Professional Documents
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Subsidiary Remedies of Creditor
Subsidiary Remedies of Creditor
Court of
Khe Hong Cheng vs. Court of Appeals Appeals
G.R. No. 144169. March 28, 2001. * lowing requisites must concur: 1) That the plaintiff asking for
KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE rescission has a credit prior to the alienation, although demandable
and RAY STEVEN KHE, petitioners, vs. COURT OF later; 2) That the debtor has made a subsequent contract conveying
APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI a patrimonial benefit to a third person; 3) That the creditor has no
other legal remedy to satisfy his claim, but would benefit by
CITY and PHILAM INSURANCE CO., INC., respondents.
rescission of the conveyance to the third person; 4) That the act being
Actions; Rescission; Accion Pauliana; Obligations and impugned is fraudulent; 5) That the third person who received the
Contracts; Prescription; Since Article 1389 of the Civil Code is silent property conveyed, if by onerous title, has been an accomplice in the
as to when the prescriptive period would commence, the general rule, fraud.
i.e., from the moment the cause of action accrues, therefore, applies.— Same; Same; Same; Prescription; Land Titles; To count the
Article 1389 of the Civil Code simply provides that, “The action to four-year period to rescind an allegedly fraudulent contract from the
claim rescission must be commenced within four years.” Since this date of registration of the conveyance with the Register of Deeds
provision of law is silent as to when the prescriptive period would would run counter to Article 1383 of the Civil Code as well as settled
commence, the general rule, i.e., from the moment the cause of jurisprudence.—Petitioners’ argument that the Civil Code must
action accrues, therefore, applies. Article 1150 of the Civil Code is yield to the Mortgage and Registration Laws is misplaced, for in no
particularly instructive: Art. 1150. The time for prescription for all way does this imply that the specific provisions of the former may
kinds of actions, when there is no special provision which ordains be all together ignored. To count the four-year prescriptive period to
otherwise, shall be counted from the day they may be brought. rescind an allegedly fraudulent contract from the date of
Indeed, this Court enunciated the principle that it is the legal registration of the conveyance with the Register of Deeds, as alleged
possibility of bringing the action which determines the starting by the petitioners, would run counter to Article 1383 of the Civil
point for the computation of the prescriptive period for the action. Code as well as settled jurisprudence. It would likewise violate the
Same; Same; Same; Requisites; An action to rescind or an third requisite to file an action for rescission of an allegedly
accion pauliana must be of last resort, availed of only after all other fraudulent conveyance of property, i.e., the creditor has no other
legal remedies have been exhausted and have been proven futile.— legal remedy to satisfy his claim.
Article 1383 of the Civil Code provides as follows: Art. 1383. An Same; Same; Same; Same; An accion pauliana presupposes the
action for rescission is subsidiary; it cannot be instituted except following—1) a judgment; 2) the issuance by the trial court of a writ
when the party suffering damage has no other legal means to obtain of execution for the satisfaction of the judgment; and 3) the failure of
reparation for the same. It is thus apparent that an action to rescind the sheriff to enforce and satisfy the judgment of the court.—
or an accion pauliana must be of last resort, availed of only after all An accion pauliana thus presupposes the following: 1) A judgment;
other legal remedies have been exhausted and have been proven 2) the issuance by the trial court of a writ of execution for the
futile. For an accion pauliana to accrue, the fol- satisfaction of the judgment; and 3) the failure of the sheriff to
_______________ enforce and satisfy the judgment of the court. It requires that the
creditor has exhausted the property of the debtor. The date of the
* FIRST DIVISION. decision of the trial court is immaterial. What is important is that
702 the credit of the plaintiff antedates that of the fraudulent alienation
by the debtor of his property. After all, the decision of the trial court
702 SUPREME COURT against the debtor will retroact to the time when the debtor became
REPORTS ANNOTATED indebted to the creditor.
