Novation by conventional subrogation; requisites

The principle of novation by substitution of creditor was erroneously applied in the first questioned resolution involving the contract of loan between petitioner and respondent Eleazar. Admittedly, in order that a novation can take place, the concurrence of the following requisites is indispensable: 1. there must be a previous valid obligation, 2. there must be an agreement of the parties concerned to a new contract, 3. there must be the extinguishment of the old contract, and 4. there must be the validity of the new contract. [G.R. No. 120817. November 4, 1996]