ASSIGNMENT &

BULK SALES LAW

Chapter 14 ASSIGNMENT
Nature of Assignment
Compare & contrast
Sale - Assignment
Subrogation - Assignment
Validity and Binding Effects
Binding Effects as to 3rd Parties
Effect if Debtor has/has no knowledge of Assignment
Effect of Assignment of Credit on Debtor
Chapter 14 ASSIGNMENT

Transfer of Ownership
Accessories and accessions
Warranties
Assignment of Credit in Litigation
Right to Redeem
Assignment of Copyright
Assignment as an Equitable Mortgage
Chapter 15 BULK SALES LAW
ACT NO. 3952

Concept of Bulk Sales Law

Reason for its creation
What is Covered and NOT Covered
WHO Are Covered
WHAT are the Requirements
Prohibitions
Consequences
Void
Innocent purchaser
Penalty
LAW ON
FOOD AND BEVERAGE
Assignment
How often has it been heard in layman conversations that a person does
not want a mere assignment but an outright purchase of the subject
matter?
How many country clubs have refused to honor a deed of assignment
covering the transfer of a proprietary share in favor of the assignee on
the ground that a deed of absolute sale is required, to ensure that
only one person has a right to the corresponding membership
entitlement?
Has it not been the common perception that the process of assignment
covers the temporary lease or use of the thing, while the title remains
with the assignor to whom it would ultimately have to be returned?
Why has assignment become the poor relations of sale?
Definition and Nature of Assignment

Assignment 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, the
assignment has an effect similar to that of a sale.

In its most and comprehensive

sense, assignment is 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 orEX.right
LOAN, ETC.
therein.
CREDITOR /
3 PERSON/
RD DEBTOR
ASSIGNOR
ASSIGNEE
Definition and Nature of Assignment

It includes transfers of all kinds of property, and is

peculiarly applicable to intangible personal property and,
accordingly, it is ordinarily employed to describe the transfer
of non-negotiable choses in action and of rights in or
connected with property as distinguished from the particular
item or property. PNB v. CA, 272 SCRA 291 (1997).
Contrast & Compare
Assignment from Sale

sale and assignment are legally the same contracts,

but with different names.

In assignments, a consideration is not always a

requisite, unlike in sale. Thus, an assignee may maintain
an action based on his title and it is immaterial whether or
not he paid any consideration therefor. Furthermore, in an
assignment, title is transferred but possession need not be
delivered.
Contrast & Compare
Assignment from Subrogation

Subrogation extinguishes the obligation and gives rise

to a new one; assignment refers to the same right
which passes from one person to another.

The nullity of an old obligation may be cured by

subrogation, such that a new obligation will be
perfectly valid; but the nullity of an obligation is not
remedied by the assignment of the creditors right to
another..
Contrast & Compare
Assignment from Subrogation

In an assignment of credit, the consent of the debtor

is not necessary in order that the assignment may fully
produce legal effects; whereas, conventional
subrogation requires an agreement among the three
parties concerned original creditor, debtor, and new
creditor. It is a new contractual relation based on the
mutual agreement among all the necessary parties.
PERFECTION OF CONTRACT FOR
ASSIGNMENT OF CREDIT
The contract for the assignment or transfer of credit and
other incorporeal rights is perfected from the moment the
parties agree upon the credit or right assigned and upon the
price even if neither has been delivered. (see Art. 1475.)
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.

However, the assignee will acquire ownership only upon

delivery. (see Arts. 1498, par. 2 and 1501.)
BINDING EFFECT OF ASSIGNMENT

As between the parties:

the assignment is valid although it appears only

in a private document so long as the law does
not require a specific form for its validity. (see
Art. 1356.)
BINDING EFFECT OF ASSIGNMENT

As to affect third parties:

Art. 1625. An assignment of a 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 OF ASSIGNMENT

(a)if personal property is involve - a public

instrument is needed to make the assignment
effective against third persons.

(a)if real property is involve - registration in the

Registry of Property would be needed.
BINDING EFFECT OF ASSIGNMENT

The assignee merely steps into the shoes of the assignor, the
former acquiring the credit subject to defenses (e.g., fraud,
prescription, etc.) available to the debtor against the assignor.

