Chapitre+sur+subrogation+et+cession+de+créance+dans+Baudouin-Jobin

Subrogation pages 983 to 1010.

General: subrogation involves payment on the part of of someone other than the debtor. This cannot be a gratuitous act – the payer (solvens) claims reimbursement from the debtor. · The original debt is discharged by the payment; the rights of the original creditor disappear if the full payment is made. · The payer then finds himself in the position of creditor vis-à-vis the debtor.


 * __I. Juridical Nature__ **

Definition: Subrogation occurs when the payer (solvens) takes the place of the creditor (legally or conventionally) and assumes the position of creditor vis-à-vis the debtor and holds the rights and accessories of the original (subrogating) creditor. · For the subrogator, this represents full payment and extinguishment of rights against the debtor. · The creditor receives his due, and the payer obgatins the debt rights but also all guarantees, sureties and other accessories.

Subrogation and other juridical features:

· Novation involves two operations: the extinction of one debt and creation of another. · Subrogation only displaces the creditor-debtor relation
 * Subrogaton & novation by change of creditor [para. 969] **

(no formalities imposed on non-hypothec subrogation) ||
 * Subrogation and cession de creance (“assignment of claims”) [para. 970] **
 * Cession de creance Subrogation **
 * ** Cession de creance ** is a mechanism by which incorporeal rights are transferred, often in the context of a speculative goal. It involves the “purchase” of a debt at a rebate and subsequent demand of full payment from the debtor. The recipient of the transfer therefore profits. || ** a. 1651 al. 2: ** A subrogated person can only reclaim from the debtor the amount paid to the subrogator (original creditor). ||
 * ** a. 1646 al. 1 ** : assignees to the same claim are paid in proportion to their claim, and preference is accorded in order of the date their assignments were established against the debtor. || ** a. 1658: ** in the case of partial subrogation, the subrogator holds rights against he debtor for the remainder. If the debtor cannot pay the entire debt, the subrogated party has preference if the subrogator obligated himself to guarantee payment. ||
 * ** Articles 1641-1645: ** assignment is subject to certain formalities of opposability with no juridical effect vis-à-vis the debt of a 3rd party || ** a. 3003: ** if the debt involves an hypothec, it is subject to formalities of publication and documentation.
 * ** a. 1639: ** cession carries a warranty as to the existence of the debt. || ||
 * || ** a. 1559: ** a payment made in good faith to the creditor is valid ( // i.e. // if debtor not informed of subrogation). ||

· Subrogation is an ** accessory of payment. ** Payment is the essential condition of all subrogation from any source. · Transmission of the obligation is its primary function. Acceptance: - IF a 3rd party offers payment that doesn’t conform to conditions imposed on a debtor, the creditor can refuse. - IF a 3rd party offer conforms to the conditions, the creditor cannot refuse payment.
 * __Section II: Conditions [paras. 971 to 979]__ **
 * Principal of the necessity of payment **


 * Sources of subrogation **

· Law distinguishes bewteen 1) ** Legal Subrogation ** : the effect of a payment by a 3rd party in a situation provided for by law 2) ** Conventional subrogation: ** effected through an agreement between payer and creditor or payer and debtor.

1) Legal subrogation: 5 paragraphs
 * 1656. ** Subrogation takes place by operation of law

(1) in favour of a creditor who pays another creditor whose claim is preferred to his because of a prior claim or a hypothec;

(2) in favour of the acquirer of a property who pays a creditor whose claim is secured by a hypothec on the property;

(3) in favour of a person who pays a debt to which he is bound with others or for others and which he has an interest in paying; · In general, situations where a payer was held to execute a join obligation or the obligation of others. This does not apply to a debtor who clears strictly personal debt. · Jurisprudentce has not allowed for recognition of subrogation where the payer is not legally held to pay. Where does this apply? - ** a. 1526 and 1525 ** : conditions relating to solidary debt - ** a. 397 ** : debt for the needs of family - ** a. 2333 ** : seondary acquittale of debt of the primary when the primary defaults. - ** a. 2474 ** : conditions relating to insurers · Subrogation transfers to a solidary debtor who acts as payer accessory rights of the creditor. · ** a. 1536: ** in this circumstance the subrogated party can only claim for the respective shares of others. · ** a. 1537 al 1: ** the payment of codebtors is carried out in equal parts unless their interest in the debt is unequal. · ** a. 1531 ** : a debtor deprived by a creditor of rights or security that could have been set up through subrogation is liberated from this debt until the prejudice is lifted. (4) in favour of an heir who pays with his own funds a debt of the succession for which he was not bound;
 * Debtor of a solidary or indivisible obligation: **
 * // Note //**// that the principal of legal subrogation is applicable to a debtor held to an indivisible onligation, as it is to a solidary debtor. //

(5) in any other case provided by law.
 * Caution **

· Belongs to a category of persons held to payement for others - can be called upon to execute the obligation of the primary debtor. - If the caution acquits the primary debtor’s obligation, he is subrogated in terms of the creditor’s rights. · A. 2355: the right to subrogation is a matter of public order and the caution can’t renounce it ahead of time. · A. 2365: the caution can invoke the exception of subrogation.

