SECOND DIVISION

[ G.R. No. 186196, August 15, 2018 ]

BENEDICTO V. YUJUICO[*], PETITIONER, V. FAR EAST BANK
AND TRUST COMPANY (NOW BANK OF THE PHILIPPINE
ISLANDS), SUBSTITUTED BY PHILIPPINE INVESTMENT ONE
(SPV-AMC), INC.[**], RESPONDENT.

RESOLUTION

CAGUIOA, J:

This is a Petition for Review on Certiorari[1] (Petition) under Rule 45 of the Rules of

Court assailing the Decision[2] of the Court of Appeals[3] (CA) dated January 23,
2009 in CA-G.R. CV No. 87836. The CA Decision partially granted the appeal and
affirmed with modification the Decision[4] dated October 6, 2004 of the Regional
Trial Court, Branch 146, Makati City (RTC) in Civil Case No. 97-2522.

Facts and Antecedent Proceedings

The CA Decision narrates the following antecedent facts of the case:

On May 14, 1993, appellant then Far East Bank and Trust Company (appellant
bank, for brevity) approved the renewal of appellee GTI Sportswear Corporation's
Omnibus Credit Line (OCL) with a total amount of P35,000,000.00. The credit line
was available in the form of letters of credit, trust receipts, margin loan, export
packing credit line, bills purchase line and export bills purchase line. This was
secured by a Comprehensive Surety Agreement executed by appellee Benedicto V.
Yujuico in his personal capacity. He was also the president of appellee GTI.

Sometime in May 1995, negotiations were undertaken to settle appellee GTI's trust
receipt obligation under the OCL. During these negotiations, appellee GTI made
known to appellant bank its request for the conversion of its peso loan to US dollar-
denominated loan. An exchange of communications concerning the conversion
transpired but no definite agreement on the said conversion was put into writing.

On June 26, 1995, appellee Yujuico, in behalf of appellee GTI and in his personal
capacity as surety, and appellant's First Vice President Ricardo G. Lazatin, in behalf
of appellant bank, signed a Loan Restructuring Agreement (LRA), the subject of
which was appellee GTI's outstanding balance on its Omnibus Credit Line in the
amount of P25,208,[874].84[5] as of May 31, 1995. The agreement expressly stated
that the restructured loan continues to be secured by the Comprehensive Surety
Agreement previously executed by appellee Yujuico in favor of appellant bank.

After the signing of the restructuring agreement, appellee GTI, reiterated its
request for the re-denomination of its loan obligation to US dollars. Appellant bank,
however, denied the request and informed appellees that the conversion was not
deemed workable in view of the following considerations: appellant bank requires
long-term FCDU loans to be fully collateralized and appellee GTI, as borrower, must
have adequate FCDU placements with appellant bank as well as maintain
substantial deposit ADB levels.

In a letter dated September 22, 1997, appellant bank demanded that appellee GTI
update all its unpaid amortizations on the outstanding restructured loan with a
principal balance of P11,376,666.25 not later than September 30, 1997 and to
settle all its other past due obligations to avert any legal action.

On October 29, 1997, appellees filed against appellant bank a Complaint for
Specific Performance with Preliminary Injunction with the Regional Trial Court of
Makati City. Appellees alleged that during the signing of the loan restructuring
agreement, they were assured by the officers of appellant bank, namely: Paul
Regondola and Jacqueline Fernandez, that after a few payments on its obligation,
appellee GTI's peso loan would be converted to US dollars. Also, sometime in
October 1996, Paul Regondola confirmed by phone that the conversion of appellee
GTI's loan from peso to US Dollars had been approved by appellant bank. This
prompted appellee GTFs financial consultant Bermundo to send appellant bank a
letter dated October 31, 1996 acknowledging appellant bank's alleged confirmation
of the approval of the conversion of the restructured loan. This letter was not
denied by appellant bank until December 18, 1996 when it informed appellees that
the conversion of the restructured loan to US dollars was not deemed workable
because of certain considerations. These considerations, however, were not
conveyed to appellees beforehand.

Appellees averred further that under the US dollar-denominated loan, appellee GTI
would be paying lower interest and would save the total amount of P2,844,228.00.

Hence, appellees prayed that appellant bank be directed to convert GTI's loan to US
dollars retroactively effective October 1, 1996 and that appellant bank be directed
to pay appellees P2,844,228.00 representing savings that could have accrued in
favor of appellees in terms of the difference in interest payments. They also prayed
for exemplary damages and attorney's fees.

