lSection 6.

— Novation
Art. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions; (2) Substituting the person of the
debtor; (3) Subrogating a third person in the rights of the creditor.

Concept of Novation. —

 Novation is the substitution or change of an obligation by another, resulting in its

extinguishment or modification, either by changing its object or principal
conditions, or by substituting another in place of the debtor, or by subrogating a
third person in the rights of the creditor.

 It is one of the modes of extinguishing obligations through the creation of a new

one effected by the change or substitution of an obligatory relation by another
with the intention of substantially extinguishing or modifying the same.

 The distinctive feature or characteristic of novation is that although it extinguishes

the obligation, it also gives birth to another obligation.

 Two-fold purpose — relative in character, not absolute, unlike the other modes of
extinguishment

1. extinguish the old obligation, and

2. create a new obligation to take the place of the old.

 Requisites. — (Cruz vs. Court of Appeals, July 27, 1998, 293 SCRA 239)

1. a previous valid obligation

2. agreement of the parties to the new obligation
3. extinguishment of the old obligation; and

4. validity of the new obligation

 broad concept -- may either be

a) extinctive – when an old obligation is terminated by the creation of a new
obligation that takes the place of the former; or

How?

1) by changing the object or principal conditions (objective or real), or

2) by substituting the person of the debtor or subrogating a third person in
the rights of the creditor (subjective or personal)

b) modificatory – when the old obligation subsists to the extent it remains

compatible with the amendatory agreement

Problem — Suppose that under the judgment obligation, the liability of

the judgment debtor is for the amount of P6,000, but both judgment
debtor and judgment creditor subsequently entered into a contract
reducing the liability of the former to only P4,000, is there an implied
 novation which will have the effect of extinguishing the judgment
obligation and creating a modified obligatory relation? Reasons.

Answer — There is no implied novation in this case. We see no valid

objection to the judgment debtor and the judgment creditor in entering
into an agreement regarding the monetary obligation of the former under
the judgment referred to. The payment by the judgment debtor of the
lesser amount of P4,000, accepted by the creditor without any protest or
objection and acknowledged by the latter as in full satisfaction of the
money judgment, completely extinguished the judgment debt and
released the debtor from his pecuniary liability. Novation results in two
stipulations — one to extinguish an existing obligation, the other to
substitute a new one in its place. Fundamentally, it is that novation effects
a substitution or modification of an obligation by another or an
extinguishment of one obligation by the creation of another. In the case at
hand, we fail to see what new or modified obligation arose out of the
payment by the judgment debtor of the reduced amount of P4,000 to the
creditor. Additionally, to sustain novation necessitates that the same be so
declared in unequivocal terms clearly and unmistakably shown by the
express agreement of the parties or by acts of equivalent import — or that
there is complete and substantial incompatibility between the two
obligations. (Sandico vs. Piguing, 42 SCRA 322.)

 Kinds. —

(1) As to its essence, novation may be

(a) objective or real – refers to the change either in the cause, object or
principal conditions of the obligations.
(b) subjective or personal – refers to the substitution of the person of the
debtor (passive) or to the subrogation of a third person in the rights of
the creditor (active)

(c) mixed – re to a combination of objective and subjective novation.

(2) As to its form or constitution, novation may be

(a) express - When it is declared in unequivocal terms that the old obligation is
extinguished by a new one which substitutes the same

(b) tacit - when the old and the new obligations are incompatible with each
other on every point

(3) As to its extent or effect, novation may be

(a) total - absolute extinguishment

(b) partial - merely a modification

 Objective novation. — Art. 1291(1) may be effected by:

(1) changing the cause of the obligation; or

(2) changing the object of the obligation; or

(3) changing the principal or essential conditions of the obligation.

 Methods not in the Code, but will evidently result in a novation:

1) Change of cause. —

 Manresa’s example - contract of sale or a contract of lease in which the

price has not yet been paid to the vendor or lessor. If the parties to the
contract subsequently enter into a new agreement whereby the
obligation to pay is converted into a loan made to the vendee or lessee,
the result is a real or objective novation.

 Castan’s example - contract of loan converted into a contract of deposit.

2) Change of object. —

 Where the obligation to pay is converted into an obligation to render a

personal service

 dation in payment.

