Fort Bonifacio Development v. Fong
REITERATIONFacts
The Antecedents: Fort Bonifacio Development Corporation (FBDC) entered into a Trade Contract with MS Maxco Company, Inc. (MS Maxco) for construction works. The contract allowed FBDC to withhold 5% retention money and to hire other contractors to rectify MS Maxco's defective work, deducting the cost from the retention money. MS Maxco was prohibited from assigning its rights without FBDC's written consent. Procedural History: Valentin L. Fong (Fong), as assignee of MS Maxco's receivables amounting to P1,577,115.90 from FBDC's retention money, demanded payment. FBDC refused, citing deductions for rectification costs and garnishment by MS Maxco's creditors. The Regional Trial Court (RTC) ruled in favor of Fong, holding that the assignment was valid upon notice to FBDC and that garnishments after notice could not prejudice Fong's rights. The Court of Appeals (CA) affirmed the RTC ruling. The Petition: FBDC filed a petition for review on certiorari, assailing the CA's ruling that it was bound by the Deed of Assignment and liable to Fong.
Issue(s)
Whether the Court of Appeals erred in ruling that FBDC was bound by the Deed of Assignment between MS Maxco and Fong. Whether FBDC was liable to pay Fong the amount of P1,577,115.90, representing a portion of MS Maxco's retention money.
Ruling
The petition is granted. The assailed Decision and Resolution of the Court of Appeals are reversed and set aside, and the complaint against petitioner Fort Bonifacio Development Corporation is dismissed.
Ratio Decidendi
On whether FBDC was bound by the Deed of Assignment: The Court ruled that FBDC was not bound by the Deed of Assignment because the Trade Contract explicitly prohibited MS Maxco from assigning its rights, obligations, or liabilities without FBDC's written consent. While an assignment of credit is generally valid between the parties upon notice to the debtor, the principle of relativity of contracts, as embodied in Article 1311 of the Civil Code, dictates that contracts take effect between the parties, their assigns, and heirs, except where rights and obligations are not transmissible by nature, stipulation, or law. In this case, the stipulation in the Trade Contract requiring written consent for assignment was a valid restriction. Fong, as the assignee, could not acquire greater rights than MS Maxco, the assignor, and was therefore bound by the prohibition against assignment without FBDC's consent. The assignment, though valid between Fong and MS Maxco, was not enforceable against FBDC without its consent. On whether FBDC was liable to pay Fong: Consequently, FBDC was not liable to pay Fong the assigned amount. Since the assignment was not validly made with respect to FBDC due to the lack of written consent, Fong could not validly demand the payment from FBDC. The Court reiterated that an assignee stands in the shoes of the assignor and cannot acquire rights superior to those of the assignor. Therefore, Fong's claim against FBDC was dismissed. However, the Court noted that this ruling did not preclude Fong from pursuing any recourse against MS Maxco, the assignor, based on the Deed of Assignment, which is considered a sale of personal property under Article 1628 of the Civil Code.
Main Doctrine
An assignee of a contract cannot acquire greater rights than those possessed by the assignor, and is bound by the stipulations in the original contract, including provisions requiring the consent of the other party for assignment, unless such consent is obtained.