Gonzales v. Camarines Sur II Electric Coop., Inc.

G.R. No. 181096, March 6, 2013

C.J . Sereno (1st Division)

Facts: Petitioner spouses Reno Gonzales (Reno) and Lourdes Gonzales owned an apartment for rent at
Naga City, Unit No. 11-A of which was rented out to Mr. and Mrs. Samuel Samson. These lessees reneged on
their obligation to pay the units electric bills for the second semester of 1992. As a result, respondent Camarines
Sur II Electric Cooperative, Inc. disconnected the power supply.

Nevertheless, electric power was restored to the unit when the Samsons executed a Promissory Note in
favor of CASURECO promising to pay their overdue electric bills.

The spouses Gonzales then protested the restoration of the power supply to the unit, given the
accumulating unpaid electric bills of their lessees for the second semester of 1992. Acting belatedly on the
protest, CASURECO terminated the power supply of the unit at the time that the Samsons vacated it.

With a new lessee about to occupy the unit, the spouses Gonzales wrote CASURECO and sought a
dialogue with its area manager, Jane Barrameda, to restore the units power supply. As a result of their dialogue,
the parties reached a compromise agreement, whereby CASURECO would restore power supply to the unit and
remove its old accountabilities, provided that petitioners would deposit the equivalent of two monthly electric
bills of the Samsons. Accordingly, petitioners complied with their obligation which resulted in the restoration of
the power supply to the unit.

On 9 December 1994, the power supply to the unit was again cut off. Thus, Reno wrote to respondents
and reminded them of the compromise agreement to remove the old accountabilities of the unit. Thereafter,
electric power was restored.

Later on, the spouses son, petitioner Rey R. Gonzales, together with his family, occupied the unit
without any interruption of electric supply. However, in some electric bills issued by CASURECO, the company
required the payment of both the current consumption and the past electric bills. The bills contained a notice of
disconnection of electric services if the dues were not paid. All in all, from 1992 to 1999, petitioners constantly
reminded respondent of their compromise agreement, which had already committed CASURECO to write off
the past unpaid power bills.

Of these bills, the electric bill for 23 August 1999 to 23 September 1999 in the amount of P1,148.17
included the past unpaid electric bills in the total amount of P11,6745.22 [sic]. Rey tendered only P1,148.17 as
payment for the current consumption, which the teller of CASURECO refused to accept.

Days after the bills due date, CASURECO allowed petitioners to pay only the current consumption.
Reno subsequently went to the office of respondent to pay, but he angrily left the premises because the teller
wanted to collect the surcharge of P21 for late payment.

As a result, petitioners filed a Complaint against respondents for consignation, mandamus, injunction
and damages before the RTC in order to permanently remove the old accountability left by the Samsons in the
electric bill and to prevent respondents from disconnecting the units power supply. They also consigned to the
trial court the charges for their current electric consumption amounting to P1,148.17.

The RTC accepted the consignation of petitioners as effective payment for the units current electric
consumption. It also adjudged that they were not liable for the past unpaid electric bills of the Samsons by virtue
of a valid and binding compromise agreement between petitioners and CASURECO.

Furthermore, the RTC found that respondents harassed petitioners with constant threats of electric
service disconnection. For seven years, they had to keep going to CASURECOs office every time they received
a monthly bill, only to explain to the management that the units old accountabilities had long been settled. In
order to teach CASURECO a lesson and to prevent such wanton, fraudulent, reckless, oppressive and malevolent
acts from happening to other hapless consumers, the RTC granted actual, moral, and exemplary damages, as well
as attorneys fees and cost of suit in favor of petitioners.

Aggrieved, respondents appealed to the CA which resulted in the affirmation of the RTCs ruling that,
by virtue of a compromise agreement, petitioners were not liable for the old accountabilities of the unit. This
Court notes that since this particular issue was not appealed by either petitioners or respondents, this matter is
already considered settled and final between the parties.

However, the CA deleted the award of actual damages in the amount of P5,000, because petitioners
failed to submit receipts or any other proof to substantiate the pecuniary loss they had incurred in restoring the
units power supply. It also removed the grant of exemplary damages based on the finding that CASURECOs
actions did not evince bad faith.

The CA further explained that petitioners, as the winning party, were not automatically entitled to
attorneys fees. It reasoned that none of the instances of granting that award as enumerated in Article 2208 of the
Civil Code existed in the case. Hence, it deleted the grant of attorneys fees. Moreover, it ruled that the RTCs
award of moral damages to petitioners was excessive. It thus reduced the award of moral damages from P50,000
to P25,000.