3) Change of principal conditions

 must refer to a principal, not incidental, condition resulting in the

alteration or modification of the essence of the obligation

 only those changes of an essential, not accidental, character can

effect a novation of the previous or original obligation

 No novation – cases:
 where the debtor merely executes another instrument reiterating
or ratifying his obligation to the creditor, (Ramos vs. Gibbon, 67
Phil. 371; Padilla vs. Levy Hermanos, Inc., 69 Phil. 681; Asiatic
Petroleum Co. vs. Sim Poo, CA , 49 Off. Gaz. 44) without changing
its object or principal conditions, although there might be minor
changes with regard to the form of payment, ( Ramos vs. Gibbon,
67 Phil. 371) or with regard to additional facilities ( Asiatic
Petroleum Co. vs. Sim Poo, CA, 40 Off. Gaz. 44; Yellow Ball
Freight Lines, Inc. vs. Western Export Co., CA , G.R. No. 10422-R,
Sept. 3, 1954) or benefits afforded to him, ( Padilla vs. Levy
Hermanos, Inc., 69 Phil. 681)
 Tiu Siuco vs. Habana, 45 Phil. 707 – Even granting that there were
some changes and alterations made after the perfection of a
contract, such as where both contracting parties agree that
certain additions shall be made to a building under construction,
such changes shall not result in the novation thereof, provided
that they are not so great that it will be impossible to follow the
 original contract; hence, the contractor cannot say that the
original contract has been entirely abandoned in such a way that
he can now recover from the other party on the basis of
quantum meruit. This conclusion gains added force where it is
established that the original contract was used as the basis for
the construction of the building, and those alterations which
were subsequently made were founded upon the original
contract with the understanding that the owner shall pay the
reasonable value of all such alterations.
 Similarly, where the change or alteration consists in providing for
another method of payment ( Tiu Siuco vs. Habana, 45 Phil. 707)
or for additional security, (Bank of the P.I. vs. Herridge, 47 Phil.
57) it is clear that such change or modification cannot constitute
a novation of the previous obligation, considering the fact that
the change is not with regard to an essential condition of the
previous obligation and that there can be no incompatibility
between the old and the new obligation.

Art. 1292. In order that an obligation may be extinguished by another which substitutes
the same, it is imperative that it be so declared in unequivocal terms, or that the old and
the new obligations be on every point incompatible with each other.

 Form of Extinguishment. — no specific form, but under Art. 1292, may be either
a) express - when there is a declaration in unequivocal terms that the old
obligation is extinguished by the new which substitutes it
b) tacit or implied - when the old and the new obligations are incompatible on
every point
 Novation is never presumed, and the animus novandi, whether totally or partially,
must appear 1) by express agreement of the parties, or 2) by their acts that are too
clear and unequivocal to be mistaken. (Quinto vs. People, April 14, 1999)
 Martinez vs. Cavives, 25 Phil. 581
Novation is a contract the object of which is: either to extinguished an
existing obligation and to substitute a new one in its place; or to discharge
an old debtor and substitute a new one to him; or to substitute a new
creditor to an old creditor with regard to whom the debtor is discharged.
It is never presumed. The intention must clearly result from the terms
of the agreement or by a full discharge of the original debt. Novation by
the substitution of a new debtor can take place without the consent of the
debtor, but the delegation does not operate a novation, unless the
creditor has expressly declared that he intends to discharge with
delegating debtor, and the delegating debtor was not in open failure or
insolvency at the time. The mere indication by a debtor of a person who is
 to pay in his place does not operate a novation. Delegates debtor est
odious is lege.

 People’s Bank and Trust Co. vs. Syvel’s, Inc . 164 SCRA 247
Facts: Syvel’s had a loan with People’s Bank and Trust Co. in the amount of
P900,000.00 secured by a chattel mortgage. Syvel’s failed to pay the loan
and People’s Bank and Trust Co. foreclosed the chattel mortgage. Syvel’s
opposed the foreclosure of the chattel mortgage on the ground that the
obligation secured by the chattel mortgage sought to be foreclosed was
novated by the subsequent execution of a real estate mortgage as
additional collateral to the obligation secured by said chattel mortgage.

Held: “Novation takes place when the object or principal condition of an

obligation is changed or altered. It is elementary that novation is never
presumed, it must be explicitly stated or there must be manifest
incompatibility between the old and the new obligation in every aspect. In
the case at bar, there is nothing in the Real Estate Mortgage which
supports appellants’ submission. The contract on its face does not show
the existence of an explicit novation nor incompatibility on every point
between the old and the new agreements as the second contract evidently
indicates that the same was executed as new additional security to the
chattel mortgage previously entered into by the parties.’’