In an Answer dated December 4, 1997, appellant bank denied that it made

assurances to appellees that it would approve the latter's request for conversion of
the peso loan to US dollar. Appellant bank informed appellees that the request for
conversion would be considered depending on appellee's performance on the
restructuring agreement and their compliance with the requisites set by appellant
bank. Sometime in October 1996, Regondola informed appellee GTI's financial
consultant, Pablito Bermundo, that the request was approved in principle, subject
to some conditions which appellant bank imposes before approving similar requests
for conversion. Appellee GTI, however, was not able to comply with the
requirements resulting in the denial of their request for conversion. Hence,
appellant bank prayed that the complaint be dismissed.

By way of counterclaim, appellant bank prayed that appellees be ordered to jointly

and severally pay their obligations under the loan restructuring agreement
amounting to P15,798,642.39 as well as appellees' other obligations under the
Export Packing Credit Facility in the amount of P2,333,531.11 and Trust Receipt
Agreements in the amount of P1,922,646.60.

In a Decision dated October 6, 2004, the court a quo ruled that appellant bank
indeed agreed to convert to US dollar appellee GTI's peso loan obligation. The
conversion also resulted in the novation of appellee GTI's loan obligation. As a
result, appellee Yujuico was accordingly released from his obligations as surety
pursuant to Article 1215 of the New Civil Code in conjunction with paragraph 1 of
Article 1291 of the same Code. In addition, the court a quo dismissed without
prejudice appellant bank's counterclaims for failure to pay the required filing fees. x
xx

xxxx

[The dispositive portion of the RTC Decision dated October 6, 2004 states:

PREMISES CONSIDERED, judgment is rendered in favor of the plaintiffs and against

the defendant Bank of the Philippine Island (sic), directing the latter to
acknowledge and confirm its obligation to convert the restructured Omnibus Credit
Line of plaintiff GTI from Philippine Peso loan account into a US Dollar denominated
loan obligation; and finding the original Omnibus Credit Line entered into by
plaintiff GTI with defendant BPI to have been novated, the Comprehensive Surety
Agreement executed by plaintiff Yujuico covering said loan is deemed extinguished
and the latter is released from his obligation as surety.

The compulsory counterclaims of the defendant which are actually permissive

counterclaims are not admitted and are therefore DISMISSED without prejudice for
failure of the defendant to pay the required filing fees.

SO ORDERED.[6]]

Appellant bank then filed a Motion for Reconsideration. x x x

[In the Motion for Reconsideration[7] dated November 2, 2004, appellant bank

manifested that:

x x x Anent the first ground, defendant hereby manifests its acceptance of and
willingness to abide by the decision of the [RTC]. As mandated by the [RTC],
defendant BPI acknowledges and confirms its obligation to convert the restructured
Omnibus Line of plaintiff GTI Sportswear from a peso account into a US Dollar
denominated loan obligation. In support thereof, defendant attaches herewith and
makes an integral part hereof as Annex "A" the Statement of Account [8] of the
plaintiffs under the restructured Omnibus Line as of October 31, 2004. The
Statement of Account reflects defendant's computation of the outstanding
obligation of the plaintiffs on the basis of a peso-dollar rate of exchange at [$1] =
P26.30, then the prevailing rate[.]

x x x With the submission of the foregoing computation, plaintiffs should now be

directed to pay defendant under the restructured Omnibus Line the amount of
US$1,132,795.31 plus the stipulated interests and penalty charges thereon from
October 31, 20[0]4 until the same is fully paid in US dollar currency[.][9]

The appellant bank raised as second ground, the correctness of the release of
Yujuico from his obligation as a surety of the loan obtained by appellee GTI and
took the position that there was no novation.[10] As third ground, appellant bank
argued that its permissive counterclaim against plaintiffs should not have been
dismissed for failure to pay the required docket fees.[11]]

The motion for reconsideration was denied in an Order dated March 4, 2005.

Aggrieved, appellant bank filed [an] appeal [before the CA].[12]

In a Decision[13] dated January 23, 2009, the CA partially granted the appeal. The
CA no longer delved on the issue of whether or not the parties perfected a contract
on the conversion of the restructured loan to US dollars in view of appellant bank's
acknowledgment and confirmation of its obligation to convert the restructured loan
to US dollars in its Motion for Reconsideration dated November 2, 2004. [14] The lone
issue left for determination as far as the CA was concerned was whether or not the
conversion of the peso-denominated loan is tantamount to novation warranting the
extinguishment of appellee Yujuico's obligations as a surety. [15] On the said issue,
the CA ruled that the Omnibus Credit Line and the Loan Restructuring Agreement
between appellee GTI Sportswear Corporation (GTI) and appellant bank were not
novated and appellee Yujuico remained to be liable as a surety under the
Comprehensive Surety Agreement.[16]

The dispositive portion of the CA Decision states:

WHEREFORE, the instant appeal is hereby PARTIALLY GRANTED. Accordingly,

the Decision dated October 6, 2004 of the Regional Trial Court, Branch 146, Makati
City is AFFIRMED WITH MODIFICATION in that the Omnibus Credit Line and the
Loan Restructuring Agreement between appellee GTI and appellant were not
novated and appellee Yujuico remains to be liable as surety under the
Comprehensive Surety Agreement.