2, Conventional Subrogation

· Introudction: this form of subroation is usually consented to between the creditor and the payer (solvens). It can be paid by a devtor in favour of a lender lending money necessary to pay creditor. · This form of subrogation is most frequent. The payer pays the debt and is subrogated in all rights related to debt. · ** a. 1654: ** consent of the creditor is never a condition of validity · ** a. 1653 ** : the creditor must have overtly manifested his intention to subrogate the payer to his rights. · ** Use of the word “subrogation” is not necessary, but the intent cannot be implicit or spontaneous. ** · ** a. 3003: ** the formality of publication of rights must be respected to protect 3rd parties.
 * A. Subrogation consented to by the creditor **
 * Essential conditions to avoid fraud: **
 * Conventional aspect: **

Concomittance of payment and subrogation · a. 1654: subrogation consented to by the creditor must occur at the same time as payment. · Some jurisprudence has accepted subrogation afer payment when it is anticipated at the moment of payment– // i.e. // payment as a “deposit” or under a “ // condition suspensive // ” in which parties formulated intent to subrogate.

· A. 1655 al. 1: The debtor transfers to the payer rights that belong not to her, but to the creditor without the creditor’s participation. · How does this occur? i.e. if the debtor obtains a loan to pay a debt: - A pays creditor “Z” - A can then subrogate the lender (“X”) into the rights of Z against herself - This allows A to relieve herself of an onerous debt for one on more advantageous terms. · 1655 al. 2: strict conditions are placed on the form, foundation of the deal. - precautions must be taken to avoid fraud, and the subrogation must be recorded as required by law 1) Character of public order of conventional subrogation by the debtor. - 1655 al. 1 – vs - 1654 · ** a. 1655 ** doesn’t mention “malgre toute stipulation contraire” (in the contract bw A and Z) · ** a. 1654 ** does mention “malgre toute stipulation contraire”. - a literal reading would lead to a belief that these clauses are valid with the exception of abusive ones (a. 1437) - BUT the continuity with old law suggests that such clauses are accepted as serving a protective function.
 * B) Subrogation consented to by the debtor **
 * Conditions: **
 * Controversies surrounding option “B”: **

2) There is a possibility for the debtor to have recourse to this mechanism in order to force the creditor before the term is up. · Authorities are of two minds on the issue · The favourable viewpoint upholds the “terme suspensif”, which respects the accessory nature of payment and its subordination to related rules. - This protects the legitimate expectations of the creditor.
 * __Section III: Effects__ **

· Juridical effect between subrogator, subrogated and debtor

1) Effects between the debtor and the creditor (subrogator) · ** Primary effect ** : extinguish the right of the creditor to the debt (unless only paid in part by subrogated party). · ** a. 1658 al. 1: ** the subrogator (Z) is the preferred creditor in relation to further payment if the subrogated party has only paid in part · ** a. 1658 al. 2: ** the subrogated party (X) is preferred if the subrogator has obligated himself to X to guarantee payment for the amount of debt transferred in subrogation. · ** a. 1659 ** : the subrogated/subrogating parties are paid proportionally to their parts unless otherwise stipulated. __2) Effects between subrogated__ __// solvens //__ __and the debtor__ · ** a. 1651 and a. 1657 ** : the subrogated solvens is the new creditor, and holds the same titles, guarantees, rights and privileges. X therefore has the same rights and recourses against A as Z did. · ** a. 1652 al. 2 ** : the subrogated party cannot recover from the debtor a sum higher than that paid to the creditor. · ** a. 1657: ** the debtor holds same defenses to the subrogated party as to the original creditor. · ** Prescription recourse is subject to the same terms as the original creditor. ** A prescription already running is opposable to the debtor (except in case of solidary debtors where 1 pays).
 * a) Extinction of the obligation **
 * Transfer of a relationship of Obligation **

There are exceptions: · ** a. : ** in the case of conventional subrogation on the part of the debtor, the loan may subsequently entail more advantageous conditions. · In the case of legal subrogation: the law can limit the translational effect of subrogation, with regard to the debt or its accessories.

3.) Effects between the solvens, X and the original creditor Z · The behaviour of creditor “Z” might deprive the solvens of certain rights he would normally have vis-à-vis the debtor in certain circumstances. The solvens has defence against prejudicial behaviour. · The transfer of guarantees and security to X does not give a legal guarantee of the debt’s existence. · ** a. 1491 and a. 1492 ** : X has recourse to “reception de l’indu” against the subrogator. - Subrogator can provide, voluntarily, a conventional guarantee (for the solvability, actual or future of the debtor – “de fournir et faire valoir”). This extends the role of a subrogator into the of a caution.
 * Exception of subrogation **
 * Absence of legal guarantee **

4.) Effects with regard to a 3rd party · Subrogation does not transform or modify the debt itself with regard to the principal or the accessories of the debt. It cannot bring about new juridical effects with regard to 3rd parties. · Subrogation permits the subrogated party to profit from the hypothecary rights held by the subrogator. · ** a. 3003 and a. 3004 ** rules must be respected – publication, registration.
 * Permanance of the lien d’obligation **
 * Opposability of hypothecary rights **