Same; Same; Same; Same; Where the judgment creditor filed same as an affirmative defense in their answer, petitioners are
its complaint for accion pauliana barely a month from its discovery deemed to have waived their right to object to improper venue.
that the defendant had no other property to satisfy the judgment
award against him, its action for rescission of the deeds of donation PETITION for review on certiorari of a decision of the Court
clearly had not yet prescribed.—As mentioned earlier, respondent of Appeals.
Philam only learned about the
703 The facts are stated in the opinion of the Court.
VOL. 355, MARCH 28, 703 Nelbert T. Poculan for petitioners.
2001 Linsangan Law Office for private respondent.
Khe Hong Cheng vs. Court of KAPUNAN, J.:
Appeals
unlawful conveyances made by petitioner Khe Hong Cheng in Before the Court is a Petition for Review on Certiorari under
January 1997 when its counsel accompanied the sheriff to Butuan Rule 45, seeking to set aside the decision of the Court of
City to attach the properties of petitioner Khe Hong Cheng. There Appeals
they found that he no longer had any properties in his name. It was 704
only then that respondent Philam’s action for rescission of the deeds 704 SUPREME COURT REPORTS
of donation accrued because then it could be said that respondent
ANNOTATED
Philam had exhausted all legal means to satisfy the trial court’s
judgment in its favor. Since respondent Philam filed its complaint Khe Hong Cheng vs. Court of Appeals
for accion pauliana against petitioners on February 25, 1997, barely dated April 10, 2000 and its resolution dated July 11, 2000
a month from its discovery that petitioner Khe Hong Cheng had no denying the motion for reconsideration of the aforesaid
other property to satisfy the judgment award against him, its action decision. The original complaint that is the subject matter of
for rescission of the subject deeds clearly had not yet prescribed. this case is an accion pauliana—an action filed by Philam
Same; Venue; Where the defendant failed to either file a motion Insurance Company, Inc. (respondent Philam) to rescind or
to dismiss on the ground of improper venue or include the same as annul the donations made by petitioner Khe Hong Cheng
an affirmative defense in its answer, it is deemed to have waived its allegedly in fraud of creditors. The main issue for resolution is
right to object to improper venue.—Petitioners now belatedly raise
whether or not the action to rescind the donations has already
on appeal the defense of improper venue claiming that respondent
Philam’s complaint is a real action and should have been filed with
prescribed. While the first paragraph of Article 1389 of the
the RTC of Butuan City since the property subject matter of the Civil Code states: “The action to claim rescission must be
donations are located therein. Suffice it to say that petitioners are commenced within four years . . .” the question is, from which
already deemed to have waived their right to question the venue of point or event does this prescriptive period commence to run?
the instant case. Improper venue should be objected to as follows 1) The facts are as follows:
in a motion to dismiss filed within the time but before the filing of Petitioner Khe Hong Cheng, alias Felix Khe, is the owner
the answer; or 2) in the answer as an affirmative defense over which, of Butuan Shipping Lines. It appears that on or about October
in the discretion of the court, a preliminary hearing may be held as 4, 1985, the Philippine Agricultural Trading Corporation
if a motion to dismiss had been filed. Having failed to either file a shipped on board the vessel M/V PRINCE ERIC, owned by
motion to dismiss on the ground of improper venue or include the petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate,
Masbate, for delivery to Dipolog City, Zamboanga del Norte.