SO ORDERED.[17]
Hence, the present Rule 45 Petition dated March 12, 2009 filed by petitioner
Benedicto V. Yujuico (Yujuico). GTI, petitioner Yujuico's co-plaintiff before the RTC
and co-appellee before the CA, did not join as co-petitioner in the Petition.
Respondent Far East Bank and Trust Company (now Bank of the Philippine Islands),
substituted by Philippine Asset Investment (SPV-AMC), Inc. (PAI) filed a
Comment[18] dated December 7, 2009. Petitioner Yujuico filed a Reply[19] dated May
20, 2010. Pursuant to the Court's Resolution [20] dated January 15, 2014, which
granted the Motion for Substitution[21] filed by Philippine Investment One (SPV-
AMC), Inc. (PIO) as the assignee of all the rights, title and interest over the Non-
Performing Loan of GTI of the assignor PAI by virtue of the Deed of
Assignment[22] dated May 11, 2007 executed by PAI and PIO [23], PIO (respondent)
was allowed to substitute for PAI as new party respondent in this case.

Issues

Petitioner Yujuico raises the following issues in the Petition:

1. whether the CA has legal basis to resolve and declare that there was no
novation between GTI and respondent;

2. whether the CA has legal basis to resolve and declare that petitioner Yujuico
remains liable as surety of the obligation of GTI; and

3. whether the CA has legal basis to entertain the appeal as respondent had
already performed a partial execution of the Decision of the RTC which
prevents and/or precludes respondent from questioning and/or appealing the
judgment/Decision of the RTC.[24]

The Court's Ruling

Petitioner Yujuico fails to convince the Court that the CA erred. His Petition is not
meritorious.

The third issue will be resolved first because it directly impacts on the other two
issues.

Petitioner Yujuico takes the position that pursuant to the leading case of Verches v.
Rios[25] (Verches), "in x x x converting the restructured Omnibus Credit Line/loan of
GTI Sportswear Corporation from Philippine Peso to United States Dollar
denominated [respondent] has clearly and definitely partially executed the
judgment/decision of the Trial Court and/or has voluntarily acquiesced or ratified
partially the execution of the judgment/decision of the Trial Court." [26]

Petitioner Yujuico entirely misses the import of the Court's ruling in Verches, which
is extensively reproduced below:

There is no dispute about any material fact. Plaintiffs complaint is founded upon an
indivisible cause of action to recover the sum of P2,400 arising out of a fraudulent
breach of a contract, upon which the lower court rendered judgment in favor of the
plaintiff for the sum of P1,000, from which the plaintiff appealed assigning the
following errors:

"The lower court erred in sentencing the defendant to pay the plaintiff only the sum
of P1,000 instead of sentencing her to the payment of the sum of P2,400 with legal
interest thereon."

After his appeal was taken and perfected, the plaintiff filed a motion in this court for
leave to have an execution issued out of the court below on the judgment in his
favor against the defendant for P1,000. That motion was granted by the vacation
Justice x x x and this order of the vacation Justice was approved by the court in
banc x x x. Based upon the order of the vacation Justice x x x, the plaintiff applied
to the lower court and obtained leave to issue an execution on his judgment for
P1,000, and that execution was issued out of the lower court, and eventually the
defendant was forced to, and did, pay the P1,000 to plaintiff, who signed the
receipt x x x.

The proof is conclusive that, through an execution issued on his motion, the plaintiff
has obtained satisfaction in full of his judgment for P1,000. xxx

Although the amount involved is small, the question presented is one of first
impression in this court, and is important to the legal profession.

The case of Paine vs. Woolley (80 Ky., 568), is a leading, well written case on the
question presented, the syllabus of which is as follows:

"1. A party who has recovered a judgment upon a claim which is indivisible, and
has, after its rendition, coerced by execution full satisfaction, cannot maintain an
appeal in this court, against the objections of the judgment debtor, upon the
ground that he has not recovered enough.

"2. This rule applies to judgments in equity as well as at law.

