FACTS: 

Sime Darby leased a billboard owned by Macgraphics for a term of four years.

Subsequently, Sime Darby executed a Memorandum of Agreement (MOA) with Goodyear, whereby it agreed to sell its tire manufacturing plants and other assets to the latter and thereafter executed a “Deed of Assignment” (the deed) through which Sime Darby assigned, among others, its leasehold rights and deposits made to Macgraphics pursuant to its lease contract over the said billboard.

Goodyear stated that it intended to honor the P120,000.00 monthly rental rate given by Macgraphics to Sime Darby.

Macgraphics said that it could not give its consent to the assignment of lease to Goodyear.

Macgraphics advised Goodyear that any advertising service it intended to get from them would have to wait until after the expiration or valid pre-termination of the lease then existing with Sime Darby.

Due to Macgraphics’ refusal to honor the deed, Goodyear, demanded partial rescission of the deed and the refund of P1,239,000.00, the pro-rata value of Sime Darby’s leasehold rights over the billboard.

As Sime Darby refused to accede to Goodyear’s demand for partial rescission, the latter commenced a case with the RTC.

The RTC rendered its decision declaring the Deed of Assignment of Receivables partially rescinded and directed defendant Sime Darby to pay Goodyear the amount of P1,239,000.00 with legal interest thereon.

ISSUE:

Whether partial rescission of the Deed of Assignment is proper

RULING:

The Court finds no merit in the petitions.

Article 1649 of the New Civil Code provides:

Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. (n)

In an assignment of a lease, there is a novation by the substitution of the person of one of the parties – the lessee. The personality of the lessee, who dissociates from the lease, disappears. Thereafter, a new juridical relation arises between the two persons who remain – the lessor and the assignee who is converted into the new lessee. The objective of the law in prohibiting the assignment of the lease without the lessor’s consent is to protect the owner or lessor of the leased property.

Broadly, a novation may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent it remains compatible with the amendatory agreement. An extinctive novation results either by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or subrogating a third person in the rights of the creditor (subjective or personal). Under this mode, novation would have dual functions—one to extinguish an existing obligation, the other to substitute a new one in its place. This requires a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation.

While there is no dispute that the first requisite is present, the Court, after careful consideration of the facts and the evidence on record, finds that the other requirements of a valid novation are lacking. A review of the lease contract between Sime Darby and Macgraphics discloses no stipulation that Sime Darby could assign the lease without the consent of Macgraphics.

Moreover, contrary to the assertions of Sime Darby, the records are bereft of any evidence that clearly shows that Macgraphics consented to the assignment of the lease..

The consent of the lessor to an assignment of lease may indeed be given expressly or impliedly. It need not be given simultaneously with that of the lessee and of the assignee. Neither is it required to be in any specific or particular form. It must, however, be clearly given. In this case, it cannot be said that Macgraphics gave its implied consent to the assignment of lease. As aptly explained by the CA in its decision: