G.R. No. 183804; September 11, 2013
S.C. MEGAWORLD CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner, vs. ENGR. LUIS U. PARADA, represented by ENGR. LEONARDO A. PARADA of GENLITE INDUSTRIES, Respondent.

FACTS

Petitioner S.C. Megaworld purchased electrical materials from respondent Engr. Luis Parada, the sole proprietor of Genlite Industries, for a construction project. Petitioner failed to pay, attributing this to its own failure to collect from its subcontractor, Enviro Kleen. Petitioner arranged for Enviro Kleen to pay the debt directly to respondent. Enviro Kleen made a partial payment but subsequently defaulted, leaving a substantial balance. Respondent filed a collection suit against petitioner.
Petitioner’s primary defense was novation, arguing that respondent’s acceptance of payment from Enviro Kleen constituted consent to substitute Enviro Kleen as the new debtor, thereby releasing petitioner from liability. Only on appeal to the Court of Appeals did petitioner raise new procedural issues, arguing that the suit was not brought in the name of the real party in interest (Genlite Industries) and that the verification and certification against forum shopping attached to the complaint was defective.

ISSUE

The core issues were: (1) whether novation occurred, releasing petitioner from its obligation; and (2) whether the procedural objections regarding the real party in interest and the certification against forum shopping could be raised for the first time on appeal.

RULING

The Supreme Court denied the petition, affirming the lower courts’ decisions. On the procedural issues, the Court held that the defense of lack of capacity to sue or not being the real party in interest must be raised at the earliest opportunity, typically in a motion to dismiss or in the answer. Petitioner failed to do so, thereby waiving the right to raise it later. The Court found respondent, as the sole proprietor, was the real party in interest, and the authorization given to his representative was valid. The challenge to the verification and certification, raised even later in a motion for reconsideration, was likewise barred.
On the substantive issue of novation, the Court ruled it did not occur. Novation by substitution of a new debtor requires the express or implied consent of the creditor to release the old debtor. The evidence, including respondent’s letters, showed he merely accepted Enviro Kleen as an additional or joint payer while explicitly reserving his right to proceed against petitioner. Acceptance of a payment from a third party, without a clear agreement to discharge the original debtor, does not constitute novation. Consequently, petitioner remained solidarily liable with Enviro Kleen for the unpaid balance. The award of monetary claims was affirmed with modification, adjusting the interest rate to conform to applicable laws and jurisprudence.