"3. Having elected to collect his judgment, appellant ratified it, and should be
estopped from prosecuting the appeal as inconsistent with his collection of the
amount adjudged to him."

And on page 573, the opinion says:

"We may, therefore, conclude with perfect confidence that the general principle is
that a party who has recovered judgment on a claim which cannot be split up and
made the basis of several causes of action, and afterwards coerced full satisfaction
by writ of execution or authority of the court, cannot maintain an appeal from the
judgment against the objections of the judgment debtor.

"Counsel for appellants have cited a number of authorities which, it is contended,

establish a different rule; but after a patient and thorough examination of each
case, we are unable to find that any of them go further than to hold that neither
a voluntary payment by the defendant of the judgment, nor a partial  satisfaction
thereof under coercion, will constitute a waiver of the appeal or a release of errors.
But the weight of authority is to the effect that an acceptance of full satisfaction of
the judgment annihilates the right to further prosecute the appeal, while there are
cases holding the contrary view."

The following authorities are also square in point:

"One who complains of a judgment must be consistent in his conduct with reference
to it. If he recognizes its validity, he will not be heard to say that it is erroneous."
(Babbit vs. Corby, 13 Kan., 612; Merchant's Nat. Bank vs. Quinton, 9 Kan. App.,
882; 57 Pac, 261.)

"A party who is dissatisfied with a decree in his favor has the option to have it
reviewed by proper proceedings, or to enforce it and receive its benefits; but he
cannot pursue both courses, since one is inconsistent with the other." (Harte vs.
Castetter, 38 Neb., 571; 57 N. W., 381.)

"If one desires to appeal from an order made in a litigation in which he is a party,
he should accept no benefit under it, for he cannot do both." (Cogswell vs. Colley,
22 Wis., 381.)

"The right to accept the fruits of a judgment, and the right of appeal therefrom are
not concurrent. On the contrary, they are totally inconsistent. An election to take
one of these courses is, therefore, a renunciation of the other." (Estate of Shaver,
131 Cal., 219.)

"When an appellee has paid, and the appellant has accepted payment of a
judgment from which an appeal has been taken, there is nothing more in
controversy, and the court will not entertain or permit the prosecution of the
appeal." (State ex rel. Neal vs. Kamp, 111 Ind., 56.)

"The right to proceed upon a judgment or decree, and invoke the process of the
court, and thus acquire or otherwise secure and enjoy the fruits of such judgment
or decree, is wholly inconsistent with the right to appeal from it." (Merriam vs.
Victory Mining Co., 37 Or., 321.)

"It is manifestly unjust to permit a partly successful litigant to take all the money
the decree gives him, and then speculate upon the possibilities of getting more by
means of a writ of error." (Holt vs. Rees, 46 Ill., 181.)

"The receipt of money due upon a decree, and the allowance of its satisfaction in
consequence of the payment in full before an appeal, is a waiver of all errors,
unless the money thus received is returned or tendered to the appellee before the
proceeding to assign errors in the appellate court." (Murphy's Heirs vs. Murphy's
Adm'r., 45 Ala., 123.)
The rule is also sustained by the supreme court of Louisiana, where it is held:

"An appellant from a judgment in his favor for a less amount than he claimed, who,
after taking his appeal, causes a fi.fa.[27] to be issued upon the judgment, will be
considered voluntarily to have executed such judgment, and to have abandoned his
appeal." (Campbell vs. Orillion, 3 La. Ann., 115.)

"A party in whose favor a judgment appealed from was rendered, who partially
executes the same by compulsory legal process, must be considered as having
acquiesced in such judgment, and cannot afterwards, by appeal or answer to his
adversary's appeal, or otherwise, ask that the judgment be amended." (Wiemann's
Succession, 112 La., 293; 36 So., 354.)

"It cannot be controverted, declared the court in De Egana's Succession, supra,

that under the laws and jurisprudence of this state, the party who voluntarily
executes, either partially or in toto, a judgment rendered for or against him, or who
voluntarily acquiesces in or ratifies, either partially or in toto, the execution of that
judgment, is not permitted to appeal from it." De Egana's Succession, 18 La. Ann.,
59.)

"To receive the amount of a judgment, in whole or in part, is, in its natural
significance, as well as under the Louisiana jurisprudence, an acquiescence in the
judgment. And to receive a part of a judgment is as significant of an acquiescence
of the judgment as would be the reception of the whole." (Flowers vs. Hughes, 46
La. Ann., 436; 15 So., 14.)

Owing to the similarity of the jurisprudence of that State with the law of the
Philippine Islands, the Louisiana decisions are important and should have great
weight in this court.

Plaintiff’s cause of action is indivisible.

