You are on page 1of 31

ARTICLE

1624
ARTICLE
1635

Prepared by: Mica Marie J. Valenzuela


Hannah Irish R. Caeda

ASSIGNMENT
OF CREDITS AND
OTHER
INCORPOREAL
RIGHTS

ARTICLE 1624.

ASSIGNMENT
OF CREDIT

An assignment of creditors and other


i
ncorporeal rights shall be perfected in ac
cordance with the provisions of
Articl
e 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.

ARTICLE 1624.

ASSIGNMENT
OF CREDIT

Perfection of Assignment
Note the cross-reference to Art. 1475.
Art. 1475. The contract of sale is perfected at t
he moment there is a meeting of minds upon the th
ing which is the object of the contract and upon th
e price.
From that moment, the parties may
ciprocally demand performance, subject to the
ovisions of the law governing the form of
ntracts.

re
pr
co

ARTICLE 1625.

ASSIGNMENT
OF CREDIT

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 r
eal 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.

ASSIGNMENT
OF CREDIT

Mortgage
A mortgage that is assigned is valid
bet
ween the parties even if the assignment is not re
gistered, because registration is only essential to
prejudice third parties. (Villanueua v. Perez, et al.,
928).
Gratuitous Assignments
A gratuitous assignment is a DONATION
an
d must therefore comply with the formalities of a d
onation.

ARTICLE 1626.

ASSIGNMENT
OF CREDIT

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.

ASSIGNMENT
OF CREDIT

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 debtors refusal to give consent.

ARTICLE 1627.

ASSIGNMENT
OF CREDIT

The assignment of a credit includes all


the accessory rights, such as a guarant
y, mortgage, pledge or preference
Rights included:
1. Guaranty
2. Mortgage
3. Pledge
4. Preference

ARTICLE 1628.

ASSIGNMENT
OF CREDIT

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 ki
nd 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)
ASSIGNMENT
OF CREDIT

LIABILITIES OF THE ASSIGNOR OF


CREDIT FOR VIOLATION OF HIS
WARRANTIES
1. Assignor in GOOD FAITH

Liability is limited only to the price re


ceived and to the expenses of the cont
ract, and any other legitimate paym
ents by reason of the assignment (arti
cle 1628, paragraph 2)
2. Assignor in BAD FAITH

ASSIGNMENT
OF CREDIT

Liable not only for the payment of the


price and all the expenses but also f
or damages (article 1628, paragraph
3)

ARTICLE 1629.

ASSIGNMENT
OF CREDIT

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.

ASSIGNMENT
OF CREDIT

One who sells an inheritance without enumerating


the things of which it is composed, shall only be a
nswerable for his character as an heir
FUTURE INHERITANCE
Sold with an enumerated list prohibited
Sold without specification of properties
permissible this would only be a sale of future he
reditary rights
PRESENT INHERITANCE may be sold
Does not enumerate the specific things sold,
warranty only extends to the fact of HEIRSHIP

ARTICLE 1631.

ASSIGNMENT
OF CREDIT

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.

ASSIGNMENT
OF CREDIT

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.

ASSIGNMENT
OF CREDIT

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 a
n agreement to the contrary.

ARTICLE 1634.
SALE OF CREDIT OR OTHER INCORPOREAL
IGHT IN LITIGATION

ASSIGNMENT
OF CREDIT

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.

ASSIGNMENT
OF CREDIT

A credit or other incorporeal right shall be consider


ed 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)

ASSIGNMENT
OF CREDIT

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

ASSIGNMENT
OF CREDIT

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 Cs 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. Cs purpose is to
preserve the tenement. There is evidently no
speculation here.

(G.R. No. 84220


March
25, 1992)

BENJAMIN
RODRIGUEZ vs.
COURT OF APPEALS
and HADJI
ESMAYATEN LUCMAN

FACTS
Importation of various
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 valuable
considerations)

RTC
CA
Ordered Rodriguez to pay
Dismissed the appeal for
lack of merit

Action to collect
the indebtedness

ISSUES
1.Whether there is subrogation or
assignment of credit?
2.Whether or not consent is essential
for the validity of the assignment

RULING
The case is one of the assignment of credit and not
subrogation.
An assignment of credit, on the other hand, is the process of
tran
sferring the right of the assignor to the assignee who would then have the
right to proceed against the debtor. The assignment may be done
eith
er gratuitously or onerously, in which case, the assignment has an
effe
ct similar to that of a sale (p. 235, Civil Code of the Philippines, Annotate
d, 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 bec
ame an assignee and, therefore, he became the only party entitled to coll
ect the indebtedness. As a result of the Deed of Assignment, the
plai
ntiff 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 ess
ential for the validity of the assignment (Art. 1624 in relati
on to Art. 1475, Civil Code), his knowledge thereof affecting
only the validity of the payment he might make (Article 1626,
Civil Code)
Article 1626 also shows that payment of an obligation whi
ch is already existing does not depend on the consent of t
he debtor. It, in effect, mandates that such payment of the e
xisting obligation shall already be made to the new creditor fr
om the time the debtor acquires knowledge of the assignme
nt 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 m
ay, therefore, validly assign his credit and its accessories wit
hout the debtor's consent (National Investment and Develop
ment Co. v. De los Angeles, 40 SCRA 489 [1971]). The purp
ose of the notice is only to inform the debtor that from the da
te of the assignment, payment should be made to the assign
ee and not to the original creditor.

G.R. No.
115410
February 27,
1998]

JUAN CASABUENA
vs.HON. COURT OF APPEALS
and SPOUSES CIRIACO
URDANETA AND
OFELIA IPIL-URDANETA

FACTS
Deed of
assignment.

Deed of
Assignment
(P 7,500)

To shoulder all obligations


including the payment of
amortization to the City, in
accordance with the contract
between it and Urdaneta.[

Filed a complaint for


recovery of possession of
the property with damages
against Juan Casabuena

Complaint for
ejectment

ISSUE

Can a deed of assignment transfe


r 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 proces
s of transferring the right of the assignor to the assignee,
who would then be allowed to proceed against the debtor. T
he assignment involves no transfer of ownership but m
erely effects the transfer of rights which the assignor ha
s 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 on
ly acquire rights duplicating those which his assignor is en
titled by law to exercise. In the case at bar, the Casabuenas
merely stepped into Benins shoes, who was not so m
uch an owner as a mere assignee of the rights of her debtor
s. Not having acquired any right over the land in questi
on, it
follows that Benin conveyed nothing to defend
ants with respect to the property.