1. Manila Banking Corporation vs.

Teodoro
Facts:
Anastacio Teodoro Jr. And Grace Ann Teodoro were ordered to pay Manila Banking
Corporation (MBC) because of the promissory notes executed by the former and his
parents in consideration of the loan they obtained from MBC. The defendantsappellants contended that due to the Deed of Assignment of Receivables from the
Emergency Employment Administration (EEA)executed by Anastacio Jr. on January
26, 1964, their obligation to pay MBC has extinguished. However, the Court of First
Instance did not find merit in the defendants-appellants defense.
Issue:
Whether the executed assignment of receivables should be considered as payment
for all the loans contracted by the Teodoros to MBC.
Whether the MBC has to exhaust all legal remedies against the Philippine Fisheries
Commission (formerly Emergency Employment Administration) before it can
proceed against appellants for collections of loan under the promissory notes.
Held:
No.
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. The
character that it may assume determines its requisites and effects. It is evident
from the assignment of receivables that the assignor did not transfer ownership and
MBC did not release the Teodoros from their loans. It is a settled rule that the
intention of the parties determined the character of transactions, not the language.
Obviously, the deed of assignment was intended as collateral security for the bank
loans of appellants. Assignment to guarantee an obligation is in effect a mortgage
and not an absolute conveyance of title which confers ownership on the assignee.
Its essence is that when the principal obligation becomes due, the things in which
the pledge or mortgage consists may be alienated for the payment to the creditor
(Article 2087, New Civil Code) is in effect a mortgage. MBC did try to collect from
EEA and in the Office of the President, but the latter denied the former's claim. It is
axiomatic that the only recourse left to MBC is to claim to the Teodoros because the
loans became unsecured and despite repeated demands the latter failed to pay its
obligation.

Petition dismissed.