Passive Subjective Novation by Substitution of Debtor
Expromision and delegacion are the two forms of passive subjective novation, where the debtor is changed while the creditor and the principal prestation remain essentially identifiable. The juridical effect is not a mere transfer of the debt as property; it is the extinguishment of the old obligation and the creation of a new obligation in which a new debtor is bound to the creditor.
The substitution must be intended as a true novation. A third person's promise to pay, an accommodation arrangement, or a creditor's acceptance of partial payments from another person does not, by itself, release the original debtor. The old debtor is discharged only when the creditor clearly accepts the new debtor in substitution, or when the new undertaking is plainly incompatible with the continued liability of the old debtor.
Because novation is never presumed, the facts must show both the entry of the new debtor and the extinguishment of the old debtor's liability. If the new debtor merely becomes an additional debtor, guarantor, surety, agent for payment, or source of funds, the result is cumulative liability or a security arrangement, not expromision or delegacion.
Expromision
Expromision exists when a third person, without being delegated by the original debtor, assumes the debtor's obligation and the creditor accepts that third person in substitution of the original debtor. The initiative comes from the third person or from the creditor's arrangement with the third person, not from a delegation by the original debtor.
The distinctive feature of expromision is that the original debtor's consent is not indispensable to the substitution. It may be made even without the debtor's knowledge, and even against the debtor's preference, because the debtor is being released rather than burdened. However, the creditor's consent is indispensable, since no creditor can be compelled to accept a different debtor in place of the one originally bound.
For expromision to operate as novation, the creditor must accept the new debtor as the one principally bound. The creditor's mere knowledge that a third person will pay, or the creditor's receipt of money from that person, normally proves payment, not substitution. The controlling inquiry is whether the creditor intended to look to the third person as debtor and to discharge the original debtor from the obligation.
If expromision is complete, the original debtor is released from the principal obligation. The new debtor becomes directly liable to the creditor under the new obligation, subject to the terms accepted by the creditor. Between the new debtor and the old debtor, reimbursement depends on whether the assumption was authorized, beneficial, or made against the old debtor's will; that internal relation does not defeat the creditor's rights under the novated obligation.
Delegacion
Delegacion exists when the original debtor causes a third person to assume the obligation, and the creditor accepts that third person in substitution of the original debtor. The old debtor is the delegating debtor, the new debtor is the delegated debtor, and the creditor becomes bound to the substitution only by acceptance.
The distinctive feature of delegacion is the participation of all three parties. The original debtor proposes or procures the substitution, the new debtor consents to be bound, and the creditor agrees to release the original debtor and accept the new debtor. Without the old debtor's act of delegation, the transaction is not delegacion; without the creditor's acceptance, the old debtor remains liable; without the new debtor's consent, no new principal debtor is created.
Delegacion commonly appears when a debtor arranges for another person to take over the debt, such as in a business transfer, assumption of liabilities, or restructuring of obligations. The legal result depends on the creditor's acceptance. If the creditor merely consents to receive payment from the transferee but does not release the original debtor, the transferee may be liable under a separate undertaking, but the original debtor remains bound.
Principal Distinctions
| Point of Comparison | Expromision | Delegacion |
|---|---|---|
| Source of initiative | The substitution arises from the third person's assumption of the debt, without delegation by the original debtor. | The substitution arises from the original debtor's act of delegating or procuring a third person to assume the debt. |
| Role of original debtor | The original debtor's consent is not essential because the effect is release from liability. | The original debtor's participation is essential because the substitution proceeds from the debtor's delegation. |
| Creditor's consent | Required, because the creditor must accept the new debtor in place of the old debtor. | Required, because the creditor must agree to the substitution and discharge of the old debtor. |
| New debtor's consent | Required, because no person becomes principal debtor without undertaking the obligation. | Required, because the delegated person must accept the debt as the new principal debtor. |
| Effect on old debtor | The old debtor is released once the creditor accepts the third person as substitute debtor. | The old debtor is released once the creditor accepts the delegated debtor in substitution. |
| Risk of choosing the new debtor | The creditor bears the risk of accepting the substitute, since the old debtor did not select or present the substitute as debtor. | The old debtor may bear a limited risk where the substitute was already insolvent and that insolvency was known to the old debtor or publicly known at the time of delegation. |
Consent Required for Effective Substitution
In both forms, the creditor's consent is the central requirement because the identity and solvency of the debtor are material to the value of the credit. A debtor cannot replace himself with another person by unilateral act, and a third person cannot force a creditor to accept a new juridical relation.