Dissatisfied with the deletion and reduction of compensation for damages, petitioners seek from this
Court the grant of the following: (1) actual damages or, in the alternative, temperate damages; (2) exemplary
damages; (3) attorneys fees; and (4) an increase in the award of moral damages.

Issue: Whether or not petitioners are entitled to the aforementioned damages.

Held: From the years 1992 to 1999, petitioners maintain that they are entitled to compensatory damages
because of their actual expenditures in going to and from CASURECOs office in order to forestall the
disconnection of the units power supply. These expenses allegedly include transportation and gasoline, postage
of letters, photocopying, and printing of documents.

Despite the enumeration of expenditures, the claim of petitioners for actual damages cannot be granted.
In People v. Buenavidez, this Court stressed that only expenses supported by receipts, and not merely a list
thereof, shall be allowed as bases for the award of actual damages. As admitted by petitioners themselves, none
of these expenses, which were incurred over a span of seven years, was backed up by documentary proof such as
a receipt or an invoice. Considering, therefore, that adequate compensation is awarded only if the pecuniary loss
suffered is proven by competent proof and by the best evidence obtainable showing the actual amount of loss,
the CA correctly denied petitioners claims for actual damages.

In the alternative, petitioners contend anew in their Rule 45 Petition that they are entitled to temperate
damages. They argue that they definitely suffered pecuniary losses, as they had to keep going back to
CASURECOs office to complain about the old accountabilities of the Samsons.

Anent this contention, we rule in favor of petitioners. Prefatorily, even if this claim was raised only for
the first time on appeal and, hence, generally not cognizable by this Court, we have nevertheless given due
course to newly raised questions that are closely related to or dependent on an assigned error. As an illustrative
case, we have resolved the issue of temperate damages in Viron Transportation Co., Inc. v. Delos Santos, albeit
raised only in the petition for review on certiorari filed before this Court.

Article 2224 of the Civil Code provides that temperate damages may be recovered when the court finds
that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with
certainty.

Notwithstanding the wording of the Civil Code cited above, we have already settled in jurisprudence that
even if the pecuniary loss suffered by the claimant is capable of proof, an award of temperate damages is not
precluded. The grant of temperate damages is drawn from equity to provide relief to those definitely injured.
Therefore, it may be allowed so long as the court is convinced that the aggrieved party suffered some pecuniary
loss.

Here, the RTC acknowledged that petitioners suffered some form of pecuniary loss when it accepted as
fact that they went back and forth to the office of CASURECO at Del Rosario, Naga City, to settle the account
of the Samsons. Although the CA did not review this factual finding, we find that the RTCs pronouncement on
this matter was nonetheless substantiated by the evidence on record given the attached letters with postages,
documents, and testimonies that signified an ongoing transaction between the parties to settle the electric charges.
Indeed, they were at least able to prove that they incurred undue costs in pursuing their rights against
CASURECO.

Hence, the award of temperate damages to petitioners is in order. Given that these are more than nominal
but less than compensatory damages, we deem it reasonable under the circumstances to award them P3,000.

Further, Petitioners assert that CASURECO acted in bad faith when it kept on unjustifiably charging
them the old accountabilities of the unit despite knowing very well that the spouses were under no obligation to
pay based on the compromise agreement. To make matters worse, CASURECO did not only disconnect the
units power supply but also continuously threatened them with disconnection. For these acts pursued in bad
faith, petitioners claim that they are entitled to exemplary damages and, consequently, attorneys fees.

In order to obtain exemplary damages under Article 2232 of the Civil Code, the claimant must prove that
the assailed actions of the defendant are not just wrongful, but also wanton, fraudulent, reckless, oppressive or
malevolent.

In this case, the CA concluded that there was no evidence that CASURECO acted in bad faith. Sadly,
this conclusion was not preceded by any explanation from the appellate court.

In contrast, the RTC discussed the evident bad faith of respondents. With the promissory note issued by
the Samsons, respondents recognized that the obligation to pay the electric bills did not belong to petitioners.
Additionally, the compromise agreement also purported that petitioners were not liable to pay the old
accountabilities of the unit. However, despite the clear import of the compromise agreement and the promissory
note, the RTC highlighted that CASURECO betrayed the compromise agreement by refusing to remove the old
accountabilities of the unit, unjustifiably and repetitively reflecting them for seven years in several electric bills
of petitioners with threats of electric service disconnection, and unduly disconnecting the units power supply.
The trial court thus concluded that CASURECO could not be deemed to have exercised honesty and good faith
in transacting with petitioners.

