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Asia Bank V Elser

1) Luis R. Yangco owed Yangco, Rosenstock & Co., Inc. P58,900 for unpaid stock subscriptions. He sold his shares in the company to Henry W. Elser for P45,000, with the condition that Elser would assume Yangco's P58,900 debt. 2) Before the sale, Elser had negotiated with the company's principal stockholders to substitute himself as a stockholder in place of Yangco. The company elected Elser as its new president and director in place of Yangco. 3) When Elser later became mentally ill and died, the question arose of whether he had become responsible for Yangco's original P58,900 debt

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104 views1 page

Asia Bank V Elser

1) Luis R. Yangco owed Yangco, Rosenstock & Co., Inc. P58,900 for unpaid stock subscriptions. He sold his shares in the company to Henry W. Elser for P45,000, with the condition that Elser would assume Yangco's P58,900 debt. 2) Before the sale, Elser had negotiated with the company's principal stockholders to substitute himself as a stockholder in place of Yangco. The company elected Elser as its new president and director in place of Yangco. 3) When Elser later became mentally ill and died, the question arose of whether he had become responsible for Yangco's original P58,900 debt

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26. Asia Bank v.

Elser
G.R. No. L-30266 | March 25, 1929
Cassandra Coloso

Facts: 

Luis R. Yangco is indebted to Yangco, Rosenstock & Co., Inc., in the sum of P58,900 (589 shares at P100 per
share), for which he had subscribed. Luis R. Yangco, by virtue of a contract of sale, sold to Henry W. Elser for
P45,000 the 935 shares he held in Yangco, Rosenstock & Co., Inc., on the condition that Elser would assume his
debt in the sum of P58,900, the unpaid stock subscription appearing in the name of Luis R. Yangco upon the books
of said corporation. Said P58,900, then, was a part of the contract of sale.

Before the execution of the above-mentioned contract, Henry W. Elser had entered into negotiations with the
principal stockholders of the corporation in order to substitute Luis R. Yangco as a stockholder. The directors
elected Henry W. Elser as president of said corporation and a member of the board of directors thereof in place of
Luis R. Yangco. Henry W. Elser having become mentally deranged, C. W. Rosenstock was appointed guardian of
his property. On June 18, 1923, Henry W. Elser died.

On October 30, 1923, plaintiff Asia Banking Corporation secured a writ of execution of the judgment in its favor
against Yangco, Rosenstock & Co., Inc., and had the sheriff of the City of Manila levy upon the assets of said
corporation, including the P58,900 credit, which is the value of the unpaid subscription of the 589 shares of Luis R.
Yangco, payment of which had been assumed by Henry W. Elser by virtue of the contract of sale.

Procedural History: 
CFI. In favor of Elser
SC. In favor of Elser

Issue: 

Whether or not Henry W. Elser became indebted to Yangco, Rosenstock & Co., Inc., in place of Luis R. Yangco
despite the fact that the corporation (creditor) did not give express consent to the novation (YES)

Ruling: 

Article 1293 of the Civil Code requires the creditor's consent in order that a new debtor may validly be substituted
for the original debtor. Before the contract was executed by and between Luis R. Yangco and Henry W. Elser, there
was an understanding between the latter and the principal stockholders of Yangco, Rosenstock & Co., Inc., to the
effect that Henry W. Elser was to be substituted for the said Luis R. Yangco as stockholder, in order to increase the
capital of the corporation by the contribution of the said Henry W. Elser. 

The Civil Code does not state that the creditor's consent to the substitution of the new debtor for the old be express.
It may be given simultaneously with the substitution or even afterwards. And since consent may as well be
expressed by deeds as by words, it may be express or implied. The act of the Board of Directors of the corporation
in electing Elser as president of the corporation as well as member of the Board of Directors as a substitute of the
Yangco clearly constitutes an implied acceptance of the substitution of debtors. There is, therefore, a novation by the
substitution of debtors, which is perfectly valid and lawful placing the new debtor under obligation to pay the debt
which he has assumed.

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