 Express novation. —
 can only take place when the contracting parties disclose that the object in
making the new contract is to extinguish the old one; otherwise, the old
contract remains in force and the new one is added to it.
 mere fact that the debtor had signed a second promissory note for the balance
of his indebtedness, does not mean the extinguishment of the first promissory
note, wherein the terms of payment were expressly stipulated. Those terms,
therefore, shall still govern the manner of liquidation of the said balance. ( Phil.
Nat. Bank vs. Granada, CA, 51 Off. Gaz. 62.)
 Implied novation —
 old and the new obligations must be incompatible with each other on every
point.
 Test of incompatibility between the old and the new obligations is to
determine whether or not both of them can stand together, each having its
own independent existence.

 If they can stand together, there is no incompatibility; consequently, there is

no novation. If they cannot stand together, there is incompatibility;
consequently, there is a novation. (Borja vs. Mariano, 66 Phil. 93)
 No Novation --
 where the new contract is merely a reiteration or acknowledgment or
ratification of the old contract with slight modifications or alterations with
respect to the cause or object or principal conditions, it is clear that the two
contracts can stand together, and consequently, there can be no
incompatibility between them. Therefore, there can be no novation. (Tiu Siuco
vs. Habana, 45 Phil. 707; Ramos vs. Gibbon, 67 Phil. 371)
 Also, where the second contract provides for another method of payment
(Zapanta vs. De Rotaeche) or for additional security, (BPI vs. Herridge) or for
the postponement of the date of payment. (Ynchausti & Co. vs. Yulo)
 where the creditor receives a guaranty or accepts payments from a third
person who has agreed to assume the obligation, so long as there is no
agreement that the first debtor shall be released from responsibility, there is
no novation, and the creditor can still enforce the obligation against the
original debtor. This is so even where a surety bond is filed, for the simple
reason that such bond is not a new and separate contract but is merely an
accessory of the original contract. (Magdalena Estate, Inc. vs. Rodriguez , 18
SCRA 967).
 In such a case, the third person who has assumed the obligation merely
becomes a co-debtor or surety. If there is no agreement as to solidarity, the
first and second debtors are considered obligated jointly. (ibid.)
 In all of these cases, since there is no clear case of incompatibility and since
the change does not refer to an essential or principal condition of the previous
contract, there can be no novation.

Novation --
 Macondray & Co. vs. Ruiz, 66 Phil. 562. To the same effect: Paterson vs. Azada, 8
Phil. 432; Fua vs. Yap, 74 Phil. 287 - incompatibility between the two contracts in
the sense that they cannot stand together, such as where there is a change, not
only of the parties but also of the amount due as well as of the date of maturity, it
is clear that there is a novation.
 Consequently, only the second contract can be the basis of an action between the
parties. (Borja vs. Mariano, 66 Phil. 393).
 Phil. Nat. Bank vs. Mallari, 104 Phil. 437 - Thus, where a third person proposed to
the creditor that he is assuming the entire obligation of the debtor, and such
proposal was categorically accepted, it cannot be argued later on that there is no
novation which will have the effect of wiping out the old obligation on the ground
that since novation cannot be presumed, consequently, the act of the creditor in
accepting the offer of the third person merely implies that he is accepting such
third person as an additional debtor. It must be remembered that novation of a
contract may be effected not only by expressly declaring that the parties intended
such a change, but also where the new obligation is in all respect incompatible
 and cannot stand side by side with the former one. Hence, the substitution of the
third person as debtor by virtue of his agreement with the creditor essentially and
entirely wiped out the original obligation.