Absent any contrary finding by the CA, and as clearly borne out by the compromise agreement and the
electric bills adverted to, we affirm the findings of the trial court. Consequently, we reinstate the award of
exemplary damages given to petitioners by the RTC.

As regards attorneys fees, the Civil Code provides that the award shall be given to the claimant if
exemplary damages are awarded;

or if the defendant acted in gross and evident bad faith in refusing to satisfy the
formers plainly valid, just and demandable claim.

Clearly, with the finding of bad faith in CASURECOs betrayal of the compromise agreement, and given that the
award of exemplary damages is proper, this Court finds basis for restoring the grant of attorneys fees. We thus
reinstate the award of attorneys fees to petitioners.


Petitioners assert that for seven long years, they were harassed, stressed, troubled, bothered and
inconvenienced by the threats of disconnection over the old accountabilities of the unit, which, in the first place,
were not their responsibility. Furthermore, they aver that although they constantly tried to remedy the problem
through explanations and requests for correction of the electric bills, they still suffered from actual disconnection
of electric supply. Finally, they emphasize that at the time the incidents in this case were transpiring, the spouses
were supposed to be enjoying their retirement, while Rey was just starting to rear his family. For petitioners,
these aforementioned circumstances justify the increase of moral damages to P50,000.

Both courts a quo agree that petitioners are entitled to moral damages, since they adduced proof of moral
suffering, mental anguish, fright and the like. However, the CA ruled that the award of moral damages by the
RTC was excessive and, hence, reduced the amount thereof from P50,000 to P25,000.

We disagree with the ruling of the CA on this matter. In Danao v. Court of Appeals, we laid down the
rule that "the fairness of the award of damages by the trial court also calls for an appellate determination such
that where the award of moral damages is far too excessive compared to the actual losses sustained by the
claimants, the former may be reduced."

In view, however, of the severe sufferings inflicted on petitioners by CASURECO, we affirm the RTCs
award of P50,000 as moral damages. This amount is appropriate considering that respondents irresponsibly
failed to update its records from 1992 until 1999, despite the execution of the compromise agreement and the
constant reminder by petitioners to make the appropriate rectifications. We further note that CASURECO
offered no valid explanation for such flagrant omission. Hence, this Court maintains the original grant in order to
exact better service from utility companies.



Cruz v. Gruspe
G.R. No. 191431, March 13, 2013
J . Brion (2nd Division)

Facts: The claim arose from an accident that occurred on October 24, 1999, when the mini bus owned
and operated by Cruz and driven by one Arturo Davin collided with the Toyota Corolla car of Gruspe; Gruspes
car was a total wreck. The next day, on October 25, 1999, Cruz, along with Leonardo Q. Ibias went to Gruspes
office, apologized for the incident, and executed a Joint Affidavit of Undertaking promising jointly and severally
to replace the Gruspes damaged car in 20 days, or until November 15, 1999, of the same model and of at least
the same quality; or, alternatively, they would pay the cost of Gruspes car amounting to P350,000.00, with
interest at 12% per month for any delayed payment after November 15, 1999, until fully paid. When Cruz and
Leonardo failed to comply with their undertaking, Gruspe filed a complaint for collection of sum of money
against them on November 19, 1999 before the RTC.

In their answer, Cruz and Leonardo denied Gruspes allegation, claiming that Gruspe, a lawyer, prepared
the Joint Affidavit of Undertaking and forced them to affix their signatures thereon, without explaining and
informing them of its contents; Cruz affixed his signature so that his mini bus could be released as it was his
only means of income; Leonardo, a barangay official, accompanied Cruz to Gruspes office for the release of the
mini bus, but was also deceived into signing the Joint Affidavit of Undertaking.

Leonardo died during the pendency of the case and was substituted by his widow, Esperanza. Meanwhile,
Gruspe sold the wrecked car for P130,000.00. The RTC ruled in favor of Gruspe and ordered Cruz and
Leonardo to pay P220,000.00, plus 15% per annum from November 15, 1999 until fully paid, and the cost of suit.

