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Obligations between the parties will depend upon the juridical relation which
is the basis of the assignment;
What is the legal effect of the Assignment (since its validity is not in question):
1. Assignment of receivables in 1964 did not transfer the ownership of the
receivables to MBC and release the spouses from their loans;
- Consideration was for certain credits, loans, overdrafts and credit accommodations
worth 10k extended by MBC to spouses and as security for the payment of said sum
and interest thereon; also quitclaim of rights to MBC of their interest in the receivables;
- Stipulated also that it was a continuing guaranty for future loans and correspondingly,
the assignment shall extend to all accounts receivable;
Contention of spouses: not mere guaranty since it was stipulated:
- That the assignor release and quitclaim to assignee all its rights, title and interest
in the accounts receivable;
- That title and right of possession to account receivable is to remain in assignee
and it shall have right to collect directly from the debtor; that whatever the
assignor does in connection with collection of such, it does so as agent and
representative and in trust of assignee;
- SC: character of transaction is not determined by the language in document but
by intention of the parties;
- If it was intended to secure the payment of money, it must be construed as a
pledge.
- A transfer of property by the debtor to a creditor, even if sufficient on its farm to
make an absolute conveyance, should be treated as a pledge if the debt continues
in existence and is not discharged by the transfer;
Assignment of receivables did not result from sale or by virtue of a dation in
payment;
- At time the deed was executed, the loans were non-existent yet;
- At most, it was a dation for 10k, the amount of credit with MBC indicated in the
deed; at the time of execution, there was no obligation to be extinguished except
for the 10k;
- 1292: in order that an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal terms, or
that the old and the new obligations be on every point incompatible with each
other;
Deed of assignment intended as collateral security for the loans, as a continuing
guaranty for whatever sums that would be owing by spouses;
- In case of doubt as to whether a transaction is a pledge or a dation in payment, the
presumption is in favor of pledge, the latter being the lesser transmission of rights and
interests (Lopez v CA);
2. MBC need not exhaust all legal remedies against PFC:
- Spouses, not being released by the assignment, remain as the principal debtors of
MBC,rather than mere guarantors;
- The deed merely guarantees said obligations;
- 2058 (creditor must have exhausted property of debtor and resorted to all legal
remedies before it can proceed to guarantor) does not apply to them;
- Appellants are both the principal debtors and the pledgors or mortgagors;
- MBC did try to collect but at OP, it was disapproved; so the loan was basically
unsecured;
DISMISSED.
Feliciano, J. concurring:
Justice Bidins, "the character of the transactions between the parties is not, however,
determined by the language used in the document but by their intention not without
exception;
- Deed here contains language which suggest that the parties intended complete
alienation of title to and rights over the receivables;- Words remise, release and
quitclaim and clauses title the title and right of possession to said accounts
receivable is to remain in said assignee" who "shall have the right to collect directly
from the debtor;
- Words agent also convey the ideas;
- But such must be taken in conjunction with and qualified by other language showing
intent of the parties that title to the receivables shall pass to the assignee for the limited
purpose of securing another, principal obligation owed by the assignor to the assignee;
Title moves from assignor to assignee but that title is defeasible being designed to
collateralize the principal obligation:
- Operationally: means assignee is burdened to collateralize the principal
obligation; taking the proceeds of the receivables assigned and applying such
proceeds to the satisfaction of the principal obligation and returning any
balance remaining thereafter to the assignor;
The parties gave the deed of assignment the form of an absolute conveyance of title
over the receivables assigned, essentially for the convenience of the assignee:
- Without such nature of absolute conveyance, the assignee would have to
foreclose the properties; he would have to comply with documentation and registration
requirements of a pledge or chattel mortgage);
- A deed of assignment by way of security avoids the necessity of a public sale
impose by the rule on pactum commisorium, by in effect placing the sale of
the collateral up front;
-
Where the 2nd element is absent, the assignment would constitute essentially
a mode of payment or dacion en pago;