The assignee is deemed subrogated to the rights as well as to

the obligations of the seller. He cannot acquire greater rights
than those pertaining to the assignor. (Koa vs. Court of Appeals, 219
SCRA 541 [1993].)

Hence, the act of assignment cannot operate to efface liens or

restrictions burdening the right assigned. (Casabuena vs. Court of
Appeals, 91 SCAD 933, 286 SCRA 594 [1998].)
BINDING EFFECT OF ASSIGNMENT

As to Mortgage and Gratuitous Assignments:

A mortgage that is assigned is valid between the parties

even if the assignment is not registered, because
registration is only essential to prejudice third parties.
(Villanueua v. Perez, et al., 928).

A gratuitous assignment is a DONATION and must

therefore comply with the formalities of a donation.
Rule If Debtor Pays Creditor BEFORE Former
Knows of the Assignment
Art. 1626. The debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the obligation.

owes

Q: is ACEs obligation
extinguished?
Actor JACK PAYS
YES. BREY 3rd Person
ACE
NOTE: Assignment is effective as to the
debtor only from the time he has knowledge
of it. (Sison v. Yap Tico, 37 Phil. 534).]
Art. 1233: A debt shall not be understood to have been
paid unless the thing or service in which the obligation
consists has been completely delivered or rendered, as the
case may be.

Art. 1285: The debtor who has consented to the assignment

of rights made by a creditor in favor of a third person,
cannot set up against the assignee the compensation which
would pertain to him against the assignor, unless the
assignor was notified by the debtor at the time he gave his
consent, that he reserved his right to the compensation.
Art. 1285 par. 2: If the creditor communicated the cession
to him but the debtor did not consent thereto the latter
may set up the compensation of debts previous to the
cession, but not of subsequent ones.

Art. 1285 par. 3: If the assignment is made without the

knowledge of the debtor, he may set up the compensation
of all credits prior to the same and also later ones until he
had knowledge of the assignment.
AFTER NOTICE, OR BEFORE NOTICE BUT
DEBTOR HAD KNOWLEDGE OF ASSIGNMENT

Payment by the debtor to the original creditor after the former

had received notice of the assignment, whether or not he
consented, is not valid as against the assignee. Even without
notice, the debtor will not also be released from his obligation
should he pay the creditor after having had knowledge of the
assignment of the obligation. He thereby acts in bad faith. He can
be made to pay again by the assignee..
AFTER NOTICE, OR BEFORE NOTICE BUT
DEBTOR HAD KNOWLEDGE OF ASSIGNMENT
NOTICE / had
knowledge of the
assignment

He thereby acts
in bad faith. He
ROMEO
can be made to ROY
pay again by ASSIGNEE
ASSIGNOR
Dr. MANUEL the assignee
An ObGyne
Effect of Assignment of Credit on
DEBTOR
Issues re Debtor (Art. 1626)

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.
xProject Builders, Inc. v. Court of Appeals, 358 SCRA 626
(2001).
Effect of Assignment of Credit on
DEBTOR
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. xNIDC v. De los
Angeles, 40 SCRA 489 (1971)
THANK YOU
ARTICLE 1356
Contracts shall be obligatory, in whatever form they
may have been entered into, provided all the essential
requisites for their validity are present. However, when
the law requires that a contract be in some form in order
that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties
stated in the following article cannot be exercised.
(1278a)
ARTICLE 1498
1. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred.
by legal formalities, applies to real and personal
property since the law does not distinguish

2. With regard to movable property, its delivery may also be

made by the delivery of the keys of the place or depository
where it is stored or kept.
traditio simbolica
ARTICLE 1501
With respect to incorporeal property, the provisions of
the first paragraph of Article 1498 shall govern. In any
other case wherein said provisions are not applicable,
the placing of the titles of ownership in the possession
of the vendee or the use by the vendee of his rights,
with the vendors consent, shall be understood as a
delivery.
Question: Is the Debtors consent is
ESSENTIAL in order for the Assignment
valid?
In an assignment of credit, the consent of the debtor is not essential in
order that it may 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. (Sison vs. Yap Tico, 37 Phil. 587 [1918];
Rodriguez vs. Court of Appeals, 207 SCRA 553 [1992].)

The law speaks not of consent but of notice to the debtor. The purpose of
the notice by the assignee is to inform the debtor that from the date of the
assignment he should make payment to the assignee and not to the original
creditor.