Consent may be express or may be clearly implied from acts that are inconsistent with the continued liability of the original debtor. However, implied consent must still show a novatory intent. A creditor's silence, bookkeeping entry, acceptance of checks, or knowledge of an assumption agreement between debtors is not enough when the creditor continues to reserve rights against the original debtor.
The old debtor's consent separates the two modes. In expromision, it is not indispensable because the law allows a third person to assume another's debt with the creditor's acceptance. In delegacion, it is indispensable because the transaction is built on the old debtor's act of presenting or causing the new debtor to stand in the old debtor's place.
Effect of Insolvency of the New Debtor
After a valid substitution, the general rule is that the insolvency of the new debtor does not revive the liability of the old debtor. Novation extinguishes the original obligation, and the creditor who accepted the substitution generally assumes the risk that the new debtor may later become unable to pay.
Delegacion has a limited statutory qualification. If the delegated debtor was already insolvent at the time of the delegation, and that insolvency was public or known to the original debtor, the original debtor remains liable despite the substitution. The rule prevents an original debtor from obtaining release by presenting a substitute whose inability to pay was already known or publicly apparent.
The qualification is narrow. It does not apply merely because the new debtor later becomes insolvent, because business conditions later deteriorate, or because the creditor made a poor credit judgment. The relevant time is the making of the delegation, and the relevant knowledge is either public notoriety of the insolvency or actual knowledge by the original debtor.
In expromision, the old debtor generally does not answer for the new debtor's insolvency because the old debtor did not delegate or select the new debtor as a substitute. Once the creditor accepts the third person's assumption as a true novation, the old debtor is released unless a separate undertaking, fraud, or other independent basis of liability is present.
Effect on the Obligation and Accessory Undertakings
When expromision or delegacion is complete, the old obligation is extinguished only to the extent covered by the substitution. If the parties preserve some terms of the original obligation, those terms may be carried into the new obligation by reference, but they bind the new debtor as part of the new juridical relation, not as a continuation of the old debtor's personal liability.
Accessory obligations ordinarily follow the fate of the principal obligation. Guaranties, sureties, pledges, mortgages, penalties, and other securities tied to the old debtor's obligation are generally discharged by a novation that releases the old debtor, unless the accessory obligor or third-person security provider consents to the new obligation or the security was expressly preserved in a manner allowed by law.
If the substitution is only partial, the release is likewise partial. The original debtor may remain bound for portions not assumed, obligations not novated, solidary undertakings not clearly discharged, or independent covenants that the creditor did not agree to extinguish. The scope of novation is measured by the parties' clear agreement and by the incompatibility between the old and new obligations.
Relation to Payment by a Third Person and Assignment of Debt
Payment by a third person extinguishes the debt through performance; expromision and delegacion extinguish the old obligation through substitution. In payment, the creditor receives satisfaction of the prestation. In substitution, the creditor accepts a new debtor and continues to hold an enforceable claim, now against the substitute debtor.
An agreement between the original debtor and a third person that the third person will assume the debt is not, by itself, novation as to the creditor. It may create rights and obligations between those parties, but the creditor may still enforce the original obligation unless the creditor accepts the assumption as a substitution that releases the original debtor.
The practical test is whether the creditor still has recourse against the original debtor. If yes, the arrangement is not a complete expromision or delegacion. If no, and the creditor has clearly accepted the new debtor in place of the old one, the transaction is a passive subjective novation, classified as expromision or delegacion according to who initiated and participated in the substitution.