G.R. Nos. L-62845-46 November 25, 1983
NATIONAL POWER CORPORATION, petitioner, vs. JUDGE ABELARDO M. DAYRIT, Court of First Instance of Manila, Branch 39, and DANIEL R. ROXAS, doing business as United Veterans Security Agency and Foreign Boats Watchmen, respondents.

FACTS

Daniel Roxas sued the National Power Corporation (NPC) to compel the restoration of his terminated security services contract. The parties entered into a Compromise Agreement, which the court approved in a Decision dated October 30, 1981. A key stipulation was that the parties “shall continue with the contract of security services under the same terms and conditions as the previous contract effective upon the signing thereof.” This judgment became final and executory. Subsequently, on May 14, 1982, NPC executed a new security services contract with Josette L. Roxas. NPC refused to implement this new contract, prompting Daniel Roxas to file a Motion for Execution of the 1981 compromise judgment to enforce the reinstatement of the security contract.

ISSUE

Whether the respondent judge committed grave abuse of discretion in granting the Motion for Execution, or whether the 1981 compromise agreement had been novated by the subsequent contract executed on May 14, 1982.

RULING

The Supreme Court sustained the respondent judge and denied NPC’s petition. The Court ruled that there was no novation of the obligation under the 1981 compromise agreement. The legal logic is anchored on Article 1292 of the Civil Code, which provides that novation is never presumed. For an obligation to be extinguished by a new one, it must be expressly declared in unequivocal terms, or the old and new obligations must be incompatible on every point. The Court examined the May 14, 1982 contract and found no explicit declaration of novation. To the contrary, Article I of that contract expressly incorporated the 1981 Compromise Agreement and Court Decision as integral parts of the new contract by reference. This incorporation demonstrated the parties’ intent for the subsequent contract to implement, not replace, the judicially approved compromise. Furthermore, no incompatibility between the two agreements was established. Since the essential obligation to continue the security services remained unextinguished, the final and executory 1981 judgment was subject to execution. The respondent judge therefore correctly issued the order for a writ of execution, and no grave abuse of discretion attended the act.