Creditor’s consent is required in substitution of the debtor
Dear PAO,
A few years ago, I obtained a loan from a lending company. I have paid about 80 percent thereof. For the remaining 20 percent, my colleague and I had an agreement that she would be the one to pay it, as her payment for the money she borrowed from me a few months ago. For this arrangement, do I still need the lending company’s approval?
Dear Aleli,
Please be informed of Article 1293 of the New Civil Code, which provides:
“Art. 1293. Novation which consists in substituting 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.” (Emphasis and underscoring supplied)
Corollary thereto, in the case of Romeo C. Garcia vs Dionisio v. Llamas, GR 54127, Dec. 8 2003, penned by Chief Justice Artemio Panganiban, the Supreme Court discussed the concept of novation in this manner:
“Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. x x x
“In general, there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In expromision, the initiative for the change does not come from — and may even be made without the knowledge of — the debtor, since it consists of a third person’s assumption of the obligation. As such, it logically requires the consent of the third person and the creditor. In delegacion, the debtor offers, and the creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the consent of these three persons are necessary. Both modes of substitution by the debtor require the consent of the creditor.” (Emphasis and underscoring supplied)
Further, in Amparo Joven De Cortes, et al. v. Mary E. Venturanza, et. al., GR L-26058, Oct. 28, 1977, Chief Justice Felix Makasiar, it was explained therein the rationale of this requirement:
“x x x the reason for the requirement that the creditor give his consent to the substitution is obvious. The substitution of another in place of the debtor
may prevent or delay the fulfillment or performance of the obligation by reason of the inability or insolvency of the new debtor;
hence, the consent of the creditor is necessary. x x x” (Emphasis and underscoring supplied)
It is clear from the foregoing legal provision and case law that the consent of the creditor is essential or necessary to validly effect such kind of novation or substitution in the person of the debtor. Otherwise, regardless of the agreement between you and your colleague, in the eyes of the lending company, you are still the debtor, to whom they can demand payment for the loan balance.
This opinion is solely based on the facts you have narrated and our appreciation of the same. Our opinion may vary when the facts are changed or elaborated on. We hope that we were able to enlighten you on the matter.