Short answer. Yes. When an assignment is made without your knowledge, the Civil Code gives you the broadest protection: you may set off all debts the original creditor owed you that arose before the assignment and also those that arose afterward, right up until you actually learned about the transfer.
What the law says
If the assignment is made without the knowledge of the debtor, he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment.
Civil Code, Article 1285 — Compensation and Assignment of Credit. Read the full provision →
The law's most generous rule for uninformed debtors
Article 1285 of the Civil Code creates a three-tier system depending on whether and when you knew about the assignment of your debt. At one extreme, if you consented to the assignment, your set-off rights are heavily restricted. In the middle, if you were notified but did not consent, you can only set off debts that existed before notification. At the other extreme — your situation — when the assignment was made entirely without your knowledge, the law protects you the most. You may set off all claims you had against the original creditor both before and after the assignment, up to the moment you actually learned about it.
Why this protection is broader than the other scenarios
The underlying principle is straightforward: you cannot be expected to adjust your dealings with a creditor based on an assignment you did not know about. Until you knew, you continued in good faith to deal with the original creditor — accumulating claims, extending credit, providing services. Allowing the assignee to collect the full assigned debt while blocking your claims against the original creditor would unfairly enrich the assignee at your expense. The law responds by letting you set off everything you had built up against the original creditor, right up until the moment the assignment came to your attention.
When the protection stops
The phrase until he had knowledge of the assignment is the time limit. Once you actually learn of the transfer, the clock stops. Claims against the original creditor that you develop after learning of the assignment cannot be raised against the new creditor. This mirrors the rule for the notified-but-not-consenting debtor: knowledge is the dividing line. The practical implication: if you only recently discovered the assignment, act promptly to identify every debt the original creditor owed you before that discovery. Those are the claims you can lawfully set off.
Set-off still has its own requirements
The right to set off does not mean every claim automatically wipes out the assigned debt. Legal compensation under the Civil Code operates when both debts are due, liquidated, and demandable, and the parties are mutually creditors and debtors of each other in their own names. The fact that assignment was made without your knowledge opens the door to the set-off; the debts themselves must still satisfy the requirements for compensation. If there is a question about whether a particular debt qualifies, it is worth discussing the specifics with a lawyer before asserting the set-off formally.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Unified Financing Corp., vs. Spouses Juan and Estelita G. Tolentino, and Spouses James and Liwayway G. Tolentino, G.R. No. 271304, February 24, 2025 — read the decision on LawPhil →