Professional Documents
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CH 8-9
CH 8-9
CH 8-9
470 SALES
Chapter 8
470
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upon the credit or right assigned and upon the price even if nei-
ther has been delivered. (see Art. 1475.)
However, the assignee will acquire ownership only upon de-
livery. (see Arts. 1498, par. 2 and 1501.)
It has been held that since the law does not require the regis-
tration of an assignment of a chattel mortgage, its registration does
not ipso facto operate as constructive notice to the mortgagor. (Sison
vs. Yap Tico, supra.)
(2) After notice, or before notice but debtor had knowledge of as-
signment. — 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.
EXAMPLE:
D owes C P1,000.00, with G as guarantor. C assigns his credit
to T with notice given to D.
In case D fails to pay T, the latter may enforce the guaranty
of G unless the credit was transferred with express stipulation
that G shall be released from his obligation.
EXAMPLE:
D owes C P20,000.00, which represents the purchase price
of a car bought by D. C assigns the credit to T.
C is liable to T if at the time of the assignment the credit
has already prescribed, or has been paid, or is annullable and
its nullity is subsequently declared because C warrants the ex-
istence and legality of the credit.
But C is not liable if D cannot fulfill his obligation due to in-
solvency because insolvency has nothing to do with the exist-
ence and legality of the credit unless it has been so expressly
stipulated, or the insolvency of D was existing prior to the as-
signment and of common or public knowledge although it was
not known to C (for C is conclusively presumed to have known
of the same), or known to C although it was not of common
knowledge.
If C lacks sufficient data to determine whether the credit is
still enforceable or not, as for instance, whether the period of
prescription was interrupted and there is a full disclosure of
such fact when the credit was assigned, he cannot be held re-
sponsible even for the existence and legality of the credit.
EXAMPLE:
D owes C P50,000.00 payable on July 1, 2004. C assigns his
credits to T with C making himself responsible for the solvency
of D.
(1) If the agreement is that the duration of C’s liability shall
last for two years from July 1, 2004, then his guaranty shall last
as agreed upon.
(2) If there is no stipulation, and the assignment was made
on August 1, 2004, the liability is limited to one year from the
assignment.
(3) However, if the assignment was made on June 1, 2004,
the responsibility shall cease exactly one year after July 1, 2004
or one year after the maturity of the debt.
EXAMPLE:
H and I are the heirs of the estate left by D, deceased. Be-
fore partition and without specifying his definite share in the
inheritance, H sold his share to B for P100,000.00.
In this case, H only warrants the fact that he is an heir to D.
He is not liable to B should his share after partition be less than
P100,000.00.
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ART. 1631. One who sells for a lump sum the whole
of a certain rights, rents, or products, shall comply by
answering for the legitimacy of the whole in gen- eral;
but he shall not be obliged to warrant each of the
various parts of which it may be composed, ex- cept
in the case of eviction from the whole or the part of
greater value. (1532a)
EXAMPLE:
P is a partner in a partnership. He sells all his interests to B
for the lump sum of P150,000.00. Upon the dissolution of the
partnership, B received the share of P in its assets consisting of
P50,000.00, some office equipment and a car. Subsequently, the
car was recovered by C, a creditor of the partnership.
P is not liable to B because P does not warrant each of the
various parts of his interest in the partnership but only the le-
gitimacy of his rights as partner taken as a whole. But if the
value of the car exceeds P75,000.00, P will be liable because B is
evicted from “the part of greater value.”
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 like-
wise subject to any contrary agreement.
ILLUSTRATIVE CASES:
1. Mortgagee assigned its rights as such and as highest bidder
in foreclosure sale of mortgaged land while there was a pending case
between unpaid seller of the land and mortgagor (buyer).
Facts: S sold several lots to B, who, after securing registra-
tion of said lots in her name, mortgaged them to C (bank). B
failed to complete payment of the purchase price. The sale was
rescinded by the court without prejudice to the right of C, which
was adjudged a mortgagee in good faith. C foreclosed the mort-
gage. At the public auction, C was the highest bidder. Subse-
quently, C assigned its rights as mortgagee and as the highest
bidder to D (NIDC).
