JUAN CASABUENA, PETITIONER, VS. HON. COURT OF APPEALS AND SPOUSES CIRIACO URDANETA AND OFELIA IPIL-URDANETA, RESPONDENTS.

Casabuena versus Urdaneta

The Case

This is a petition for review on certiorari brought by Juan Casabuena against the spouses Ciriaco Urdaneta and Ofelia Ipil-Urdaneta. The dispute concerns a one hundred square meter lot in the NDC Compound in Santa Mesa, Manila, awarded to the Urdaneta spouses under the City of Manila's Land of the Landless Program. Casabuena claims the land through a chain of assignments originating from Ciriaco Urdaneta himself. The case matters because it fixes the true nature and limits of a deed of assignment: it transfers rights, not ownership, and the assignee takes the property subject to every lien and restriction that burdened the assignor.

Procedural History

An earlier ejectment complaint filed by Arsenia Benin's administrator, Angel Tanjuakio, against Casabuena was dismissed by the city court, and that dismissal was affirmed by the Regional Trial Court of Manila and then by the Court of Appeals. Tanjuakio's petition for review on certiorari was denied by the Supreme Court.

Urdaneta later filed a complaint for ejectment and recovery of possession against Casabuena, Benin, and Tanjuakio, but the city court dismissed it for lack of jurisdiction. The Urdaneta spouses then entered into an agreement with Benin, who surrendered the property and the duplex built on it. On November 3, 1987, the spouses filed a complaint for recovery of possession with damages against Juan Casabuena and Thelma Casabuena, representing the heirs of Candido Casabuena. The trial court declared the Urdaneta spouses the true and lawful owners, holding that the deed of assignment to Benin merely evidenced Ciriaco's indebtedness, given the City's prohibition against selling the land. The Court of Appeals affirmed, and denied reconsideration. Casabuena then filed this petition for review on certiorari before the Supreme Court.

Facts

Ciriaco Urdaneta was one of the grantees of a parcel of land purchased by the City of Manila and conveyed to less privileged inhabitants under its land reform program. On August 12, 1965, he assigned his rights and interests in one half of the lot to Arsenia Benin to cover an indebtedness of five hundred pesos. A deed of sale with mortgage was executed, with Urdaneta undertaking to pay the City five thousand five hundred pesos over forty years in four hundred eighty equal installments. On February 16, 1967, after incurring an additional debt of two thousand pesos, Ciriaco executed another deed of assignment covering the whole lot, with Benin agreeing to shoulder all obligations, including the amortizations to the City. The parties verbally agreed that Urdaneta could redeem within three years; failing that, physical possession would pass to Benin for fifteen years, without transfer of title. A transfer certificate of title was issued in the name of Urdaneta, married to Ofelia Ipil.

Benin later transferred her right, title, and interest to the brothers Candido and Juan Casabuena for seven thousand five hundred pesos. Benin constructed a two-door apartment on the lot, separately occupied by Jose Abejero and Juan Casabuena, who collected rentals from Abejero. After the lot was fully paid, a release of mortgage was executed on February 7, 1984, extending the period of non-alienation from five years to twenty years.

From 1973 to 1976, Juan Casabuena served as Benin's rental collector, but their relationship soured and Benin named Angel Tanjuakio as administrator. Upon learning of the litigation between Casabuena and Benin, Urdaneta demanded that they vacate and surrender the property within fifteen days. Casabuena refused, and the spouses sued for recovery of possession.

Issues

• Whether or not a deed of assignment can transfer ownership of the property to the assignee.
• Whether or not the Casabuenas acquired any right over the land through the assignments from Benin.

Applicable Provisions

Article 2085 of the Civil Code provides:

The following requisites are essential to the contracts of pledge and mortgage: (2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged.

This provision bears on the case because the Court reasons that only an owner may mortgage property, so the encumbrance of the lot through the deed of assignment actually confirmed that the Urdanetas remained its owners.

Ruling

On the first issue, the Court held that a deed of assignment does not transfer ownership. An assignment of credit is an agreement by virtue of which the owner of a credit, the assignor, by a legal cause, transfers his credit and its accessory rights to another, the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. The assignment involves no transfer of ownership but merely effects the transfer of rights which the assignor has at the time. Benin, having been subrogated to the rights and obligations of the spouses, was bound by exactly the same conditions, including the prohibition against selling the property within the five-year period imposed by the City government.

On the second issue, the Court held that the act of assignment could not have operated to efface liens or restrictions burdening the right assigned, because an assignee cannot acquire a greater right than that pertaining to the assignor. At most, an assignee acquires rights duplicating those his assignor is entitled by law to exercise. The Casabuenas merely stepped into Benin's shoes, and Benin was not so much an owner as a mere assignee of the rights of her debtors. Not having acquired any right over the land, Benin conveyed nothing to the Casabuenas with respect to the property. While the duplex is owned by Benin, the Casabuenas mistakenly believed the deed included cession of ownership over the land. By mortgaging property, a debtor merely subjects it to a lien but ownership is not parted with. Thus, notwithstanding the encumbrance in favor of Benin, the Urdaneta spouses remain the owners, to the exclusion of the petitioner.

Doctrine

An assignment of credit transfers only the assignor's rights, not ownership of the property, and the assignee acquires no greater right than the assignor had. The assignee takes the right subject to every lien and restriction burdening it, because an assignment cannot efface encumbrances. A mortgage does not divest the mortgagor of ownership, consistent with Article 2085 of the Civil Code, which requires the mortgagor to be the absolute owner of the thing mortgaged.

Disposition

The Supreme Court affirmed the decision of the Court of Appeals, upholding the Urdaneta spouses as the true and lawful owners entitled to possession, without costs.

Remember This

Memorize this line: an assignee cannot acquire a greater right than that pertaining to the assignor. Examiners use this case to test the distinction between an assignment of credit and a transfer of ownership, and to test whether a mortgage implies ownership under Article 2085 of the Civil Code.