MACONDRAY & CO., INC., PLAINTIFF AND APPELLANT, VS. ANTONIO E. RUIZ AND ERNESTO CUISIA, DEFENDANTS AND APPELLEES.

On
January 21, 1932 plaintiff sold to the defendant Antonio E. Ruiz an
automobile “De Sotto De Luxe Sedan” for P,572. They agreed that
defendant would pay in cash P302 and for the balance of P3,270 he would
execute several promissory notes in different amounts maturing on
different dates. The defendant executed jointly with one Ramon Borromeo
27 promissory notes wherein both undertook to pay jointly and severally
the value of said notes on the dates of their maturity. In addition,
Ruiz mortgaged the automobile, executing the corresponding deed. Ruiz
made some payments on account of his promissory notes and his
indebtedness was reduced to P2,246.18. On March 15, 1934 the parties
agreed to execute another contract excluding Ramon Borromeo, whereby
Ruiz and another person would sign the promissory notes for the
balance. Consequently, on said date Ruiz and the other defandant,
Ernesto Cuisia, signed another promissory note whereby they promised
jointly and severally to pay the plaintiff the sum of P2,246.18 with
interest thereon at 12 per cent per annum. In this latter contract the
parties stipulated that the mortgage of the automobile would be left to
stand. Ruiz again made other payments and his indebtedness was reduced
to P2.088.89 plus the interest thereon. As the defendants failed to pay
some of the installments upon their maturity, the plaintiff foreclosed
the mortgage and the sheriff sold the automobile at public auction,
awarding it to the plaintiff for the sum of P500. After the account of
the defendants had been liquidated and the proceeds of the public sale
of the automobile together with the expenses of the proceeding had been
deducted, it appeared that the defendants were owing the plaintiff the
sum of P1,696.20. In order to recover this amount plus the interest
thereon and the penalty agreed upon, the plaintiff brought this action
against the defendants. After trial the court absolved the defendants
from the complaint, without costs. The plaintiff appealed from the
decision and timely filed the bill of exceptions which was approved and
certified.

1. The court absolved the defendants
   because in its opinion the first mortgage and the promissory notes
   signed by Ruiz and Ramon Borromeo on January 21, 1932 were substituted
   and novated by the deed executed by Ruiz and Ernesto Cuisia on March
   14, 1934, and because on this latter date Act No. 4122 was already in
   force, under which the plaintiff cannot maintain the present action for
   the recovery from the defendants of the balance owing after it had
   elected to foreclose the mortgage. In its first assignment of error
   plaintiff contends that the court erroneously applied the law in
   considering as novated the first mortgage and the promissory notes
   which were then executed. We hold that the court did not commit the
   alleged error, for it clearly appears that the first contract was
   substituted in its entirety by the second, because the stipulations
   contained in the first were substantially altered by other stipulations
   that were inserted in the second. According to article 1203 of the
   Civil Code obligations are modified by altering their object or
   principal conditions, by substituting another in place of the debtor,
   or by subrogating a third person to the rights of the creditor; and
   article 1204 provides that in order that an obligation may be
   extinguished by another which substitutes it, it shall be necessary
   that it be so declared expressly, or that the old and new obligations
   be incompatible in every respect In the first contract the debtors were
   Ruiz and Borromeo and they were answerable jointly and severally for
   the sum of P3,270. In the second contract the debtors were the same
   Ruiz and Ernesto Cuisia and the amount for which they ‘were liable was
   only P2,246.18. In the latter contract the dates of the maturity of the
   obligations were changed due to the lapse of time and to the partial
   payments made by the former debtors. These facts show at a glance that
   the first contract was in its terms substituted by the second, and that
   the latter is incompatible with the former. With respect to the first
   mortgage, the principal obligation, consisting of the previous
   indebtedness, having been extinguished, its terms and conditions should
   be understood as subject to those of the contract subsequently entered
   into.

2. As we have already said, the
   trial court held that Act No. 4122 is applicable to the contract later
   entered into by the parties and that by virtue thereof the plaintiff
   cannot maintain the action for the recovery of the balance owing from
   the defendants. In its second assignment of error the plaintiff insists
   that the court erred in applying said law. The subsequent contract
   between the parties took place on March 14, 1934 and said law having
   gone into effect on December 9, 1933, it was doubtless applicable.

   But the plaintiff argues further that said law is inapplicable because
   under the last contract there was no sale of the automobile, but only a
   renewal of the promissory notes and mortgage. We do not find any merit
   in the argument because according to Act No. 4122 its provisions are
   applicable when there is a contract of sale with mortgage of the
   property sold as well as when there is only mortgage of the property
   sold on installment, as in the present case. It is true that in the
   subsequent contract the automobile was not sold, but it cannot be
   denied that the promissory note and the mortgage were executed, the
   first, in order to evidence the unpaid balance of the price of the
   automobile, and the second, in order to guarantee payment of said
   balance; in other words, the promissory note and the mortgage
   originated from the sale of the automobile.

3. The last assignment of error is a corollary of the preceding ones. If
   the court did not commit the errors we have discussed, it follows that
   it did not err in denying the motion for new trial filed by the
   plaintiff.

The appealed judgment being in
accordance with law, the same is hereby affirmed, with the costs in
this instance against the plaintiff-appellant. So ordered.

Avanceña, C. J., Villa-Real, Diaz, and Laurel, JJ., concur.