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Nyco Sales Corporation vs.

BA Finance Corporation
GR No. 71694
August 16, 1991

Assignor of a check was not given notice by the assignee of the dishonor by the drawee-bank

FACTS
 Petitioner Nyco, whose president and general manager is Rufino Yao, is engaged in the business of selling
construction materials. The brothers Fernandez’s, acting in behalf of Sanchell Corporation, approached Yao
for credit accommodation. They requested Nyco, through Yao, to grant Sanshell discounting privileges which
Nyco had with BA Finance.
 Petitioner corporation became the assignor, and the Fernandez’s are the assignee.
 Sanshell Corporation issued a BPI post-dated check worth P60,000 payable to Nyco, and following the
discounting process, indorsed the check in favor of BA Finance. Later, BA Finance issued a check payable to
Nyco which then indorsed it in favor of Sanshell Corporation.
 Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in favor of BA Finance
with the conformity of Sanshell. The said deed provides that subject of discounting was the BPI check, and at
the back of the deed was the continuing suretyship agreement where the Fernandez’s unconditionally
guaranteed to BA Finance the full, faithful and prompt payment and discharge of any and all indebtedness of
Nyco.
 The BPI check was dishonored upon presentment for payment, and BA Finance immediately reported to the
Fernandez’s. the Fernandez’s issued a Security Bank and Trust Company check, which was again
dishonored.
 Despite repeated demands, Nyco and Fernandez’s failed to settle the obligation with BA Finance, prompting
the latter to file an action. Despite being served with summons Nyco and Fernandez failed to answer their
complaint.

ISSUE
Whether or not the assignor is liable to its assignee for its dishonored checks.

RULING/RATIO: Yes.
 An assignment of credit is the process of transferring the right of the assignor to the assignee, who would then
be allowed to proceed against the debtor. It may be done either gratuitously or generously, in which case, the
assignment has an effect similar to that of a sale. Art. 1628 of the Civil Code provides that the assignor-vendor
warrants both the credit itself, and the person of the debtor. If there be any breach of the warranties, the
assignor-vendor should be answerable thereof.
 Nyco executed a deed of assignment infavor of BA Finance with Sanshell Corporation as the debtor-obligor.
BA Finance is enforcing said deed and the check covered is merely an incidental or collateral matter. The
check emrely evidence the credit which was assigned to BA Finance. Thus, the designation is immaterial.
Nyco is being held liable for what the checks presented.
 The dishonor of an assigned check simply stresses its liability and the failure to give notice of dishonor will
not discharge Nyco from such liability. This is because the cause of action stems from the breach of warranties
embodied in the deed of assignment and not from the dishonoring of the check alone.