Assignment Credit

Prepared by: Mica Marie J. Valenzuela Hannah Irish R. Cañeda

ASSIGNMENT OF CREDITS

AND OTHER INCORPO-

REAL RIGHTS

ARTICLE 1624 – ARTICLE

1635

ARTICLE 1624.

An assignment of creditors and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475

• Assignment is the process of transferring gratuitously or onerously the right of the assignor to the assignee, who would then be allowed to proceed against the debtor.

ASSIGN-MENT OF CREDIT

ARTICLE 1624.

• Perfection of AssignmentNote the cross-reference to Art. 1475.

“Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

“From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.”

ASSIGNMENT OF CREDIT

ARTICLE 1625.

An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property.

• Effectivity Against Third Persons

(a) if personal property is involved — a public instrument is needed to make the assignment effective against third persons

(b) if real property is involved –– registration in the Registry

of Property would be needed.


ARTICLE 1625.

• MortgageA mortgage that is assigned is valid

between the parties even if the assignment is not registered, because registration is only essential to prejudice third parties. (Villanueua v. Perez, et al., 928).

• Gratuitous AssignmentsA gratuitous assignment is a DONATION

and must therefore comply with the formalities of a donation.


ARTICLE 1626.

The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation

1. BEFORE NOTICE of the assignment– Payment to the original creditor is valid and the debtor shall be release from his obligation

2. AFTER NOTICE of the assignment– Payment to the original creditor is not valid as against the assignee. He can be made to pay again by the assignee.


• Formal notice is not essential. As long as the debtor has knowledge of the assignment, he is not released from responsibility should he pay the original creditor

• The consent of the debtor is not necessary to make an assignment of credit effective

– His duty to pay does not depend upon his consent to the assignment. Otherwise, all creditors would be prevented from assigning their credits because of the possibility of the debtor’s refusal to give consent.

ASSIGN-MENT OF CREDIT

ARTICLE 1627.

The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference

Rights included:

1. Guaranty

2. Mortgage

3. Pledge

4. Preference


ARTICLE 1628.

The vendor in good faith shall be responsible for the existence and legality of the credits at the time of the sale, unless it shall have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.

Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616. The vendor in bad faith shall always be answerable for the payment of all expenses, and for damages.


WARRANTIES OF THE ASSIGNOR OF CREDIT (ARTICLE 1628, PARAGRAPH 1)

1. The existence and legality of the credit at the time of assignment unless it shall have been sold as doubtful (objective kind of warranty)

2. The solvency of the debtor if expressly stipulated, or if the insolvency of the debtor was prior to the sale and of common knowledge (subjective kind of warranty)


LIABILITIES OF THE ASSIGNOR OF CREDIT FOR VIOLATION OF HISWARRANTIES

1. Assignor in GOOD FAITH– Liability is limited only to the price

received and to the expenses of the contract, and any other legitimate payments by reason of the assign-ment (article 1628, paragraph 2)

2. Assignor in BAD FAITH– Liable not only for the payment of the

price and all the expenses but also for damages (article 1628, para-graph 3)ASSIGNMENT

OF CREDIT

ARTICLE 1629.

In case the assignor in good faith should have made himself responsible for the solvency of the debtor

1. Time agreed upon

2. If no time was agreed upon

a. One year from ASSIGNMENT – if debt was already due

b. One year from MATURITY – if debt was not yet due


ARTICLE 1630.

One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir

FUTURE INHERITANCESold with an enumerated list – prohibitedSold without specification of properties –

permissible – this would only be a sale of future hereditary rights

PRESENT INHERITANCE may be soldDoes not enumerate the specific things sold,

warranty only extends to the fact of HEIRSHIP


ARTICLE 1631.

One who sells for a lump sum the whole of a certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or the part of greater value


ARTICLE 1632.

Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the vendee thereof, of the contrary has not been stipulated

• Since the vendor has already sold the inheritance, he should not profit except insofar as the price is concerned.


ARTICLE 1633.

The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary.


ARTICLE 1634.

SALE OF CREDIT OR OTHER INCORPO-REAL RIGHT IN LITIGATION

GENERAL RULE: (paragraph 1)The debtor has the right of legal redemption in

sale of credit or incorporeal rights in litigation. The debtor must pay the assignee:

1. The price paid by him

2. The judicial costs incurred

3. Interest on the price from the date of payment


ARTICLE 1634.