S filed a motion to cancel the encumbrance of D from the
certificates of title concerned which was granted by the lower
court on the ground that C “should have submitted the deed of
assignment for approval of the court knowing that the subject
matter of said deed is in custodia legis and so that the consent of
S could be taken.”
Issue: Upon the facts, has a valid assignment been made by
C to D of its rights over the lots in question?
Held: Yes. There is nothing in our statutes or jurisprudence
which prohibits a creditor without the consent of the debtor
from making an assignment of his credit and the rights acces-
sory thereto; and, certainly, an assignment of credit and its ac-
cessory rights does not at all obliterate the obligation of the
debtor to pay, but merely puts the assignee in the place of his
assignor. Indeed, Article 1634 definitely recognizes the likeli-
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Although the pledgee or assignee (L) did not ipso facto be-
come the creditor of M, the pledge being valid, the incorporeal
right assigned by T in favor of L can only be alienated by T
with due notice to and consent of L or his duly authorized rep-
resentative. To allow the assignor to dispose or alienate the se-
curity without notice to and consent of the assignee will render
nugatory the very purpose of a pledge or an assignment of
credit.
Moreover, under Article 1634, the debtor (M) has a corre-
sponding obligation to reimburse the assignee (L) for the price
the latter paid or for the value given in consideration for the
deed of assignment. Failing in this, the alienation of the liti-
gated credit made by T in favor of M by way of a compromise
agreement does not bind L.
Furthermore, having knowledge of the assignment, M was
estopped from entering into a compromise agreement without
notice to and consent of L. More so, in the light of the fact that
no reimbursement has even made in favor of L as required un-
der Article 1634. M acted in bad faith and in connivance with T
so as to defraud L in entering into the compromise agreement.
(Estate of G. Litton vs. Mendoza, 163 SCRA 246 [1988].)
mitted to the vendee or transferee as soon as the pledgee consents to the alienation, but
the latter shall continue in possession. (n)
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EXAMPLE:
D is indebted to B and C in the amount of P10,000.00. For
failure to pay his debt, B sues D.
If B transfers his credit to C during the pendency of the
litigation, D cannot redeem.
EXAMPLE:
A owes B the sum of P10,000.00 and B owes C P8,000.00.
If B assigns his credit against A to C then the subject of
litigation (between A and B), A has also no right of legal re-
demption.
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EXAMPLE:
A owes B P10,000.00 which is secured by a mortgage on a
land owned by A.
If A sells the land to C and B assigns his credit in litigation
against A to C, A is not entitled to redeem.
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487
Chapter 9
GENERAL PROVISIONS
487
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Definition of terms.
This article defines or explains the various terms used in the
preceding articles governing the sale of goods. They hardly re-
quire comment. The definitions in this article do not apply if the
context or subject matter of any particular portion of the law oth-
erwise requires.
(1) Goods do not include things or choses in action or negoti-
able instruments.
(a) A chose in action is any claim or right which may be
pleaded in a suit at law, such as a claim of reparation for a tort
or quasi-delict, or a right acquired under a contract.
(b) Stock certificates have been held to be goods within the
meaning of the U.S. Uniform Sales Act. (Babb & Martin, op. cit.,
p. 86.)
(c) Real property is not the proper subject of a transaction
involving a sale of goods within the definition of the term.
However, growing crops or fruits which are agreed to be sev-
ered under the contract of sale are treated as goods and not as
interest in realty.
(d) The U.S. Uniform Commercial Code excludes money
from the term “goods” but only where money is the medium
of payment. Said another way, money in which the price is to
be paid for the goods involved, is not to be considered part of
the goods which are the subject matter of the transaction. Said
Code (Sec. 2-105 thereof.) specifically provides that money,
when treated as a commodity, is a good and the contract
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EXAMPLES:
(1) S sells to B one used X truck, Motor No. 12345. S and B
are on the truck when the bargain is made. The goods are exist-
ing, ascertained, and specific.
(2) B, a retail grocer, orders 6 dozen cans of X brand toma-
toes from S, a wholesale concern. S has the canned goods in
stock, and accepts the order but does not immediately set aside
6 dozen cans. The goods are existing and unascertained. When
6 dozen cans have been set aside and earmarked for B, the goods
have become ascertained or specified — not specific. (Ibid.)
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