GR 45154; (March, 1938) (Digest)
G.R. No. 45154; March 31, 1938
TIRSO GARCIA, Bank Commissioner and Receiver of the Mercantile Bank of China, in liquidation, plaintiff-appellee, vs. KHU YEK CHIONG, ANG GIOC CHIM, and M. ESCOLAR, the latter two doing business in the Philippines under the name of “ANG GIOC CHIM-M. ESCOLAR & CO.,” defendants. ANG GIOC CHIM, appellant.
FACTS
The Mercantile Bank of China extended a credit line to Khu Yek Chiong and a separate credit line to the co-partnership Ang Gioc Chim-M. Escolar & Co. Khu Yek Chiong acted as a solidary guarantor for the partnership’s obligations. He also delivered stock certificates as security for both his own and the partnership’s debts. The bank sued to recover the amounts due. The trial court held Khu Yek Chiong liable for his personal debt and held him solidarily liable with the partnership for its debt, ordering the application of the pledged shares to the judgment. Defendant Ang Gioc Chim appealed, arguing that a novation occurred whereby Khu Yek Chiong assumed sole liability for the partnership’s debt, releasing the partners.
ISSUE
Whether the obligation of the partnership Ang Gioc Chim-M. Escolar & Co., solidarily guaranteed by Khu Yek Chiong, was extinguished by novation when Khu Yek Chiong allegedly assumed it as the sole debtor.
RULING
No. The Supreme Court affirmed the trial court’s judgment. There was no valid novation. Under Article 1205 of the Civil Code, a novation that substitutes a new debtor for the original one requires the express consent of the creditor. The letters presented as evidence did not show the bank’s consent to release the partnership from its solidary obligation. The letters merely indicated Khu Yek Chiong’s willingness to assume the debt, which was already his responsibility as a solidary guarantor. Furthermore, novation must be declared expressly or involve obligations that are entirely incompatible, which was not the case. The stock certificates were accepted as additional security, not as payment, and thus did not extinguish the debt.
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