Payment

Dela Cruz vs Concepcion

Agner vs BPI

- Obligation of respondent is extinguished. Payment made to

- The burden of proof of payment lies upon the debtor.

- Demand is unnecessary for petitioners to be held in default
because petitioners legally waived the necessity of notice or
demand when they executed the Promissory Note with Chattel
Mortgage.

Adoracion Losloso is valid because there was a letter executed

by petitioner spouses authorizing Losloso to accept payment.
- When the issue is tried without the objection of the parties, it
should be treated with all respects as if it had been raised in
the pleadings. Thus, while respondent first admitted in her
Answer that she still owed petitioners 200,000, and during the
presentation of evidence submitted a receipt to show that she

Death
Stronghold vs Republic Asahi

already paid the whole amount of her unpaid obligation, it is

noteworthy that petitioners did not object thereto.

- As a general rule, the death of either the creditor or the debtor

does not extinguish the obligation.

Dation in Payment

- A surety companys liability under the performance bond it

Estanislao vs East West Bank

issues is solidary. The death of the principal obligor, does not,

- The deed of assignment was a perfected agreement which

as a rule, extinguish the obligation and the solidary nature of

extinguished petitioners total outstanding obligation to the

that liability.

respondent.

- In the case at bar, death did not result in the extinguishment

- The deed explicitly provides that the assignor (petitioners), in

of those obligations or liabilities, which merely passed on to his

full payment of its obligation shall deliver the 3 units of heavy

estate. Death is not a defense that he or his estate can set up

equipment to the assignee (respondent), which accepts the

to wipe out the obligations under the performance bond.

assignment in full payment of the above-mentioned debt.

Ong vs Roban Lending

Application of Payments

- The Court finds that the Memorandum of Agreement and

PNB vs Ca

Dacion in Payment constitute pactum commissorium.

- Under Art. 1233 of the Civil Code, a debt shall not be

- The elements of pactum commissorium which enables the

understood to have been paid unless the thing or service in

mortgagee to acquire ownership of the mortgaged property

which the obligation consists has been completely delivered or

without the need of any foreclosure proceedings, are: (1) there

rendered, as the case may be.

should be a property mortgaged by way of security for the

- The burden of proof of such payment lies with the debtor. In

the instant case, neither the SPA nor the check issued by
petitioner was ever presented in court.

payment of the principal obligation, and (2) there should be a

stipulation for automatic appropriation by the creditor of the
thing mortgaged in case of non-payment of the principal
obligation within the stipulated period.

Culaba vs SMC
- Obligation is not extinguished. Article 1240 of the Civil Code
provides that payment shall be made to the person in whose

Typingco vs Lim

favor the obligation has been constituted, or his successor-in-

- There having been no previous foreclosure of the Real Estate

interest, or any person authorized to receive it.

Mortgage on the subject property, respondent Sychingcos

- The basis of agency is representation. A person dealing with

an agent is put upon an inquiry and must discover upon his
peril the authority of the agent.

ownership thereof remained intact. Indeed, a mortgage does

not affect the ownership of the property as it is nothing more
than a lien thereon serving as security for the debt.
- Since petitioner agreed to the full extinguishment of
respondent spouses then outstanding obligation in view of the

Allied Banking vs Lim Sio Wan

- Art. 1240 of the Code states that payment shall be made to
the person in whose favor the obligation has been constituted,
or his successor in interest, or any person authorized to
receive it.
- Lim Sio Wan did not authorize the release of her money
market placement to Santos and the bank had been negligent
in so doing.

unconditional conveyance to him of the subject property, there

is a perfected and enforceable dacion en pago.
Tan Shuy vs Maulawin
- The pesadas served as proof that the net proceeds from the
copra deliveries were used as installment payments for the
debts of respondents.
- The subsequent arrangement between Tan Shuy and
Guillermo can thus be considered as one in the nature of

dation in payment. There was partial payment every time

Guillermo delivered copra to petitioner as installment payments
for his loan from Tan Shuy.

