Extinguishment of an obligation:
payment is incomplete or irregular, the
 Payment or performance;
 By the loss of the thing due;
 By the condonation or remission of the debt;
 By the confusion or merger of the rights of the
creditor and debtor;
 By compensation;
 By novation.
Section 1: PAYMENT OR PERFORMANCE
ART 1232. Payment means not only the delivery of
money but also the performance, in any other
manner, of an obligation.
 Payment may consist of not only in the
delivery of money but also the giving of a
thing, the doing of an act or not doing of an
act.
Debt is considered paid: (ART 1233)
 As a general rule, a debt to deliver a thing or
to render service is understood to have been
paid when it is completely delivered or
rendered.
 The very prestation due must be deliverer or
performed.
Substantial performance in good faith: (ART 1234)
- First exception to the general rule laid down
in ART 1233.
- In case of substantial performance, the
obligee is benefited.
- The obligor should be allowed to recover as if
there had been a strict and complete
fulfilment less damages suffered by the
obligee.
Requisites:
1. There must be substantial performance; and
2. The obligor must be in good faith.
ART 1235. When the obligee accepts the
performance, knowing its incompleteness or
irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied
with.
- Founded in the principle of estoppels; if the
creditor may properly reject it.
Requisites:
1. The obligee knows that the performance is
incomplete or irregular; and
2. He accepts the performance without
expressing any protest or objection.
Art. 1236. The creditor is not bound to accept
payment or performance by a third person who has
no interest in the fulfillment of the obligation, unless
there is a stipulation to the contrary.
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. (1158a)
Persons from whom the creditor must accept
payment.
1. The debtor;
2. Any person who has an interest in the
obligation (like a guarantor); or
3. A third person who has no interest in the
obligation when there is stipulation that he
can make payment.
 Creditor may refuse payment by a third
person
Effect of payment by third person.
1. If made without the knowledge or against the
will of the debtor: The recovery is only up to
the extent or amount of the debt at the time
of the payment.
2. If made with the knowledge of the debtor: the
payer shall have the right s of reimbursement
and subrogation, that is, to recover what he
has paid and to acquire all the rights of the
creditor
-Whoever pays on behalf of the debtor is
entitled to subrogation if the payment is with
the consent of the latter
-If the payment is without the knowledge or
against the will of the debtor, the third person
cannot compel the creditor to subrogate him
in the latter’s accessory rights of mortgage,
guaranty, or penalty.

Section 2: LOSS OF THE THING DUE
Art 1262. An obligation which consists in the delivery
of a determinate thing shall be extinguished if it
should be lost or destroyed without the fault of the
debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even
for fortuitous events, the loss of the thing does not
extinguish the obligation, and he shall be responsible
for damages. The same rule applies when the nature
of the obligation requires the assumption of risk.
(1182a)
When a thing is considered lost:
 When in perishes, or goes out of commerce or
disappears in such a way that its existence is
unknown or it cannot be recovered.
When loss off thing will extinguish an obligation to
give:
1. The obligation is to deliver a specific or
determinate thing;
2. The loss of the thing occurs without the fault
of the debtor; and
3. The debtor is not guilty of delay.
When loss off thing will not extinguish liability: ( Even
without the fault and delay of the debor)
1. When the law so provides;
2. When the stipulation so provides;
3. When the nature of the obligation requires
the assumption of risk; and
4. When the obligation to deliver a specific thing
arises from a crime.
Art 1263. In an obligation to deliver a generic thing,
the loss or destruction of anything of the same kind
does not extinguish the obligation. (n)
Effect of Loss of a generic thing:
 Debtor is still liable even for a fortuitous event
 Genus nunquam perit- generic thing never
perishes; thus the debtor can still be
compelled to deliver a thing of the same kind.
 Note: The creditor cannot demand a thing
superior quality and neither can the debtor
deliver a thing of inferior quality.
2
Art 1264. The courts shall determine whether, under
the circumstances, the partial loss of the object of
the obligation is so important as to extinguish the
obligation. (n)
Effect of partial loss of a specific thing:
- There is a partial loss when only a portion of
the thing is lost or destroyed or when it
suffers depreciation or deterioration.
- Partial loss is the equivalent of difficulty of
performance in obligations to do.
- In case of partial loss, the court is given the
discretion in case of disagreement between
the parties, to determine whether under the
circumstances it is so important in relation to
the whole as to extinguish the obligation.
- The court will decide whether the partial loss
is such as to be equivalent to a complete or
total loss.
Art 1265. Whenever the thing is lost in the
possession of the debtor, it shall be presumed that
the loss was due to his fault, unless there is proof to
the contrary, and without prejudice to the provisions
of article 1165. This presumption does not apply in
case of earthquake, flood, storm, or other natural
calamity. (1183a)
 There is disputable presumption of fault
whenever the thing to be delivered is lost in
the possession of the debtor.
 This presumption is reasonable because the
debtor who has the custody and care of the
thing can easily explain the circumstances of
the loss.
 Exception: In case of natural calamities, the
presumption of fault does not apply. Lack of
fault on the part of the debtor is more likely.
So it is unjust to presume negligence on his
part.”
Art 1266. The debtor in obligations to do shall also
be released when the prestation becomes legally or
physically impossible without the fault of the obligor.
(1184a)
Effect of impossibility of performance:
 When the obligation becomes physically or
legally impossible without the debtor’s fault,
the impossibility of performance will result in
the extinction of the obligation.

