On 26 September 2002, the Supreme Court defined the assignment of receivables as the “replacement of the creditor with another person respect to the same credit, (and) implies a change of creditor, the new creditor having the same right as the previous one and the binding relationship remaining unchallenged”.
For understanding how this right operates, we must start from the unanimous case law of the Supreme Court (TS), which understands that the assignor and the assignee may freely agree an assignment of receivables (see STS 04/02/2016. Not surprisingly, article 1112 of the Civil Code sets forth that “all rights acquired under an obligation are transferable subject to the laws, if not otherwise agreed”.
Such precept provides for the assignment in its broadest sense, only regulating two exceptions to the free transfer of the credit: (i) the law may provide for otherwise or (ii) unless otherwise agreed (pactum non cedendo, concept that we will deal with below).
To these two exceptions, we must only add the prohibition to assign such receivables when the creditor may determine the characteristics of the provision, since they are personal and non-transferable rights. In this regard, we transcribe below the old Judgment of the Supreme Court, dated 8 October 1968: “For any rights acquired under an obligation to be transferable pursuant to that set forth in this article, not only must such rights belong to its holder on a private basis, but also the subjective modification implied by this legal figure must not be forbidden by any legal precept, or be opposed to the nature itself of the right questioned, which is the case, for example, of those rights arisen from legal custody, filiation, right to a name and, in general terms, those of a merely personal nature”.
Developing the aforementioned article 1112 CC and within the Sale and Purchase Chapter, the Civil Code regulates the assignment of receivables in articles 1526 et seq. Such placement within the legal text has led the case law to clarify that it is not a sale in itself, but the assignment may find its cause in the sale and in any other legal businesses (Judgment of the Supreme Court of 1 June 2011).
As regards the determination of the price of such legal business, the TS in its Judgment of 30 April 2007 already established that the creditor assignee “may claim the entire assignor’s credit, regardless of that paid up (special sale and purchase), and the debtor is only obliged to pay that actually owed (breached)”.
Accordingly, the allegation of unfair enrichment was refused, “because there is no impoverishment since, whatever the creditor, the debtor entity pays what it must pay (that owed) and the possibility to claim the entire credit amount, and not what was paid for it, is grounded on the law, as indirectly inferred from the regulation of the so-called “buy-back of contentious receivables” (arts. 1535 and 1536 CC.).”
- Assignment of the right to claim
The issue hereby analysed is how the case law provides for the assignment of the right to claim.
For example, what happens when a consumer assigns to a third party the right to claim towards a company, for the latter to assume the costs and risk of the out-of-court and court claim in return for a share in the result.
The example that comes to mind in this case is that of companies engaged in managing compensations internationally due to flight delays or cancellations. These companies may operate by assigning the rights to claim for expediting the procedures and bureaucracy, which are usually different in each country.
In the light of this assignment of receivables (or assignment of the right to claim), the defendant companies usually allege lack of active legal standing for understanding that the action corresponds to the affected consumer only. In this point, we must make a brief summary of the different positions adopted by the Courts in Spain:
2.1. Firstly, we find some judgments that have admitted the exception put forward by the defendant of lack of active legal standing, for understanding that the action personally corresponds to the affected consumer.
In general terms, such judgments defend that in such cases where there is a document authorising a third party to claim in the consumer’s name, there is not an actual assignment of receivables. Judgment 7 February 2018 issued by Commercial Court Nº 1 of Santander, (Cendoj: 39075470012018100003) explains this case as follows:
“The plaintiff appears as the credit assignee due to a delay of two passengers. From the attached documents nº 6 and nº 7 and the consultation of its web results that no payment has been made to the assignees and no credit has been actually assigned, but the management of its collection has been committed, and as a result of the litigation initiated, if admitted, the “assignor” shall be paid an amount, discounting the relevant commission.
The assignment of receivables is a disposal business seeking acquisition thereof by the assignee. It is a credit transfer carried out on an inter-vivos basis and which fulfils an economic function of movement of credits within legal transactions. It is not really an abstract business, but the, we could say, generic cause of the transfer of the credit right, shall always require a variable element, which is the specific purpose or function of the transfer on a case by case basis.
Pursuant to the foregoing and despite the systematic placement of art 1526 CC, even from the terms of precepts such as article 1528 CC, sale is not the only possible cause, but the multiple choices permitted (sale, donation, financing – discount-, discharge, warranty, trust, etc.) do not admit the “collection management” precisely because there is not a credit transfer.”
This position has been sporadically admitted by other Courts, such as Commercial Court Nº 7 of Madrid (Judgment of 10 May 2018) or Commercial Court nº 2 of Bilbao (Judgment of 17 December 2018).
The Judge of Santander expressly excludes the collection management as an admitted cause of the assignment, for understanding that such business is inconsistent and does not imply an effective transfer of the credit.
The question is if the fact that the assignee may assume the costs and risks of the claim as its own, holding the assignor harmless, cannot be considered as an effective transfer, because we could consider that the creditor assignee is really paying a price for the transfer of the right, consisting of the assumption and actual pay-out of the costs and risks of the claim.
