Broadway Centrum Condominium Corp., v.

Tropical Hut,
G.R. No. 79642, July 5, 1993
Facts: Petitioner and respondent Tropical executed a contract of lease.
Subsequently, Tropical insistently requested petitioner to lower the rental cost
provided for in the contract as it comprised more than half of the sales Tropical was
making. Tropical also reasoned that their low sales were caused by the temporary
closure of the street where the store was facing. Broadway then, in a letteragreement, granted Tropicals requests by lowering the rental costs accordingly
among other things, on certain terms and conditions, and stating that this
agreement shall not be an amendment of the original lease contract. When the
street abovementioned was reopened, Broadway informed Tropical that it will
gradually return the rental costs to the prices stipulated in the lease contract.
Tropical resisted, still contending that their sales have not improved, and that they
will not pay the original costs and still insists to be given lower costs until sales have
picked up. Broadway informed that they will nonetheless impose the original costs,
and it will no longer be negotiable. Tropical filed suit against petitioner, contending
that the subsequent letter-agreement novated the lease contract. The lower court
decided in favor of Tropical, the appellate court affirmed the decision, hence this
petition for review on certiorari.
Issue: Whether or not the letter-agreement novated the contract of lease.
Held: It is entirely clear to the court that the letter-agreement did not extinguish or
alter the obligations of respondent Tropical and the rights of petitioner Broadway
under their lease contract. In the first place, the letter-agreement by its own terms,
a " provisional and temporary agreement to a reduction of [Tropical's] monthly
rental ." The letter-agreement, as noted earlier, also contained the following
sentence: This provisional agreement should not be interpreted as amendment to
the contract entered into by us. In the second place, the formal notarized Lease
Contract made it clear that a temporary and provisional concessional reduction of
rentals which Broadway might grant to Tropical was not to be construed as
alteration or waiver of any; of the terms of the Lease Contract itself. In the third
place, the course of negotiations between Broadway and Tropical before the
execution of their letter-agreement quite clearly indicated that what they were
negotiating was a temporary and provisional reduction of rentals. In the fourth
place, the course of discussions between Broadway and Tropical, as disclosed in
their correspondence, after execution of the letter-agreement, shows that the
reduction of rentals agreed upon in the letter-agreement was not to persist, for the
rest of the life of the Contract of Lease. That correspondence is bereft of any, sign of
mutual agreement or recognition that the reduced rentals had so permanently
replaced the contract stipulations on rentals as to have become immune to change
save by common consent of Tropical and Broadway. The decision of the lower court
and CA are reversed and set aside, this petition is given due course, the original
complaint of Tropical is dismissed.

Reyes v. Secretary of Justice, 264 SCRA 35 (1996)

Facts: Elsa Reyes is the president of Eurotrust Capital Corporation (EUROTRUST), a
domestic corporation engaged in credit financing. Graciela Eleazar, private
respondent, is the president of B.E. Ritz Mansion International Corporation
(BERMIC), a domestic enterprise engaged in real estate development. The other
respondent, Armed Forces of the Philippines Mutual Benefit Asso., Inc. (AFP-MBAI), is
a corporation duly organized primarily to perform welfare services for the Armed
Forces of the Philippines. Petitioner assails the respondent courts decision[1] dated
May 12, 1995 which sustained the two resolutions of the respondent Secretary of
Justice, namely: 1) the Resolution dated January 23, 1992 affirming the resolution of
the Provincial Prosecutor of Rizal dismissing the complaints of petitioner against
private respondent Eleazar in I.S. Nos. 91-2853, 91-4328 to 29, 91-4585 to 91 and
91-4738 to 39 for violations of B.P. Blg. 22 and estafa under Article 315, par. 4, no. 2
(d) of the Revised Penal Code, and 2) the Resolution dated January 12, 1993
affirming the resolution of the City Prosecutor of Quezon City finding a prima facie
case in I.S. No. 92-926 for violation of B.P. Blg. 22 and estafa filed by respondent
AFP-Mutual Benefit Association, Inc. (AFP-MBAI, for brevity) against petitioner Reyes.
On February 2, 1994, petitioner seeking the nullification of either of the two
resolutions of the respondent Secretary of Justice, Reyes filed a petition for review of
the said resolution with respondent Secretary of Justice contending that novation
did not take place.
The Secretary of Justice dismissed the petition holding that the novation of the loan
agreement prevents the rise of any incipient criminal liability since the novation had
the effect of canceling the checks and rendering without effect the subsequent
dishonor of the already cancelled checks.
Issue: Whether or not novation existed in this case under Resolution A.
Held: The Court cannot see how novation can take place considering the
surrounding circumstances which negate the same. The principle of novation by
substitution of creditor was erroneously applied in the first questioned resolution
involving the contract of loan between petitioner and respondent Eleazar.
Admittedly, in order that a novation can take place, the concurrence of the following
requisites[7]is indispensable:
1. there must be a previous valid obligation,
2. there must be an agreement of the parties concerned to a new contract,
3. there must be the extinguishment of the old contract, and

4. there must be the validity of the new contract.

Upon the facts shown in the record, there is no doubt that the last three essential
requisites of novation are wanting in the instant case. No new agreement for
substitution of creditor was forged among the parties concerned which would take
the place of the preceding contract. The absence of a new contract extinguishing
the old one destroys any possibility of novation by conventional subrogation.
CALIFORNIA BUS LINES INC. vs STATE INVESTMENT HOUSE, INC.
G.R. No. 147950. December 11, 2003
Facts:
Delta Motors Corporation applied for financial assistance from respondent State
Investment House, Inc., a domestic corporation engaged in the business of quasibanking. SIHI agreed to extend a credit line to Delta which eventually became
indebted to SIHI. Meanwhile, petitioner purchased on installment basis several
buses to Delta. To secure the payment of the obligation petitioner executed
promissory notes in favor of Delta. When petitioner defaulted on the payments of
the debts, it entered into an agreement with delta to cover its due obligations.
However, petitioner still had trouble meeting its obligations with delta. Pursuant to
the memorandum of agreement delta executed a deed of sale assigning to
respondent, the promissory notes from petitioner. Respondent subsequently sent a
demand letter to petitioner requiring remitting payments due on the promissory
notes. Petitioner replied informing respondent of the fact that delta had taken over
its management and operations.
Issue:
Whether the Restructuring Agreement dated October 7, 1981, between petitioner
CBLI and Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp.
assigned to respondent SIHI,
Held:
The attendant facts do not make out a case of novation. The restructuring
agreement between Delta and CBLI executed on October 7, 1981, shows that the
parties did not expressly stipulate that the restructuring agreement novated the
promissory notes. Absent an unequivocal declaration of extinguishment of the preexisting obligation, only a showing of complete incompatibility between the old and
the new obligation would sustain a finding of novation by implication. 59 However,
our review of its terms yields no incompatibility between the promissory notes and
the restructuring agreement.
.