(2) To affect third persons, the assignment must appear in a public instrument, and in case it involves

real property, it is indispensable that it be recorded in the Registry of Property. (see Lopez vs.
Alvarez, et al., 9 Phil. 28)

(3) 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.

Art. 1626. The debtor who, before having knowledge of the assignment, pays his creditor
shall be released from the obligation. (1527)

In as assignment of credit, the consent of the debtor is not essential. 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.

Effect of payment by debtor after assignment of credit.

(1) The notice is thus for the protection of the assignee because before the said notice, payment
to the original creditor is valid. In such case, the assignee has a right of action against the assignor, the
original creditor. In the absence of notice, the burden of proving that the debtor had knowledge of the
assignment is on the interested party which is the assignee. It has been held that since the law does not
require the registration of an assignment of a chattel mortgage, its registration does not ipso facto operate
as constructive notice to the mortgagor.
(2) Even without notice, the debtor will not be related from his obligation should he pay the
creditor after having had knowledge of the assignment. He thereby acts in bad faith. He can be made to
pay again by the assignee.

Art. 1627. The assignment of a credit includes all the accessory rights, such as a guaranty,
mortgage, pledge or preference. (1528)

Extent of assignment of credit.

The assignment of credit includes not only the credit itself but also all rights accessory
thereto. (see Art. 1537.) This follows the familiar rule that the accessory follows the principal. But
the parties may stipulate that the accessory rights shall not be included in the assignment.

Art. 1628. The vendor 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.

Even in these cases he shall only be liable for the price received and for the expenses
specified in No. 1 of Article 1616. The vendor in bad faith shall always be answerable for the
payment of all expenses, and for damages. (1529)

Warranties of the assignor of credit.

When a creditor assigns his credit, he warrants only the

(1) existence and

(2) legality of the credit at the perfection of the contract.

He is not even liable for the warranty if the credit had been sold as doubtful. There is no warranty
as to the solvency of the debtor unless it is expressly stipulated or unless the insolvency was already
existing and of public knowledge at the time of the assignment.
 (2) Warranties of seller. –The seller of an inheritance warrants only the objects of his heirship but
he does not warrant the objects which make up his inheritance. The sale is therefore, a sort of an
aleatory contract because the assignee bears the risk that the estate may not be sufficient to pay
the obligations of the deceased.

(3) Limitation – there is no law which prohibits an heir from selling his interests in an inheritance
before partition (see Art. 1088.) except that any such sale must be proceedings and any pending
litigation. Pursuant to Article 774 (Civil Code), “the rights to the succession are transmitted from
the person concerned is an heir and may exercise his rights as such, from the very moment of
the death of the decedent.

Art. 1631. 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. (1532a)

Sale of whole of certain rights, rents, or products.

In the sale of the whole of certain rights, rents, or products for a lump sum, the subject matter
is the totality of such rights, rents, or products. As a consequence, the vendor warrants only the
legitimacy of the whole and not the various parts of which it may be composed. The vendor is not
liable for eviction of each of the various parts unless the eviction involves the whole or the part of
greater value.

Art. 1632. Should the vendor have profited by some of the fruits or received anything from
the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated. (1533)

Liability of vendor of inheritance for fruits received.

Unless otherwise stipulated, the fruits of an inheritance are included in the sale thereof. (see
Article 1537.) If the vendor merely received the fruits, he must deliver them to the vendee; if they
have been consumed, he must reimburse the vendee; if they have been sold, he must deliver the
price of the sale. (see 10 Manresa 406.)

The liability of the vendor for anything received from the inheritance sold is subject to any
agreement to the contrary.

Art. 1633. The vendee shall, on his part, reimburse the vendor 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. (1534)

Liability of vendee for debts of and charges on estate.

Since under Article 1632 the vendor is obliged to pay the vendee the fruits or anything received
from the inheritance, it is also just that the vendee be required to reimburse the vendor for whatever the
latter has paid for the debts of and charges on the estate.

The liability of the vendee for the debts and charges is likewise subject to any contrary agreement.

Art. 1634. 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.

A credit or other incorporeal right shall be considered in litigation from the time the
complaint concerning the same is answered.