The said shipment of copra was covered by a marine insurance 1. 1)the sum of P354,000.00 representing the amount paid by
policy issued by American Home Insurance Company the plaintiff to the Philippine Agricultural Trading
(respondent Philam’s assured). M/V PRINCE ERIC, however, Corporation with legal interest at 12% from the time of the
sank somewhere between Negros Island and Northeastern filing of the complaint in this case;
2. 2)the sum of P50,000.00 as attorney’s fees;
Mindanao, resulting in the total loss of the shipment. Because
3. 3)the costs. 1
ordering the latter to pay the former: Petitioners subsequently filed their answer to the
complaint a quo. They moved for its dismissal on the ground
that the action had already prescribed. They posited that the VOL. 355, MARCH 28, 2001 707
registration of the deeds of donation on December 27, 1989 Khe Hong Cheng vs. Court of Appeals
constituted constructive notice and since the complaint a Petitioners now assail the aforesaid decision and resolution of
quo was filed only on February 25, 1997, or more than four (4) the CA alleging that:
years after said registration, the action was already barred by I
prescription. 3
Acting thereon, the trial court denied the motion to dismiss. PUBLIC RESPONDENT GRAVELY ERRED AND ACTED IN
It held that respondent Philam’s complaint had not yet GRAVE ABUSE OF DISCRETION WHEN IT DENIED THE
prescribed. According to the trial court, the prescriptive period PETITION TO DISMISS THE CASE BASED ON THE GROUND
OF PRESCRIPTION.
began to run only from December 29, 1993, the date of the
decision of the trial court in Civil Case No. 13357. 4
II
On appeal by petitioners, the CA affirmed the trial court’s
decision in favor of respondent Philam. The CA declared that PUBLIC RESPONDENT COURT OF APPEALS GRAVELY
the action to rescind the donations had not yet prescribed. ERRED IN HOLDING THAT PRESCRIPTION BEGINS TO RUN
Citing Articles 1381 and 1383 of the Civil Code, the CA WHEN IN JANUARY 1997 THE SHERIFF WENT TO BUTUAN
basically ruled that the four year period to institute the action CITY IN SEARCH OF PROPERTIES OF PETITIONER FELIX
for rescission began to run only in January 1997, and not when KHE CHENG TO SATISFY THE JUDGMENT IN CIVIL CASE NO.
the decision in the civil case became final and executory on 13357 AND FOUND OUT THAT AS EARLY AS DEC. 20, 1989,
PETITIONERS KHE CHENG EXECUTED THE DEEDS OF
December 29, 1993. The CA reckoned the accrual of
DONATIONS IN FAVOR OF HIS CO-PETITIONERS THAT THE
respondent Philam’s cause of action on January 1997, the time
ACTION FOR RESCISSION ACCRUED BECAUSE
when it first learned that the judgment award could not be PRESCRIPTION BEGAN TO RUN WHEN THESE DONATIONS
satisfied because the judgment creditor, petitioner Khe Hong WERE REGISTERED WITH THE REGISTER OF DEEDS IN
Cheng, had no more properties in his name. Prior thereto, DECEMBER 1989, AND WHEN THE COMPLAINT WAS FILED
respondent Philam had not yet exhausted all legal means for ONLY IN FEBRUARY 1997, MORE THAN FOUR YEARS HAVE
the satisfaction of the decision in its favor, as prescribed under ALREADY LAPSED AND THEREFORE, IT HAS ALREADY
Article 1383 of the Civil Code. 5 PRESCRIBED. 6
5 Id., at 44-47.
years.” Since this provision of law is silent as to when the
prescriptive period would commence, the general rule, i.e.,
707
from the moment the cause of action accrues, therefore, An accion pauliana accrues only when the creditor discovers that he
applies. Article 1150 of the Civil Code is particularly has no other legal remedy for the satisfaction of his claim against
instructive: the debtor other than an accion pauliana. The accion pauliana is an
______________ action of a last resort. For as long as the creditor still has a remedy
at law for the enforcement of his claim against the debtor, the
6 Id., at 16. creditor will not have any cause of action against the creditor for
rescission of the contracts entered
708
708 SUPREME COURT REPORTS _______________
ANNOTATED
7Constancia C. Tolentino vs. CA, et al., 162 SCRA 66, 72.
