ASSIGNMENT

BULK SALES LAW

Chapter 14

Nature of Assignment
Compare & contrast

Accessories and accessions

Warranties

Assignment of Credit in Litigation

Effect if Debtor has/has no knowledge of Assignment

Effect of Assignment of Credit on Debtor

Transfer of Ownership

Sale - Assignment
Subrogation - Assignment

Validity and Binding Effects

Binding Effects as to 3rd Parties

ASSIGNMENT

Right to Redeem

Assignment of Copyright
Assignment as an Equitable Mortgage

Assignment
How often has it been heard in layman conversations that a person does
not want a mere assignment but an outright purchase of the subject
matter?
How many country clubs have refused to honor a deed of assignment
covering the transfer of a proprietary share in favor of the assignee on
the ground that a deed of absolute sale is required, to ensure that
only one person has a right to the corresponding membership
entitlement?
Has it not been the common perception that the process of assignment
covers the temporary lease or use of the thing, while the title remains
with the assignor to whom it would ultimately have to be returned?
Why has assignment become the poor relations of sale?

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, the assignment has an effect similar to that of a
sale.
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. PNB v. CA, 272 SCRA 291 (1997).

Contrast & Compare

Assignment from Sale

sale and assignment are legally the same contracts, but with
different names.
In assignments, a consideration is not always a requisite, unlike
in sale. Thus, an assignee may maintain an action based on his title
and it is immaterial whether or not he paid any consideration
therefor. Furthermore, in an assignment, title is transferred but
possession need not be delivered.

Contrast & Compare

Assignment from Subrogation

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 creditors 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.

PERFECTION OF CONTRACT FOR ASSIGNMENT OF

CREDIT
The contract for the assignment or transfer of credit and other
incorporeal rights is perfected from the moment the parties agree
upon the credit or right assigned and upon the price even if neither
has been delivered. (see Art. 1475.)
However, the assignee will acquire ownership only upon delivery.
(see Arts. 1498, par. 2 and 1501.)

BINDING EFFECT OF ASSIGNMENT

As between the parties:
the assignment is valid although it appears only in a private document so long as
the law does not require a specific form for its validity. (see Art. 1356.)[
(a) if personal property is involve - a public instrument is needed to make
the assignment effective against third persons.
(b) if real property is involve - registration in the Registry of Property
would be needed.
As to affect third parties:
Art. 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.

BINDING EFFECT OF ASSIGNMENT

As to Mortgage and Gratuitous Assignments:
A 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). A gratuitous
assignment is a DONATION and must therefore comply with the formalities of
a donation.
The assignee merely steps into the shoes of the assignor, the former
acquiring the credit subject to defenses (e.g., fraud, prescription, etc.)
available to the debtor against the assignor. The assignee is deemed
subrogated to the rights as well as to the obligations of the seller. He
cannot acquire greater rights than those pertaining to the assignor. (Koa
vs. Court of Appeals, 219 SCRA 541 [1993].) Hence, the act of assignment
cannot operate to efface liens or restrictions burdening the right assigned.
(Casabuena vs. Court of Appeals, 91 SCAD 933, 286 SCRA 594 [1998].)

Rule If Debtor Pays Creditor BEFORE Former

Knows of the Assignment
Art. 1626. The debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the
obligation.
Example:
ACE owes BREY, who assigns his credit to JACK. ACE, without
knowing of the assignment, pays BREY. Is ACEs obligation
extinguished?
ANS.: Yes.
[NOTE: Assignment is effective as to the debtor only from the
time he has knowledge of it. (Sison v. Yap Tico, 37 Phil. 534).]

Art. 1233: A debt shall not be understood to have been paid unless the thing or
service in which the obligation consists has been completely delivered or
rendered, as the case may be.
Art. 1285: The debtor who has consented to the assignment of rights made by a
creditor in favor of a third person, cannot set up against the assignee the
compensation which would pertain to him against the assignor, unless the
assignor was notified by the debtor at the time he gave his consent, that he
reserved his right to the compensation.
If the creditor communicated the cession to him but the debtor did not consent
thereto the latter may set up the compensation of debts previous to the cession,
but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he may set up
the compensation of all credits prior to the same and also later ones until he
had knowledge of the assignment.

AFTER NOTICE, OR BEFORE NOTICE BUT DEBTOR HAD

KNOWLEDGE OF ASSIGNMENT
Payment by the debtor to the
original creditor after the former
had
received
notice
of
the
assignment, whether or not he
consented, is not valid as against
the assignee. Even without notice,
the debtor will not also be released
from his obligation should he pay the
creditor after having had knowledge
of the assignment of the obligation.
He thereby acts in bad faith. He can
be made to pay again by the
assignee.

PAY

PAY

Effect of Assignment of Credit on 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. Project Builders, Inc. v. Court of Appeals, 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)