Transfer of Obligations: Assignment, Subrogation, and Novation
**Means of Transmission of Obligations**
Obligations are likely to be alienated, but the transmission of a receivable or a debt necessarily implies a change in the duty structure, which occurs by changing or replacing one of the subjects in the legal relationship, either the creditor or the debtor. There are three ways to transmit obligations: the transfer of rights, subrogation, and assignment of debts.
**Assignment of Rights**
There will be a transfer of rights when the creditor transfers to another person the rights they have against their debtor.
**Constituent Elements**
**Subject**
Three parties are involved in the celebration of the transfer, but only the agreement of two of them is essential:
- Originator: Materialized by the creditor who is going to transfer the rights of credit they have against a debtor, referred to as the original creditor for better identification.
- Assignee: The third party who purchases, for a consideration or free of charge, the quality of the new creditor as a result of the transfer of rights against the debtor.
- Courtesy: Represented by the debtor, whose consent is not required for the full validity and effectiveness of the assignment, and their role is limited to the obligation in the terms originally agreed.
**Object**
The object is made up of receivables. Although it is also concluded that property rights, inheritance rights, or rights arising from liability may be the subject of transfer.
**Rights Not Assignable by Express Provision of Law**
These are those determined by express prohibition in the law, which the parties have agreed as impossible to transfer, or where the nature of the law prevents it. These rights include inheritance rights, rights arising from the constitution of family patrimony, real rights, and room usage.
- Inheritance Rights: They cannot be transferred while the case is not updated. CCDF – Article 1291: The heir or beneficiary cannot transfer their share in the inheritance until after the death of the person they inherit from.
- Rights Generated by the Constitution of Family Patrimony: Article 727: The goods concerned with the heritage of the family are inalienable and not subject to seizure or liens.
- Real Right of Use and Habitation: Article 1051: The user and the person who has the right of residence in a building cannot alienate, encumber, or lease in whole or in part their right to another, and these rights can be seized by creditors.
**Rights Not Assignable by Their Very Nature**
These are directly related to those derived from legal institutions, such as food, people’s marital status, parentage, kinship, and, in general, forming part of the moral property of individuals.
**Inalienable Rights by Agreement of the Contracting Parties**
In the event that the parties expressly stipulated, these rights are not transmitted to third parties.
**Form**
The lien must be in writing, either in a private writing or in a public document.
**Effects**
The transfer of rights will occur as the transferor and the consequent imposition of ownership of these by the assignee, without the need for the will of the debtor.
**Notice of Assignment of the Debtor**
For the assignee to exercise their rights against the debtor, they must make this notification of the assignment, either judicially or extrajudicially, before two witnesses or a notary. This is necessary for the assignment to be perfect.
**Other Specific Forms of Transfer**
- Transfer of Rights of Inheritance: An heir or legatee who has that character established in a will, or who has been declared as such in or out of court, has the possibility of selling the rights granted by this privilege.
- Assignment of Litigious Rights: Implies the possibility of transmitting credit claims that are disputed in legal proceedings, the transferee assuming the outcome of the trial without any liability to the assignor, unless otherwise agreed. A claim is disputed when recovery is subject to a court decision, but there is still no writ of execution.
- Transfer of Interests: Article 2032 of the CCDF allows the assignment of associated rights such as the pledge and the mortgage, which are real rights. The same happens with the aliquot representing the real right of ownership of the owner, indicating that not only credit or personal rights are assignable, but also real rights.
**Subrogation (Transfer of Obligations)**
Substitution is admitted or established by law in the creditor’s claim by a third party who pays the debt or lends the debtor money to pay.
**Effects**
- Translational Effect: Subrogation is less a mode of extinguishing obligations than a mode of transmission.
- Limitation: If the third-party creditor has obtained a complete release, when yet this has been content to an amount less than the nominal amount of its claim, the subrogee cannot claim from the debtor more than what was delivered.
“Subrogation takes everyone and does not harm anyone.”
**Types**
a) Real: One thing for another.
b) Personal: One person for another.
**Real Subrogation**
One thing, by agreement of the parties or mandated by law, is replaced with another that comes to occupy the place and status of the former.
**Personal Subrogation**
When a person is replaced by another in an obligational legal relationship with the consequences and in terms that are noted below. When a third party pays the debt or lends the debtor money to pay, the binding relationship remains identical and unchanged.