The plaintiff, having applied to this court for leave to issue an execution out of the
lower court on his judgment for P1,000, and, through coercion, having collected
that judgment and receipted for it in full, ought not to be heard in this Court to say
that the judgment of the lower court was erroneous. It may be, as plaintiff claims,
that in the collection of a judgment for P1,000 on an execution, it never was his
purpose or intent to waive or abandon his appeal from that judgment.

His cause of action being indivisible, and the judgment from which plaintiffs appeal
was taken having been satisfied by an execution issued on his own motion, there is
nothing left from which to appeal. Upon an indivisible cause of action, plaintiff,
through an execution, cannot collect a judgment in his favor and at the same time
prosecutes an appeal from that judgment upon the ground that it was erroneous
and should have been for more money.[28]

To distill the foregoing, the party, who is barred from appealing and claiming that
he has not recovered enough, must have recovered a judgment upon a claim which
is indivisible and, after its rendition, has coerced by execution full or partial
satisfaction. Thus, having elected to collect from the judgment by execution, he has
ratified it, either in toto or partially, and should be estopped from prosecuting an
appeal inconsistent with his collection of the amount adjudged to him.

In fine, the claim must be one which is indivisible and there must be an execution
of the judgment, either partially or fully. Indeed, the claim of respondent against
GTI and petitioner Yujuico is indivisible since it cannot be split up and made the
basis for several causes of action. However, there is yet no execution of the RTC
Decision, either fully or partially. Respondent merely acceded to the directive of the
RTC "to acknowledge and confirm its obligation to convert the restructured
Omnibus Credit Line of x x x GTI from Philippine Peso loan account into a US Dollar
denominated loan obligation."[29] In fact, the RTC, while it recognized that GTI is
indebted to respondent, ruled that "[t]he liquidation of this obligation is however
subject to a condition that the bank [(respondent)] must first comply with its
obligation to convert the Peso loan account into a US Dollar denominated loan and
thereafter [compute] the outstanding obligation of [GTI and petitioner Yujuico] to
it."[30] Even in the Motion for Reconsideration[31] dated November 2, 2004 filed by
respondent wherein it manifested its acceptance of and willingness to abide by the
RTC directive, respondent alleged that "[w]ith the submission of the x x x
computation [of the outstanding obligation of GTI and petitioner Yujuico pursuant to
the Statement of Account it attached as Annex 'A' thereof, they] should now be
directed to pay [respondent] under the restructured Omnibus Line the amount of
US$1,132,795.31 plus the stipulated interests and penalty charges thereon from
October 31, 20[0]4 until the same is fully paid in US dollar currency."[32] Thus, GTI
or petitioner Yujuico has not been coerced by execution to satisfy the RTC
judgment; and respondent is not precluded to appeal the resolution of the RTC that
there is novation and petitioner Yujuico is released from his obligation as a surety.
Additionally, respondent questioned the release of petitioner Yujuico as surety and
the ruling on the presence of novation in the said Motion for Reconsideration.

Tañada v. Court of Appeals[33] cited by petitioner Yujuico is not persuasive. In that

case, the assailed order of the lower court dated April 8, 1941, which was
subsequently opposed by Narcisa Mendoza (Mendoza), the defendant therein, "had
become final and executory, [and] it could no longer be disturbed, not even by the
very court which rendered it" because "Mendoza did not question the
reasonableness of said order before the court, much less did she interpose an
appeal therefrom."[34] The actuations of Mendoza after the issuance of the said
order — surrender to the Register of Deeds the certificates of title covering the
lands involved for annotation of therein petitioners' lien; delivery to the petitioners
their one-half share of the yearly produce from 1941 to 1958 — were tantamount
to virtual acquiescence to the assailed order and she could not subsequently be
allowed to repudiate her representations or assume an inconsistent posture. [35] It is
within this context that the principle being raised by petitioner Yujuico was invoked
by the Court.

Regarding the first issue, novation is governed principally by Articles 1291 and
1292 of the Civil Code, which provide:
ART. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;

(2) Substituting the person of the debtor;

(3) Subrogating a third person in the rights of the creditor.

ART. 1292. In order that an obligation may be extinguished by another which

substitutes the same, it is imperative that it be so declared in unequivocal terms, or
that the old and the new obligations be on every point incompatible with each
other.

