A SSIGNMENT (Arts 1624-1635) 1 Definition and Nature of Assignment

―Assignment‖ is the process of transferring the right of assignor to assignee who would then have the right to proceed against the debtor. The assignment may be done gratuitously or onerously [?], in the latter case, the assignment has an effect similar to that of a sale. xLicaros v. Gatmaitan, 362 SCRA 548 (2001).203

In its most general and comprehensive sense, an assignment is ―a transfer or making over to another of the whole of any property, real or personal, in possession or in action, or of any estate or right therein. It includes transfers of all kinds of property, and is peculiarly applicable to intangible personal property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable choses in action and of rights in or connected with property as distinguished from the particular item or property.‖ xPNB v. CA, 272 SCRA 291 (1997).

2. Perfection by Mere Consent (Art. 1624)

200_{Vaca v. CA, 234 SCRA 146 (1994).}

201_{Heirs of Felicidad Canque v. CA, 275 SCRA 741 (1997).} 202

Springsun Management Systems Corp. v. Camerino, 449 SCRA 65 (2005).

203

Nyco Sales Corp. v. BA Finance Corp., 200 SCRA 637 (1991); Rodriguez v. CA, 207 SCRA 553 (1992); Project Builders, Inc. v. CA, 358 SCRA 626 (2001).

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3. But Must Be in Public Instrument to Affect Third Parties (Art. 1625) 4. Effects of Assignment

a. Assignment of Credit

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. xAquintey v. Tibong, 511 SCRA 414 (2006).204

As a consequence, the third party steps into the shoes of the original creditor as subrogee of the latter. Although constituting a novation, such assignment does not extinguish the obligation under the credit assigned, even when the assignment is effected without his consent. xSouth City Homes, Inc.

V. BA Finance Corp., 371 SCRA 603 (2001).

b. Issues re Debtor (Art. 1626)

In an assignment of credit, the consent of the debtor is not essential for its perfection, his knowledge thereof or lack of it affecting only the efficaciousness or inefficaciousness of any payment he might make. xProject Builders, Inc. v. CA, 358 SCRA 626 (2001).

Consent of debtor is not necessary in order that assignment may fully produce legal effects, and the duty to pay does not depend on the consent of the debtor. Otherwise, all creditors would be prevented from assigning their credits because of the possibility of the debtors’ refusal to given consent. What the law requires in an assignment of credit is mere notice to debtor, and 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. xNIDC v. De los Angeles, 40 SCRA 489 (1971).205 c. Accessories and Accessions (Art. 1627)

Assignment of a credit includes all the accessory rights, such as guaranty, mortgage, pledge or preference. xUnited Planters Sugar Milling Co., Inc. (UPSUMCO) v. CA, 527 SCRA 336 (2007). d. Tradition in Assignment

Notarization converts a private document Assignment of Credit into a public document, thus complying with the mandate of Article 1625 of the Civil Code and making it enforceable even as against third persons. xLedonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).

5. Warranties of Assignor (Art. 1628)

Assignor warrants only the existence or legality of the credit but not the solvency of the debtor. √Nyco Sales Corp. v. BA Finance, 200 SCRA 637 (1991).

EXCEPTIONS: (a) If this is expressly warranted.

(b) If insolvency is known by the assignor prior to assignment. (c) If insolvency is prior to assignment is common knowledge.

When dacion en pago takes the form of an assignment of credit, it produces the effects of a dation in payment, which may extinguishes the obligation; however, by virtue of the warranty in Art. 1628, which makes the vendor liable for the existence and legality of the credit at the time of sale, when it is shown that the assigned credit no longer existed at the time of dation, then it behooves the assignor to make good its warranty and pay the obligation. xLo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).

6. Right of Repurchase on Assignment of Credit under Litigation (Arts. 1634 and1635)

204

Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).

205

Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C & C Commercial Corp. v. PNB, 175 SCRA 1 (1989); Project Builders, Inc. v. CA, 358 SCRA 626 (2001); .Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Dev’t Corp., 526 SCRA 379 (2007).

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7. Subrogation versus Assignment of Credit (Art.1301)

Subrogation extinguishes the obligation and gives rise to a new one; assignment refers to the same right which passes from one person to another. The nullity of an old obligation may be cured by subrogation, such that a new obligation will be perfectly valid; but the nullity of an obligation is not remedied by the assignment of the creditor’s right to another. In an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce legal effects; whereas, conventional subrogation requires an agreement among the three parties concerned – original creditor, debtor, and new creditor. It is a new contractual relation based on the mutual agreement among all the necessary parties. √Licaros v. Gatmaitan, 362 SCRA 548 (2001).206

8. Assignment of Copyright (Sec. 180, Intellectual Property Code) 9. Assignment as an Equitable Mortgage

When an assignor executes a Deed of Assignment covering her leasehold rights in order to secure the payment of promissory notes covering the loan she obtained from the bank, such assignment is equivalent to an equitable mortgage, and the non-payment of the loan cannot authorize the assignee to register the assigned leasehold rights in its name as it would be a violation of Art. 2088 against pactum

commissorium. The proper remedy of the assignee is to proceed to foreclose on the leasehold right

assigned as security for the loan. xDBP v. CA, 284 SCRA 14 (1998).

XV. BULK SALES LAW (A