**Elements**
- Existence of a claim.
- A third party with a legal interest to pay the creditor, or;
- A third party lends money to the debtor to make payment.
- Subsistence and incorruptibility of credit.
**Types**
**Contractual Subrogation**
The creditor may make this personal surrogacy agreement with a third party.
**Subrogation by Operation of Law**
The law establishes a series of cases designated as surrogacy.
Section 2369: When the debt is paid by the debtor with money lent by a third party for that purpose, the lender will be subrogated by operation of law to the rights of the creditor if the loan appears in an authentic title stating that the money was lent to pay that debt. In the absence of this circumstance, the lender will only have the rights expressed in their respective contract.
**Similarities Between Subrogation and Assignment of Rights**
- Both figures change the person of the creditor to a third party.
- The obligation remains the same.
- Therefore, the third-ranked first secured creditor has the same benefits that they enjoyed.
**Differences Between Subrogation and Assignment of Rights**
- In surrogacy, the surrogate creditor (original) does not count in the operation, and the third surrogate simply pays to preserve their rights and interests or does so to favor the debtor.
- In the transfer of rights, the assignee seeks to place the most beneficial monetary assets for them, and the transferor usually seeks the onerous transfer of credit.
- Surrogacy involves the payment of their right to the original creditor, while the transfer does not involve the payment of the obligation by the transferee to the transferor.
- Subrogation may be conventional or established by law, while the transfer of rights only operates conventionally.
- Statutory subrogation takes place without the will of the creditor or even against the will of the creditor, while the assignment of rights cannot be verified without the authorization of the creditor.
- Subrogation is a solemn contractual act, and the assignment of rights is as much formal as it is consensual.
**Assignment of Debt**
A legal act whereby a person called the “donor,” who is a debtor in a different legal act, passes the debt to their creditor in the other act, and with the authorization of this, to another person.
**In this contract, there are 3 people:**
- Borrower – The Seller.
- The Creditor – The Creditor.
- The Third Party – The Transferee (the person to whom the debt is transmitted).
“For there to be a replacement of the debtor, the creditor must consent, expressly or impliedly.”
a) Express Approval: This is made when the debtor and the transferee, after the conclusion of the contract, ask for the creditor’s consent and ratify their assumption, and the creditor expresses their will through speech, writing, or unmistakable signs.
b) Tacit Approval (Article 2052):
“It is presumed that the creditor consents to the replacement of the debtor when they allow the substitute to perform acts that the debtor would perform, such as payment of returns, partial payments, or periodic payments, if they do so on their own behalf and not on behalf of the original debtor.”
**Ways of Substitution**
- By Delegation: Debtor – Third Party.
- By Expromission: Third Party – Creditor.
**Novation**
It is a contract, which must be in writing, by which the creditor and debtor substantially alter the obligation, substituting it with a new one.
**Types of Novation**
- Objective: When the object of the obligation changes, the cause changes, the order changes, or the main conditions change.
- Subjective: When the creditor or the debtor changes, or both parties change. This includes a change of debtor and creditor with express acceptance, or a change of creditor with the explicit consent of the debtor.
- Pure and Simple: This becomes conventional, or vice versa, the conventional becomes pure and simple.
**Requirements for Novation**
- Must be expressed in writing.
- A new obligation replaces an old one.
- There is an alteration or substantial change between the two obligations.
- It is expressly stated that there is an intention of novation.
- The parties have the capacity to enter into a novation.
**Effects of Novation**
If the debtor was in default, they are no longer in default. The limitation period expires and a new one starts running with the new requirement. There is no liability for the new requirement.
Dation in Payment
It is the fulfillment of the obligation with conduct different from what was its original purpose, with the consent of the creditor. “It involves a voluntary agreement between the creditor and the debtor because although the creditor may not be required to receive in return a good (thing) other than what is due, there is no reason not to accept it.”
The optional requirement: the content of the benefit which is payable in lieu of the original provision is duly provided by the parties to the agreement, from the beginning. It produces a very different payment from the one originally agreed upon, and this depends on the will of the debtor.
Effects: Produces satisfaction for the creditor, discharge for the debtor, and the termination of the legal link.