H. Assignment of credits

1. ASSIGNMENT

Perfection of assignment

⦁ An assignment of credits and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475. (Article 1624, Ibid.)

Cross-referenced article/s
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. (Art. 1475, Ibid.)
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. (Paragraph 2, Art. 1475, Ibid.)

Accessory rights included. The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference. (Article 1627, Ibid.)

To bind third parties

Public instrument for non-real properties; Recorded in Registry for real properties. An assignment of a credit, right or action shall produce no effect as against third person, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property. (Article 1625, Ibid.)

2. DEBTOR IN GOOD FAITH

⦁ The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation. (Article 1626, Ibid.)

3. SELLER

In good faith

⦁ The seller in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge. (Article 1628, Ibid.)

⦁ Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616. (Paragraph 2, Article 1628, Ibid.)

In bad faith

⦁ The seller in bad faith shall always be answerable for the payment of all expenses, and for damages. (Paragraph 3, Article 1628, Ibid.)

4. ASSIGNOR IN GOOD FAITH

⦁ In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired. (Article 1629, Ibid.)

⦁ If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the maturity. (Paragraph 2, Article 1629, Ibid.)

5. HEIR WHO SELLS INHERITANCE

⦁ One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir. (Article 1630, Ibid.)

⦁ Should the seller have profited by some of the fruits or received anything from the inheritance sold, he shall pay the buyer thereof, if the contrary has not been stipulated. (Article 1632, Ibid.)

⦁ The buyer shall, on his part, reimburse the seller for all that the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary. (Article 1633, Ibid.)

6. SELLER OF A LUMP SUM

⦁ One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or the part of greater value. (Article 1631, Ibid.)

7. CREDIT OR OTHER INCORPOREAL RIGHT UNDER LITIGATION

General Rule: When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid. (Article 1634, Ibid.)
A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered. (Paragraph 2, Article 1634, Ibid.)
The debtor may exercise his right within thirty days from the date the assignee demands payment from him. (Paragraph 3, Article 1634, Ibid.)
Exceptions: … the preceding article shall be excepted the assignments or sales made:
1) To a co-heir or co-owner of the right assigned;
2) To a creditor in payment of his credit;
3) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned. (Article 1635, Ibid.)

Disclaimer: All information herein is for educational and general information only intended for those preparing for the bar exam. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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