SPS MODOMO VS SPS LAYUG

G.R. No.197722 | August 14, 2019 | CAGUIOA, J.

DOCTRINE: It is not in every case of novation that the old obligation is necessarily extinguished. Our Civil
Code now admits of the so-called imperfect or modificatory novation where the original obligation is not
extinguished but modified or changed in some of the principal conditions of the obligation. Thus, article
1291 provides that obligations may be modified

FACTS: Sps. Layug filed a complaint for ejectment before the MeTC Makati. They alleged among others
that they are the legal possessors of the land located at Makati City. This property was leased to Sps.
Modomo for a period of 7 years. Pursuant to a Contract of Lease dated Feb. 11, 2005 they agreed to pay
170,000 as monthly rentals subject to an escalation of 10% for the second and third year, 15% on the
fourth and fifth year, and 20% on the sixth and seventh year. It was also agreed that the real estate
taxes shall be paid by Sps. Modomo. Subsequently, Sps. Modomo defaulted in the payment of the
escalation of rental fees commencing from 2006 up to the filing of the complaint for ejectment in 2008.
Sps. Modomo also failed to pay their rentals for 2008 and the real estate taxes. This prompted Sps.
Layug to institute the present suit claiming that Sps. Layug should vacate the premises.

On the contrary, Sps Modomo argued that because Jocelyn Modomo had introduced improvements to
the property Sps. Layug agreed to reduce the monthly rentals to 150,000 and the non-imposition of the
escalation clause and the real estate tax provision. Therefore, Sps. Modomo prayed that the case be
dismissed because the contract of lease had been amended by ORAL AGREEMENTS between the parties.
They also alleged that Sps. Layug are in estoppel in pais, due to their unconditional acceptance of the
reduced monthly rental.

The MeTC issued a decision in favor of Sps. Layug and this was affirmed by the RTC. The RTC harped on
the Parole Evidence Rule and held that if the intention of the parties was to cancel the original contract
of lease, they should have executed a new contract. The CA held that Sps. Modomo failed to establish
the concurrence of the requisites necessary to extinguish or modify the contract of lease by way of
novation.

ISSUE:
1. Whether the provision of the Contract of Lease have been partially novated by the parties’
alleged subsequent verbal agreement. – YES, with regard to the lowering of rental fees
2. Whether the principle of estoppel in pais applies so as to preclude Sps. Layug from denying the
partial novation of the Contract of Lease - NO

HELD:
1. While the Civil Code permits the subsequent modification of existing obligations, these
obligations cannot be deemed modified in the absence of clear evidence to this effect. Novation
is never presumed, and the animus novandi, whether total or partial, must appear by express
agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken. The
Court finds that the novation only applies to the lowering of the monthly rental fee from
170,000 to 150,000. The records in the court shows that there is sufficient evidence which
shows the modification of monthly rental through the verbal agreement of the parties. The
Statement of Accounts show that Sps. Layug computed the unpaid balance on the basis of the
lowered rental fee. In addition, Sps. Layug's Letter43 dated March 24, 2008 also reflects a
computation of Sps. Modomo's unpaid balance on the basis of the lowered monthly rental fee.

With regard to the escalation clause and the payment of real estate tax, the record shows no
sufficient evidence to warrant the non-imposition of the said provision. The first Addendum
which was executed to show the detailed schedule of payment and the second addendum which
 reflects the modifications in relation to taxes assessments reinforce the intention of the parties
to impose an annual escalation and the payment of real estate taxes.

2. Estoppel does not apply. Estoppel in pais arises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist and such other rightfully relies and
acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence
of such facts. For the principle of estoppel in pais to apply, there must be: (i) conduct amounting
to false representation or concealment of material facts or at least calculated to convey the
impression that the facts, are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (ii) intent, or at least expectation that this conduct shall be
acted upon, or at least influenced by the other party; and (iii) knowledge, actual or constructive,
of the actual facts. Based on the records, Spouses Layug served upon Spouses Modomo several
letters expressing their objection to the latter's deficient payments.