CREDIT TRANSACTION CASE DIGEST/ SERVICE-WIDE SPECIALIST, INC. VS. COURT OF APPEALS, G.R. NO. 116363, 10 DECEMBER 1999

SERVICE-WIDE SPECIALIST, INC. VS. COURT OF APPEALS,

G.R. NO. 116363, 10 DECEMBER 1999

TOPIC/DOCTRINE

Mortgage credit may be alienated or assigned to a third person; The assignee’s consent is necessary in order to bind him of the alienation of the mortgaged thing by the debtor-mortgagor.

FACTS

This controversy is between a mortgagor who alienated the mortgaged property without the consent of the mortgagee, on the one hand, and the assignee of the mortgagee to whom the latter assigned his credit without notice to the mortgagor, on the other hand.

ISSUE

Whether the consent of the debtor-mortgagor is required before the assignment of credit of the mortgagee binds him.

Whether assignee’s consent is necessary in order to bind him of the alienation of the mortgaged thing by the debtor-mortgagor.

RULING

No in the first issue.

The court held that in case of assignment of credit, only notice to but not the consent of the debtor-mortgagor is necessary to bind the latter.

Yes, as to the second issue.

The court held that the assignee’s consent is necessary in order to bind him of the alienation of the mortgaged thing by the debtor-mortgagor. Since the assignee of the credit steps into the shoes of the creditor-mortgagee to whom the chattel was mortgaged, it follows that the assignee’s consent is necessary in order to bind him of the alienation of the mortgaged thing by the debtor-mortgagor. This is tantamount to novation.

Here, the court held that as the new assignee, petitioner’s consent is necessary before respondent spouses’ alienation of the vehicle can be considered as binding against third persons. Petitioner is considered a third person with respect to the sale with mortgage between respondent spouses and third-party defendant Conrado Tecson.

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