 Obligations with a term or period, distinguish –

 If there is an increase of the term or period, such as when there is a
postponement of the date of payment,( Pascual vs. Lacsamana, 100 Phil. 381)
or an extension of the period of payment, ( Ynchausti & Co. vs. Yulo, 34 Phil.
978; La Tondeña, Inc. vs. Alto Surety & Ins. Co. , 101 Phil. 879)  no novation
because:
1) no clear case of incompatibility between the two obligations;
2) neither is there a change in the obligatory relation between the parties
which will alter the essence of the obligation.
 BUT if there is a reduction or decrease of the duration of the term or period,
there is certainly a novation, not only because there is a 1) clear case of
incompatibility between the two obligations, but there is 2) also a change or
alteration of the principal condition of the old obligation.
Cases:
 Kabankalan Sugar Co. vs. Pacheco , 55 Phil. 555 - Thus, where the two
contracting parties entered into a second contract reducing the duration of the
term or period of a right of way from twenty to seven years, “there can be no
doubt that the two contracts, in so far as the duration of the right of way is
concerned, are incompatible with each other, for the second contract reduces
the period agreed upon in the first contract, and so both contracts cannot
subsist at the same time. The term stipulated in the second contract cannot be
added to that of the first, because the period would then be twenty-seven years
instead of twenty years.’’
 Cruz vs. Court of Appeals (July 27, 1998, 293 SCRA 239) - the Court ruled that
the Memorandum of Agreement falls short of producing a novation because it
does not express a clear intent to dissolve the old obligation as a consideration
for the emergence of the new one. Likewise, petitioner failed to show that the
two contracts were materially and substantially incompatible with each other.

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 of the new debtor gives him the
rights mentioned in Articles 1236 and 1237.

Novation By Substitution of Debtor. —

 subjective or personal novation consists in the substitution of a new debtor in the
place of the original debtor, which must be effected with the consent of the
creditor at the instance of either the new debtor or the old debtor.
Two forms —

1) substitution by expromisión - effected with the consent of the creditor at the

instance of the new debtor even without the knowledge or against the will of
the old debtor
2) substitution by delegación - effected with the consent of the creditor at the
instance of the old debtor with the concurrence of the new debtor

Expromisión Requisites:

1) The initiative for the substitution must emanate from the new debtor; and
2) Consent of the creditor to the substitution

Two kinds of substitution by expromisión

(1) substitution with the knowledge and consent of the old debtor; and
(2) substitution without the knowledge or against the will of the old debtor.

Delegación Requisites:

1) The initiative for the substitution must emanate from the old debtor;
2) Consent of the new debtor; and

3) Acceptance by the creditor.

Necessity of creditor’s consent. — must always be secured (expromision or delegacion)

 Reason - Substitution of one debtor for another may delay or prevent the
fulfillment or performance of the obligation by the temporary inability or
insolvency of the new debtor
 Asia Banking Corp. vs. Elser, 54 Phil. 994 --
 No prescribed time = may be given simultaneously with the substitution or
even afterwards;

 No prescribed form = may be express or implied

 Thus, where a stockholder in a certain corporation sold his shares of stock
to another subject to the condition that his indebtedness to the corporation
shall be assumed by the latter and the corporation was duly notified
regarding the sale including all of the terms and conditions thereof, the act
of the Board of Directors of the corporation in electing the vendee as
president of the corporation as well as member of the Board of Directors as
a substitute of the vendor clearly constitutes an implied acceptance of the
substitution of debtors. There is, therefore, a novation by the substitution of
debtors, which is perfectly valid and lawful placing the new debtor under
obligation to pay the debt which he has assumed.
  Pacific Commercial Co. vs. Sotto, 34 Phil. 237 - It must be observed, however,
that the mere act of the creditor in accepting payments by a third party for the
benefit of a debtor whose accounts the third party has assumed, without
further facts, does not constitute an implied acceptance of the substitution of
the debtor.
 McCullough vs. Veloso, 46 Phil. 1 - Thus, where the mortgagor transferred the
mortgaged property to a third person subject to the condition that the latter
shall assume the payment of the obligation, the mere fact that the creditor
accepted payments from the transferee does not relieve the mortgagor from
his obligation to pay the unpaid balance of the debt, since the substitution of
debtors was made without the consent of the creditor — a requirement which
is indispensable in order to effect a novation of the obligation. In such case, it
is evident that Arts. 1236 and 1237 of the Civil Code, and not Art. 1293, shall
govern.

Effect of payment by new debtor. —

 in expromision —

(1) substitution with the knowledge and consent of the original debtor, and
payment made by the new debtor with or without the knowledge and consent
of original debtor,  the new debtor can 1) demand reimbursement from the
original debtor of the entire amount which he has paid, and, 2) at the same
time, be subrogated in all of the rights of the creditor.

(2) substitution without the knowledge and consent of the original debtor, and

a) payment made by the new debtor again without the knowledge and
consent of the original debtor  the new debtor can demand
reimbursement from the original debtor only insofar as the payment has
been beneficial to such debtor, but he cannot be subrogated in the rights of
the creditor.

b) payment is made with the knowledge and consent of the original debtor 
the new debtor can still demand reimbursement from the original debtor of
the entire amount which he has paid, and, at the same time, be subrogated
in all of the rights of the creditor.