Noted civilist Justice Eduardo P. Caguioa elucidated on the concept of novation as

follows:

x x x Novation has been defined as the substitution or alteration of an obligation by

a subsequent one that cancels or modifies the preceding one. [36] Unlike other modes
of extinction of obligations, novation is a juridical act of dual function, in that at the
time it extinguishes an obligation, it creates a new one in lieu of the old. [37] xxx This
is not to say however, that in every case of novation 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.[38]

As to its essence, novation may be classified into: (a) objective or real,

(b) subjective or personal, or (c) mixed.[39] Article 1291(1) contemplates an
objective or real novation where there is a change in the cause, object or principal
conditions of the obligations while (2) and (3) of said Article contemplate
a passive one where there is a substitution of the person of the debtor and
an active one where there is subrogation of a third person in the rights of the
creditor.[40] Mixed novation, on the other hand, refers to a combination of objective
and subjective novation.[41]

As to its form or constitution, novation may be express, when it is declared in

unequivocal terms that the old obligation is extinguished by a new one which
substitutes the same, or implied or tacit, when the old and the new obligations are
incompatible with each other on every point. [42]

As to extent or effect, novation may be total or extinctive[43], when there is an

absolute extinguishment of the old obligation, or partial, when there is merely a
modification of the old obligation.[44]

The Court agrees with the finding of the CA that "[t]he attendant facts do not make
out a case of novation"[45] in the sense of a total or extinctive novation. As
explained by the CA:
A perusal of the records reveals that there is no document that states in
unequivocal terms that the agreement to convert the loan from peso to US dollar
would abrogate the loan restructuring agreement or the omnibus credit line.
Instead what is readily apparent from the exchange of communications concerning
the request for conversion is that the parties recognize the subsistence of the loan
restructuring agreement. In fact, in the letter dated September 5, 1995 sent by x x
x GTI to [respondent] reiterating the former's request to re-dominate its loan
obligation from peso to US dollar, x x x GTI even assured [respondent] that the
other terms of the restructuring agreement would be complied with. Verily, where
the parties to the new obligation expressly recognize the continuing existence and
validity of the old one, there can be no novation.[46]

Neither do We see any substantial incompatibility between the obligations of the

parties under the restructuring agreement and the agreement to convert the loan
as to warrant a finding of an implied novation. Implied novation necessitates that
the incompatibility between the old and new obligations be total on every point
such that the old obligation is completely superseded by the new one. [47] This is not
the case here. The only modification that the conversion agreement introduced was
that [GTI's and petitioner Yujuico's] loan obligation would be payable in US dollars
instead of Philippine pesos. Incidentally, the applicable interest rate is lower on
account of the change in currency. These alterations, however, do not suffice to
constitute novation. The well-settled rule is that, 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.[48] At most, the changes introduced by the conversion of the loan obligation
amount merely to modificatory novation, which results from the alteration of the
terms and conditions of an obligation without altering its essence. [49]

In the 1912 case of Zapanta v. De Rotaeche,[50] the plaintiff therein commenced an

action against Zapanta for the purpose of recovering the sum of 7,179.48 pesos
Mexican currency; the trial court rendered a judgment in favor of the plaintiff
therein and against Zapanta for the said sum of 7,179.48 pesos Mexican currency,
which equaled the sum of P6,353.52. Subsequent to the judgment, the plaintiff
therein and Zapanta entered into an agreement or contract whereby Zapanta
acknowledged his indebtedness in the sum of P6,353.52 as declared in the
judgment and as Zapanta was unable to pay said amount in a lump sum, he
promised to pay at the end of each month to the plaintiff therein P150 per month;
the sum owed was to bear interest at 3% per annum; and in case of nonfulfillment
of Zapanta's promise, said plaintiff would be at liberty to enter suit against him.
When Zapanta failed to punctually comply with the provisions of the agreement, the
plaintiff therein sued for the issuance of a writ of execution of the judgment. [51] In
resolving the issue of whether the plaintiff therein had lost his right to the writ of
the execution under the said judgment and the remedy was for the said plaintiff to
commence an action against Zapanta upon said agreement, the Court ruled as
follows:
x x x The Civil Code[52], in article 1156[53], provides the method by which all civil
obligations may be extinguished. One of the methods recognized by said code for
the extinguishment of obligations is that by novation. (Civil Code, arts. 1156, 1203
to 1213[54].) In order, however, that an obligation shall be extinguished by another
obligation (by novation) which substitutes it, the law requires that the novation or
extinguishment shall be expressly declared or that the old and new obligations shall
be absolutely incompatible. (Civil Code, art. 1204.) In the present case, the
contract referred to does not expressly extinguish the obligations existing in said
judgment. Upon the contrary it expressly recognizes the obligations existing
between the parties in said judgment and expressly provides a method by which
the same shall be extinguished, which method is, as is expressly indicated in said
contract, by monthly payments. The contract, instead of containing provisions
"absolutely incompatible" with the obligations of the judgment, expressly ratifies
such obligations and contains provisions for satisfying them. The said agreement
simply gave the plaintiff a method and more time for the satisfaction of [the]
judgment. It did not extinguish the obligations contained in the judgment, until the
terms of said contract had been fully complied with. Had the plaintiff continued to
comply with the conditions of said contract, he might have successfully invoked its
provisions against the issuance of an execution upon the said judgment. The
contract and the punctual compliance with its terms only delayed the right of the
defendant to an execution upon the judgment. The judgment was not satisfied and
the obligations existing thereunder still subsisted until the terms of the agreement
had been fully complied with. The plaintiff was bound to perform the conditions
mentioned in said contract punctually and fully, in default of which the defendant
was remitted to the original rights under his judgment. [55]

