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Kabankalan Sugar Co. vs. Pacheco, 55 PHIL. 555, NO. 33654 DECEMBER 29, 1930

The Kabankalan Sugar Co. entered into a contract with Josefa Pacheco in 1920 granting the company right of way to build a railway through Pacheco's estate for 20 years. In 1922, Pacheco proposed a new agreement where the company would pay her debts in exchange for milling her sugar cane. The new 1922 contract reduced the duration of the right of way to 7 years. The company sued, arguing the 1920 contract should still apply. The court ruled the 1922 contract novated the 1920 contract because the principal condition of duration of the right of way was incompatible between the two agreements.

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150 views2 pages

Kabankalan Sugar Co. vs. Pacheco, 55 PHIL. 555, NO. 33654 DECEMBER 29, 1930

The Kabankalan Sugar Co. entered into a contract with Josefa Pacheco in 1920 granting the company right of way to build a railway through Pacheco's estate for 20 years. In 1922, Pacheco proposed a new agreement where the company would pay her debts in exchange for milling her sugar cane. The new 1922 contract reduced the duration of the right of way to 7 years. The company sued, arguing the 1920 contract should still apply. The court ruled the 1922 contract novated the 1920 contract because the principal condition of duration of the right of way was incompatible between the two agreements.

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mark gil alpas
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KABANKALAN SUGAR CO. VS.

PACHECO,
55 PHIL. 555, NO. 33654 DECEMBER 29, 1930

PONENTE: VILLAREAL, J.:

FACTS:
The plaintiff, Kabankalan Sugar Co., Inc entered into a contact with the defendant, Josefa
Pacheco, to grant right of way in the construction of railway which will pass through the estate
of the defendant on November 1, 1920.
During the year 1922, the defendant had to pay the firm Ledesma Hermanos and the
Philippine National Bank of installment on her indebtedness to them, and she went to the
plaintiff suggesting that it assume the obligation of making those annual payments, as well as
the land tax upon the estate, in return for which she would bind herself to deliver to the plaintiff
every year fifteen per centum (15%) of all the sugar obtained from the estate.
Guillermo Lizarraga, manager of the plaintiff company, told the defendant that the
company would accept her proposition provided she made out a new contract granting the
plaintiff a right of way through the estate for a railway, for a period of twenty years (20) from
November 1, 1920, that is, from the date of the execution of the previous contract, and in
addition, bind herself for a like period to deliver all the sugar can produced in the estate to the
plaintiff's sugar mill known as Bearin, for milling into centrifugal sugar.
The defendant insisted that the new contract, both with regard to the easement and to
the milling of the sugar cane, should not be for the same period as that stipulate between the
parties in the contract of November 1, 1920, that is twenty (20) years from 1920, but only seven
(7) years or crop of sugar can, beginning with the harvest of 1922-1923. The parties agreed to
these last-mentioned conditions, both with regard to the easement and with regard to the
milling of the sugar cane on September 29, 1922.
The plaintiff filed a complaint against Josefa Pacheco to compel her to execute the
contract entered into on November 1, 1920. The defendant answered that the contract referred
to as signed on November 1, 1920 had been substituted, modified, and novated by another
instrument executed on September 29, 1922.

ISSUE:
Whether the contract of September 29, 1922, has extinguished the contract of
November 1, 1920, by novation.

RULING:
Yes. Under Art. 1204, In order that an obligation may be extinguished by another which
substitutes it, it shall be necessary that it be so declared expressly, or that the old new
obligations be incompatible in every respect.
In the contract of November 1, 1920, the duration of the right of way which the
defendant bound herself to impose upon her estate in favor of the plaintiff was twenty years,
while in the contract of September 29, 1922, that period was reduced to seven crops which is
equivalent to seven years. There can be no doubt that these two contracts, in so far as the
duration of the right of way is concerned, are incompatible with each other, for the second
contract reduces the period agreed upon in the first contract, and so both contracts cannot
subsist at the same time. The term stipulated in the second contract cannot be added to that of
the first, because, the period would then be twenty-seven instead of twenty years, which is
greater than the period specified in the first contract. The duration of the right of way is one of
the principal conditions of the first as well as of the second contract, and inasmuch as said
principal condition has been modified, the contract has been novated, in accordance with the
provision quoted above.

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