 In delegación — substitution with the consent of all the parties  the new debtor
can demand reimbursement of the entire amount paid as well as compel the
creditor to subrogate him in all of his rights

Art. 1294. If the substitution is without the knowledge or against the will of the debtor,
the new debtor’s insolvency or nonfulfi lment of the obligation shall not give rise to any
liability on the part of the original debtor.

Art. 1295. The insolvency of the new debtor, who has been proposed by the original
debtor and accepted by the creditor, shall not revive the action of the latter against the
original obligor, except when said insolvency was already existing and of public
knowledge, or known to the debtor, when he delegated his debt.
Effect of Nonpayment By New Debtor. —

 General Rule – Novation by substitution of debtor 1) releases original debtor from

his obligation to the creditor, and 2) substitutes the new debtor thereto BUT what if
new debtor becomes insolvent or unable to fulfill the obligation?
 Arts. 1294 – applies to expromisión
= w/out the knowledge or consent of the debtor  shall not revive the original
debtor’s liability to the creditor
= (by inference) with the knowledge and consent  shall revive the original
debtor’s liability to the creditor
 Art. 1295 – applies to delegación = the right of action of the creditor can no
longer be revived except in the following cases:

1) when the insolvency of the new debtor was already existing and of public
knowledge at the time when the original debtor delegated his debt; and
2) when such insolvency was already existing and known to the original debtor
when he delegated his debt
 purpose of these two exceptions = to prevent the commission of fraud

Art. 1296. When the principal obligation is extinguished in consequence of a novation,

accessory obligations may subsist only insofar as they may benefit third persons who did
not give their consent.

Effect Upon Accessory Obligations. —

 General Rule - an accessory obligation is dependent upon the principal obligation

to which it is subordinated (applies to objective novations and those effected by
substitution of debtor)
 Exception – accessory obligations which may benefit third persons who did not
gove their consent
 refers to a case in which there is a stipulation constituted in favor of a third
person, which may be demanded separately from the principal obligation,
although subordinated to the latter.
 Example - stipulation pour autrui (Art. 1311(2) - a contract or provision in a
contract that confers a benefit on a third-party beneficiary and gives the third-
party beneficiary a cause of action against the promisor for specific
performance.)

Art. 1297. If the new obligation is void, the original one shall subsist, unless the parties
intended that the former relation should be extinguished in any event.

Art. 1298. The novation is void if the original obligation was void, except when
annulment may be claimed only by the debtor, or when ratification validates acts which
are voidable.

Effect If New and/or Old Obligations Are Void. — (Art. 1297)

 If the old obligation is void or has already been extinguished  there is nothing to
novate; new obligation cannot produce any effect

 If the new obligation is void  there is no new obligation which is supposed to be

the substitute for the old obligation.

 old obligation subsists, unless the parties intended that the former relation
should be extinguished in any event.

Rule if old obligation is voidable. — (Art. 1298)

 A voidable obligation is binding until it is annulled by a competent court, and

therefore, susceptible of ratification, i.e. if the debtor concurs in the novation, he
impliedly renounces his right to ask for annulment, and therefore, validates the
obligation
 Note: in case of expromisión where debtor does not concur in the substitution of
debtors, and the new debtor pays such obligation, he (the old debtor) can still
avail of the right to invoke the voidable character of the obligation against any
claim of the second debtor. The second debtor, on the other hand, if he was aware
of the vice or defect of the obligation at the time when he assumed its payment,
cannot avail himself of the right to invoke its voidable character against any claim
of the creditor

Art. 1299. If the original obligation was subject to a suspensive or resolutory condition,
the new obligation shall be under the same condition, unless it is otherwise stipulated.

