PAYMENT BY CESSION : ART 1255

ART 1255 : The debtor may cede or assign his property to

his creditors in payment of his debts. This cession, unless there
is stipulation to the contrary, shall only release the debtor from
responsibility for the net proceeds of the thing assigned. The
agreements which, on the effect of the cession, are made
between the debtor and his creditors shall be governed by
special laws.

delas w/ voluntary assignment of D to C but C must accept the assignment of

D to become effective
assignment gives the C the right to proceed to the sale of the prop and
proceeds will be applied as payment as agreed upon
absence of agreement among the Creditors they shall be paid in the order
established by law
Payment by Cession Distinguished from Dacion en Pago
PAYMENT
BY
CESSION: DACION IN PAYMENT:

NVE-OAA

TIP - TNA

there
is
a
transfer
of
ownership from the debtor to
the creditor.

- is a special form of payment because there is no

completeness of performance integrity. In most cases, there
will be a balance due.

there is no
transfer
of
ownership.
The
creditors
simply acquire the right to sell
the properties of the debtor
and apply the proceeds of the
sale to the satisfaction of their
credit.

Dation in payment (Art. 1245)

There are various

In favor of only one creditor

Payment by Cession an act whereby a debtor

abandons all his property to his creditors, so that the
latter may apply the proceeds (of its sale) to their
credits.

Delivery and transmission of ownership of a thing by the

debtor to the creditor as an accepted equivalent of the
performance of the obligation (dacion en pago).
The situation is contemplated here is that the debtor has several creditors and

creditors

Extinguishes credits only up to

the extent of proceeds from
sale of assigned property,
unless otherwise agreed upon

Payment
extinguishes
the
obligation to the extent of the
value of the thing delivered,
unless the parties agree that
the
obligation
be
totally
extinguished

Only
possession
and
administration
with
authorization
to
convert
property to cash with which
the debts shall be paid

Transfer of ownership of thing

alienated to creditor

Assignment
presupposes
insolvency of debtor

Not necessarily in state of

financial difficulty

Assignment involves all the

property of the debtor

Assignment of only some

specific thing

several debts. He turns over property to his creditors who are given the authority
to sell the property and to apply the proceeds to his debt.
In payment by cession, property is turned over by the debtor to the creditors
who acquire the right to sell it and divide the net proceeds among themselves.
In payment by cession, the creditors do not own the property to be sold. The
creditors only have the power to sell. The net proceeds of the sale will be
distributed according to the agreement.
Payment by cession does not generally terminate all debts due since normally
there is still a balance due. The balance will continue to be due unless the parties
agree otherwise. Usually, the termination is only to the extent of the net proceeds. The
extinguishment of the obligation is pro tanto.
Payment by cession must be distinguished from insolvency.
debtor is still liable if there is a balance or proceeds of the prop not sufficient
to cover all obligation unpaid amount remains due and demandable