QUESTION: A landlord entered into agreement with its tenant stipulating among others the payment of Service Fees

for enumerated services that former may incur in the maintenance of the leased property. The services were actually rendered not by the landlord but by independent contractors who were duly paid by the tenants. However, the agreement considered these service fees as Additional Rent , thus the landlord seek to enforce payment of Additional Rent May the Landlord validly enforce payment from tenants? ANSWER: No. The decisive factor in evaluating an agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement. The contract is reciprocal in nature, where the performance of one is conditioned upon the simultaneous fulfillment of the other. Hence, for failure to actually render the enumerated services under the contract the landlord does not have the right to enforce payment from the tenants. SBMA VS. CA AND SUBIC INTERNATIONAL HOTEL CORPORATION, G.R. No. 192885, July 04, 2012

Facts: SBMA, a government agency, entered into The Lease and Development Agreement with private respondents for the latter to develop and rehabilitate the Subic Naval Base by taking over abandoned barracks and constructing hotel and restaurant facilities. Stipulated under the agreement is payment of service fees, which are considered as Additional Rent, to its proportional share (based on the Gross Land Area of the Property) of all costs which SBMA may incur in providing services or in maintaining and operating facilities which directly or indirectly benefit or serve the Property or Tenants. The ibrarService Fees include the proportional share of the private respondent in the costs that SMBA may incur in the provision of enumerated services, such as , electricity, telephone, janitorial and security services, etc. SBMA Internal Audit Department found out that private respondent have not been charged for service fees thus the billing of accrued charges and SBMAs Board waived the payment of future service fees. Private respondent then formally requested for the reconsideration alleging that the services were not actually provided by SBMA, but by private service providers of water. SBMA denied request. RTC and CA decided, that SBMA has no legal right under the Agreement to enforce the collection as it did not actually provide most of the services and that it cannot be considered as additional rent since enumeration of the services provides the real intention of the parties that such fees refer to service fees actually rendered than mere additional rent. Issue: WON SBMA is entitled to collect the agreed Service Fees, for which service was not actually rendered, but are considered in the Lease Development Agreement as Additional Rent. Ruling: SBMA is not entitled to service fees. It is well settled that the decisive factor in evaluating an agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement. SBMA failed to furnish the agreed services which were provided by private service providers and contractor, but not by SBMA. The latter also impliedly admitted that it is not in the position to demand for the payment of service fees when it approved the proposal for the waiver of future service fees. Thereafter, respondent-appellant moved for the amendment of the contract, inserting a provision for the waiver of future service fees. Prior to that, the concerned departments of SBMA issued their respective certifications that they did not extend any service to petitioner-appellee. It is further apparent that the questioned provisions of the contract are reciprocal in nature. Reciprocal obligations

are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such [12] that the obligation of one is dependent upon the obligation of the other. They are to be performed [13] simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. SBMA not having provided the services that would require the payment of service fees as stipulated in the Lease Development Agreement, is not entitled to collect the same.cralaw

HEIRS OF SERVANDO FRANCO vs SPOUSES VERONICA AND DANILO GONZALES G.R. No. 159709 June 27, 2012 Facts: Servando Franco and Leticia executed promissory notes to obtain loans from respondent in the amount

of P50,000.00, P90,000.00 and P300,000.00 which was secured by a real estate mortgage over a property belonging to Leticia Yaptinchay, all with interest at 6% per month. On different maturity dates, the borrowers failed to pay the indebtedness. On July 23, 1986, Servando and Leticia with her husband consolidated all their previous unpaid loans and sought another loan in the amount of P60,000.00, bringing their indebtedness to a total of P500,000.00, with 5.5% interest per month payable on August 23, 1986, evidenced by another promissory note. On maturity, they failed to pay. Respondents filed in RTC a complaint for collection which rendered a decision ordering petitioners to pay. Upon the finality of the decision in Medel v. Court of Appeals, the respondents moved for execution. Servando Franco opposed claiming that he and the respondents had agreed to fix the entire obligation at P775,000.00 thus the alleged receipt dated February 5, 1992, whereby he made an initial payment of P400,000.00 and promised to pay the balance of P375,000.00 on February 29, 1992, superseded the July 23, 1986 promissory note. They insist that even the maturity date was extended until February 29, 1992. Such changes, they assert, were incompatible with those of the original agreement under the promissory note. RTC denied the opposition. CA affirmed the RTC, because Servando failed to comply with the terms of the compromise agreement. It further ruled that even if there is a compromise agreement and the terms have been violated, the aggrieved party, has the right to move for execution of the final judgment and that petitioner is not harmed since what has been asked is only the balance of petitioners obligation after deducting the payments made on the basis of the compromise agreement.

Issue: Was there a novation of the August 23, 1986 promissory note when respondent Veronica Gonzales issued the February 5, 1992 receipt? Ruling: No, there is no novation. Novation did not transpire because no irreconcilable incompatibility existed between the promissory note and the receipt A novation arises when there is a substitution of an obligation by a subsequent one that extinguishes the first, either by changing the object or the principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor.
[16]

For a valid novation to take place, there must be,

therefore: (a) a previous valid obligation; (b) an agreement of the parties to make a new contract; (c) an

extinguishment of the old contract; and (d) a valid new contract.

[17]

In short, the new obligation extinguishes the

prior agreement only when the substitution is unequivocally declared, or the old and the new obligations are incompatible on every point. A compromise of a final judgment operates as a novation of the judgment obligation upon compliance with either of these two conditions.
[18]

The receipt dated February 5, 1992, excerpted below, did not create a new obligation incompatible with the old one under the promissory note. Novation is not presumed. A contract should expressly agree to abrogate the old contract in favor of a new one. There is incompatibility when the two obligations cannot stand together, each one having its independent existence. If the two obligations cannot stand together, the latter obligation novates the first.
[22]

Changes that

breed incompatibility must be essential in nature and not merely accidental. The incompatibility must affect any of the essential elements of the obligation, such as its object, cause or principal conditions thereof; otherwise, the change is merely modificatory in nature and insufficient to extinguish the original obligation.
[23]

In light of the foregoing, the issuance of the receipt created no new obligation. Instead, the respondents only thereby recognized the original obligation by stating in the receipt that the P400,000.00 was partial payment of loan and by referring to the promissory note subject of the case in imposing the interest. The loan mentioned in the receipt was still the same loan involving the P500,000.00 extended to Servando. Advertence to the interest stipulated in the promissory note indicated that the contract still subsisted, not replaced and extinguished. An obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old, or changes only the terms of payment, or adds other obligations not incompatible with the old ones, or the new contract merely supplements the old one. Lastly, the extension of the maturity date did not constitute a novation of the previous agreement. It is settled that an extension of the term or period of the maturity date does not result in novation.