NOVATION

The Supreme Court clearly defined novation in the case of Spouses Francisco and Ruby Reyes vs. BPI
Family Savings Bank, Inc. (G.R. No. 149840-41, March 21, 2006. Novation is defined in the said case “as
the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one
which terminates the first, either by changing the object or principal conditions, or by substituting the
person of the debtor, or subrogating a third person in the rights of the creditor.”

Requisites of novation:

a) The existence of a valid obligation.

b) The intent to extinguish or to modify the old obligation, whether implied or expressed,
completely/substantially incompatible with the old and new obligation on every point.
c) The capacity and consent of all the parties, except in the case of expromission, where the old
debtor does not participate.
d) The validity of the new obligation.

Article 1293, New Civil Code of the Philippines. Novation which consist in substitution a new debtor in
the place of the original one, may be made even without the knowledge or against the will of the latter,
but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned
in articles 1236 and 1237.

Substitution of Debtor
Two kinds of substitution

Expromission – which, when a third person initiatively takes place the obligation even without
the consent or against the will of the original debtor but with the consent of the creditor.

Delegacion - Is when the debtor offers and the creditor accept a third person to take place for the
satisfaction of the original debtors obligation. In this agreement, they are called as a Delegante
(debtor) ,Delegatario (creditor) and delegado (third person).

Release of the old debtor

The old debtor must be release from the obligation after the substitution otherwise there is no novation
and the third person who assumed the obligation without the release becomes co-debtor or surety.
Absence of agreement as to solidarity will then, both the original and the new debtors are
considered obligated jointly.

The creditor may still enforce the obligation against the original debtor without the release.

Consent of the Creditor

To be able to change the debtors, CONSENT of the Creditor whether expromission or in delegacion is
an INDISPENSABLE REQUIREMENT. The reason for this rule is that the substitution implies a waiver by
the creditor of his credit and it may be prejudicial to the creditor. The prejudice may take a form of delay
in the fulfillment of the obligation or non-performance by the new debtor, by reason of his financial
inability or insolvency.
Consent of debtors
Consent of the debtors in case of expromission is not necessary, substitution may be made without his
knowledge. In delegacion old debtor need to be with consent for the substitution for the reason that the
initiative comes from him. Both delagacion and expromission , the consent of the new debtor is necessary
because he is the one who will assume the obligation.

Right of the new debtors who pays

1. In expromision, payment by the new debtor gives him the right to beneficial reimbursement
under the second paragraph of Article 1236
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“Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor.”

Exceptions
a) If there is a stipulation that the creditor shall accept the payment made by a third person; and
b) If the third person has an interest in the fulfilment of an obligation such as the interest of a surety,
a guarantor or a mortgagee.

If the third person pays for the obligation of the debtor with the knowledge and consent of the
latter, the payor is entitled to be reimbursed for the full amount.

If the third person pays for the obligation with the knowledge of the debtor and does not object
thereto at any time, the latter must pay the amount advanced by the former.

If the payment was made without the knowledge of or against the will of the debtor, the
reimbursement shall only be up to the amount or extent by which the debtor was benefited.

If the debt had already prescribed or had been compensated, the payor is not entitled to
reimbursement from the debtor.

2. If the payment was made with the consent of the original debtor or on his own initiative
(delegacion), the new debtor is entitled to reimbursement and subrogation under Article 1237.

“Article 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of
the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a
mortgage, guaranty, or penalty.”

Consequences of payment made by a third person without the knowledge or against the will of
the debtor.
a) He can only recover the payment that is beneficial to the debtor.
b) He cannot place himself to have all the rights pertaining to the debtor.