Rosario Guanzon v. Graciano Rivera

Summary

This case involves a guarantee obligation where plaintiff Rosario Guanzon served as guarantor for defendant Graciano Rivera's P5,000 loan from Kabancalan Sugar Co., Inc. When Rivera defaulted and the debt grew to P8,754.84, Guanzon paid to prevent foreclosure of her mortgaged property. Rivera argued that a subsequent lease contract between Guanzon and Jose Rivera (Exhibit 5) constituted novation that extinguished his original debt. The Supreme Court rejected this argument, applying Civil Code Articles 1204 and 1205 on novation. The Court held that valid substitution of debtor requires agreement involving the creditor, which was absent here since the lease was merely between Guanzon and Jose Rivera. Company records showing temporary transfer of Rivera's account to Jose Rivera were deemed clerical errors later corrected. The decision affirmed Rivera's continued liability to Guanzon, who properly exercised her right of subrogation after paying the guaranteed debt.