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Obligations and Contracts | Novation MILLAR v. CA Eusebio S. Millar (creditor) v. The Hon. Court of Appeals and Antonio P. Gabriel (debtor) Petition for certiorari to review a decision of the CA April 30, 1971 Fred Ruiz Castro, J.
Facts 1. Gabriel did not pay the first installment due on a chattel mortgage on a jeep he had executed with Millar. Millar. [Background] The CFI of Manila issued a wr it of execution ordering Gabriel to return a Willy’s Ford jeep to Millar. Gabriel pleaded with Millar to release the jeep under an arrangement whereby he was to mortgage the jeep in order to pay the judgment debt in favor of the latter. Gabriel executed a chattel mortgage on the jeep. Gabriel was to pay a total of PHP 1700 in two installments at PHP 850 each. o 2. Gabriel failed to pay the first installment. 3. Millar then obtained a writ of execution but even after the lapse of the entire chattel mortgage period, it was returned unsatisfied. After five unsatisfied unsatisfied writs of execution, execution, the sheriff levied on certain certain personal properties belonging to Gabriel and scheduled them for execution sale. Respondent Gabriel: Filed an urgent motion for suspension of execution sale on the ground of payment of the judgment debt. 4. The lower court ordered the suspension of the execution sale and ruled that novation had taken place and that the parties had executed the chattel mortgage only “to secure or get better security for the judgment.” CA held that there the chattel mortgage agreement impliedly novated the CFI judgment. CA held that the following circumstances demonstrated the incompatibility between the judgment debt and the deed of chattel mortgage:
Judgment Debt Orders Gabriel to pay PHP 1746.98 with interest at 12% per annum from the filing of complaint plus PHP 400 in attorney’s fees and the costs of suit No specific mode of payment No mention of damages Unsecured
Chattel Mortgage Only PHP 1700
Payment of the sum of PHP 1700 in two equal installments Obligates Gabriel to pay liquidated damages in the amount of PHP 300 in case of default Jeep may be foreclosed extrajudicially in case of default
Issue/s WON the deed of chattel chattel mortgage novated the the judgment of the CFI. CFI. Ratio Decidendi No novation shall be implied, unless there is clear and convincing proof of complete incompatibility between the two obligations. Reasoning 1. NO. There was no clear and convincing proof that there was an implied novation in the execution of the Chattel Mortgage Agreement. On the first circumstance: Only modifications that alter the essence of the old obligation result in implied novation. The mere reduction of the amount due does not constitute a sufficient indicium of incompatibility o especially in the light of Millar and G abriel’s admission that the reduced amount was due to partial payments made by the latter before the execution of the chattel mortgage agreement. The deed of chattel mortgage was a mere specification of how much exactly Gabriel owed to Millar o in order to avoid confusion. On the third circumstance: Discrepancy between the PHP 400 and PHP 300 fixed as attorney’s fees and damages in the judgment and the deed r espectively explained: Partial payments made by Gabriel before the execution of the chattel mortgage agreement were o applied in satisfaction of part of the judgment debt and of part of the attorney’s fees fixed in the judgment, thereby reducing reducing both amounts. ( I don’t understand understand the reasoning here)
Obligations and Contracts | Novation There was no clear and convincing evidence that the PHP 300 in attorney’s fees stipulated in the deed of chattel mortgage intended the same as an o bligation for payment of liquidated damages in case of default. On the second circumstance: The chattel mortgage simply gave Gabriel an express and specific method of payment and more time to enable him to satisfy the judgment indebtedness. It did not constitute any substantial modification of the judgment. On the fourth circumstance: The debt security in the form of the jeep was stipulated to secure the satisfaction of the liability. It effectuated no substantial alteration in Gabriel’s liability. o
Disposition Gabriel directed to pay the PHP 1700. Concurrence Antonio P. Barredo, J.: The sense in which the parties contemplated to have bound themselves may be considered in the determination of WON there is implied novation. Comments/Questions: Trivia: We owned a Willy’s jeep for more than 30 years! Binigay siya ng adoptive Filipino mom ng tatay ko nung binata pa siya sa Navotas. Dinala niya sa Bacolod nung nagmove kami doon. It was my service vehicle to school until 2005! Ikinahihiya ko dati yun dahil basag ang windshield. Isang cube na siya ng metal ngayon huhu. Digest by: Dawn Chua