CHAPTER XIV:

ASSIGNMEN
T
By:

Lapez, Ailen
Orquia, Ian
Salto, Dianne
Tabu, Katrina

What is ASSIGNMENT?
- The sale of credits and other incorporeal rights.
(Art. 1624, NCC).
- It 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,
in the later case, the assignment has an effect
similar to that of a sale. (Licaros vs. Gatmaitan,
362 SCRA 548)
- Prior to the New Civil Code, assignment was not
limited to the genus of sale, it could be a sale but
at times it may constitute a dation in payment or it
may constitute a donation.
NATURE OF ASSIGNMENT:
Though intangible things, it may be the object of
sale as defined under Art. 1458 of the Civil Code
and the more proper term is ASSIGNMENT.
All jurisprudence about sale pertains to
assignment with some modifications.
CHARACTERISTICS OF ASSIGNMENT:
a. Nominate
b.Consensual
c. Reciprocal

d.Onerous (but may be done gratuitously also1)

e. Commutative
WHAT MAKES IT DIFFERENT?
- It is characterized assignment as 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.
o Includes transfers of all kinds of property, and
is peculiarly applicable to intangible personal
property.
o Ordinarily employed to describe the transfer
of non-negotiable choses in action and rights
connected with property distinguished from
actual item.2
- Assignment may also refer to tangible property.3
Art. 1624 An assignment of creditors and other
incorporeal
rights
shall
be
perfected
in
accordance with the provisions of Art. 1475. (n)

SALE
Subject
matter
tangible property

ASSIGNMENT
is Subject
matter
intangible property

1 Nyco Sales vs. BA Finance, 200 SCRA 637

2 PNB vs. Court of Appeals, 272 SCRA 291 (2001)
3 PNB vs. Court of Appeals 272 SCRA 291 (1997)

is

CONSENSUAL

CONSENSUAL

- Assignment does not cover donation involving

intangibles.
o Donations are formal contracts.
- Any ambiguity in the meaning of an assignment
shall be resolved against the party who prepared
the deed of assignment.
BINDING EFFECTS AS TO THIRD PARTIES:
Art. 1625 An assignment of 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 as to third persons not present
unless it appears in a public document, or in the
registry of property if real rights are assigned.
o Because assignment deals with intangible
property, the only evidence as to the transfer
is the public instrument.
- Without the public instrument, assignment is still
valid.
o But in such case, it is enforceable only
between assignor and assignee, and their
successors in interest.

NOTE: When assignment is still at the executory stage

(and not evidenced in writing) it is covered by the
Statute of Frauds.
Exceptions:
- When assignment involves document of title.
- Assignment does not bind the bailee unless
specific notice of the transfer of the covering
document of title is given by transferor/transferee
to the bailee.
EFFECTS OF ASSIGNMENT:
- An assignment of credit is an agreement by virtue
of which the owner of a credit, known as the
assignor, by 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.4
- As a consequence, the third party steps into the
shoes of the original creditor as subrogee of the
latter. Although constituting a novation, such
assignment does not extinguish the obligation
under the credit assigned, even when the
assignment is effected without his consent.5

4 Aquintey vs. Tibong, 511 SCRA 414 (2006)

5 South City Homes, Inc. vs BA Finance Corp., 371 SCRA 603 (2001)

In C &C Commercial Corp. v. Philippine

National Bank, 175 SCRA 1 (1989) the court
held that the meeting of minds in assignment
contemplates that between the assignor and
assignee. The debtors consent is not necessary,
and it is sufficient that the assignment be brought
to the debtors knowledge in order to be binding.

