Source: https://www.scribd.com/document/182982414/SALES-assignment-of-credit-docx
Timestamp: 2019-12-07 10:02:24
Document Index: 215270389

Matched Legal Cases: ['art.1642', 'art.1544', 'art.1626', 'art.1628', 'art.1626', 'art.1514', 'art.1634', 'art.1634']

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Nyco Sales v Ba Finance
2008 Mar Re News1
Leeds v. Marine Ins. Co., 19 U.S. 565 (1821)
Producer Composer Contract
ASSIGNMENT OF CREDIT Q: What is an assignment of credit?
A specie of the genus of sale, in fact, a sale of credits and other incorporeal rights (art.1642, NCC) *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. As a consequence, the third party steps into the shoes of the original creditor as subrogee of the latter. But such assignment does not extinguish the obligation under the credit assigned (South City Homes, Inc. v. BA Finance Corp, 371 SCRA 603) Q: Does it come under the purview of the Statute of Frauds? Yes, because it is specie of sale, all the characteristics of the genus of sale must be present, and all the jurisprudential doctrines pertaining to the genus of sale also pertain to assignment, except to the extent modified by the chapter dealing specifically with assignment Q: Does art.1544 in the law on sales (i.e.: on double sales) apply to assignment of credit? Yes Q: Can credit encompass both real and personal property? Yes Q: If there are 2 assignments of credit, to whom should the debtor pay? To the assignor, because this is the safest approach (see: art.1626) payment to the assignor without knowledge of assignment creates the effect of extinguishing the debtors liability. *JARA: If the assignee does not want to deal with the assignor, he should go to court. Q: But between the creditor and the persons to whom the credit was assigned twice, the debtors do not know who to pay, and who should make payment between themselves. It would be unwise to decide on their own. What should they do? Go to court via interpleader and request the court to determine who has a right to the payment, and who should make payment Q: What are the warranties of a vendor under assignment of credit? That the credit exists and it is legal at the time of the sale (art.1628) Q: Does the vendor warrant the solvency of the debtor? Generally, he doesnt EXCEPTIONS: (1) when the warranty is expressly stipulated, or (2) the debtors insolvency was prior to the sale and of common knowledge Q: In the second exception, why is the vendor deemed to have warranted the debtors solvency if the same was of common knowledge prior to the sale?
Because if the debtors insolvency was prior to the sale and commonly known, the buyer must be assured that the debtor has the ability to pay otherwise, he would not have a right of recourse should the debtor default in the payment, because the debtor can invoke his insolvency as a defense Q: If the debtor claims that the debt has already been paid, is the assignor liable for breach of warranty? Yes, the assignor warrants the existence of the credit at the time of the sale Q: How does an assignment differ from a sale? They differ with regard to the nature of the thing sold. In a contract of sale, the thing sold is a particular item or property; on the other hand, in assignment, what is sold is intangible property (think: credit, non-negotiable choses in action) Q: Are third persons bound by the assignment? Not unless the assignment appears in a public instrument or is recorded in the Registry of Property, in case the assignment involves real rights. Q: Why is embodiment in a public instrument or registration required in order to bind 3 rd persons? Because assignment deals with the sale of intangible property and the only real evidence of the sale is either a public instrument or registration. Q: Does the assignee become the owner of the credit upon the moment of the assignment? No, just like in sale, ownership is vested upon delivery, and delivery in this case is effected through the execution of a public instrument. While the assignment is valid with regards to the perfection stage, delivery is still required for consummation. Q: Is the consent of the debtor necessary? No, it is sufficient that the assignment is brought to the creditors knowledge in order to be binding upon him Q: Suppose the debtor was not informed of the assignment, what is the effect? 1. If the debtor pays his creditor under this circumstance, his payment shall produce the effect of releasing him from further obligations (art.1626) 2. The debtor may set up against the assignee the defense of compensation of prior credit between him (debtor) and the assignor Q: If the debtor consented to the assignment, what is the effect? The debtor may not set up the defense of compensation of prior credit against the assignee Q: Are there any exceptions to this rule? 1. When the third person has actual knowledge of the transfer 2. In the case of negotiable documents of title, the mere execution of a public instrument covering an assignment does not bind the bailee unless specific notice of the transfer of the covering document of title is given by the transferor or transferee to the bailee (art.1514) Q: Is there legal redemption when we speak of assignment? Yes
Q: When a credit or other incorporeal right in litigation is sold litis pendentia, the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid, the costs of suit, the interest of the price within 30 days from the date the assignee demands payment. Is this a case of redemption or simply one wherein the debtor pays his debt? Where is the redemption aspect here? (art.1634) It is a case of redemption *see the follow-up questions below for the logic of this Q: Juan dela Cruz bought credit worth Php1 million for the price of Php800,000. How much can Juan enforce against the debtor? How much should the debtor pay? Php800,000 within 3o days following the assignment Q: Despite the fact that the assignee paid only 800,ooo can he collect the balance of 200,000 from the debtor? No, he cannot not within the 30-day period granted by 1634 to the debtor within which time the debtor may extinguish the liability by reimbursing the assignee the amount of the price paid by the latter for the assigned credit *JARA: This is the situation contemplated under [art.1634]. How can this be considered legal redemption? Why should [1634] be called legal redemption? The legal redemption aspect here is that the debtor, within 30 days, may redeem the entire debt of Php 1 million by reimbursing the assignee for the Php800,000 the latter paid for the assigned credit. If the debtor fails to exercise his right to redeem within the 30-day period, the assignee may now enforce the full Php1 million indebtedness, because by virtue of subrogation (and absent the exercise of redemption by the debtor), the assignee can enforce the debt to the full extent, as if he were the original creditor. Q: Does the right to redeem a debt in assignment of credit exist for all kinds of assigned credits? No, its a special right granted for the case of assigned credit in litigation only Q: Why? What is the rationale behind this? In the assignment of credit in litigation, the assignee is deemed to have bought the credit for speculation (because it IS a form of speculation assignee buys credit in litis pendentia in the hopes of winning the case and being able to collect heads you win, tails you try again lol), and in this scenario, the law sees fit to grant the debtor a right to redeem the debt for less than the full indebtedness because if the credit is to be bought for speculation, then the party who should be benefited should be the debtor. Q: What is the case contemplated when we speak of credit in litis pendentia? A case involving the credit itself as the main issue, or one of the main issues Q: In this case, does the debtor have to be the defendant? No, the debtor himself may even be the plaintiff, the same right would still be available to him Q: What is the effect of non-registration of the assignment of credit? Non-registration would not bind third parties
Q: Is the debtor a third party, so that when the assignment is not registered, he can claim to not be bound by the assignment? Yes, the debtor is a third person. The registration creates constructive notice, so that if it was not registered, the debtor (whose consent was never necessary to assign the credit in the first place) is not bound by the assignment. *Ledonio v. Capital Development Corp., 526 SCRA 379 (2007) Q: But payment to the assignor without knowledge of the assignment creates the effect of payment to release the debtor from liability, does it not? How would you construe this? Yes, payment to the assignor without knowledge of the assignment absolves the debtor of liability. However, this does NOT mean that the knowledge necessary to estop the debtor from claiming extinguishment of liability is actual knowledge. The debtor, once the assignment is registered, is deemed to have knowledge of the assignment because registration operates as constructive notice. *Ledonio v. Capital Development Corp., 526 SCRA 379 (2007)
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