Indeed, we could understand that having the creditor assignor fully delegated the management of its right of credit to the person who will assume the costs and risks thereof, the right has been actually transferred.
The foregoing would lead us to consider that, if the claim is successful, the person receiving a remuneration or reward – and not part of its credit – is the assignor and not the assignee, since the latter is realising its credit right.
On the contrary, if the claim is unsuccessful, the assignee would be the only one to assume all losses, the assignor being released, to the extent it has transferred its right.
2.2. The position mostly supported by Courts is the one refusing the exception of lack of active legal standing, for understanding that the assignment of the right to claim is valid.
All these Judgments consider the assignment as a contractual title granting full legal standing of article 10 LEC to the creditor assignee that has acquired the credit.
We transcribe below Judgment of 27 March 2018 issued by Commercial Court nº 6 of Madrid (Cendoj: 28079470062018100003):
“We are therefore dealing with a transfer of the credit title in order to claim, finance and manage in and out of courts any possible compensation for flight incidences; a lawful business cause admitted in Law which grants the assignee to any third-party debtors of the assignor the title to claim as if the former was the one to claim.
This business cause must be recognised and remarked since the same enables the claim by the consumer/passenger against companies of different countries, subject to different regulations and different out-of-court and court remedies to be carried out in the language of each company, with important personal, temporal and material costs which are assumed by the assignee at its business risk [-of being rejected-] and in return for a percentage remuneration [-if admitted-]; which is made available to passengers by the different claim companies which, concurrently and globally, offer consumers such collection management services.
Judgment of 15 November 2018 issued by Commercial Court nº 1 of San Sebastián (Cendoj 20069470012018100330) also explains this matter very well, when considering that in these cases there is no exception limiting the possibility to transfer the credit:
“Therefore, there is no legal prohibition to assignment as we are not dealing with a non-transferable or absolute right in its nature, so that there is no objection to the assignment of receivables. In brief, the rule of exception to the transferability of receivables does not apply, i.e., (i) the specific nature of the credit in question, either because the creditor determines the characteristics of the provision or because, for example, it is an ancillary right to another principal one from which the former cannot be detached; (ii) the existence of a contractual prohibition (pactum de non cedendo); or (iii) a legal prohibition.
In fact, STJUE of 17 February 2016 confirms the thesis put forward in this ruling when allowing a third-party other than the passenger to claim against the flight company to compensate for the damages caused due to a delayed flight.
What is assigned is a credit right against a company, fruit of the existing commercial relationship and above all, fruit of the existence of a fact triggering compensation. The fact that the same is not quantified, does not prevent the identification of that transferred, which is the possibility to claim to the third party. This right held by the passenger is the right assigned and which is identified in the contract submitted in these proceedings”.
The Commercial Court nº 2 of Palma de Mallorca (Judgment of 12 December 2018), Commercial Court nº 3 of Mallorca (Judgment of 20 December 2018) or Commercial Court nº 13 of Madrid (Judgment of 20 February 2019) have also ruled uniformly.
- Pactum de non cedendo: “prohibition to assign the rights to claim” clause.
Contracts entered into between a company and a consumer usually contains a general condition imposing the consumer the “prohibition to assign the economic rights arisen from the incidences generated by compensation rights in favour of consumers, as well as contractual breaches, capable of triggering a compensation”. That is, a clause whereby the consumer undertakes to exercise any possible actions personally and not to assign its credit to third parties.
Recently, Commercial Court nº 1 of Las Palmas de Gran Canarias, by means of Judgment of 22 April 2019, has declared the nullity of such clause for considering it unfair, contrary to good faith and causing unbalance between the parties.
The Judge considers that such clause “intends or seeks to prevent the exercise of the right to claim in a series of cases where, despite this case, where there is an objective responsibility, due to personal or other concurrent circumstances, the passenger or holder of such responsibility decides to assign such right. Therefore, since it is an unfair clause, the same is not applied in these proceedings”.
Consequently, this type of clause is recently being declared null, considered as excluded and does not prevent the consumer from assigning the right to claim in order not to discourage the initiation of actions before the Courts.
- Assignment of receivables formalism
We must ask ourselves if the so-called assignment of receivables requires any formalism for being fully effective. Judgment of 20 December 2018 issued by Commercial Court nº 3 of Palma de Mallorca has stated that in these cases, since the contract is not assigned, but only the credit, such assignment does not require any public document or, logically and as established in our Civil Code, the debtor’s consent.
This is also confirmed by Judgment of 19 December 2018 of Commercial Court nº 1 of San Sebastián, which states that the assignment does not require any special formalism.
The assignment of a right to claim to a third party for the latter to manage such right on its own name and risk is actually an assignment of receivables ex art. 1112 CC and, as such, is perfectly valid, with the only limits mentioned above (law, agreement otherwise and absolute rights).
We must remind that the Civil Code expressly allows the assignment of “doubtful receivables” (Art. 1529), or “litigious receivables” (1535) with no more conditions other than those seen above.
Therefore, we understand that restrictive interpretations by courts to the assignment of this type of rights to claim are not only contrary to their regulation in the CC, but they may also unduly limit commercial transactions and unjustifiably hinder the right to effective judicial protection.