Khe Hong Cheng vs. Court of Appeals 8Siguan vs. Lim, 318 SCRA 725, 735, quoting TOLENTINO, ARTURO M.,
Art. 1150. The time for prescription for all kinds of actions, when CIVIL CODE OF THE PHILIPPINES 576 (1991); citing 8 Manresa 756, 2
there is no special provision which ordains otherwise, shall be Castan 543-555, and 3 Camus 207.
counted from the day they may be brought.
709
Indeed, this Court enunciated the principle that it is the legal VOL. 355, MARCH 28, 2001 709
possibility of bringing the action which determines the Khe Hong Cheng vs. Court of Appeals
starting point for the computation of the prescriptive period into by and between the debtor and another person or persons.
for the action. Article 1383 of the Civil Code provides as
7 Indeed, an accion pauliana presupposes a judgment and the
follows: issuance by the trial court of a writ of execution for the satisfaction
Art. 1383. An action for rescission is subsidiary; it cannot be of the judgment and the failure of the Sheriff to enforce and satisfy
instituted except when the party suffering damage has no other the judgment of the court. It presupposes that the creditor has
legal means to obtain reparation for the same. exhausted the property of the debtor. The date of the decision of the
trial court against the debtor is immaterial. What is important is
It is thus apparent that an action to rescind or an accion that the credit of the plaintiff antedates that of the fraudulent
pauliana must be of last resort, availed of only after all other alienation by the debtor of his property. After all, the decision of the
legal remedies have been exhausted and have been proven trial court against the debtor will retroact to the time when the
futile. For an accion pauliana to accrue, the following debtor became indebted to the creditor. 9
requisites must concur: Petitioners, however, maintain that the cause of action of
1) That the plaintiff asking for rescission has a credit prior to the
respondent Philam against them for the rescission of the deeds
alienation, although demandable later; 2) That the debtor has made
of donation accrued as early as December 27, 1989, when
a subsequent contract conveying a patrimonial benefit to a third
person; 3) That the creditor has no other legal remedy to satisfy his petitioner Khe Hong Cheng registered the subject conveyances
claim, but would benefit by rescission of the conveyance to the third with the Register of Deeds. Respondent Philam allegedly had
person; 4) That the act being impugned is fraudulent; 5) That the constructive knowledge of the execution of said deeds under
third person who received the property conveyed, if by onerous title, Section 52 of Presidential Decree No. 1529, quoted infra, as
has been an accomplice in the fraud. (Emphasis ours)
8 follows:
Section 52. Constructive knowledge upon registration.—Every
We quote with approval the following disquisition of the CA on conveyance, mortgage, lease, lien, attachment, order, judgment,
the matter: instrument or entry affecting registered land shall, if registered,
filed or entered in the Office of the Register of Deeds for the province demandable at the time the rescissory action is brought. Rescission
or city where the land to which it relates lies, be constructive notice is a subsidiary action, which presupposes that the creditor has
to all persons from the time of such registering, filing, or entering. exhausted the property of the debtor which is impossible in credits
which cannot be enforced because of a suspensive term or condition.