Tender of Payment and Consignation

Pabugais v Sahijwani

Extraordinary Inflation/Deflation
Equitable Bank v Ng Sheung Ngor
- NO extraordinary deflation
For to apply 1250, the ff requisites are required:
1. That there was an official declaration of extraordinary
inflation or deflation from the Bangko Sentral ng Pilipinas
(BSP); [no declaration from BSP]
2. That the obligation was contractual in nature; [contractual in
nature, but] and
3. That the parties expressly agreed to consider the effects of
the extraordinary inflation or deflation [parties did not agree to
recognize the effects of extraordinary inflation].
Almeda vs. Bathala Marketing
- NOT a case of extraordinary inflation or devaluation,
therefore Article 1250 does not apply.
- The erosion of the value of the Philippines peso in the past is
the characteristic of most currencies. Such downward trend of
the peso cannot be considered as the extraordinary
phenomenon contemplated by Article 1250 of the Civil Code.
- Furthermore, absent an official pronouncement or declaration
by competent authorities of the existence of extraordinary
inflation during a given period, the effects of extraordinary
inflation are not to be applied.

Application of Payments
Premiere Development Bank v. Central Surety
- YES, correct application of payment because creditor is given
the right to apply payments
- Notwithstanding the fact that 1252 of the Civil Code provides
that the debtor shall have the right to choose how the debt is
applied, in the case at bar, it was expressly stipulated in the
promissory note that PDB reserved the right to apply the
payments made by the debtor in any manner it saw fit.
Such was the contract between the parties and thus this must
be respected.
ESPINA VS CA
WON payment made on October 28, 1992 in the amount of
Php 100,000.00 be applied as payment for purchase of the
condominium unit
- NO. Petitioner terminated the provisional deed of sale.
Nonetheless, respondent Diaz continued to occupy the
premises, as lessee, but failed to pay the rentals due. When
respondent made a payment of P100,000.00 on October 28,
1992, the payment made may be applied either to the back
rentals or for the purchase of the condominium unit.
- Unless the application of payment is expressly indicated, the
payment shall be applied to the obligation most onerous
to the debtor. In this case, the unpaid rentals constituted the
more onerous obligation of the respondent to petitioner.

- YES, there is valid tender of payment and valid consignation.

- NO, petitioner cannot withdraw the amount consigned.
General Rule: paying a manager's check is not tender of
payment (coz manager' checks are not legal tender)
BUT payment in check by the debtor may be valid if no
prompt objection to the same is made. In the case at bar,
none was made. What was merely made was a denial of the
actual receipt of the check, a claim which was contradicted by
petitioners own claims.
There was also a valid consignation as the requisites for a
valid consignation were present in the case. There was a debt
owing, the debtor refused to accept the payment unjustly,
previous notice had been given, the amount was consigned
with the judicial authorities and there was notice given after the
consignation....also, the prayer of SJ in his reply to be awarded
the sum of money consigned signified an acceptance of the
consignation on the part of the creditor, thus Dr. may no longer
withdraw.
Llobera v Fernandez
- NO valid consignation.
Consignation based on Article 1256 of the Civil Code
indispensably requires a creditor-debtor relationship
between the parties, in the absence of which, the legal effects
thereof cannot be availed of. (They did not have a least
contract)
Article 1256 pertinently provides: If the creditor to whom tender
of payment has been made refuses without just cause to
accept it, the debtor shall be released from responsibility by the
consignation of the thing or sum due.
Unless there is an unjust refusal by a creditor to accept
payment from a debtor, Article 1256 cannot apply. In the
present case, the possession of the property by the petitioners
being by mere tolerance as they failed to establish through
competent evidence the existence of any contractual relations
between them and the respondent, the latter has no obligation
to receive any payment from them. Since respondent is not a
creditor to petitioners as far as the alleged P20.00 monthly
rental payment is concerned, respondent cannot be compelled
to receive such payment even through consignation under
Article 1256. The bank deposit made by the petitioners
intended as consignation has no legal effect insofar as the
respondent is concerned.
BENOS vs LAWILAO,
- NO valid tender of payment and consignation of the balance
of the contract price
The court enumerated the requisites of a valid tender of
payment & consignation, where requisites were not observed
by the Lawilaos.
First, although the Lawilao spouses repeatedly alleged that the
159,000 was still w/ the trial court the Benoses can withdraw
anytime, they never made any step to withdraw the amount
& consign it.
Second, the respondents failed to notify the petitioners of
their petition for consignation against the bank. In fact, the

