CESSION OR ASSIGNMENT

PROJECT BUILDERS, INC. vs. THE COURT OF APPEALS

G. R. No. 99433 2001 Jun 19

FACTS:

On August 21, 1975, plaintiff and defendant PBI entered into an

agreement whereby it was agreed that plaintiff would provide a maximum
amount of P2,000,000.00 against which said defendant would discount and
assign to plaintiff on a ‘with recourse non-collection basis’ its accounts
receivable under the contracts to sell specified in said agreement. And on
June 15, 1976, the same parties entered into an agreement whereby it was
agreed that PBI’s credit line with plaintiff be increased to P5,000,000.00. It
was stipulated that the credit line of P5,000,000.00 granted includes the
amount already assigned/discounted. The discounts were on different date
accounts receivables with different maturity dates from different
condominium-unit buyers. And each time a certain account receivable was
discounted, the covering Contract to Sell was assigned by defendant to
plaintiff. The total amount of receivables discounted by defendant PBI is
P7,986,815.38 and consists of twenty accounts. Of such receivables
amounting to P7,986,815.38 plaintiff released to defendant PBI the amount
of P4,549,132.72 and the difference of P3,437,682.66 represents the
discounting fee or finance fee. To secure compliance, defendants executed
a Deed of Real Estate Mortgage in favor of plaintiff. When defendants
allegedly defaulted in the payment of the subject account, plaintiff
foreclosed the mortgage and plaintiff was the highest bidder in the amount
of P3,500,000.00. The foreclosed property was redeemed a year later, but
after application of the redemption payment, plaintiff claims that there is still
a deficiency in the amount of P1,323,053.08. The trial court dismissed the
complaint. The Court of Appeals however overturned the judgment of the
trial court.

ISSUE:
Whether or not the assignment of credit is valid.
RULING:

An assignment of credit is an act of transferring, either onerously or

gratuitously, the right of an assignor to an assignee who would then be
capable of proceeding against the debtor for enforcement or satisfaction of
the credit. The transfer of rights takes place upon perfection of the contract,
and ownership of the right, including all appurtenant accessory rights, is
thereupon acquired by the assignee. The assignment binds the debtor only
upon acquiring knowledge of the assignment but he is entitled, even then,
to raise against the assignee the same defenses he could set up against
the assignor. Where the assignment is on account of pure liberality on the
part of the assignor, the rules on donation would likewise be pertinent;
where valuable consideration is involved, the assignment partakes of the
nature of a contract of sale or purchase.

Upon an assignment of a contract to sell, the assignee is

effectively subrogated in place of the assignor and in a position to enforce
the contract to sell to the same extent as the assignor could. 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.Consent is not necessary in order that assignment may fully produce
legal effects. Hence, 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 give consent.
What the law requires in an assignment of credit is not the consent of the
debtor but merely notice to him. A creditor may, therefore, validly assign his
credit and its accessories without the debtor’s consent. 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.

In the case, the assignment, was "with recourse", and default in the
payment of installments had been duly established when petitioner
corporation foreclosed on the mortgaged parcels of land.
 DIRECT FUNDERS HOLDERS ASSOCIATION VS LAVIŇA
GR No. 141851. January 16, 2002

FACTS:

The petitioners assail the decision of the CA affirming the decision of

the RTC in issuing a writ of mandatory preliminary injunction despite the
orders of a co-equal court in deciding that the property in question was in
the lawful possession of the petitioner.

ISSUE:

Is petitioner’s contention tenable?

RULING:

The conditional sale agreement was the only document that the
respondent presented during the summary hearing of the application for a
temporary restraining order before the Regional Trial Court, Branch 71,
Pasig City. The conditional sale agreement is officious and ineffectual.
First, it was not consummated. Second, it was not registered and duly
annotated on the Transfer Certificate of Title (No. 12357) covering the
subject property. Third, it was executed about eight (8) years after the
execution of the real estate mortgage over the subject property.

To emphasize, the mortgagee (United Savings Bank) did not give

its consent to the change of debtor. It is a fundamental axiom in the law on
contracts that a person not a party to an agreement cannot be affected
thereby. Worse, not only was the conditional sale agreement executed
without the consent of the mortgagee-creditor, United Savings Bank, the
same was also a material breach of the stipulations of the real estate
mortgage over the subject property.
 The petitioner as opposed to Kambiyak Chan bears a TCT, deeds
of assignment, certificates of sale in its favor showing that it has a better
right to possession of the disputed land.

