ANAMER vs. J.Y. BROTHERS MARKETING CORPORATION, Respondent. SALAZAR, Petitioner, ANAMER CALLEJA AND KALLOS TIMARIO JY BROS CALLEJA AND KALLOS approached Anamer Salazar, a freelance sales agent, if she knew a supplier of rice.Salazar then answered the two in the affirmative and accompanied them to JY Bros.a corporation engaged in the business of selling commodities. Thereafter, Salazar, Calleja and Kallos were able to obtain 300 cavans of rice from JY Bros in the amount of 214,000. As payment, Salazar negotiated and indorsed to JY Bros a NEGOTIABLE Prudential bank check issued bby Timario. However, upon presentment of the said check by JY Bros, it was dishonoured due to “closed accnt” Because of this, Calleja, Kallos and Salazar delivered another check- a Solidbank crossed check issued by Timario, but just the same, this check bounced due to insufficient funds. Salazar failed to settle the amount due and the respondent corporation charged Saalzar and Timario with the crime of estafa before the RTC who acquitted Salazar of the criminal charge but ordered him to pay the sum of 214,000 in favor of the corporation in relation to his civil liability against the latter. Aggrieved, Salazar ask for a reconsideration on the civil aspect but such was denied. The case was then brought to the SC and was granted, ordering the RTC to set a trial with respect to the civil charge. The RTC found that the Prudential Check ( first check that was issued) was a negotiable ORDER inst payable to the respondent and not to the petitioner. And that as a payee of the check, JY Bros should have endorsed it or should have even delivered it to the petitioner to constitute her the holder theroef. But since they failed to do so, it ffs that the petitioner's signing of her name on the face of the dorsal side of the check did not produce the technical effect of an indorsement arising from negotiation. AND AS FOR THE SUBSEQUENT REPLACEMENT OF A NEGOTIABLE PRUDENTIAL CHECK, the RTC held that its replacement by a Solid Bank check which is a corssed-check, thus nonnegotiable resulted in an essential change which had the effect of endorsers of the obligation arising from a negotiable check. Thus, resulting to novation, which extinguishes the obligation arising from the issuance of the first check. The CA reversed the ruling of the RTCfound that petitioner was considered an indorser of the checks paid to respondent and considered her as an accommodation indorser, who was liable on the instrument to a holder for value Hence this petition holding petitioner liable as an accommodation indorser for the payment of the dishonored Prudential Bank check; and that the acceptance had the effect of erasing whatever criminal responsibility, the drawer or the indorser of the Prudential check had incurred. ISSUE: WON the replacement of the checks amounted to a novation thereby extinguishing all obligations arising therefrom. WON the Salazar is liable to JY Bros as an indorser of the inst RULING: IT DID NOT EXTINGUISH THE OBLIGATION Section 119 of the Negotiable Instrument Law provides, thus: A negotiable instrument is discharged: D ) By any other act which will discharge a simple contract for the payment of money; And, under Article 1231 of the Civil Code, obligations are extinguished: xxxx (6) By novation. Novation is done by the substitution or change of the obligation by a subsequent one which extinguishes the first, either by changing the object or principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor. [E]ither be extinctive, WHICH IS NEVER PRESUMED AND MUST BE EXPRESS IN UNEQUIVOCAL TERMS. Implied novation necessitates that the incompatibility between the old and new obligation be total on every point such that the old obligation AND THE TEST Of incompatibility is whether they can stand together, each one having an independent existence; if they cannot and are irreconcilable, the subsequent obligation would also extinguish the first. In Nyco Sales Corporation v. BA Finance Corporation, found untenable petitioner Nyco's claim that novation took place when the dishonored BPI check it endorsed to BA Finance Corporation was subsequently replaced by a Security Bank check, In the instant case, there was no express agreement Neither is there incompatibility because both checks were given precisely to terminate a single obligation arising from Nyco's sale of credit to BA Finance. novation speaks of two distinct obligations, In this case, respondent’s acceptance of the Solid Bank check, which replaced the dishonored Prudential Bank check, did not result to novation as there was no express agreement to establish that petitioner was already discharged from his liability to pay respondent the amount of ₱214,000.00 as payment for the 300 bags of rice. As we said, novation is never presumed, there must be an express intention to novate. In fact, when the Solid Bank check was delivered to respondent, the same was also indorsed by petitioner which shows petitioner’s recognition of the existing obligation to respondent to pay ₱214,000.00 subject of the replaced Prudential Bank check. Moreover, respondent’s acceptance of the Solid Bank check did not result to any incompatibility, since the two checks − Prudential and Solid Bank checks − were precisely for the purpose of paying the amount of ₱214,000.00, THUS there was no substantial change in the object or principal condition of the obligation. AND AS FOR THE CONTENTION OF SALAZAR THAT A NEW OBLIG AROSE BY THE RESPONDENT’S ACCEPTANCE OF THE SOLID BANK CHECK- A NON-NEGO CHECK, REPLACING A NEGO ONE, THEREBY EFFECTING AN ESSENTIAL CHANGE IN THE CIRCUMSTANCE OF THE CHECK. The court held that he effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein.21 The change in the mode of paying the obligation was not a change in any of the objects or principal condition of the contract for novation to take place. holding petitioner liable as an accommodation indorser for the payment of the dishonored Prudential Bank check.