Casabuena vs. Court of Appeals and Urdaneta

A deed of assignment executed to secure a debt transfers only the assignor’s personal rights of credit and its accessory rights to the assignee; it does not convey ownership of the property subject of the assigned rights, and an assignee cannot acquire a greater right than that belonging to the assignor. Consequently, where the original grant of a lot is burdened by a prohibition against alienation, the assignee steps into the assignor’s shoes and is bound by the same restriction.

Ciriaco Urdaneta purchased a 100-square-meter lot at the NDC Compound, Santa Mesa, Manila, from the City of Manila under its “Land for the Landless Program.” The sale was subject to a prohibition against alienation for a specified period and required payment of ₱5,500.00 in 480 monthly installments. Urdaneta incurred debts to Arsenia Benin and, on two occasions in 1965 and 1967, executed deeds of assignment covering first half, then the entire lot, to Benin to secure payment. Benin subsequently transferred her right, title, and interest to brothers Candido and Juan Casabuena for ₱7,500.00. After the Urdanetas fully paid the lot and a release of mortgage was issued, they sought to recover possession from Juan Casabuena, who refused to vacate and claimed ownership through the chain of assignments.

• The Land of the Landless Program Lot: On August 12, 1965, Ciriaco Urdaneta, married to Ofelia Ipil, was a grantee of a 100-square-meter lot at the NDC Compound, Santa Mesa, Manila, under the City of Manila’s Land for the Landless Program. The Deed of Sale with Mortgage obligated Urdaneta to pay the City ₱5,500.00 over forty years in 480 equal monthly installments and imposed a prohibition on alienation of the land, initially for five years and later extended to twenty years upon full payment. A Transfer Certificate of Title was issued in the name of “Ciriaco Urdaneta, married to Ofelia Ipil.”

• The Assignments to Arsenia Benin: To secure a ₱500.00 loan, Urdaneta assigned his rights and interests over one-half of the lot to Arsenia Benin on August 12, 1965. After incurring an additional ₱2,000.00 debt, Urdaneta executed a second deed of assignment on February 16, 1967, this time covering the entire lot. Under the second assignment, Benin undertook to pay all amortizations to the City on Urdaneta’s behalf. The parties verbally agreed that Urdaneta could redeem the property within three years by repaying the loans; upon failure, physical possession would pass to Benin for fifteen years, without actual transfer of title and ownership.

• Benin’s Transfer to the Casabuenas: Arsenia Benin later transferred her right, title, and interest in the property to brothers Candido and Juan Casabuena for a consideration of ₱7,500.00. Juan Casabuena thereafter acted as Benin’s rental collector from 1973 to 1976 for the two-door apartment Benin had constructed on the lot.

• Full Payment and Release of Mortgage: The Urdanetas fully paid the lot; on February 7, 1984, a Release of Mortgage was executed, extending the period of non-alienation from five to twenty years.

• Prior Litigation: Benin’s subsequent administrator, Angel Tanjuakio, filed an ejectment complaint against Juan Casabuena, alleging non-payment of rentals. The complaint was dismissed by the city court, the Regional Trial Court, and the Court of Appeals, with a petition for review denied by the Supreme Court, on the ground that the receipts issued by Tanjuakio were insufficient to prove ownership or a better right of possession.

• Urdaneta’s Demand and the Present Suit: Upon learning of the litigation between Casabuena and Benin, the Urdaneta spouses demanded that Casabuena and Benin vacate the property within fifteen days. Casabuena refused. The Urdanetas’ initial complaint for ejectment was dismissed for lack of jurisdiction. After the Urdanetas and Benin reached an agreement for the surrender of the property with the duplex, the Urdanetas filed the present complaint for recovery of possession with damages against Juan Casabuena and Thelma Casabuena (heirs of Candido) on November 3, 1987.

• Ownership Through Assignment: Petitioner Juan Casabuena maintained that the deed of assignment executed by the Urdanetas in favor of Arsenia Benin effectively transferred ownership of the lot, because Benin as creditor was subrogated to the rights of the debtor-spouses and could lawfully convey ownership to her assignees, the Casabuenas.

• Right to Possession: Petitioner argued that, as transferee of Benin’s rights, he acquired a better right to possess the property than the Urdanetas, and that the payments he made to Benin were for the construction cost of the building, not rentals.

• Assignment as Security, Not Sale: Respondent spouses countered that the assignment was merely a security arrangement for the loans they obtained from Benin and did not operate to transfer ownership of the land. They asserted that the verbal agreement gave them the right to redeem the property within three years, confirming that the assignment was not an absolute conveyance.