 The impossibility must take place after the
constitution of the obligation.
 If the obligation is impossible from the very
beginning, the obligation is void.
Kinds of impossibility:
1. Legal Impossibility
2. Physical Impossibility
Art. 1267. When the service has become so difficult
as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom,
in whole or in part. (n)
Effect of difficulty of performance:
 As a general rule, the impossibility of
performance releases the obligor from the
obligation.
 When the performance of the service has
become so difficult as to be manifestly
beyond the contemplation of both parties, the
court is authorized to release the obligor in
whole or in part.
 Applicable to personal obligations to do and
to real obligations to give or deliver.
Art1268. When the debt of a thing certain and
determinate proceeds from a criminal offense, the
debtor shall not be exempted from the payment of
its price, whatever may be the cause for the loss,
unless the thing having been offered by him to the
person who should receive it, the latter refused
without justification to accept it. (1185)
Effect of fortuitous event where obligation proceeds
from a criminal offense:
 Another instance where a fortuitous event
does not exempt the debtor from liability.
 The obligation subsists except when the
creditor refused to accept the thing without
justification, after it had been offered to him.
Art. 1269. The obligation having been extinguished
by the loss of the thing, the creditor shall have all the
rights of action which the debtor may have against
third persons by reason of the loss. (1186)
3
Rights of the creditor to proceed against debtor:
 The creditor is given the right to proceed
against the third person responsible for the
loss.
Section 3: CONDONATION OR REMISSON OF
DEBT
Art. 1270. Condonation or remission is essentially
gratuitous, and requires the acceptance by the
obligor. It may be made expressly or impliedly.
One and the other kind shall be subject to the rules
which govern inofficious donations. Express
condonation shall, furthermore, comply with the
forms of donation. (1187)
Condonation or Remission
- The gratuitous abandonment by the creditor
of his right against the debtor.
- A form of donation.
Requisites:
1. It must be gratuitous
2. It must be accepted by the obligor
3. The parties must have capacity;
4. It must be inofficious; and
5. If made expressly, it must comply with the
forms of donations.
Effect of inofficious remission:
- No one can give more than that which he can
give by will; otherwise, he excess shall be
inofficious and shall be reduced by the court
accordingly.
- As a rule, testamentary dispositions which
impair the legitime shall be reduced on
petition of the heirs insofar as they are
inofficious or excessive.
- Legitimes is that part of the testator’s
property which he cannot dispose of because
the law has reserved it for certain heirs, who
are, therefore, called compulsory heirs.

