Chapter five
Subrogation by the debtor
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SCHOOL OF LAW A THESIS SUBMITTED IN THE, CHALLENGES OF CASE MANAGEMENT IN SOMALILAND HIGH COURT
Subrogation by the debtorArticles 1969 and 1970 of the Civil Code govern the second type of conventional subrogation, subrogation by the debtor. In this case, subrogation is effected by agreement between a debtor and a third party who lends him money or fungibles for the purpose of paying the debtor's creditor. Then, the creditor's rights against the debtor are transferred to the third party, without the consent, or even against the will, of the original creditor. For example, a debtor who owes several creditors and who prefers to be obligated to a single new creditor may borrow funds from a third person to pay his creditors and subrogate the third person to the rights of the former creditors. In this regard, for subrogation to occur, the code requires both the instruments evidencing the loan and the receipt for payment obtained from the creditor to have an authenticated date. Apart from this, the loan instrument must also include an express statement as to the intended use of funds, and the receipt, as to the source of the funds. Absence of any one of these conditions will invalidate the subrogation. This option is however, extremely restricted. It only concerns loans of money or other fungibles, when the loan is specifically granted to pay off a specific debt. This is confirmed by the conditions put by Article 1970 of the Civil Code. The date of the operations (loan and then payment) must be certain (authenticated dates), as well as the destination and origin of the money set out precisely both in the loan itself and in the receipt given by the creditor. The debtor may require that such origin is stated in the receipt granted by the creditor. Note that the English translation improperly says under 1970 sub.2 "receipt for the loan", where it should of course be "receipt for the payment". Under the French law, Article 2160(2) requires three conditions for the subrogation granted by the debtor (1) an act of borrowing and a receipt from the original creditor executed before a notary and two witnesses; 2) a declaration in the act of borrowing that the funds were borrowed by the debtor to pay the creditor; and 3) an acknowledgement in the receipt from the creditor that the payment was made with the funds furnished by the new creditor. Nonetheless, nothing prevents in a contractual subrogation to restrict the scope of such subrogation to part of the original debt. The difficulty here is to decide who will benefit from the sureties covering the entire original debt. Article 1972 of the Civil Code states the principle that such a part subrogation cannot be detrimental to the original creditor. In other words he has a priority to get paid the balance due, or even to resort to the sureties granted to get paid such balance. The third party subrogated only comes second if he has only paid for part of the original debt. This provision encourages him therefore to pay in full in order to benefit in full of all the sureties. It also leads to limit in practice the number of situations of part payment, which are indeed problem situations because of the co-existence of two creditors for the debtor. Download 53.56 Kb. Share with your friends:
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