MAGDALENA ESTATES, INC., PLAINTIFF-APPELLEE, VS. ANTONIO A. RODRIGUEZ, DEFENDANTS-APPELLANTS.

Appeal from the decision of the Court of First Instance of Manila ordering
the defendants-appellants to pay jointly and severally to the plaintiff-appellee
the sum of P655.89, plus legal interest thereon from the date of the judicial
demand, the sum of P100.00 as attorney’s fees, and to pay the costs.

The appellants bought from the appellee a parcel of land in Quezon City known
as lot 7-K-2-G, Psd-26193. In view of an unpaid balance of P5,000.00 on account
of the purchase price of the lot, the appellants executed on January 4, 1957,
the following promissory note representing the said account:

“PROMISSORY NOTE

P5,000.00

Manila, January 4, 1957

We, the Spouses ANTONIO A. RODRIGUEZ and HERMINIA C. RODRIGUEZ, jointly and
severally promise to pay the Magdalena Estate, Inc., or order, at its offices in
the City of Manila, without any demand the sum of FIVE THOUSAND PESOS
(P5,000.00), Philippine currency, with interest at the rate of Nine Per Cent
(9%) per annum, within sixty (60) days from January 7, 1957. The sum of
P5,000.00 represents the’balance of the purchase price of the parcel of land
known as Lot 7-K-2-G, Psd-26193, containing an area of 2,191 square meters,
Quezon City.

(Sgd.) Antonio A. Rodriguez
(T.) ANTONIO A. RODRIGUEZ

(Sgd.) Herminia C. Rodriguez
(T.) HERMINIA C. RODRIGUEZ

Signed in the presence of:

(Sgd.) ILLEGIBLE

(Sgd.) ILLEGIBLE”

On the same date, the appellants and the Luzon Surety Co., Inc. executed a
bond in favor of the appellee, the undertaking thereof being embodied therein as
follows:

‘x x x comply with the obligation to pay the amount of P5,000.00 representing
balance of the purchase price of a parcel of land known as Lot 7-K-2-C,
Psd-26193, with an area of 2191 square meters, Quezon City, covered by Transfer
Certificate of Title No. 13 (6947), Quezon City, within a period of sixty (60)
days from January 7, 1957; That the Surety shall be notified in writing within
Ten (10) days from moment of default otherwise, this undertaking is
automatically null and void.”

On June 20, 1958, when the obligation of the appellants became due and
demandable, the Luzon Surety Co., Inc. paid to the appellee the sum of
P5,000.00. Subsequently, the appellee demanded from the appellants the payment
of P655.89 corresponding to the alleged accumulated interests on the principal
of P5,000.00. Due to the refusal of the appellants to pay the said interest, the
appellee started this suit in the Municipal Court of Manila to enforce the
collection thereof. The said court, on February 5, 1959, rendered judgment in
favor of the appellee and against the appellants, ordering the latter to pay
jointly and severally the appellee the sum of P655.89 with interest thereon at
the legal rate from November 10, 1958, the date of the filing of the complaint,
until the whole amount is fully paid. Not satisfied with that judgment,
appellants appealed to the Court of First Instance of Manila, where the case was
submitted for decision on the pleadings. The Court of First Instance of Manila
rendered the judgment stated at the outset of this decision.

On appeal directly to this Court, the following errors are assigned:

1. The lower court erred in concluding as a fact from the pleadings that the
   plaintiff-appellee demanded, and the Luzon Surety Co., Inc. refused, the payment
   of interest in the amount of P655.89, and in not finding and declaring that said
   plaintiff-appellee waived or condoned the said interests.

2. The lower court erred in not finding and declaring that the obligation of
   the defendants-appellants in favor of the plaintiff-appellee was totally
   extinguished by payment and/or condonation.

3. The lower court erred in not finding and declaring that the promissory note
   executed by the defendants-appellants in favor of the plaintiff-appellee was,
   insofar as the said document provided for the payment of interests, novated when
   the plaintiff-appellee unqualifiedly accepted the surety bond which merely
   guaranteed payment of the principal in the sum of P5,000.00.

Appellants claim that the pleadings do not show that there was demand
made by the appellee for the payment of accrued interest and what could be
deduced therefrom was merely that the appellee demanded from the Luzon Surety
Co., Inc., in the capacity of the latter as surety, the payment of the
obligation of the appellants, and said appellee accepted unqualifiedly the
amount of P5,000.00. as performance by the obligor and/or obligors of the
obligation in its favor. It is further claimed that the unqualified acceptance
of payment made by the Luzon Surety Co., Inc. of P5,000.00 or only the amount of
the principal obligation and without exercising its (appellee’s) right to apply
a portion of P655.89 thereof to the payment of the alleged interest due despite
its presumed knowledge of its right to do so, the appellee showed that it waived
or condoned the interests due, because Articles 1235 and 1253 of the Civil Code
provide:

“Art. 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or objection,
the obligation is deemed fully complied with.”

“Art. 1253. If the debt produces interest, payment of the principal shall not
be deemed to have been made until the interests have been
covered.”

We do not agree with the contention of the appellants. It is very clear in
the promissory note that the principal obligation is the balance of the purchase
price of the parcel of land known as Lot 7-K-2-G, Psd-26193, 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 known as Lot 7-K-2-C, Psd-26193, x x x.” The appellee 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.^[1] It is for the
same reason that the appellee 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, but the rules contained in articles 1252 to 1254 of the Civil Code apply
to a person owing several debts of the same kind of a single creditor. They
cannot be made applicable to a person whose obligation aa 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.^[2] Besides, Article 1253 of
the Civil Code is merely directory, and not mandatory.^[3] 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.

It is 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.

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.^[4]

An obligation to pay a sum of money is not novated, in a new instrument
wherein the old is ratified, by changing only the terms of payment and adding
other obligations not incompatible with the old one,^[5] or wherein the old contract is merely
supplemented by the new one.^[6] 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. (Straight v. Haskell, 49 Phil. 614; Pacific Commercial Co.
v. Sotto, 34 Phil. 237; Estate of Mota v. Serra, 47 Phil. 464;
Dungo v. Lopena, supra). In the instant case, the surety bond is
not a new and separate contract but an accessory of the promissory note.

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

Concepcion, C.J., Reyes,
J.B.L., Barrera, Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and
Ruiz Castro, JJ., concur.

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^[1] La Insular v. Machuca Go
Tauco, 39 Phil. 567.

^[2]
Socony-Vacuum Corp. v. Miraflores, 67 Phil. 304.

^[3] Baltazar v. Lingayen Gulf
Electric Co., Inc., G. R. Nov. L-16236-38, June 30, 1965.

^[4] Martinez v. Cavives, 25 Phil.
581; Tiu Sinco v. Havana, 45 Phil. 707; Asia Banking Corporation
v. Lacson, 48 Phil. 482; Pascual v. Lacsamana, 53 0.G. 2467; Dungo
v. Lopena, et al., G. R. No. L918377, Dec. 29, 1962.

^[5] lnchausti v. Yulo, 34 Phil. 978;
Pablo v. Sapungan, 71 Phil. 145.

[6] Ramos v. Gibbon, 67 Phil.
371; Dungo v. Lopena, supra.