation requires unequivocal declaration or complete incompatibility between obligations.

Uploaded by

Geneva Bejasa Arellano
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Antonio Garcia, Jr. vs. Court of Appeals, Lasal Development Corp.

G.R. No. 80201, November 20, 1990

PONENTE: Cruz, J.

FACTS:
Western Minolco Corporation (WMC) obtained from Philippine Investments Systems Organization
(PISO) two loans of P2,500,000 and P1,000,000 for which it issued promissory notes. Antonio
Garcia and Ernest Kahn executed a surety agreement for the P2.5 million loan. WMC failed to
pay after repeated demands. A memorandum of agreement was entered into by WMC and its
creditors in which promissory notes were to be issued by NDC, fully and unconditionally
guaranteed by the Philippine government, in payment of WMCs obligation. Also, the parties to
the original loans agreed to an extension of the original period of payment and the compounding
of the interest on the principal loans.

Lasal Development Corporation, PISOs assignee of the credit, sued Garcia. He claims that the
issuance of the new promissory notes which extended the period of payment and provided for the
compounding of the interest operated as a novation of the contract, therefore releasing him from
his obligation as surety.

ISSUE: Whether or not there was a novation of the contract.

HELD:
No. An obligation to pay a sum of money is not novated in a new instrument by changing the term
of payment and adding other obligations not incompatible with the old one. It is not proper to
consider an obligation novated as in the case at bar by the mere granting of extension of payment
which did not even alter its essence. To sustain novation necessitates that the same be so
declared in unequivocal terms or that there is complete and substantial incompatibility between
the two obligations.

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