NOTE: Debtors consent not needed for assignment to

produce legal effects.6 Duty to pay assignee does not
depend on debtors consent. Otherwise, creditors
would have a hard time
assigning credit.
Purpose of notice: only to inform debtor that he
should pay someone else, not the original creditor. This
change is a novation. However, liability is not
extinguished.
NOTE: Even though knowledge/consent of debtor is
not required for validity of the assignment, lack of
such has legal effects.
WHAT IS ASSIGNMENT OF CREDIT?
Art. 1626 The debtor who, before having
knowledge of the assignment, pays his creditor
shall be released from obligation. (1527)
- 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

6 NIDC v. De los Angeles, 40 SCRA 489 (1971)

efficaciousness or inefficaciousness of any

payment he might make.7
o When a credit is assigned, if the debtor pays
his creditor because he didnt know of the
assignment, his payment shall release him
from further obligations.
NOTE: 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.8
TRADITION IN ASSIGNMENT:
- Notarization
converts a
private
document
Assignment of Credit into a public document, thus
complying with the mandate of Article 1625 of the
Civil Code and making it enforceable even as
against third persons.9
- Assignment of credit is an act of transferring the
right of an assignor to an assignee who could
proceed against principal debtor.
7 Project Builders, Inc. v. Court of Appeals, 358 SCRA 626 (2001)
8 Ibid
9 Ledonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).

ACCESSORIES AND ACCESSIONS:

- Assignment of a credit includes all the accessory
rights, such as guaranty, mortgage, pledge or
preference.10
WARRANTIES:
- The warranty against hidden defects generally has
no application to an intangible because it has no
physical existence.
- The assignor shall be responsible for the existence
and legality of the credit at the time of sale.
NOTE: Assignment does not make the assignor
warrant the solvency of the debtor to the credit.
Unless:
a. There is a stipulation to that effect; or
b. The insolvency of the debtor was prior to the
assignment and of common knowledge.
- Even when there is a warranty as to the debtors
solvency, it doesnt last forever.
o 1 year from the assignment, if credit was
already due o Otherwise, 1 year from the
maturity of the credit
o If assignor in good faith is liable for a
warranty.
o Only expenses of the contract

10 United Planters Sugar Milling Co., Inc. (UPSUMCO) v. Court of

Appeals, 527 SCRA 336 (2007).

- Other legitimate payments made by reason of

assignment.
OTHER SPECIFIC WARRANTIES:
- One who assigns an inheritance right without
enumerating the things it is composed of, shall
only be answerable for his character as an heir;
but any fruits received he shall pay to the
assignee, unless the contrary has been stipulated.
- One who sells for a lump sum the whole of certain
rights, rents, or products, shall be answerable for
the legitimacy of the whole in general, but not for
each of the various parts of which it may be
composed; except in the case of eviction from the
whole or the part of the greater value.
ASSIGNMENT OF CREDIT IN LITIGATION
- Reason for the rule on assignments in litis
pendencia
o Such assignments are deemed speculative
o Law would rather benefit the debtor, than the
one who merely speculates for profit.
o If assignor is willing to dispose of the credit at
a low price, debtor should benefit.
- Right to redeem on debtors part shall not exist
when the law considers the assignment as not for
speculation.
Examples:
Assignment of credit to the co-heir or co-owner
of such credit/right;

 Assignment to a creditor in payment for his own

credit;
Assignment to the possessor of a tenement/piece
of land which is subject to the right in litigation
that was assigned;
In the foregoing cases, assignee has a legitimate
purpose for taking the assignment not merely
speculation.
SUBROGATION vs. ASSIGNMENT OF CREDIT
Subrogation

Assignment

Extinguishes
original Same right passed
obligation, gives rise to a from one person to
new one
another
Nullity
of
an
old Nullity of obligation
obligation may be cured not
remedied
by subrogation (new one through assignment
is valid)
Agreement
required Consent of debtor
between original parties not
required
to
and new creditor
produce
legal
effects

ASSIGNMENT OF COPYRIGHT
- Owner of copyright may assign it in whole or in
part.
- Assignee entitled to all rights and remedies which
assignor had with respect to copyright.
- Not deemed assigned inter vivos unless there is
written indication of such intention.

- Submission of a work to a newspaper or magazine

for publication shall constitute an assignment.
o But only for one publication
o Unless a greater right is granted
ASSIGNMENT AS AN EQUITABLE MORTGAGE
- Assignment of intangibles may be used to secure
loans
- Principles pertaining to Equitable Mortgage will
apply.
o Assignment to secure payment of promissory
notes
o Such is equivalent to an equitable mortgage
- Thus, nonpayment of loan cannot authorize
assignee to register the assigned rights in his
name (it would be tantamount to Pactum
Commissorium)