The Court observed in Sandico, Sr. v. Piguing[56] that:

Novation results in two stipulations — one to extinguish an existing obligation, the

other to substitute a new one in its place.[57] Fundamental it is that novation effects
a substitution or modification of an obligation by another or an extinguishment of
one obligation by the creation of another. In the case at hand, we fail to see what
new or modified obligation arose out of the payment by the respondent of the
reduced amount of P4,000 and substituted the monetary liability for P6,000 of the
said respondent under the appellate court's judgment. Additionally, to sustain
novation necessitates that the same be so declared in unequivocal terms — clearly
and unmistakably shown by the express agreement of the parties or by acts of
equivalent import — or that there is complete and substantial incompatibility
between the two obligations.[58]

From the foregoing, it can be gathered that, at best, the agreement to convert the
Peso-denominated restructured loan into a US Dollar-denominated one is an implied
or tacit, partial, modificatory novation. There was merely a change in the method of
payment.

As to the second issue, without a total or extinctive novation, the surety agreement
subsists.
Aside from the absence of a "perfect" novation, the CA said that "another
circumstance that militates against the release of [petitioner] Yujuico as surety is
the fact that he executed a comprehensive or continuing surety, one which is not
limited to a single transaction, but which contemplates a future course of dealing,
covering a series of transactions, generally for an indefinite time or until
revoked."[59] The CA added:

x x x The comprehensive characteristic of the surety is evident in the

Comprehensive Surety Agreement by which [petitioner] Yujuico guaranteed in joint
and several capacity, the punctual payment at maturity of any and all indebtedness
of every kind which, at the time of execution was or may thereafter become due or
owing [to respondent by the Borrower, GTI]. Indubitably, these provisions are
broad enough to include the loan obligation under the loan restructuring agreement
even after its conversion to US dollar. x x x[60]

The Court fully agrees with the CA. While Article 1215 of the Civil Code provides
that novation, compensation or remission of the debt, made by any of the solidary
creditors or with any of the solidary debtors, shall extinguish the obligation, the
novation contemplated therein is a total or extinctive novation of the old obligation.
Also, the Comprehensive Surety Agreement that petitioner Yujuico executed in
favor of respondent is so worded that it covers "any and all other indebtedness of
every kind which is now or may hereafter become due or owing to [respondent] by
the Borrower."[61]

WHEREFORE, the Petition is hereby DENIED. The Decision dated January 23,

2009 of the Court of Appeals in CA-G.R. CV No. 87836 is AFFIRMED.

SO ORDERED.

Perlas-Bernabe (Acting Chairperson), Jardeleza,[***] A. Reyes, Jr., and J. Reyes, Jr.,

JJ., concur.

[*]
 In the Motion for Extension of Time to File Petition for Review on Certiorari dated
February 18, 2009 (rollo, pp. 3-7) the caption reflects GTI Sportswear Corporation
and Benedicto V. Yujuico as the petitioners. However, in the Petition for Review on
Certiorari dated March 12, 2009 (rollo, pp. 11-51) subsequently filed, only the
name of Benedicto V. Yujuico appears as petitioner in the caption.

[**]
 Per Resolution of the Court dated January 15, 2014; rollo, p. 280.

[***]
 Designated additional Member per Raffle dated July 30, 2018.

[1]
 Rollo, pp. 11-51, excluding Annexes.

[2]
 Id. at 53-69. Penned by Associate Justice Ramon R. Garcia, with Associate
Justices Edgardo P. Cruz and Magdangal M. De Leon concurring.
[3]
 Seventh Division.

[4]
 Rollo, pp. 75-85. Penned by Pairing Judge Cesar D. Santamaria.

[5]
 See rollo, p. 79.

[6]
 Rollo, p. 85.

[7]
 Id. at 87-96, including Annexes.

