G.R. No. L-18411, 17 December 1966

FACTS:

 Spouses Rodriguez bought form the petitioner a parcel of land in Quezon City. There was an unpaid balance of P5,000.00 on account of the price of the lot which was covered by the promissory note issued by respondents. On the same date, Respondents and Luzon Surety Co., Inc. executed a bond in favor of petitioner, the latter being the surety of the respondents. When the promissory note becomes due and demandable, Luzon Surety Com., Inc. paid the amount to petitioner. Subsequently, petitioner demanded payment from respondents herein on the alleged accumulated interests on the principal amount. Respondents refuse to pay.

Respondents alleged that petitioner waived or condoned the interests due upon its unqualified acceptance of the principal payment knowing its incompleteness and without exercising its rights to apply a portion thereof to the interest as provided in the Articles 1235 and 1253 of the Civil Code. They claimed that there was a novation and/or modification of the obligation of the appellants in favor of the appellee because the appellee accepted without reservation the subsequent agreement set forth in the surety bond despite its failure to provide that it also guaranteed payment of accruing interest.

ISSUE:

Whether or not there was a waiver, novation and/or modification of the obligation?

RULING:

No.It is very clear in the promissory note that the principal obligation is the balance of the purchase price of the parcel of land, which is the sum of P5,000.00, and in the surety bond, the Luzon Surety Co., Inc. undertook “to pay the amount of P5,000.00 representing balance of the purchase price of a parcel of land. Petitioner did not protest nor object when it accepted the payment of P5,000.00 because it knew that that was the complete amount undertaken by the surety as appearing in the contract. The liability of a surety is not extended, by implication, beyond the terms of his contract. It is for the same reason that the petitioner cannot apply a part of the P5,000.00 as payment for the accrued interest.

Appellants are relying on Article 1253 of the Civil Code which states that “If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been recovered.” This law cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular; his liability is confined to such obligation, and he is entitled to have all payments made applied exclusively to said application and to no other. It is merely directory, and not mandatory. Inasmuch as the appellee cannot protest for non-payment of the interest when it accepted the amount of P5,000.00 from the Luzon Surety Co., Inc., nor apply a part of that amount as payment for the interest, we cannot now say that there was a waiver or condonation on the interest due.

The rule is settled that novation by presumption has never been favored. To be sustained, it needs to be established that the old and new contracts are incompatible in all points, or that the will to novate appears by express agreement of the parties or in acts of similar import. The mere fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility does not constitute a novation, and the creditor can still enforce the obligation against the original debtor.

WHEREFORE, the judgment appealed from should be, as it is hereby, affirmed, with costs against the appellants.

* Case digest Frilin Lomosad, LLB-1, Andres Bonifacio Law School, SY 2017-2018