A has two creditors, B and C. B is a mortgage creditor for P20,000, and C is an ordinary creditor for P10,000. C paid A's debt of P20,000 to B. Statement I - If C's payment is with A's knowledge, C will be subrogated in the rights of B. Statement II - If C's payment is without A's knowledge, C will not be subrogated in the rights of B. Which are true?

• A. True, true
• B. True, false
• C. False, true
• D. False, false

Answer: (B)

Subrogation occurs automatically when a third person pays the debt of another to a creditor. By paying B the full P20,000, C steps into B’s shoes and obtains B’s rights against A, including the mortgage security, to the extent of the payment. This transfer happens by operation of law and does not depend on A knowing or approving the payment. So the fact that C paid with A’s knowledge is not a condition for subrogation; subrogation can attach regardless of A’s awareness. That makes the first statement true.

If C pays without A’s knowledge, subrogation still occurs; the debtor’s lack of knowledge doesn’t prevent the third party from taking on the creditor’s rights. Therefore the second statement is not correct. In this scenario, C becomes subrogated to B’s rights (the mortgage rights securing the 20,000), and C’s own 10,000 claim is effectively satisfied out of the amount paid, with any remaining amount providing reimbursement to C.