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a collections of case digests and laws that can help aspiring law students to become a lawyer


Nyco Sales vs BA Finance (200 SCRA 637, 1991)

7/4/2021

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Nyco Sales vs BA Finance (200 SCRA 637, 1991)

Facts:
Nyco Sales Corporation (Nyco) whose president and general manager is Rufino Yao (Yao), is engaged in the business of selling construction materials. The Fernandez brothers, acting in behalf of Sanshell Corporation (Sanshell), approached Rufino Yao for credit accommodation.

Fernandez Brothers went to Yao for the purpose of discounting Sanshell's post-dated check payable to Nyco. Following the discounting process agreed upon, Nyco, thru Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance issued a check payable to Nyco which endorsed it in favor of Sanshell. Sanshell then made use of and/or negotiated the check. Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in favor of BA Finance with the conformity of Sanshell with Sanshell Corporation as the debtor-obligor. The BPI check, however, was dishonored by the drawee bank upon presentment for payment. Nyco contended that they are not notified of the fact of dishonor.


Issue:
Whether the assignor is liable to its assignee for its dishonored checks.

​Held:
Yes, the assignor-vendor is liable for the invalidity of whatever he as signed to the assignee-vendee
An assignment of credit is the process of transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor. It may be done either gratuitously or generously, in which case, the assignment has an effect similar to that of a sale.
According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit itself (its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor should be held answerable therefor. The dishonor of an assigned check simply stresses its liability and the failure to give a notice of dishonor will not discharge it from such liability. This is because the cause of action stems from the breach of the warranties embodied in the Deed of Assignment, and not from the dishonoring of the check alone (See Art. 1628, Civil Code).
Here, it is beyond dispute that Nyco executed a deed of assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. Nyco is liable to pay the amount represented in the said checks.


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