Art 1271. The delivery of a private document
evidencing a credit, made voluntarily by the
creditor to the debtor, implies the renunciation
of the action which the former had against the
latter.
- If in order to nullify this waiver it should be
claimed to be inofficious, the debtor and his
heirs may uphold it by proving that the
delivery of the document was made in virtue
of payment of the debt. (1188)
Presumption in case of voluntary delivery of
document of indebtedness by creditor:
1. Presumption of implied remission
- If the debt is not yet paid, the creditor would
need the document to enforce.
- In case he voluntarily delivers it to the debtor,
the only logical interference is that he is
renouncing his right.
2. Contrary evidence
- The presumption is prima facie evidence or
rebuttable by contrary evidence.
3. Extent of remission
- If the obligation is joint, the presumption of
remission pertains only to the share of the
debtor who is in possession of the document;
if solidary, to the total obligation..
4. Presumption applicable only to private
document
- Art 1271 only speaks of a private document.
- Does not apply to public documents because
it is easy to obtain a copy of the same being a
public record.
Inofficious (2nd paragraph of Art 1271)
- The renunciation of the action which the
creditor had against the debtor may be
nullified or invalidated by a showing that he
waiver is inofficious
- The remission becomes null and void upon
proof that it is inofficious.
- The debtor may prove that the delivery of the
document was really made in virtue of
payment of the debt and not remission.
4
Art. 1272. Whenever the private document in which
the debt appears is found in the possession of the
debtor, it shall be presumed that the creditor
delivered it voluntarily, unless the contrary is
proved. (1189)
Presumption in case document found in the
possession of debtor
- Ordinarily, the document evidencing the debt
is in the possession of the creditor.
- If the document is later found in the hands of
the debtor and it is not known how he came
into possession of the same, the presumption
is that it was voluntarily delivered by the
creditor. : This presumption of voluntarily
delivered gives rise to the presumption of
remission.
- The presumption of voluntary delivery should
give rise to the presumption of payment only
when it is known that indeed there is no
payment should there be a presumption of
remission.
Art. 1273. The renunciation of the principal debt
shall extinguish the accessory obligations; but the
waiver of the latter shall leave the former in force.
(1190)
Effect of renunciation of the principal debt of the
accessory obligation:
- As a general rule, the accessory follows the
principal.
- While the accessory obligations cannot exist
without the principal obligation, the latter
may exist without former.
Art. 1274. It is presumed that the accessory
obligation of pledge has been remitted when the
thing pledged, after its delivery to the creditor, is
found in the possession of the debtor, or of a third
person who owns the thing. (1191a)
Presumption in case thing pledged found in
possession of debtor.
 Pledge is a contract by virtue of which the
debtor delivers to the creditor or to a third
person a movable or instrument evidencing
incorporeal rights for the purpose of securing
the fulfilment of a principal obligation with
the understanding that when the obligation is