[8]
 The Statement of Account (Annex "A") states that principal of the restructured
loan as of October 31, 2004 was P10,998,027.38 or US$418,175.95 with interest
from 10/01/96 to 10/31/04 at 8.8402% interest rate equivalent to interest amount
of US$303,134.24 and penalty at 12% penalty rate equivalent to US$411,485.13.
Thus, the total amount due was US$1,132,795.31. Id. at 94.

[9]
 Rollo, p. 88.

[10]
 Id. at 89.

[11]
 Id. at 90.

[12]
 CA Decision dated January 23, 2009, id. at 55-61.

[13]
 Id. at 53-69.

[14]
 Id. at 62.

[15]
 Id.

[16]
 Id. at 68.

[17]
 Id.

[18]
 Id. at 214-225.

[19]
 Id. at 230-240, excluding Annexes.

[20]
 Id. at 280-281.

[21]
 Id. at 267-274, excluding Annexes.

[22]
 Id. at 278-279.

[23]
 Id. at 268.

[24]
 Petition, id. at 29.
[25]
 48 Phil. 16 (1925).

[26]
 Petition, rollo, p. 43.

[27]
 A writ of fieri facias (or Writ of Fi Fa) is a document issued by the Clerk of
Magistrate Court for the purpose of recording a lien on the judgment debtor's
property. It is also the legal instrument by which the sheriff of a county may seize
the assets of a judgment debtor. < https://www.accgov.com/709/Writs-of-Fieri-
Facias >.

[28]
 Verches v. Rios, supra note 25, at 19-23.

[29]
 RTC Decision dated October 6, 2004, rollo, p. 85.

[30]
 Id. at 84.

[31]
 Rollo, pp. 87-96, including Annexes.

[32]
 Id. at 88.

[33]
 223 Phil. 634 (1985).

[34]
 Id. at 639.

[35]
 Id.

[36]
 Eduardo P. Caguioa, COMMENTS AND CASES ON CIVIL LAW, CIVIL CODE OF
THE PHILIPPINES, Vol. IV (1983 Rev. 2nd Ed.), p. 410, citing 8 Manresa, p. 751.

[37]
 Id., citing Gov't v. Bautista (CA), 37 O.G. 1880; 3 Castan, 8th ed., p. 306.

[38]
 Id. at 410-411.

[39]
 Desiderio P. Jurado, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND
CONTRACTS (1987 9th Rev. Ed.), p. 323, citing 3 Castan, 7 th Ed., p. 284.

[40]
 Id.

[41]
 Id., citing 3 Castan, 7th Ed., p. 284.

[42]
 Id., citing CIVIL CODE, Art. 1292.

[43]
 Edgardo L. Paras, CIVIL CODE OF THE PHILIPPINES ANNOTATED, Vol. IV (2016
18th Ed.), p. 489.

[44]
 Id. at 490.
[45]
 CA Decision dated January 23, 2009, rollo, p. 63.

[46]
 Id. at 64, citing California Bus Lines, Inc. v. State Investment House, Inc., 463
Phil. 689, 708 (2003), further citing Cochingyan, Jr. v. R&B Surety and Insurance
Co., Inc., 235 Phil. 332, 345 (1987).

[47]
 Id., citing Iloilo Traders Finance Inc. v. Heirs of Sps. Soriano, 452 Phil. 82, 89
(2003).

[48]
 Id. at 64-65, citing Sps. Reyes v. BPI Family Savings Bank, Inc., 520 Phil. 801,
808 (2006).

[49]
 Id. at 65, citing  Swagman Hotels and Travel, Inc. v. Court of Appeals, 495 Phil.
161, 175 (2005).

[50]
 21 Phil. 154 (1912).

[51]
 Id. at 156-158.

[52]
 OLD CIVIL CODE or the CIVIL CODE OF 1889.

[53]
 CIVIL CODE (Republic Act No. 386), Art. 1231.

[54]
 Id., Arts. 1291, 1292, 1293, 1295, 1296, 1298, 1300, 1302, 1303, and 1304.

[55]
 Zapanta v. De Rotaeche, supra note 50, at 159-160.

[56]
 149 Phil. 422 (1971).

[57]
 Id. at 433, citing Tin Siuco v. Habana, 45 Phil 707 (1924).

[58]
 Id., citing CIVIL CODE, Art. 1292.

[59]
 CA Decision dated January 23, 2009, rollo, p. 65, citing Fortune Motors (Phils.)
Corporation v. Court of Appeals, 335 Phil. 315, 326 (1997).

[60]
 Id.

[61]
 Id. at 66; emphasis omitted.