On appeal, the CA affirmed the RTC decision, but reduced the interest rate to 12% per annum pursuant
to the Joint Affidavit of Undertaking. It declared that despite its title, the Joint Affidavit of Undertaking is a
contract, as it has all the essential elements of consent, object certain, and consideration required under Article
1318 of the Civil Code. The CA further said that Cruz and Leonardo failed to present evidence to support their
contention of vitiated consent. By signing the Joint Affidavit of Undertaking, they voluntarily assumed the
obligation for the damage they caused to Gruspes car; Leonardo, who was not a party to the incident, could
have refused to sign the affidavit, but he did not.

In their appeal by certiorari with this Court, Cruz and Esperanza assail the CA ruling, contending that the
Joint Affidavit of Undertaking is not a contract that can be the basis of an obligation to pay a sum of money in
favor of Gruspe. They consider an affidavit as different from a contract: an affidavits purpose is simply to attest
to facts that are within his knowledge, while a contract requires that there be a meeting of the minds between the
two contracting parties.

Even if the Joint Affidavit of Undertaking was considered as a contract, Cruz and Esperanza claim that it
is invalid because Cruz and Leonardos consent thereto was vitiated; the contract was prepared by Gruspe who is
a lawyer, and its contents were never explained to them. Moreover, Cruz and Leonardo were simply forced to
affix their signatures, otherwise, the mini van would not be released.

Also, they claim that prior to the filing of the complaint for sum of money, Gruspe did not make any
demand upon them. Hence, pursuant to Article 1169 of the Civil Code, they could not be considered in default.
Without this demand, Cruz and Esperanza contend that Gruspe could not yet take any action.

Issue: Whether the Joint-Affidavit of Undertaking is a contract.

Held: Contracts are obligatory no matter what their forms may be, whenever the essential requisites for
their validity are present. In determining whether a document is an affidavit or a contract, the Court looks
beyond the title of the document, since the denomination or title given by the parties in their document is not
conclusive of the nature of its contents. In the construction or interpretation of an instrument, the intention of the
parties is primordial and is to be pursued. If the terms of the document are clear and leave no doubt on the
intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be
contrary to the parties evident intention, the latter shall prevail over the former.

A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that it contains
stipulations characteristic of a contract. As quoted in the CA decision, the Joint Affidavit of Undertaking
contained a stipulation where Cruz and Leonardo promised to replace the damaged car of Gruspe, 20 days from
October 25, 1999 or up to November 15, 1999, of the same model and of at least the same quality. In the event
that they cannot replace the car within the same period, they would pay the cost of Gruspes car in the total
amount of P350,000.00, with interest at 12% per month for any delayed payment after November 15, 1999, until
fully paid. These, as read by the CA, are very simple terms that both Cruz and Leonardo could easily understand.

There is also no merit to the argument of vitiated consent. An allegation of vitiated consent must be
proven by preponderance of evidence; Cruz and Leonardo failed to support their allegation.

Although the undertaking in the affidavit appears to be onerous and lopsided, this does not necessarily
prove the alleged vitiation of consent. They, in fact, admitted the genuineness and due execution of the Joint
Affidavit and Undertaking when they said that they signed the same to secure possession of their vehicle. If they
truly believed that the vehicle had been illegally impounded, they could have refused to sign the Joint Affidavit
of Undertaking and filed a complaint, but they did not. That the release of their mini bus was conditioned on
their signing the Joint Affidavit of Undertaking does not, by itself, indicate that their consent was forced they
may have given it grudgingly, but it is not indicative of a vitiated consent that is a ground for the annulment of a
contract.

Thus, on the issue of the validity and enforceability of the Joint Affidavit of Undertaking, the CA did not
commit any legal error that merits the reversal of the assailed decision.

Nevertheless, the CA glossed over the issue of demand which is material in the computation of interest
on the amount due. The RTC ordered Cruz and Leonardo to pay Gruspe "P350,000.00 as cost of the car xxx plus
fifteen percent (15%) per annum from November 15, 1999 until fully paid.

Anchor Savings Bank v. Furigay
G.R. No. 191178, March 13, 2013
J . Mendoza (3rd Division)

Facts: On April 21, 1999, ASB filed a verified complaint for sum of money and damages with
application for replevin against Ciudad Transport Services, Inc., its president, respondent Henry H. Furigay; his
wife, respondent Gelinda C. Furigay; and a "John Doe."

The RTC rendered its Decision in favor of ASB. However, while said case was pending, respondent
spouses donated their registered properties in Alaminos, Pangasinan, to their minor children, respondents Hegem
G. Furigay and Herriette C. Furigay. As a result, Transfer Certificate of Titles were issued in the names of
Hegem and Herriette Furigay.