Petitioners’ argument that the Civil Code must yield to the While it is necessary that the credit of the plaintiff in the accion
Mortgage and Registration Laws is misplaced, for in no way pauliana must be prior to the fraudulent alienation, the date of the
does this imply that the specific provisions of the former may judgment enforcing it is immaterial. Even if the judgment be
be all together ignored. To count the four year prescriptive subsequent to the alienation, it is merely declaratory with
period to rescind an allegedly fraudulent contract from the retroactive effect to the date when the credit was constituted.” 10
debtor will retroact to the time when the debtor became In the same case, the Court also quoted the rationale of the CA
indebted to the creditor. when it upheld the dismissal of the accion pauliana on the
Tolentino, a noted civilist, explained: basis of lack of cause of action:
“x x x [T]herefore, credits with suspensive term or condition are
“In this case, plaintiffs-appellants had not even commenced an
excluded, because the accion pauliana presupposes a judgment and
action against defendants-appellees Bareng for the collection of the
unsatisfied execution, which cannot exist when the debt is not yet
alleged indebtedness. Plaintiffs-appellants had not even tried to “That the DONOR further states, for the same purpose as expressed
exhaust the property of defendants-appellees Bareng. Plaintiffs- in the next preceding paragraph, that this donation is not made with
appellants, in seeking the rescission of the contracts of sale entered the object of defrauding his creditors having reserved to himself
into between defendants-appellees, failed to show and prove that property sufficient to answer his debts contracted prior to this
defendants-appellees Bareng had no other property, either at the date.”12
time of the sale or at the time this action was filed, out of which they
could have collected this (sic) debts.” (Emphasis ours) As mentioned earlier, respondent Philam only learned about
the unlawful conveyances made by petitioner Khe Hong Cheng
Even if respondent Philam was aware, as of December 27, in January 1997 when its counsel accompanied the sheriff to
1989, that petitioner Khe Hong Cheng had executed the deeds Butuan City to attach the properties of petitioner Khe Hong
of donation in favor of his children, the complaint against Cheng. There they found that he no longer had any properties
Butuan Shipping Lines and/or petitioner Khe Hong Cheng in his name. It was only then that respondent Philam’s action
was still pending before the trial court. Respondent Philam for rescission of the deeds of donation accrued because then it
had no inkling, at the time, that the trial court’s judgment could be said that respondent Philam had exhausted all legal
would be in its favor and further, that such judgment would means to satisfy the trial court’s judgment in its favor. Since
not be satisfied due to the deeds of donation executed by respondent Philam filed its complaint for accion
petitioner Khe Hong Cheng during the pendency of the case. pauliana against petitioners on February 25, 1997, barely a
Had respondent Philam filed his complaint on December 27, month from its discovery that petitioner Khe Hong Cheng had
1989, such complaint would have been dismissed for being no other property to satisfy the judgment award against him,
premature, Not only were all other legal remedies for the its action for rescission of the subject deeds clearly had not yet
enforcement of respondent Philam’s claims not yet exhausted prescribed.
at the time the deeds of donation were executed and A final point. Petitioners now belatedly raise on appeal the
registered. Respondent Philam would also not have been able defense of improper venue claiming that respondent Philam’s
to prove then that petitioner Khe Hong Cheng had no more complaint is a real action and should have been filed with the
property other than those covered by the subject deeds to RTC of Butuan City since the property subject matter of the
satisfy a favorable judgment by the trial court. donations are located therein. Suffice it to say that petitioners
It bears stressing that petitioner Khe Hong Cheng even are already deemed to have waived their right to question the
expressly declared and represented that he had reserved to venue of the instant case. Improper venue should be objected
himself property sufficient to answer for his debts contracted to as follows 1) in a motion to dismiss filed within the time but
prior to this date: before the filing of the answer; or 2) in the answer as an
13
_______________
affirmative defense over which, in the discretion of the court,
11 Adorable vs. CA, 319 SCRA 201, 207 (1999). a preliminary hearing may be held as if a motion to dismiss
had been filed. Having failed to either file a motion to dismiss
14
712
on the ground of improper venue or include the same as an
712 SUPREME COURT REPORTS affirmative defense in their answer, petitioners are deemed to
ANNOTATED have waived their right to object to improper venue.
Khe Hong Cheng vs. Court of Appeals ______________
12 Annex “K.” Notes.—Venue relates to the place of trial and not to the
Section 1, Rule 16, 1997 Rules of Court.
jurisdiction of the court. (Philippine Banking Corporation vs.