A credit or other incorporeal right shall be consid-ered in litigation from the time the complaint concerning the same is answered. (article 1634, paragraph 2)

The debtor may exercise his right within 30 days FROM the date the assignee DEMANDS PAYMENT from him. (judicial or extrajudicial)


EXCEPTIONS (ARTICLE 1635)

1. Sale to a co-heir or co-owner of the right assigned– The law does not favor co-ownership

2. Sale to a creditor in payment of his credit– The assignment is above suspicion and is in the

form of dacion en pago, thus perfectly legal

3. Sale to the possessor of property in question– To presumably preserve the tenement, and not to

speculate at the expense of the debtor


ARTICLE 1635

EXAMPLES OF PARAGRAPH 3:

(1) A mortgaged his land to B, but A sold it to C. Later while suit is pending, C acquires mortgage credit assigned to him by B. A has no right to redeem the mortgage credit. This is because C’s purpose is presumably to preserve the tenement.

(2) A owed B. For non-payment, B attached the property. Property was sold to C, who also acquired the credit. A cannot redeem. C’s purpose is to preserve the tenement. There is evidently no speculation here.


BENJAMIN RODRIGUEZ vs.

COURT OF AP-PEALS

and HADJI ESMAYATEN LUC-

MAN

(G.R. No. 84220 March

25, 1992)

FACTS

Importation of vari-ous commodities

from Hongkong

Allied Overseas Commercial Co.,

Ltd.HK

$418,729.60(P540,553.00.

) Deed of Assignment ( in consideration of

HK$ 1 and other valu-able considerations)

RTC

Action to collect the indebted-

ness

CA

Ordered Rodriguez to pay

Dismissed the appeal for lack of merit

ISSUES

1.Whether there is subrogation or assignment of credit?

2.Whether or not consent is essential for the validity of the assignment

RULINGThe case is one of the assignment of credit and not subrogation.

An assignment of credit, on the other hand, is the process of transferring the right of the assignor to the assignee who would then have the right to proceed against the debtor. The assignment may be done either gratuitously or onerously, in which case, the assignment has an effect similar to that of a sale (p. 235, Civil Code of the Philippines, Anno-tated, Vol. V, Paras, 1982 ed.; Nyco Sales Corp. vs. BA Finance Corp., G.R. No. 71694, August 16, 1991).

The deed of assignment clearly states that the private respondent became an assignee and, therefore, he became the only party entitled to collect the indebtedness. As a result of the Deed of Assignment, the plaintiff acquired all rights of the assignor including the right to sue in his own name as the legal assignee.

RULING

NO. In assignment, the debtor's consent is not essential for the validity of the assignment (Art. 1624 in relation to Art. 1475, Civil Code), his knowledge thereof af-fecting only the validity of the payment he might make (Arti-cle 1626, Civil Code)

Article 1626 also shows that payment of an obligation which is already existing does not depend on the consent of the debtor. It, in effect, mandates that such payment of the existing obligation shall already be made to the new creditor from the time the debtor acquires knowledge of the assignment of the obligation.

RULING

The law is clear that the debtor had the obligation to pay and should have paid from the date of notice whether or not he consented.

What the law requires in an assignment of credit is not the consent of the debtor but merely notice to him. A creditor may, therefore, validly assign his credit and its accessories without the debtor's consent (National Investment and De-velopment Co. v. De los Angeles, 40 SCRA 489 [1971]). The purpose of the notice is only to inform the debtor that from the date of the assignment, payment should be made to the assignee and not to the original creditor.

JUAN CASABUENA vs. HON. COURT OF AP-

PEALS and SPOUSES CIRIACO

URDANETA AND OFELIA IPIL-URDANETA

G.R. No. 115410

February 27, 1998]

FACTS

Deed of assignment.

To shoulder all obligationsincluding the payment ofamortization to the City, in accordance with the con-tract between it and Urdaneta.[

Deed of Assignment

(P 7,500)

Complaint for ejectment

Filed a complaint for recovery of possession of the property with dam-

ages against Juan Casabuena

http://sc.judiciary.gov.ph/jurisprudence/1998/feb1998/115410.htm

ISSUE

Can a deed of assignment transfer ownership of the property to the assignee?

RULING

NO. An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, transfers his credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. Stated simply, it is the process of transferring the right of the assignor to the as-signee, who would then be allowed to proceed against the debtor. The assignment involves no transfer of owner-ship but merely effects the transfer of rights which the assignor has at the time, to the assignee.

RULING

The act of assignment could not have operated to efface liens or restrictions burdening the right assigned, because an assignee cannot acquire a greater right than that pertaining to the assignor. At most, an assignee can only acquire rights duplicating those which his assignor is entitled by law to exercise. In the case at bar, the Casabue-nas merely stepped into Benin’s shoes, who was not so much an owner as a mere assignee of the rights of her debtors. Not having acquired any right over the land in question, it follows that Benin conveyed nothing to defendants with respect to the property.

Assignment Credit

Documents

Transcript of Assignment Credit