Claiming that the donation of these properties was made in fraud of creditors, ASB filed a Complaint for
Rescission of Deed of Donation, Title and Damages against the respondent spouses and their children.

Instead of filing an answer, respondents sought the dismissal of the complaint, principally arguing that
the RTC failed to acquire jurisdiction over their persons as well as over the subject matter in view of the failure
of the ASB to serve the summons properly and to pay the necessary legal fees.

On September 29, 2006, the RTC issued an Order denying the motion to dismiss. Respondents sought
reconsideration of the Order adding that the ASBs action for rescission had already prescribed.
Upon filing of ASBs opposition to the motion for reconsideration, on February 27, 2007, the RTC reconsidered
its earlier pronouncement and dismissed the complaint for failure of ASB to pay the correct docket fees and for
prescription.

On the issue of prescription, the RTC ruled that the action for rescission had already prescribed. It stated
that an action for rescission grounded on fraud should be filed within four (4) years from the discovery of fraud.
ASB filed the action for rescission only on October 14, 2005 or after four (4) years from the time the Deed of
Donation was registered in the Register of Deeds of Alaminos, Pangasinan, on April 4, 2001. The four-year
prescriptive period should be reckoned from the date of registration of the deed of donation and not from the
date of the actual discovery of the registration of the deeds of donation because registration is considered notice
to the whole world.

On appeal, the CA agreed with ASB that its complaint should not have been dismissed on the ground
that it failed to pay the correct docket fees. On the issue of prescription, however, the CA saw things differently.
Considering the subsidiary nature of an action for rescission, the CA found that the action of ASB had not yet
prescribed, but was premature. The CA noted that ASB failed to allege in its complaint that it had resorted to all
legal remedies to obtain satisfaction of its claim. The CA wrote:
After a thorough examination of the foregoing precepts and the facts engirding this case, this court opines that
plaintiff-appellants action for rescission has not yet prescribed for it must be emphasized that it has not even
accrued in the first place. To stress, an action for rescission or accion pauliana accrues only if all five requisites
are present, to wit:

1) That the plaintiff asking for rescission, has a credit prior to the alienation, although demandable later;

2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third person;

3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by rescission of the
conveyance to the third person;

4) That the act being impugned is fraudulent; and

5) That the third person who received the property conveyed, if by onerous title, has been an accomplice
in the fraud.

In the instant case, the plaintiff-appellant failed to satisfy the third requirement considering that it did not
allege in its complaint that it has resorted to all legal remedies to obtain satisfaction of his claim. It did not even
point out in its complaint if the decision in the civil case has already become final and executory and whether the
execution thereof yielded negative result in satisfying its claims. Even the skip tracing allegedly done by the
plaintiff-appellant to locate the properties of the defendant-appellees was not mentioned. And although the skip
tracing reports were subsequently presented by the plaintiff-appellant, such reports are not sufficient to satisfy
the third requirement. First, they are not prepared and executed by the sheriff, and second, they do not
demonstrate that the sheriff failed to enforce and satisfy the judgment of the court and that the plaintiff-appellant
has exhausted the property of the defendant-appellees. Perforce, the action for rescission filed by the plaintiff-
appellant is dismissible.

Both parties sought reconsideration but were rebuffed. Hence, this recourse.

ASB argues that, considering that its action was still in its preliminary stages, the CA erred in dismissing
its action on the ground that it failed to allege in its complaint the fact that it had resorted to all other legal
remedies to satisfy its claim, because it is a matter that need not be alleged in its complaint, but, rather, to be
proved during trial. It asserts that its action is not yet barred by prescription, insisting that the reckoning point of
the four (4)-year prescriptive period should be counted from September 2005, when it discovered the fraudulent
donation made by respondent spouses.

Held: It is not enough that a party has, in effect, a cause of action. The rules of procedure require that the
complaint must contain a concise statement of the ultimate or essential facts constituting the plaintiff's cause of
action. "The test of the sufficiency of the facts alleged in the complaint is whether or not, admitting the facts
alleged, the court can render a valid judgment upon the same in accordance with the prayer of plaintiff." The
focus is on the sufficiency, not the veracity, of the material allegations. Failure to make a sufficient allegation of
a cause of action in the complaint warrants its dismissal.