fulfilled the thing delivered shall returned
with ill its fruits and accessions.
- In a contract of pledge, it is necessary that the
thing pledged be placed in the possession of
the creditor, or of a third person common
agreement.
- If the pledge is later found in the hands of the
creditor, the accessory obligation of pledge is
presumed remitted, not the obligation itself.
Section 4: CONFUSION OR MERGER OF RIGHTS
Art. 1275. The obligation is extinguished from the
time the characters of creditor and debtor are
merged in the same person. (1192a)
Confusion or merger:
- The meeting in one person of the qualities of
creditor and debtor with respect to the same
obligation.
Reason or basis for confusion:
1. If a debtor is his own creditor, enforcement of
the obligation becomes absurd since a person
cannot claim payment from himself.
2. When there is a confusion of rights, the
purposes for which the obligation may have
been created are deemed realized.
Requisites:
1. It must take place between the principal debt
and creditor;
2. It must be complete;
3. It must be clear and identical; and
4. The obligation must be the same and
identical.
Art. 1276. Merger which takes place in the person of
the principal debtor or creditor benefits the
guarantors. Confusion which takes place in the
person of any of the latter does not extinguish the
obligation. (1193)
Effect of merger in the person of principal debtor or
creditor:
- Merger in the person of the principal debtor
or creditor extinguishes the obligation
5
- Hence, the accessory obligation of guaranty is
also extinguished in accordance with the
principle that the accessory follows up the
principal.
Effect of merger in the person of guarantor:
- The extinguishment of the accessory
obligation does not carry with it that the
principal obligation.
- Consequently, merger, which takes place in
the person of the guarantor, while it
extinguishes the guaranty, leaves the principal
obligation.
Art. 1277. Confusion does not extinguish a joint
obligation except as regards the share corresponding
to the creditor or debtor in whom the two characters
concur. (1194)
Confusion in a joint obligation:
- In a joint obligation, there are as many debts
as there are debtors and as many credits as
there are creditors, the debts and/or credits
being considered distinct and separate from
one another.
- The confusion will extinguish only the share
corresponding to the creditor or debtor in
whom the two characters concur.
Confusion in a solidary obligation:
- Merger in the person of one of the solidary
debtors shall extinguish the entire obligation
because it is also a merger in the other
solidary debtors.
- He who makes a payment may claim
reimbursement from his co-debtors for the
shares which correspond to them.
Section 5: COMPENSATION
Art. 1278. Compensation shall take place when two
persons, in their own right, are creditors and debtors
of each other. (1195)
Compensation:
- The extinguishment to the concurrent amount
of the debts of two persons who, in their own
right, are debtors and creditors of each other.

- It involves the simultaneous balancing of two
obligations in order to extinguish them to the
extent in which the amount of one is covered
by that of the other.
-
CONFUSION COMPENSATION
There is only one person There are two persons
who is a creditor and involved, each of whom is
debtor of himself ; a debtor and a creditor of
the other;
There is but one There are two
obligation; obligations;
There is impossibility of There is indirect payment
payment
There may be
compensation in joint
and solidary obligations.
Art. 1279. In order that compensation may be
proper, it is necessary:
(1) That each one of the obligors be bound
principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of
money, or if the things due are consumable,
they be of the same kind, and also of the
same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any
retention or controversy, commenced by
third persons and communicated in due time
to the debtor. (1196)
Requisites of legal compensation:
1. The parties are principal creditors and
principal debtors of each other
2. Both debt consist in a sum of money, or of
consumable things of the same kind and
quality
3. The two debts are due or demandable
4. The two debts are liquidated
5. No retention or controversy commenced by a
third person
6
Art. 1280. Notwithstanding the provisions of the
preceding article, the guarantor may set up
compensation as regards what the creditor may owe
the principal debtor. (1197)
Compensation benefits guarantor
- Exception to the general rule, that only the
principal debtor can set up against his creditor
what the latter owes him
- Although the guarantor is only subsidiarily,
not principally bound, he is given the right to
set up compensation.
Art. 1281. Compensation may be total or partial.
When the two debts are of the same amount, there
is a total compensation. (n)
Total and partial compensations:
- Applies to all the different kinds of
compensation
- Total compensation results when the two
debts are of the same amount.
- If they are of different amounts,
compensation is total as regards the smaller
debt, and partial only with respect to the
larger debt.
Art. 1282. The parties may agree upon the
compensation of debts which are not yet due. (n)
Voluntary compensation:
- This is an exception to the general rule that
only debts which are due and demandable
can be compensated.
- Includes any compensation which takes place
by agreement of the parties even if all the
requisites for legal compensation are not
present
- No special requisites; it is sufficient that the
contract of the parties, which declares the
compensation, is valid
 7

Art. 1283. If one of the parties to a suit over an Neither can compensation be set up against a
obligation has a claim for damages against the other, creditor who has a claim for support due by
the former may set it off by proving his right to said gratuitous title, without prejudice to the provisions
damages and the amount thereof. (n) of paragraph 2 of Article 301. (1200a)

