ASSIGNMENT OF CREDITS

8/9/2019 ASSIGNMENT OF CREDITS

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ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS

(ARTICLES 1624-1635)

It is a contract by which the owner (assignor/creditor) of a credit

and other incorporeal rights transfers, either gratuitously or onerously,

to another (assignee) his rights and actions against a third person(debtor) in consideration of a price certain in money or its equivalent.

Nature

The assignment involves no transfer of ownership but merely effects

the transfer of rights which the assignor has at the time to the

assignee.

D!t"#t$" %et&ee" a C$"tra#t $' Sae a" A!!*"+e"t $'

Cret!

ASSIGNMENT OF CREDITS CONTRACT OF SALE

A! t$ O%,e#t

Credit, incorporeal rights, orrights of action

roperty

Ma""er $' Deer. $' O%,e#t

ublic instrument !eed not be through a publicinstrument

Su%,e#t O%*ate

"efinite third person #hole world

/0e" O&"er!0 ! Tra"!'erre

$pon delivery of the documentsevidencing the credit or

incorporeal rights

Transfer need not be upondelivery of the thing. The parties

may agree that ownership betransferred only after full

payment

C$"!erat$"

!ot always a requisite. %ction

may be maintained by the

assignee based on his title even if there is no consideration

It is always a requisite

E''e#t! $' A!!*"+e"t

&. Transfers the right to collect the full value of the credit, even ifhe paid a price less than such value.

'. Transfers all the accessory rights (e.g. guaranty, mortgage,pledge, preference).

!ote If the period for payment has been etended without theconsent of the guarantor, the assignee cannot go after the


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guarantor because, as to him, his guaranty is only up to theoriginal period.

*. "ebtor can set up against the assignee all the defenses he couldhave set up against the assignor.

+. %ssignee cannot go after the assignor as to enforce the credit ifthrough his own negligence he allowed the credit to prescribe

provided the assignee was given enough time to enforce the said

credit.

E''e#tt. a*a"!t T0r Per!$"!

&. If personal property is involved, a public instrument is needed tomae the assignment effective against third persons-

'. If real property is involved, registration in the egistry if

roperty is necessary. (%rticle &'0)

E''e#t $' Pa.+e"t %. t0e De%t$r A'ter A!!*"+e"t $' Cret

1. Before Notice of the Assignment: ayment to the originalcreditor is valid and debtor shall be released from his obligation

(%rticle &')

2. After Notice: ayment to the original creditor is not valid as

against the assignee. 1e can be made to pay again by the

assignee.

!ote 2ormal notice is not essential. %s long as the debtor hasnowledge of the assignment, he is not released from theresponsibility should he pay the original creditor.

/arra"te! $' t0e A!!*"$r $' Cret

&. The eistence of the credit at the time of the assignment

'. The legality of the credit at the time of the sale

*. The solvency of the debtor, only I2 epressly stipulated, or if thesolvency was already eisting and of public nowledge at the

time of the assignment. (%rticle &'3)

!ote The seller of an inheritance warrants only the fact of his heirshipbut not the ob4ects which mae up his inheritance.

La%te! $' t0e A!!*"$r $' Cret '$r $at$" $' 0!

/arra"te!

1. Assignor in good faith: 5iability is limited only to the price

received and to the epenses of the contract, and any otherlegitimate payments by reason of the assignment.

2. Assignor in bad faith: 5iability is not only for the payment of theprice and all the epenses but also for damages.

(%rticle &'3, par. ' and *)

Le*a Ree+t$" " Sae $r Cret $r Ot0er I"#$r$rea R*0t

" Lt*at$" Reu!te!


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&. There must be a sale or assignment of credit

'. There must be a pending litigation at the time of the assignment

*. The debtor must pay the assignee the

a) rice paid

b) 6udicial costs- and

c) Interest on the price from the date of payment+. The right must be eercised by the debtor within *7 days from

the date the assignee demands (4udicially or etra4udicially)

payment from him. (%rticle &*+)

SALE OF CREDIT OR OTHER INCORPOREAL RIGHTS IN

LITIGATION

General Rule: "ebtor has the right of legal redemption in sale of creditor incorporeal rights in litigation.

Exceptions:

1. 8ale to a co9heir or co9owner (Ratio: The law does not favor co9

ownership)

'. 8ale to a creditor in payment of his credit (resumption: The

assignment is above suspicion and is in the form of dacion en pago! thus perfectly legal)

*. 8ale to the possessor of property in question (urpose: Topresumably preserve the tenement)

(%rticle &*0)

Documents

ASSIGNMENT OF CREDITS