• Prohibition on Alienation: Respondents invoked the prohibition against sale or alienation imposed by the City of Manila, arguing that any transfer in violation of that condition was void and could not vest ownership in Benin or her successors. They contended that, as the original grantees who fully paid the purchase price and obtained the release of mortgage, they remained the true and lawful owners.

• Validity of Transfer: Whether the deed of assignment executed by Ciriaco Urdaneta in favor of Arsenia Benin operated to transfer ownership of the lot, such that her subsequent transfer to Juan Casabuena likewise conveyed rights of ownership and possession.

• Validity of Transfer: The assignment did not transfer ownership of the lot. An assignment of credit is an agreement by which the owner of a credit transfers the credit and its accessory rights to another, who acquires the power to enforce it against the debtor to the same extent as the assignor could have enforced it. It involves no transfer of ownership but merely effects the transfer of the rights the assignor had at the time. Benin was subrogated to the rights and obligations of the Urdanetas and was bound by the identical conditions, including the prohibition against alienation imposed by the City. An assignee cannot acquire a greater right than that pertaining to the assignor; the Casabuenas merely stepped into Benin’s shoes, who in turn was no more than an assignee of the debtor’s rights. Having acquired no ownership over the land, Benin conveyed nothing to the Casabuenas. The duplex was owned by Benin, but the land continued to belong to the Urdanetas. The encumbrance of the lot by way of mortgage did not part the Urdanetas with ownership; a mortgage merely subjects the property to a lien. Accordingly, the Urdanetas remained the true owners to the exclusion of petitioner.

• Definition and Effect of Assignment of Credit — An assignment of credit is an agreement by virtue of which the owner of a credit (assignor), by a legal cause, transfers his credit and its accessory rights to another (assignee), who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. It involves no transfer of ownership but merely transfers the rights the assignor possesses at the time. The assignee steps into the shoes of the assignor and is bound by the same conditions and restrictions that burdened the assigned right.

• Assignee Cannot Acquire a Greater Right — An assignee cannot acquire a greater right than that pertaining to the assignor. At most, an assignee may acquire rights duplicating those which the assignor is entitled by law to exercise. Consequently, restrictions such as a prohibition on alienation bind the assignee as they bound the assignor.

• Mortgage and Ownership — A mortgage merely subjects the property to a lien; ownership is not parted with. Only the absolute owner of a property may mortgage it, but the act of mortgaging does not transfer title.

• “The assignment involves no transfer of ownership but merely effects the transfer rights which the assignor has at the time, to the assignee.” — This passage distills the ratio decidendi that the deed of assignment did not convey title to the land.

• “An assignee cannot acquire a greater right than that pertaining to the assignor.” — The Court reiterated this fundamental principle of assignment law to explain why the prohibition on alienation equally bound Benin and the Casabuenas.

• “By mortgaging a piece of property, a debtor merely subjects it to a lien but ownership thereof is not parted with.” — This underscored that the Urdanetas remained owners despite having encumbered the property through the deed of sale with mortgage.

• Nyco Sales Corp. vs. BA Finance Corp., 200 SCRA 637 (1991) — Cited for the definition and nature of an assignment of credit as the transfer of the assignor’s right to proceed against the debtor, without transferring ownership of the subject property.

• Koa vs. Court of Appeals, 219 SCRA 541 (1993) — Relied upon for the principle that an assignee is subrogated to the rights and obligations of the assignor and is bound by exactly the same conditions.

• Gonzales vs. Land Bank of the Philippines, 183 SCRA 520 (1990) — Cited for the rule that an assignment cannot efface liens or restrictions burdening the right assigned.

• Adlawan vs. Torres, 233 SCRA 645 (1994) — Invoked for the doctrine that a mortgage does not transfer ownership but merely subjects the property to a lien.

• Article 2085, Civil Code — Establishes the essential requisites of contracts of pledge and mortgage, including that the pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. The Court invoked this provision to demonstrate that the Urdanetas’ act of mortgaging the lot was consistent with their ownership, not a waiver of it.

• Condition No. 10, Deed of Sale with Mortgage between City of Manila and Ciriaco Urdaneta — The prohibition on alienation of the lot for a specified period (initially five years, later extended to twenty) was a condition of the grant under the Land for the Landless Program. This restriction was central to the holding that the assignment could not validly convey ownership.

Chief Justice Andres R. Narvasa, Justice Santiago M. Kapunan, and Justice Fidel P. Purisima. No separate concurring opinions were noted.