CESSION v. DACION IN PAYMENT

Cession is the assignment of the debtor's property in favor of creditors.

Sale and cession are different the same way sale differs from dation in payment. In cession the assignee (creditor) does not acquire ownership over the things assigned, but only the right to sell said things. From the proceeds of such sale, the creditors are to be paid what is due them.

Article 1255 of the Civil Code provides that "the debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is a stipulation to the contrary, shall only release the debtor from responsibility of 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."

Manresa, as cited by Paras, defines cession as "the abandonment of all the property of the debtor for the benefit of his creditors in order that the latter may apply the proceeds thereof to the satisfaction of their credits." (8 Manresa 321; Paras [2008]. Special Contrats. ISBN 978-971-23-4503-6).

In dation, one creditor is enough while, in cession, there must be two or more creditors.

In dation, not all properties of the debtor are to be given. In cession, all of the debtor's properties are conveyed.

In dation, there is no requirement of insolvency. In cession, it can only take place if the debtor is insolvent.

In dation, ownership is transferred to the creditor in whose favor the conveyance was made. In cession, the creditors do not become owners.

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