SONNY LO v. KJS ECO-FORMWORK SYSTEM

G.R. No. 149420 October 8, 2003

FACTS:

KJS is engaged in the sale of steel scaffoldings while Lo is a building

contractor. On February 22, 1990, petitioner ordered scaffolding equipments
from respondent worth P540,425.80. He paid a downpayment in the amount
of P150,000. The balance was made payable in 10 monthly installments.
Respondent delivered the equipments. Petitioner was able to pay the first
two monthly installments. His business suffered financial difficulties and he
was unable to settle his obligations despite demands. On October 11, 1990,
the parties executed a Deed of Assignment whereby petitioner assigned to
respondent his receivables from Jonero Realty. However, Jonero refused to
honor the Dees of Assign,nt because it claimed that petitioner was indebted
to it. Petitioner refused to pay claiming that that his obligation had been
extinguished when they executed the deed of assign,ent. RTC dismissed the
complaint on the ground that the assignment of credit extinguished the
obligation. Court of appeals reversed the decision and ordered Lo to pay the
plaintiff KJS with legal interests of 6% per annum until fully paid.

ISSUE:

Whether or not the Deed of Assignment extinguished the obligation

RULING:

An assignment of credit, by virtue of which the owner of the credit, 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, the assignee, who acquires the power to enforce
it against the debtor. Petitioner, as assignor, is bound to warrant the
existence and legality of the credit at the tim of the sale or assignment. When
Jonero claimed that it was no longer indebted to petitioner since the latter
had also as unpaid obligation to it, it essentially meant that its obligation to
the petitioner has been extinguished by compensation. Petitioner was found
in breach of his obligation under the Deed of assignment. Court of Appeals
decision is affirmed.

SONNY LO v. KJS ECO-FORMWORK SYSTEM

G.R. No. 149420 October 8, 2003

FACTS:

KJS is engaged in the sale of steel scaffoldings while Lo is a building

contractor. On February 22, 1990, petitioner ordered scaffolding equipments
from respondent worth P540,425.80. He paid a downpayment in the amount
of P150,000. The balance was made payable in 10 monthly installments.
Respondent delivered the equipments. Petitioner was able to pay the first
two monthly installments. His business suffered financial difficulties and he
was unable to settle his obligations despite demands. On October 11, 1990,
the parties executed a Deed of Assignment whereby petitioner assigned to
respondent his receivables from Jonero Realty. However, Jonero refused to
honor the Dees of Assign,nt because it claimed that petitioner was indebted
to it. Petitioner refused to pay claiming that that his obligation had been
extinguished when they executed the deed of assign,ent. RTC dismissed the
complaint on the ground that the assignment of credit extinguished the
obligation. Court of appeals reversed the decision and ordered Lo to pay the
plaintiff KJS with legal interests of 6% per annum until fully paid.

ISSUE:

Whether or not the Deed of Assignment extinguished the obligation

RULING:
 An assignment of credit, by virtue of which the owner of the credit, 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, the assignee, who acquires the power to enforce
it against the debtor. Petitioner, as assignor, is bound to warrant the
existence and legality of the credit at the tim of the sale or assignment. When
Jonero claimed that it was no longer indebted to petitioner since the latter
had also as unpaid obligation to it, it essentially meant that its obligation to
the petitioner has been extinguished by compensation. Petitioner was found
in breach of his obligation under the Deed of assignment. Court of Appeals
decision is affirmed.

CALTEX V. INTEREDIATE APPELLATE COURT and ASIA PACIFC

G.R. No. 72703, November 13, 1992

FACTS:

On January 12, 1975, Asia Pacific entered into an agreement with

Caltex whereby petitioner agreed to supply private respondent’s aviation fuel
for 2 years. As of June 30, 1980, asia Pacific had an outstanding obligation
n the total amount of P 4,072,682.13. Caltex executed a Ded of Assignment
wherein it assigned to petitioner its receivables from the National treasury of
the Philippines. Pursuant to the Deed of assignment, National Treasury
warrant the amount of P5,475,294 representing the refund. Caltex refused
to return the excess amount of P510,550.63 because it represented the
interest and service charges and the rate of 18% per annum on the unpaid
and overdue account of respondent. RTC dismissed the case. IAC reversed
the decision and ordered petitioner to return the amount of P510,550.63 to
private respondent.

ISSUE:
 Whether or not the Deed of Assignment entered into by the parties
constituted dacion en pago, such that the obligation is totally extinguished,
hence, no interest and service charges could anymore be imposed

RULING:

The Deed of Assignment executed by the parties is not a dation in

payment in payment and did not totally extinguish respondent’s obligation. It
is clear that in this case, dation in payment does not necessarily mean total
extinguishment of the obligation. The obligation is totally extinguished only
when the parties, by agreement, express or implied, or by their silence,
consider the thing a equivalent to the obligation.
Decision of Intermediate Appellate Court is set aside.