Paymntt By Cession

Question 1

Coda provision payment by cession

Answer 1

ART. 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.

Question 2

Meaning of payment by cession.

Answer 2

Payment by cession is another special form of payment. It is the assignment or 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.

Question 3

Requisites of payment by cession.

Answer 3

They are:
(1) There must be two or more creditors;
(2) The debtor must be (partially) insolvent;
(3) The assignment must involve all the properties of the debtor;
and
(4) The cession must be accepted by the creditors.

Question 4

Effect of payment by cession.

Answer 4

Unless there is a stipulation to the contrary, the assignment does not make the creditors the owners of the property of the debtor and the debtor is released from his obligation only up to the net proceeds of the sale of the property assigned. (Art. 1255.) In other words, the debtor is still liable if there is a balance.

Question 5

Distinguish Dation in payment and cession

Answer 5

Both are substitute forms of payment or performance. They are governed by the law on sales.

The differences are:
(1) In dation (see Art. 1245.), there is usually only one creditor, while in cession, there are several creditors;

(2) Dation does not presuppose the insolvency of the debtor or a situation of financial difficulties, while in cession, the debtor is insolvent at the time of assignment;
(3) Dation does not involve all the property of the debtor, while cession extends to all the property of the debtor subject to execution;
(4) In dation, the creditor becomes the owner of the thing given by the debtor, while in cession, the creditors only acquire the right to sell the thing and apply the proceeds to their credits pro rata; and
(5) Dation is really an act of novation (Art. 1291[1].), while cession is not an act of novation.