G.R. No. 187822 -23, August 3, 2016
EVER ELECTRICAL MANUFACTURING, INC., VICENTE C. GO, and GEORGE C. GO, Petitioners, vs. PHILIPPINE BANK OF COMMUNICATIONS (PBCOM), Respondent.

FACTS

Petitioner Ever Electrical Manufacturing, Inc. (Ever) obtained a loan from respondent Philippine Bank of Communications (PBCom). A compromise agreement, approved by the Regional Trial Court (RTC), was subsequently executed wherein petitioner Vicente C. Go, Ever’s President, assumed sole liability for the loan. The agreement stipulated that Vicente would make payments according to a promissory note and that any failure to pay an installment would render the entire balance immediately due and demandable, entitling PBCom to a writ of execution for the full amounts in the original complaint. Vicente defaulted on the required quarterly payments for the first quarter of 2004.
Consequently, PBCom moved for execution. The RTC granted the motion and issued a writ of execution, leading to the levy and eventual auction sale of two parcels of land mortgaged by Ever to secure the original loan. Petitioners challenged the writ of execution, levy, and auction sale via certiorari in the Court of Appeals (CA), arguing that the writ was invalid because it was enforced against Ever’s corporate properties despite Vicente’s personal assumption of liability. The CA dismissed the petitions, upholding the RTC’s actions.

ISSUE

Whether the RTC committed grave abuse of discretion in issuing the writ of execution against Ever’s mortgaged properties despite Vicente Go’s personal assumption of the loan obligation under the court-approved compromise agreement.

RULING

The Supreme Court denied the petition and affirmed the CA. The Court held that the compromise agreement did not constitute a novation that would extinguish Ever’s original obligation. A novation requires a clear intent to extinguish the old obligation, which was absent. The agreement explicitly stated that Vicente’s assumption of liability was “without prejudice to the right of [Vicente] to avail himself of his right for reimbursement under Art. 1236 of the Civil Code.” This clause indicated Vicente acted as a solidary debtor, not a substitute debtor who would release the original debtor, Ever. Therefore, Ever’s obligation was merely modified, not extinguished; both Ever and Vicente remained liable to PBCom.
Furthermore, the compromise agreement expressly provided that upon Vicente’s default, PBCom would be entitled to a writ of execution for the full amounts due as specified in the original complaint. The original complaint sought payment from Ever and enforcement of the real estate mortgage. Since Vicente defaulted, PBCom’s right to seek execution, including against the mortgaged properties, was contractually stipulated and judicially approved. The RTC’s issuance of the writ of execution, which implemented the terms of the binding compromise agreement, was thus a valid exercise of its jurisdiction and not a grave abuse of discretion. The subsequent levy and auction sale were valid consequences of the lawful writ.