Lawilao spouses never notified the Benos spouses of their

offer to pay.
Thus, as far as the Benos are concerned, there was no
complete & full payment of the contract price, which gives them
the right to rescind the contract pursuant to Art. 1191 in relation
to Art. 1592.
B.E. SAN DIEGO VS ALZUL
- NO valid consignation, because mere tender of payment is
not enough to extinguish an obligation.
A valid tender of payment had been made by respondent.
Absent however a valid consignation, mere tender will not
suffice to extinguish her obligation and consummate the
acquisition of the subject properties.
In the case at bar, in respondents complaint for consignation
and specific performance, respondent only prayed that she be
allowed to make the consignation without placing or
depositing that amount due at the disposal of the court of
origin. Verily, respondent made no valid consignation.
CACAYORIN VS ARMED FORCES AND POLICE MUTUAL
BENEFIT ASSOCIATION, INC. (AFPMBAI)
- YES, there is valid consignation, even if the prior tender of
payment was not made
Article 1256: the debtor shall be released from responsibility
by the consignation of the thing or sum due, without need of
prior tender of payment, when the creditor is absent or
unknown, or when he is incapacitated to receive the payment
at the time it is due, or when two or more persons claim the
same right to collect, or when the title to the obligation has
been lost.
In the present case petitioners do not know which of the two
the Rural Bank or AFPMBAI should receive full payment of
the purchase price, or to whom tender of payment must validly
be made.

Doctrine of Unforeseen Events

Philippine National Construction Corp. v CA
Doctrine of Unforeseen Events or rebus sic stantibus
(Art. 1266 and 1267) applies in obligations to do and not to
obligations to give. Payment of rentals is an obligation to
give. Hence, PNCC is not free from its obligations to
Raymundo.
It cannot also apply to the case at bar because the
change in political climate (already existing at the time of the
constitution of the obligation) as well as financial difficulty are
not the unforeseen events referred to by this principle.
Magat Jr. v. CA
Two reasons why Guerrero cannot be held liable by reason of
breach is that
he cannot comply with the agreement nor can he take hold of
the necessary permits because of the LOI and the Admin
Order issued by the authorities for the regulation of importation
and possession of radio transmitters. Hence, when the service
has become so manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or
in part. Here, Guerrero's inability to secure a letter of credit and
to comply with his obligation was a direct consequence of the
denial of the permit to import. For this, he cannot be faulted.

No bad faith on Guerreros part the fact that he borrowed

radio from the US Navy does not imply bad faith. It was a swift
alternative on his part because was faced with the danger of
cancellation with his contract with Subic Naval Forces.

Compensation
BPI v CA
Legal Compensation is proper. Art 1290 provides that
if all the requisites laid down in Ar. 1279 concurs, Legal
Compensation takes place even without the knowledge of the
parties, and that its effect rise on the very day the requisites
concur. The obligors bound principally are at the same time
creditors of each other. BPI stands as a debtor of Reyes, a
depositor. At the same time, said bank is the creditor of the
Reyes with respect to the dishonored U.S. Treasury Warrant
which the latter illegally transferred to his joint account. The
debts involved consist of a sum of money. They are due,
liquidated, and demandable. They are not claimed by a third
person.
The want of consent of his wife is of no moment
because to frustrate the application of legal compensation on
the ground that the parties are not all mutually obligated
(specifically the wife) would result in unjust enrichment on the
part of the Reyes and his wife who herself out of honesty has
not objected to the debit.
PNB v CA
PNB cannot make a legal set off against the
remittances coursed through in favour of Sapphire even if the
latter is indebted to it with regards to the double credit. The
reason is that the first requirement in Art. 1279 is not present
parties are bound principally.
The relationship created by the telexed fund transfers from
abroad: A contract between a foreign bank and local bank
asking the latter to pay an amount to a beneficiary is a
stipulation pour autrui.
Hence the parties are not both principally bound with
respect to the $2,627.11 from Jeddah neither are they at the
same time principal creditor of the other. Therefore, as matters
stand, the parties' obligations are not subject to compensation
or set off under Art. 1279 of the Civil Code, for the reason that
the defendant is not a principal debtor nor is the plaintiff a
principal creditor insofar as the amount of $2,627.11 is
concerned. They are debtor and creditor only with respect to
the double payments; but are trustee-beneficiary as to the fund
transfer of $2,627.11.
EGV Realty v CA
Compensation is not proper because the
P12,295(amount stolen from Unisphere) is not a debt but a
claim.
At best, what Unisphere has against EGV is just a
claim, not a debt. Such being the case, it is not enforceable in
court. It is only the debts that are enforceable in court, there
being no apparent defenses inherent in them. Unispheres
claim for its loss has not been passed upon by any legal
authority so as to elevate it to the level of a debt.
Compensation or offset takes place by operation of
law when two (2) persons, in their own right, are creditor and
debtor of each other. For compensation to take place, a
distinction must be made between a debt and a mere claim. A
debt is a claim which has been formally passed upon by the
highest authority to which it can in law be submitted and has

