Article 1255

The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws. (1175a)

Ang nangutang ay maaaring italaga ang kanyang pag-aari sa kanyang inutangan para sa pagbabayad sa kanyang inutangan ng inutang.  Ang pagtatalaga, maliban kung may nasasaad na kasalungat, ay maari lang na palayain ang nangutang sa kanyang responsibilidad para sa natitirang halagang bagay na itinalaga. Ang kasunduan na epekto ng pagtatalaga, ay ginawa sa pagitan ng nangutang at nagpa-utang  ay pinamamahalaan ng espesyal na batas.

Discussion:

Payment by Cession is another special form of payment.  It is assignment and abandonment of all the properties of the debtor for the benefit of his creditors in order that the latter may sell the same and apply the proceeds thereof to the satisfaction of their credits.

Classes of Cession or Assignment:

1. Voluntary or Contractual – cession or assignment by agreement of the parties
2. Involuntary or legal – cession or assignment which is governed by the insolvency law (Act 1956)

Requisites:

1. There is plurality of debts;
2. Debtor must be partial or completely insolvent;
3. There are at least 2 creditors;
4. There is acceptance of the cession or assignment by the creditors;
5. The property ceded or assigned must not exempt from execution.

Cession or Assignment /vs/ Dation:

1. Object: What is ceded is the universality of debtor’s property excluding those exempted from execution /vs/ What is delivered is only a particular property considered as an equivalent of the performance of the obligation;
2. Number of Parties : There is plurality of creditors /vs/ There may be only one creditor
3. Financial Condition of debtor: Debtor is insolvent /vs/ Not necessarily insolvent. dation payment can take place even when the debtor is solvent
4. Effect: Ownership is not transferred to the creditor /vs/ Ownership is transferred to the creditor upon delivery
5. Novation: Not an act of novation of the contract /vs/ an act of novation

Case Illustration: Development Bank of the Philippines vs. Court of Appeals and Lydia Cuba