Jessette Amihope N.

Castor BL-5A

VICTOR D. YOUNG and JOHNNY YOUNG, petitioners,

vs.
COURT OF APPEALS, as nominal party respondent, and FAUSTA B. JAGDON, AMPARO R.
CASAFRANCA and MIGUELA R. JARIOL, respondents.
May 8, 1991
G.R. No. 83271

Principle: When the changes refer to secondary agreements, and not to the object or principal
conditions of the contract, there is no novation; such changes will produce modifications of
incidental facts, but will not extinguish the original obligation.

CRUZ, J.

Facts:
On 1961, the estates of Humiliano Rodriguez and Timoteo Rodriguez leased to Victor D.
Young a parcel of land on which the latter's building, then known as Liza Theater (later renamed
Nation Theater), was standing. The contract of lease contained a stipulation that at the end of this
lease contract or after the twenty-first (21st) year, the LESSORS may purchase the LIZA
THEATRE building, that if the LESSORS do not exercise this option to buy, the LESSEE shall
continue for another period of TWENTY-ONE (21) YEARS and the rental will be agreed upon by
the parties with the prevailing rental of properties near the premises as the basis.

Still on 1961, exactly the same contract was again executed by the same parties, except that
the estate of Humiliano Rodriguez was this time represented by Antolin A. Jariol, instead of
Miguela Rodriguez, as one of the signatories. On 1982, or two days before the expiration of the
first contract, the heirs filed a suit for specific performance against Victor D. Young to compel
him to sell to them his theater-building. They tendered this amount with the clerk of court by way
of consignation. They also sued Victor Young's son, Johnny, as an unwilling co-plaintiff.

Issue:
Whether the appearance of Jariol in the signing of contract constitutes novation?
Held:
In Caneda, Jr. v. Court of Appeals it was held that Novation has been defined as the
extinguishment of an obligation by a subsequent one which terminates it, either by changing its
object or principal conditions, referred to as objective or real novation or by substituting a new
debtor in place of the old one, or by subrogating a third person to the rights of the creditor, also
called as subjective or personal novation. But as explained by this Court, novation is never
presumed; it must be explicitly stated or there must be a manifest incompatibility between the
old and the new obligations in every aspect. The test of incompatibility between two obligations
or contracts, is whether or not they can stand together, each one having an independent existence.
If they cannot, they are incompatible, and the later obligation novates the first. (Emphasis
supplied.)

A careful examination of the text of the two contracts will show that the only change
introduced in the second contract was the substitution by Antolin A. Jariol of his wife Miguela as
signatory for the estate of Humiliano Rodriguez. There was no express declaration in the second
contract that it was novating the first. To determine if there was at least an implied novation
because of a clear incompatibility between the old and new contracts, we apply the rule that— In
order that there may be implied novation arising from incompatibility of the old and new
obligations, the change must refer to the object, the cause, or the principal conditions of the
obligation. In other words, there must be an essential change.

There was clearly no implied novation for lack of an essential change in the object, cause,
or principal conditions of the obligation. At most, the substitution of a signatory in the second
contract can be considered only an accidental modification which, according to Tolentino, "does
not extinguish an existing obligation. When the changes refer to secondary agreements, and not
to the object or principal conditions of the contract, there is no novation; such changes will
produce modifications of incidental facts, but will not extinguish the original obligation.