been declared to be a debt. A claim, on the other hand, is a

debt in embryo. It is mere evidence of a debt and must pass
thru the process prescribed by law before it develops into what
is properly called a debt.
Tested by the foregoing yardstick, it has not been
sufficiently established that compensation or set-off is proper
here as there is lack of evidence to show that petitioners
E.G.V. Realty and CCC and respondent Unisphere are
mutually debtors and creditors to each other.
Metropolitan Bank v. Tonda
The handwritten note by the METROBANK officer
acknowledging receipt of the checks amounting to P2.8 Million
made no reference to the TONDAS' trust receipt obligations,
and we cannot presume that it was anything more than an
ordinary bank deposit. The Court of Appeals implied that in
making the deposit, the TONDAS are entitled to set off, by way
of compensation, their obligations to METROBANK. However,
Article 1288 of the Civil Code provides that "compensation
shall not be proper when one of the debts consists in civil
liability arising from a penal offense" as in the case at bar. The
raison d'etre for this is that, "if one of the debts consists in civil
liability arising from a penal offense, compensation would be
improper and inadvisable because the satisfaction of such
obligation is imperative."
Trinidad v Acapulco
No Dacion en Pago. Compensation takes effect by
operation of law even without the consent or knowledge of the
parties concerned when all the requisites mentioned in Article
1279 of the Civil Code are present.
(a) respondent and petitioner were personally both creditor and
debtor of each other;
(b) the monetary obligation of respondent was P566,000.00
and that of the petitioner was P500,000.00 showing that both
indebtedness were monetary obligations the amount of which
were also both known and liquidated;
(c) both monetary obligations had become due and
demandablepetitioners obligation as shown in the deed of
sale and respondents indebtedness as shown in the
dishonored checks; and
(d) neither of the debts or obligations are subject of a
controversy commenced by a third person.
It was likewise proven that petitioner owed
respondent the amount of P500,000.00 while respondent owed
petitionerP566,000.00; that both debts are due, liquidated and
demandable, and; that neither of the debts or obligations are
subject of a controversy commenced by a third person.
The claim of respondent that there could be no legal
compensation in this case as one of the obligations consists of
delivery of a car and not a sum of money must also fail.
Respondent sold the car to petitioner on March 4, 1991
forP500,000.00 while she filed her complaint for nullification of
the sale only on May 6, 1991. As legal compensation takes
place ipso jure, and retroacts to the date when its requisites
are fulfilled, legal compensation has already taken place at the
time of the sale. At such time, petitioner owed respondent the
sum of P500,000.00 which is the price of the vehicle.
Consequently, by operation of law, the P500,000.00
which petitioner owed respondent is off-set against
theP566,000.00 owed by respondent to petitioner, leaving a
balance of P66,000.00, which respondent should pay with 12%
interest per annum from date of judicial or extrajudicial deed.
Since there was no extrajudicial deed in this case, the interest

shall be resolved from the date petitioner filed its Supplemental

Motion for Reconsideration invoking for the first time legal
compensation, that is, May 20, 1992.
Insular Investments v. Capital One
COEC can set off its obligations to IITC as against the
latters obligation to it.
For compensation to be valid, the five requisites
mentioned in Article 1279 should be present, as in the case at
bench. It is established that IITC acted as a principal in the
purchase of treasury bills from PDB and in the subsequent sale
to COEC of the COEC T-Bills. Thus, COEC and IITC are
principal creditors of each other in relation to the sale of the
COEC T-Bills and IITC T-Bills, respectively.
IITC also claims that the COEC T-Bills cannot be set-off
against the IITC T-Bills because the latter are specific
determinate things which consist of treasury bills with specific
maturity dates and various interest rates. IITCs actions belie
its own assertion. The fact that IITC accepted the assignment
by COEC of Central Bank Bills with an aggregate face value of
P20,000,000.00 as payment of part of the IITC T-Bills is
evidence of IITCs willingness to accept other forms of security
as satisfaction of COECs obligation. It should be noted that
the second requisite only requires that the thing be of the same
kind and quality. The COEC T-Bills and the IITC T-Bills are
both government securities which, while having differing
interest rates and dates of maturity, have each been assigned
a certain face value to determine their monetary equivalent. In
fact, in the Tripartite Agreement, the COEC-IITC Agreement
and in the memoranda of the parties, the parties recognized
the monetary value of the treasury bills in question, and, in
some instances, treated them as sums of money. Thus, they
are of the same kind and are capable of being subject to
compensation.
The third, fourth and fifth requirements are clearly
present and are not denied by the parties. Both debts are due
and demandable because both remain unsatisfied, despite
payment made by IITC for the IITC T-Bills and by COEC for the
COEC T-Bills. Moreover, COEC readily admits that it has an
outstanding balance in favor of IITC. Conversely, IITC has
been found by the lower courts to be liable, as principal seller,
for the delivery of the COEC T-Bills. The debts are also
liquidated because their existence and amount are determined.
Finally, there exists no retention or controversy over the COEC
T-Bills and the IITC T-Bills.
Because all the stipulations under Article 1279 are
present in this case, compensation can take place. COEC is
allowed to set-off its obligation to deliver the IITC T-Bills
against IITCs obligation to deliver the COEC T-Bills.
First United Constructors v Bayanihan
Legal compensation was permissible.
Legal compensation takes place when the
requirements set forth in Article 1278 and Article 1279 of the
Civil Code are present.
The RTC already found that petitioners were entitled
to the amount of P71,350.00 stated in their counterclaim, and
the CA concurred in the finding.
Said amounts may be considered to have been spent
for repairs covered by the warranty period of three (3) months.
This delay in repairs is attributable to the fact that when defects
were brought to the attention of Bayanihan in the letter of
August 14, 1992, which was within the warranty period, it did
not respond with the required repairs and actual repairs were