Effect If Old Obligation Is Conditional. —

 If the original obligation is conditional (whether the condition is suspensive or

resolutory) the novation must also be conditional
 the fulfillment (resolutory) or non-fulfillment (suspensive) of the condition
affects the subsequent obligation the previous obligation is placed in the same
category as a void obligation or an obligation which has already been
extinguished.
 if the suspensive condition is not fulfilled, the novation is valid; otherwise, it
is not
 If obligations subject to different conditions –
 If the conditions affecting both obligations can stand together, and they are all
fulfilled, the effect is that the new obligation becomes demandable;
 if only the condition affecting the first obligation is fulfilled, the previous
obligation is revived, while the new obligation loses its force
 if only the condition affecting the second obligation is fulfilled, the effect is
that there is no novation since the requisite of a previous valid and effective
obligation would be lacking
 If the conditions affecting both obligations are incompatible with each other, it
is evident that the effect of such incompatibility is the extinguishment of the
 first obligation so that only one obligation remains — the new obligation whose
demandability or effectivity shall depend upon the fulfillment or non-fulfillment
of the condition affecting it

Art. 1300. Subrogation of a third person in the rights of the creditor is either legal or
conventional. The former is not presumed, except in cases expressly mentioned in this
Code; the latter must be clearly established in order that it may take effect. 430

Novation By Subrogation. —

 Two forms
1) conventional subrogation - takes place by the agreement of the original
creditor, the third person substituting the original creditor, and the debtor
2) legal subrogation - takes place by operation of law

Art. 1301. Conventional subrogation of a third person requires the consent of the
original parties and of the third person.

Conventional Subrogation. —

 must be clearly established in order that it may take effect = essential that there
must be an agreement of all the parties with respect to the subrogation (consent
of all parties required)
 Distinguished from Assignment of Rights:
(1) As to rules which govern: Conventional subrogation is governed by Art. 1300 to
Art. 1304 of the Civil Code, while assignment of rights is governed by Art. 1624
to Art 1627 of the same Code.
(2) As to necessity of debtor’s consent: In conventional subrogation the debtor’s
consent is required, while in assignment of rights it is not.
(3) As to effect upon obligation: Conventional subrogation has the effect of
extinguishing the obligation and giving rise to a new one, while assignment of
rights has the effect of transmitting the rights of the creditor to another person
without modifying or extinguishing the obligation.
(4) As to effect upon vices: In conventional subrogation defects or vices in the
original obligation are cured, while in assignment of rights they are not.
(5) As to time of effectivity: In conventional subrogation the effect arises from the
moment of novation or subrogation, while in assignment of rights the effect, as
far as the debtor is concerned, arises from the moment of notification.

Art. 1302. It is presumed that there is legal subrogation

(1) When a creditor pays another creditor who is preferred, even without the
debtor’s knowledge;
(2) When a third person, not interested in the obligation, pays with the express or
tacit approval of the debtor;
 (3) When, even without the knowledge of the debtor, a person interested in the
fulfillment of the obligation pays, without prejudice to the effects of confusion as to the
latter’s share.

Legal Subrogation. —

 takes place without agreement of the parties but by operation of law because of
certain acts
 Art. 1302, Exceptions to the general rule that legal subrogation is not presumed.
 the word “preferred’’ under the first exception should be understood in its
broad sense and in connection with the rules on preference of credits
 second exception = the provisions of Arts. 1236 and 1237 are applicable
 a “person interested in the fulfillment of the obligation’’ = refers only to a co-
debtor, a guarantor, the owner of the thing which is given as security, or one
who has a real right over the thing which is the object of the obligation.

Art. 1303. Subrogation transfers to the person subrogated the credit with all the rights
thereto appertaining, either against the debtor or against third persons, be they
guarantors or possessors of mortgages, subject to stipulation in a conventional
subrogation.

Art. 1304. A creditor, to whom partial payment has been made, may exercise his right
for the remainder, and he shall be preferred to the person who has been subrogated in
his place in virtue of the partial payment of the same credit.

Effect of Total Subrogation —

 effects of the other forms of novation governed by Art. 1296

 Arts. 1303 and 1394 govern effects of novation by subrogating a third person in
the rights of the creditor
 unlike the other forms of novation, accessory obligations are not extinguished
because in such obligations the person subrogated also acquires all of the rights
which the original creditor had against third persons
 rule is absolute with respect to legal subrogations but subject to agreement of
the parties with respect to conventional subrogations (parties may agree to
increase or reduce accessory obligations)

Effect of Partial Subrogation. —Art. 1304.

Illustration:

If P, a third person, pays two-thirds of the indebtedness of D to C, such payment

shall result in the partial subrogation of P in the rights of the creditor, C. C’s rights
with respect to the remainder are not affected by the subrogation. In other words,
both rights shall co-exist. In case of a conflict between the two, however, the right
of C shall be preferred.

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