13
It also appears that on 31 July 1990 LIM was convicted of On 23 June 1993, petitioner filed an accion
estafa by the RTC of Quezon City in Criminal Case No. Q-89- pauliana against LIM and her children before Branch 18 of
2216 filed by a certain Victoria Suarez. This decision was
2 the RTC of Cebu City to rescind the questioned Deed of
affirmed by the Court of Appeals. On appeal, however, this Donation and to declare as null and void the new transfer
Court, in a decision promulgated on 7 April 1997, acquitted
3 certificates of title issued for the lots covered by the questioned
LIM but held her civilly liable in the amount of P169,000, as Deed. The complaint was docketed as Civil Case No. CEB-
actual damages, plus legal interest. 14181. Petitioner claimed therein that sometime in July 1991,
Meanwhile, on 2 July 1991, a Deed of Donation conveying4 LIM, through a Deed of Donation, fraudulently transferred all
the following parcels of land and purportedly executed by LIM her real property to her children in bad faith and in fraud of
on 10 August 1989 in favor of her children, Linde, Ingrid and creditors, including her; that LIM conspired and confederated
Neil, was registered with the Office of the Register of Deeds of with her children in antedating the questioned Deed of
Cebu City: Donation, to petitioner’s and other creditors’ prejudice; and
that LIM, at the time of the fraudulent conveyance, left no
1. (1)a parcel of land situated at Barrio Lahug, Cebu City, sufficient properties to pay her obligations.
containing an area of 563 sq. m. and covered by TCT No. On the other hand, LIM denied any liability to petitioner.
93433; She claimed that her convictions in Criminal Cases Nos.
22127-28 were erroneous, which was the reason why she
_______________ appealed said decision to the Court of Appeals. As regards the
1 Original Record (OR), 42.
questioned Deed of Donation, she maintained that it was not
2 Id., 135. antedated but was made in good faith at a time when she had
3 G.R. No. 102784, 271 SCRA 12 (1997).
sufficient property. Finally, she alleged that the Deed of
4 OR, 10-12.
Donation was registered only on 2 July 1991 because she was
731
seriously ill.
VOL. 318, NOVEMBER 19, 731
In its decision of 31 December 1994, the trial court ordered
6
1999
the rescission of the questioned deed of donation; (2) declared
Siguan vs. Lim null and void the transfer certificates of title issued in the
celebration of the contract; and (2) there must be a fraud, or at the various circumstances indicating the existence of fraud in
least the intent to commit fraud, to the prejudice of the a transaction. She reiterates her arguments below, and adds
creditor seeking the rescission. that another fact found by the trial court and admitted by the
According to the Court of Appeals, the Deed of Donation, parties but untouched by the Court of Appeals is the existence
which was executed and acknowledged before a notary public, of a prior final judgment against LIM in Criminal Case No. Q-
appears on its face to have been executed on 10 August 1989. 89-2216 declaring Victoria Suarez as LIM’s judgment creditor
Under Section 23 of Rule 132 of the Rules of Court, the before the execution of the Deed of Donation.
questioned Deed, being a public document, is evidence of the Petitioner further argues that the Court of Appeals
fact which gave rise to its execution and of the date thereof. incorrectly applied or interpreted Section 23, Rule 132 of the
9
No antedating of the Deed of Donation was made, there being Rules of Court, in holding that “being a public document, the
no convincing evidence on record to indicate that the notary said deed of donation is evidence of the fact which gave rise to
public and the parties did antedate it. Since LIM’s its execution and of the date of the latter.” Said provision
indebtedness to petitioner was incurred in August 1990, or a should be read with Section 30 of the same Rule which
10
year after the execution of the Deed of Donation, the first provides that notarial documents are prima facie evidence of
requirement for accion pauliana was not met. their execution, not “of the facts which gave rise to their
Anent petitioner’s contention that assuming that the Deed execution and of the date of the latter.”
of Donation was not antedated it was nevertheless in fraud of
_______________
creditors because Victoria Suarez became LIM’s creditor on 8
October 1987, the Court of Appeals found the same untenable, 8 21 Phil. 243 (1912).
for the rule is basic that the fraud must prejudice the creditor 9 Sec. 23. Public documents as evidence.—Documents consisting of entries
in public records made in the performance of a duty by a public officer
seeking the rescission.
are prima facie evidence of the facts therein stated. All other public documents
Her motion for reconsideration having been denied, are evidence, even against a third person, of the fact which gave rise to their
petitioner came to this Court and submits the following issue: execution and of the date of the latter.
