Short answer. Yes. Article 1285 lets a debtor who consented to an assignment of credit still invoke compensation against the assignee, but only if he notified the assignor, at the very moment he gave consent, that he was reserving that right. Since you did exactly that, your set-off should still be usable against the assignee.
What the law says
The debtor who has consented to the assignment of rights made by a creditor in favor of a third person, cannot set up against the assignee the compensation which would pertain to him against the assignor, unless the assignor was notified by the debtor at the time he gave his consent, that he reserved his right to the compensation.
Civil Code, Article 1285 — Compensation and Assignment of Credit. Read the full provision →
What the law says
If the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the compensation of debts previous to the cession, but not of subsequent ones.
Civil Code, Article 1285 — Compensation and Assignment of Credit. Read the full provision →
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 →
Consenting to an assignment normally waives your set-off
Article 1285 opens with the default rule, and it is not friendly to a debtor who consents without thinking ahead: the debtor who has consented to the assignment of rights made by a creditor in favor of a third person, cannot set up against the assignee the compensation which would pertain to him against the assignor. Ordinarily, once you agree to the assignment, whatever your original creditor owed you personally can no longer be used to offset what you owe the new assignee. Consent, by itself, is treated as giving up that defense.
The reservation is what saves your right
The article then supplies the one way around that waiver: unless the assignor was notified by the debtor at the time he gave his consent, that he reserved his right to the compensation. Timing matters here. The reservation has to be made at the moment consent is given, not raised later as an afterthought once a dispute arises with the assignee. Because you told your creditor, at the time you consented, that you were keeping your set-off right, you fall squarely within this exception rather than the general waiver rule.
A different rule when you never consented
Article 1285 also covers debtors who were merely informed of an assignment rather than asked to agree to it: if the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the compensation of debts previous to the cession, but not of subsequent ones. Here, no waiver happens at all, because there was no consent to waive anything with. The debtor keeps the set-off for debts that existed before the assignment was communicated, but cannot add new debts arising afterward into the compensation.
The most protective rule: no notice at all
The broadest protection goes to a debtor who was never told anything: 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. Without any notice, the debtor can keep accumulating set-off rights right up until the moment he actually learns of the assignment, at which point the clock on new compensation stops. The less the debtor was told, the more compensation the law lets him raise against the assignee.
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 →