Judicial compensation: Art. 1288. Neither shall there be compensation if one

- Declared by a final judgment of a court in a
suit
- A party may set off his claim for damages
against his obligation to the other party by
proving his right to said damages and the
amount thereof.
of the debts consists in civil liability arising from a
penal offense. (n)
Art. 1289. If a person should have against him
several debts which are susceptible of compensation,
the rules on the application of payments shall apply
to the order of the compensation. (1201)

Art. 1284. When one or both debts are rescissible or
voidable, they may be compensated against each
other before they are judicially rescinded or avoided.
(n)
Compensation of rescissible or voidable debts:
Art. 1290. When all the requisites mentioned in
Article 1279 are present, compensation takes effect
by operation of law, and extinguishes both debts to
the concurrent amount, even though the creditors
and debtors are not aware of the compensation.
(1202a)

- Rescissible and voidable obligations are valid

until they are judicially rescinded or avoided.
- Prior to rescission or annulment, the debts
may be compensated against each other.

Art. 1285. The debtor who has consented to the

assignment of rights made by a creditor in favor of a
third person, cannot set up against the assignee the
compensation which would pertain to him against
the assignor, unless the assignor was notified by the
debtor at the time he gave his consent, that he
reserved his right to the compensation.

If the creditor communicated the cession to him but

the debtor did not consent thereto, the latter may
set up the compensation of debts previous to the
cession, but not of subsequent ones.

If the assignment is made without the knowledge of

the debtor, he may set up the compensation of all
credits prior to the same and also later ones until he
had knowledge of the assignment. (1198a)

Art. 1286. Compensation takes place by operation of

law, even though the debts may be payable at
different places, but there shall be an indemnity for
expenses of exchange or transportation to the place
of payment. (1199a)

Art. 1287. Compensation shall not be proper when

one of the debts arises from a depositum or from the
obligations of a depositary or of a bailee in
commodatum.

Section 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. (1203)
Novation
- The total or partial extinction of an obligation
through the creation of a new one which
substitutes it.
- It is the substitution or change of an
obligation by another, which extinguishes or
modifies the first, 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.
DUAL FUNCTION
- A contract containing two stipulations
1. To extinguish or modify an existing
obligation
2. Substitute a new one in its place
Art. 1292. In order that an obligation may be
extinguished by another which substitute 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. (1204)
Requisites of Novation:
1. A previous valid obligation;
2. Capacity and intention of the parties to
modify or extinguish the obligation;
3. He modification or extinguishment of the
obligation; and
4. The creation of a new valid obligation
Novation is not presumed
- Never presumed
- It must be clearly and unmistakably
established either by the express agreement
of the parties or acts of equivalent import or
8
by incompatibility of the two obligations with
each other in every material respect.
Test of incompatibility:
- Whether they can stand together, each one
having an independent existence.
- If they cannot, they are incompatible, and the
subsequent obligation novates the first.
- Upon such novation, the former obligation
loses all force and effect and only the new
obligation can be enforced
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. (1205a).
Kinds of Personal Novation:
1. SUBSTITUTION – when the person of the
debtor is substituted
2. SUBROGATION – when a third person is
subrogated in the rights of the creditor
Kinds of Substitution:
1. EXPROMISION
- which takes place when third person of his
own initiative and without the knowledge or
against the will of the original debtor assumes
the latter’s obligation with the consent of the
creditor
- requires the consent of a third party
- it is essential that the old debtor be released
from his obligation, otherwise, there is no
expromision.
2. DELEGACION
- That which takes place when the creditor
accepts a third person to take place of the
debtor at the instance of the latter.
- The creditor may withhold approval
- In delegacion, all the parties, the old debtor,
the new debtor, and the creditor must agree.