undertaken by defendants. Thereafter, the spare parts pertain

to the engine, which was covered by the warranty.
All other items of expenses connected with
subsequent breakdowns are no longer chargeable to plaintiff
which granted only a 3-month warranty.
A debt is liquidated when its existence and amount
are determined. Accordingly, an unliquidated claim set up as a
counterclaim by a defendant can be set off against the
plaintiffs claim from the moment it is liquidated by judgment.
Article 1290 of the Civil Code provides that when all the
requisites mentioned in Article 1279 of the Civil Code are
present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount. With
petitioners expenses for the repair of the dump truck being
already established and determined with certainty by the lower
courts, it follows that legal compensation could take place
because all the requirements were present. Hence, the amount
of P71,350.00 should be set off against petitioners unpaid
obligation of P735,000.00, leaving a balance of P663,650.00,
the amount petitioners still owed to respondent.

NOVATION
Licaros v Gatmaitan
No Subrogation.
All parties, specifically Anglo-Asean, did not consent,
as stated in their MOA.
-

Conventional subrogation of a third person requires

the consent of the original parties and of the third
person.

Garcia v Llamas
No novation
Garcia has not shown that he was expressly released
from the obligation, that a third person was
substituted in his place, or that the joint and solidary
obligation was cancelled and substituted by the
solidary undertaking of De Jesus.
California Bus Lines v State Investments
No novation
Parties did not expressly stipulate that the
restructuring agreement novated the promissory
notes, neither was there absolute or complete
incompatibility between the restructuring agreement
and the promissory notes.
Aquintey v Tibong
No novation but dacion en pago.
No consent of the new debtors, although they had
knowledge.
Ricarze v. CA
There is legal subrogation which took place by
operation of law.
Even if Ricarze had no knowledge of or that he did
not consent to the subrogation, it takes place by
operation of law (even if against their will) once the
requisites are complied with.
Ledonio Vs. Capitol Investment
- No. There was no Novation.
- The transaction between Ms. Picache and Capitol was an
assignment
of
credit
and
not
conventional
subrogation(novation), and does not require Ledonios consent
as debtor for its validity and enforceability.
- The Assignment of Credit by Ms. Picache in favor of
respondent, was a simple deed of assignment. There is
nothing in the said Assignment of Credit which imparts to this
Court, whether literally or deductively, that a conventional
subrogation was intended by the parties thereto. The terms of
the Assignment of Credit only convey the straightforward
intention of Ms. Picache to sell, assign, transfer, and convey
to respondent the debt due her from petitioner, as evidenced
by the two promissory notes of the latter
Valenzuela Vs. Kalayaan Development
-No novation.
- The contract to sell was not novated when Juliet was
allegedly designated as the new debtor and substituted the
petitioners in paying the balance of the purchase price.
- There is only one existing and binding contract between the
parties, because Kalayaan never agreed to the creation of a
new contract between them or Juliet. True, petitioners may
have offered that they be substituted by Juliet as the new
debtor to pay for the remaining obligation. Nonetheless,
Kalayaan did not acquiesce to the proposal.
Its acceptance of several payments after it demanded
that petitioners pay their outstanding obligation did not modify
their original contract. Petitioners, admittedly, have been in
default; and Kalayaans acceptance of the late payments is, at
best, an act of tolerance on the part of Kalayaan that could not
have modified the contract.
Tomimbang Vs. Tomimbang
-Yes. There was novation.
- by virtue of the subsequent agreement, the parties mutually
dispensed with the condition that petitioner shall only begin
paying after the completion of all renovations. There was, in
effect, a modificatory or partial novation, of petitioner's
obligation.