10 Sec. 30. Proof of notarial documents.—Every instrument duly Findings of fact of the latter court are conclusive, except in a
acknowledged or proved and certified as provided by law may be presented in
number of instances. In the case at bar, one of the recognized
11
evidence without further proof, the certificate of acknowledgment being prima
facie evidence of the execution of the instrument or document involved.
_______________
734
734 SUPREME COURT REPORTS 11 In Sta. Maria v. Court of Appeals, 285 SCRA 351 (1998), the Court
ANNOTATED enumerated some of the instances when the factual findings of the Court of
Siguan vs. Lim Appeals are not deemed conclusive, to wit: (1) when the findings are grounded
entirely on speculation, surmises, or conjectures; (2) when the inference made
Finally, petitioner avers that the Court of Appeals overlooked is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of
Article 759 of the New Civil Code, which provides: “The discretion; (4) when
donation is always presumed to be in fraud of creditors when 735
at the time of the execution thereof the donor did not reserve VOL. 318, NOVEMBER 19, 735
sufficient property to pay his debts prior to the donation.” In 1999
this case, LIM made no reservation of sufficient property to Siguan vs. Lim
pay her creditors prior to the execution of the Deed of exceptions warranting a review by this Court of the factual
Donation. findings of the Court of Appeals exists, to wit, the factual
On the other hand, respondents argue that (a) having findings and conclusions of the lower court and Court of
agreed on the law and requisites of accion pauliana, petitioner Appeals are conflicting, especially on the issue of whether the
cannot take shelter under a different law; (b) petitioner cannot Deed of Donation in question was in fraud of creditors.
invoke the credit of Victoria Suarez, who is not a party to this Article 1381 of the Civil Code enumerates the contracts
case, to support her accion pauliana; (c) the Court of Appeals which are rescissible, and among them are “those contracts
correctly applied or interpreted Section 23 of Rule 132 of the undertaken in fraud of creditors when the latter cannot in any
Rules of Court; (d) petitioner failed to present convincing other manner collect the claims due them.”
evidence that the Deed of Donation was antedated and The action to rescind contracts in fraud of creditors is
executed in fraud of petitioner; and (e) the Court of Appeals known as accion pauliana. For this action to prosper, the
correctly struck down the awards of damages, attorney’s fees following requisites must be present: (1) the plaintiff asking
and expenses of litigation because there is no factual basis for rescission has a credit prior to the alienation, although 12
therefor in the body of the trial court’s decision. demandable later; (2) the debtor has made a subsequent
The primordial issue for resolution is whether the contract conveying a patrimonial benefit to a third person; (3)
questioned Deed of Donation was made in fraud of petitioner the creditor has no other legal remedy to satisfy his claim; (4) 13
and, therefore, rescissible. A corollary issue is whether the the act being impugned is fraudulent; (5) the third person
14
awards of damages, attorney’s fees and expenses of litigation who received the property conveyed, if it is by onerous title,
are proper. has been an accomplice in the fraud. 15
The fourth requisite for an accion pauliana to prosper is not 1. (2)A parcel of land located in Benros Subdivision, Lawa-an,
present either. Talisay, Cebu;23
Article 1387, first paragraph, of the Civil Code provides: 2. (3)A parcel of land containing an area of 2.152 hectares, with
“All contracts by virtue of which the debtor alienates property coconut trees thereon, situated at Hindag-an, St. Bernard,
by gratuitous title are presumed to have been entered into in Southern Leyte, and covered by Tax Declaration No.