Right of new debtor who pays:
1. In expromision, payment by the new debtor
gives him the right to beneficial
reimbursement
2. In delegacion, the new debtor is entitled to
reimbursement and subrogation
Art. 1294. If the substitution is without the
knowledge or against the will of the debtor, the new
debtor's insolvency or non-fulfillment of the
obligations shall not give rise to any liability on the
part of the original debtor. (n)
Effect of new debtor’s insolvency or non-fulfilment of
the obligation in expromision:
 The new debtor’s insolvency or non-fulfilment
of the obligation will not revive the action of
the creditor against the old debtor whose
obligation is extinguished by the assumption
of the debt by the new debtor.
 In expromision, the replacement of the old
debtor is not made at his own initiative.
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 the
delegated his debt. (1206a)
Effect of new debtor’s insolvency or non-fulfilment of
the obligation in delegacion:
 Refers only of insolvency
 If the non-fulfilment of the obligation is due to
other causes, the old debtor is not liable
 As a general rule, the old debtor is not liable
to the creditor in case of the insolvency of the
new debtor.
o Exceptions:
1. The said insolvency was already
existing and of public knowledge
at the time of the delegacion,
although it was not known to the
old debtor;
2. The insolvency was already
existing and known to the debtor
at the time of the delegacion,
9
although it was not of public
knowledge.
o The exceptions are intended to
prevent fraud on the part of the
old debtor.
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. (1207)
Effect of novation on accessory obligations:
 General rule: the extinguishment of the
principal obligation carries with it that of the
accessory obligations.
 Exception: An accessory obligation created in
favor of a third person which remains in force
unless said third person gives his consent to
the novation.
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.
(n)
Effect where the new obligation void:
 General rule: there is no novation if the new
obligation is void and, therefore, the original
one shall subsist for the reason that the
second obligation being inexistent, it cannot
extinguish or modify the first.
 Exception: where the parties intended that
the old obligation should be extinguished in
any event.
Effect where the new obligation voidable:
 Novation can take place but the moment it is
annulled, the novation must be considered as
not having taken place.
 The original one can be enforced , unless the
intention of the parties is otherwise.

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. (1208a)
Effect where the old obligation void or voidable:
 Based on the requisites of a valid novation
 A void obligation cannot be novated because
there is nothing to novate.
 If the original obligation is only voidable, or if
the voidable obligation is validated by
ratification, the novation is valid.
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. (n)
Presumption where original obligation subject to a
condition:
 If the obligation is subject to a suspensive or
resolutory condition, the second obligation is
deemed subject to the same condition unless
the contrary is stipulated by the parties in
their contract.
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. (1209a)
Subrogation
 The substitution of one person (subrogee) in
the place of a creditor (subroger) with
reference to a lawful claim or right, giving the
former all the rights of the latter, including
the right to employ all remedies to enforce
payment.
Kinds of Subrogation
 Conventional: when in takes place by express
agreement of the original parties and the
third person; must be clearly established in
order that it may take place.
 Legal: when it takes place without agreement
but by operation of law; not presumed except
in the cases expressly provided by law.
10
Art. 1301. Conventional subrogation of a third
person requires the consent of the original parties
and of the third person. (n)
Consent of all parties required in conventional
subrogation:
1. The debtor: because he becomes liable under
the new obligation to a new creditor
2. The old creditor: because his right against the
debtor is extinguished.
3. The new creditor: because he may dislike or
distrust the debtor
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. (1210a)
Cases of legal subrogation:
 Subrogation takes place by operation of law
even without the consent of the parties
Subrogation is produced from payment:
1. When a creditor pays another creditor who is
preferred
2. When a third person without interest in the
obligation pays with the approval of the
debtor
3. When a third person with interest in the
obligation pays even without the knowledge
of the debtor
Art. 1303. Subrogation transfers to the persons
subrogated the credit with all the rights thereto
appertaining, either against the debtor or against
third person, be they guarantors or possessors of
mortgages, subject to stipulation in a conventional
subrogation. (1212a)
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Effect of legal subrogation:

 To transfer to the new creditor the credit and

all the rights and actions that could have been
exercised by the former creditor either
against the debtor or against third person, be
they guarantors or mortgagors.
 The obligation subsists in all respects as
before the novation.

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. (1213)

Effect of partial subrogation:

 The creditor to whom partial payment has

been made by the new creditor remains a
creditor to the extent of the balance of the
debt.
 In case of insolvency of the debtor, he is given
a preferential right to recover the remainder
as against the new creditor