[G.R. No. L-3734. August 26, 1907. ]
JAMES J. PETERSON, Plaintiff-Appellee, v. RAFAEL AZADA, Defendant-Appellant.
Antonio V. Herrero, for Appellant.
Thomas E. Kepner, for Appellee.
1. DEBTS AND DEBTORS; MERGER OF LIABILITIES; PROMISSORY NOTE. — When by reason of the insolvency of a debtor, two sums due and stated in an equal number of instruments are merged with an additional amount in a promissory note, payable on a fixed date, by virtue of an agreement between the creditor and the debtor, an actual novation, valid and efficient, takes place, because the former obligations have been modified in their essential conditions, and have fortwith become extinguished.
2. ID.; ID.; ID. — If the former obligations were valid, the new one must necessarily be so unless it be alleged and proven that there was no such novation or that there exists some reason which makes it invalid.
3. CONTRACT. — Whatever may have been agreed to in a contract, not in contravention of law or morals, is binding upon the contracting and their legal representatives.
4. ID.; MISTAKE. — An error which invalidates a contract and such transactions as may have been executed by virtue thereof, on account of the absence of consent, must refer to the substance of the thing which may be the subject of the contract, and not to a right of the parties therein, particularly when the difference of opinion in connection with this right is what gave rise to the execution of the contract. (Arts. 1261, 1265, 1266, and 1817, Civil Code.)
D E C I S I O N
On the 6th of August, 1906, James J. Peterson, through his attorney, W.A. Kincaid, filed a complaint with the Court of First Instance of Manila, asking that judgment be entered against Rafael Azada sentencing him to pay 1,160 pesos and 55 centavos, with interest thereon at the rate of 1