-In partial novation, only the terms and conditions of the

obligation are altered, thus, the main obligation is not changed
and it remains in force.
- Her partial performance of her obligation is unmistakable
proof that indeed the original agreement between her and
respondent had been novated by the deletion of the condition
that payments shall be made only after completion of
renovations.
Milla vs. People
-No novation.
-mere payment of an obligation before the institution of a
criminal complaint does not, on its own, constitute novation
that may prevent criminal liability. For the latter to exist, there
must be proof of intent to extinguish the original relationship,
and such intent can not be inferred from the mere acceptance
of payments on account of what is totally due. The offended
partys acceptance of a promissory note for all or part of the
amount misapplied does not obliterate the criminal offense
HEIRS OF SERVANDO v. GONZALES
There was no novation. The act of the party of
entering into a new agreement/compromise does not
include an express stipulation of extinguishing the old
one. It is neither incompatible with each other. There
is only an extension of maturity date and fixing of the
amount. Hence, there was only modification of
contract and in addition, the petitioners are bounded
solidarily, thus, they can still be held liable to pay the
balance.
Novation; 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
Novation is not presumed- this means that the parties
to a contract should expressly agree to abrogate the
old contract in favor of a new one- in the absence of
the express agreement, the old and the new
obligations must be incompatible on every point.
PNB v. SORIANO
There was no novation. The restructuring agreement
on the parties from FSL to OL are not incompatible
with each other.
Novation; 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.
Novation is not presumed- this means that the parties
to a contract should expressly agree to abrogate the
old contract in favor of a new one- in the absence of
the express agreement, the old and the new
obligations must be incompatible on every point.
Indispensable requisites in order for novation to take
place:
1. There must be a previous valid obligation
2. There must be an agreement of the parties
concerned to a new contract
3. There must be the extinguishment of the old
contract and
4. There must be the validity of the new contract
-

Test of Incompatibility is whether the two obligations

can stand, each one having its independent
existence. If the cannot, they are incompatible and the
latter obligation novates the first.
With respect to obligations to pay a sum of money,
the obligation is not novated by an instrument that
expressly recognizes the old, changes only the terms
of payment, adds other obligations not incompatible
with the old ones, or the new contract merely
supplements the old one.

SERFINO v. FAR EAST BANK

There was no assignment of credit. FEBTC cannot be
held liable to Serfino because what was agreed in the
compromise was the mere designation of fund where

the payment will come from (Retirement benefit) and

not an assignment of credit. Hence, Serfino has no
right over the money deposited in FEBTC being not
an owner therein.
An Assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor, by
a legal cause, such as sale, dation in payment,
exchange or donation, and without the consent of the
debtor, transfers his credit and accessory rights to
another, known as the assignee, who acquires the
power to enforce it to the same extent as the assignor
could enforce it against the debtor.

PHIL. RECLAMATION v. ROMAGO

There was no novation. The substitution of PRA and
HPMC does not include the transfer of liability. There
was no agreement by between PRA and HPMC with
regards to the transfer of liability. Therefore, PRA
remained liable to Romago.
Novation; 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.
Indispensable requisites in order for novation to take
place:

1.
2.
3.
4.

There must be a previous valid obligation

There must be an agreement of the parties
concerned to a new contract
There must be the extinguishment of the old
contract and
There must be the validity of the new
contract

ACE FOODS v. MICROPACIFIC

There was no novation. The mere fact of signing the
invoice does not prove animos novandi.
Novation is never presumed, and the animus novandi,
whether totally or partially, must appear by express
agreement of the parties, or their acts that are too
clear and unequivocal to be mistaken.
DAVID v. DAVID
There was no novation. The deed of sale and the
MOA was found to be not incompatible with each
other. Thus, Roberto is still liable to return the tractors
to Eduardo in the exercise of his right to repurchase.
- The issue of novation involves a question of fact, as it
necessarily requires the factual determination of the
existence of the various requisites of novation.