fraud of creditors when the donor did not reserve sufficient 13572.24
property to pay all debts contracted before the donation. 3. (4)A parcel of land containing an area of 3.6 hectares, with
Likewise, Article 759 of the same Code, second paragraph, coconut trees thereon, situated at Hindag-an, St. Bernard,
states that the donation is always presumed to be in fraud of
Southern Leyte, and covered by Tax Declaration No. tions, petitioner did not present evidence that would indicate
13571. 25
the actual market value of said properties. It was not,
therefore, sufficiently established that the properties left
During her cross-examination, LIM declared that the house behind by LIM were not sufficient to cover her debts existing
and lot mentioned in No. 1 was bought by her in the amount before the donation was made. Hence, the presumption of
of about P800,000 to P900,000. Thus: 26
fraud will not come into play.
ATTY. FLORIDO: Nevertheless, a creditor need not depend solely upon the
Q These properties at the Sto. Niño presumption laid down in Articles 759 and 1387 of the Civil
Village, how much did you acquire Code. Under the third paragraph of Article 1387, the design to
this property? defraud may be proved in any other manner recognized by the
A Including the residential house law of evidence. Thus in the consideration of whether certain
P800,000.00 to P900,000.00. transfers are fraudulent, the Court has laid down specific
Q How about the lot which includes rules by which the character of the transaction may be
the house. How much was the price determined. The following have been denominated by the
in the Deed of Sale of the house Court as badges of fraud:
and lot at Sto. Niño Violage [sic]?
A I forgot. 1. (1)The fact that the consideration of the conveyance is
fictitious or is inadequate;
Q How much did you pay for it?
2. (2)A transfer made by a debtor after suit has begun and while
A That is P800,000.00 to it is pending against him;
P900,000.00. 3. (3)A sale upon credit by an insolvent debtor;
Petitioner did not adduce any evidence that the price of said 4. (4)Evidence of large indebtedness or complete insolvency;
property was lower. Anent the property in No. 2, LIM testified 5. (5)The transfer of all or nearly all of his property by a debtor,
that she sold it in 1990. As to the properties in Nos. 3 and 4,
27 especially when he is insolvent or greatly embarrassed
the total market value stated in the tax declarations dated 23 financially;
November 1993 was P56,871.60. Aside from these tax declara- 6. (6)The fact that the transfer is made between father and son,
when there are present other of the above circumstances;
_______________ and
7. (7)The failure of the vendee to take exclusive possession of
22 Exhibit “M”; Exhibit “2”; OR, 114. all the property.28
25 Exhibit “O”; Id., 147. The above enumeration, however, is not an exclusive list. The
26 TSN, 12 November 1993, 7. circumstances evidencing fraud are as varied as the men who
27 Id., 6.
perpetrate the fraud in each case. This Court has therefore
740
declined to define it, reserving the liberty to deal with it under
740 SUPREME COURT REPORTS
whatever form it may present itself. 29
ANNOTATED
Siguan vs. Lim _______________
Oria v. McMicking, supra note 8.
28
the petitioner. We have pored over the records and found no
Rivera v. Litam & Co., 4 SCRA 1072 (1962).
factual or legal basis therefor. The trial court made these
29
741
VOL. 318, NOVEMBER 19, 741 awards in the dispositive portion of its decision without
stating, however, any justification for the same in the ratio
1999
deci-
Siguan vs. Lim
Petitioner failed to discharge the burden of proving any of the _______________
circumstances enumerated above or any other circumstance
from which fraud can be inferred. Accordingly, since the four 30 Exhibit “K”; OR, 135.
31 4 PARAS, EDGARDO L., CIVIL CODE OF THE PHILIPPINES, 70
requirements for the rescission of a gratuitous contract are not (1994); 4 TOLENTINO 586, citing 7 Planiol & Ripert 274-275.
present in this case, petitioner’s action must fail. 32 4 TOLENTINO 586, Citing 7 Planiol & Ripert 271-272.