The Soriano couple executed two promissory notes in favor of ITF that were secured by real property mortgages. When the Sorianos defaulted, ITF moved for extrajudicial foreclosure of the mortgages. The parties entered an amicable settlement but failed to comply with the court's clarification requirements. Seven years later, the Sorianos filed to submit a new amicable settlement, which ITF opposed due to the lapse in time. The court affirmed that the original obligation was not novated by the amicable settlement as it only contained modificatory changes like increased indebtedness and extended payment period, rather than cancelling or materially altering the mortgages.
The Soriano couple executed two promissory notes in favor of ITF that were secured by real property mortgages. When the Sorianos defaulted, ITF moved for extrajudicial foreclosure of the mortgages. The parties entered an amicable settlement but failed to comply with the court's clarification requirements. Seven years later, the Sorianos filed to submit a new amicable settlement, which ITF opposed due to the lapse in time. The court affirmed that the original obligation was not novated by the amicable settlement as it only contained modificatory changes like increased indebtedness and extended payment period, rather than cancelling or materially altering the mortgages.
The Soriano couple executed two promissory notes in favor of ITF that were secured by real property mortgages. When the Sorianos defaulted, ITF moved for extrajudicial foreclosure of the mortgages. The parties entered an amicable settlement but failed to comply with the court's clarification requirements. Seven years later, the Sorianos filed to submit a new amicable settlement, which ITF opposed due to the lapse in time. The court affirmed that the original obligation was not novated by the amicable settlement as it only contained modificatory changes like increased indebtedness and extended payment period, rather than cancelling or materially altering the mortgages.
The Soriano couple executed two promissory notes in favor of ITF that were secured by real property mortgages. When the Sorianos defaulted, ITF moved for extrajudicial foreclosure of the mortgages. The parties entered an amicable settlement but failed to comply with the court's clarification requirements. Seven years later, the Sorianos filed to submit a new amicable settlement, which ITF opposed due to the lapse in time. The court affirmed that the original obligation was not novated by the amicable settlement as it only contained modificatory changes like increased indebtedness and extended payment period, rather than cancelling or materially altering the mortgages.
Iloilo Traders Finance, Inc. vs. Heirs of Oscar Soriano, Jr.
G.R. No. 149683; June 16, 2003
FACTS: Spouses Oscar Soriano and Marta Soriano executed 2 promissory notes, secured by real property mortgages, in favor of petitioner Iloilo Traders Finance, Inc. (ITF). When Sorianos defaulted on the notes, ITF moved for the extrajudicial foreclosure of the mortgages. The parties entered into an Amicable Settlement but the trial court required the parties to first give some clarifications on a number of items. The parties failed to comply with the court order. The trial court disapproved the amicable settlement and set case for pre-trial Seven years later when the Soriano couple filed a motion to submit anew amicable settlement The motion was opposed by ITF on the ground that the amount expressed in the settlement would no longer be accurate considering the lapse of seven years Trial Court denied the Soriano motion and affirmed by the Court of Appeals ISSUE: W/N the amicable settlement entered into between the parties has novated the original obligation HELD: NO An extinctive novation would thus have the twin effects of, first, extinguishing an existing obligation and, second, creating a new one in its stead. This kind of novation presupposes a confluence of four essential requisites: (1) a previous valid obligation, (2) an agreement of all parties concerned to a new [6] contract, (3) the extinguishment of the old obligation, and (4) the birth of a valid new obligation. Novation is merely modificatory where the change brought about by any subsequent agreement is merely [7] [8] incidental to the main obligation (e.g., a change in interest rates or an extension of time to pay ); in this instance, the new agreement will not have the effect of extinguishing the first but would merely supplement it or supplant some but not all of its provisions. An amicable settlement or a compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. It may be judicial or extrajudicial; the absence of court approval notwithstanding, the agreement can become the source of rights and obligations of the parties. In the case at bar, the amicable settlement contained modificatory changes. Thus, (1) it increased the indebtedness; (2) it extended the period of payment; and (3) it provided for a waiver of claims, counterclaims, attorneys fees or damages that the debtor spouses might have against their creditor, but the settlement neither cancelled, nor materially altered the usual clauses in, the real estate mortgages.