In relation to an action for rescission, it should be noted that the remedy of rescission is subsidiary in
nature; it cannot be instituted except when the party suffering damage has no other legal means to obtain
reparation for the same. Article 1177 of the New Civil Code provides:

The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the latter for the same purpose, save those which are
inherent in his person; they may also impugn the actions which the debtor may have done to defraud
them. (Emphasis added)

Consequently, following the subsidiary nature of the remedy of rescission, a creditor would have a cause
of action to bring an action for rescission, if it is alleged that the following successive measures have already
been taken: (1) exhaust the properties of the debtor through levying by attachment and execution upon all the
property of the debtor, except such as are exempt by law from execution; (2) exercise all the rights and actions of
the debtor, save those personal to him (accion subrogatoria); and (3) seek rescission of the contracts executed by
the debtor in fraud of their rights (accion pauliana).

A cursory reading of the allegations of ASBs complaint would show that it failed to allege the ultimate
facts constituting its cause of action and the prerequisites that must be complied before the same may be
instituted. ASB, without availing of the first and second remedies, that is, exhausting the properties of CTS,
Henry H. Furigay and Genilda C. Furigay or their transmissible rights and actions, simply undertook the third
measure and filed an action for annulment of the donation. This cannot be done. The Court hereby quotes with
approval the thorough discourse of the CA on this score:

To answer the issue of prescription, the case of Khe Hong Cheng vs. Court of Appeals (G.R. No. 144169,
March 28, 2001) is pertinent. In said case, Philam filed an action for collection against Khe Hong Cheng.
While the case was still pending, or on December 20, 1989, Khe Hong Cheng, executed deeds of
donations over parcels of land in favor of his children, and on December 27, 1989, said deeds were
registered. Thereafter, new titles were issued in the names of Khe Hong Chengs children. Then, the
decision became final and executory. But upon enforcement of writ of execution, Philam found out that
Khe Hong Cheng no longer had any property in his name. Thus, on February 25, 1997, Philam filed an
action for rescission of the deeds of donation against Khe Hong Cheng alleging that such was made in
fraud of creditors. However, Khe Hong Cheng moved for the dismissal of the action averring that it has
already prescribed since the four-year prescriptive period for filing an action for rescission pursuant to
Article 1389 of the Civil Code commenced to run from the time the deeds of donation were registered on
December 27, 1989. Khe Hong Cheng averred that registration amounts to constructive notice and since
the complaint was filed only on February 25, 1997, or more than four (4) years after said registration, the
action was already barred by prescription. The trial court ruled that the complaint had not yet prescribed
since the prescriptive period began to run only from December 29, 1993, the date of the decision of the
trial court. Such decision was affirmed by this court but reckoned the accrual of Philam's cause of action
in January 1997, the time when it first learned that the judgment award could not be satisfied because the
judgment creditor, Khe Hong Cheng, had no more properties in his name. Hence, the case reached the
Supreme Court which ruled that the action for rescission has not yet prescribed, ratiocinating as follows:

"Essentially, the issue for resolution posed by petitioners is this: When did the four (4) year
prescriptive period as provided for in Article 1389 of the Civil Code for respondent Philam to
file its action for rescission of the subject deeds of donation commence to run?

Article 1389 of the Civil Code simply provides that, The action to claim rescission must be
commenced within four years. Since this provision of law is silent as to when the prescriptive
period would commence, the general rule, i.e, from the moment the cause of action accrues,
therefore, applies. Article 1150 of the Civil Code is particularly instructive:

ARTICLE 1150. The time for prescription for all kinds of actions, when there is no
special provision which ordains otherwise, shall be counted from the day they may be
brought.

Indeed, this Court enunciated the principle that it is the legal possibility of bringing the action
which determines the starting point for the computation of the prescriptive period for the action.
Article 1383 of the Civil Code provides as follows:

ARTICLE 1383. An action for rescission is subsidiary; it cannot be instituted except
when the party suffering damage has no other legal means to obtain reparation for the
same.

It is thus apparent that an action to rescind or an accion pauliana must be of last resort, availed of
only after all other legal remedies have been exhausted and have been proven futile.

We quote with approval the following disquisition of the CA on the matter:

An accion pauliana accrues only when the creditor discovers that he has no other legal
remedy for the satisfaction of his claim against 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 creditor will not
have any cause of action against the creditor for rescission of the contracts entered into
by and between the debtor and another person or persons. Indeed, an accion pauliana
presupposes a judgment and the issuance by the trial court of a writ of execution for the
satisfaction of the judgment and the failure of the Sheriff to enforce and satisfy the
judgment of the court. It presupposes that the creditor has exhausted the property of the
debtor. The date of the decision of the trial court against the debtor is immaterial. What
is important is that 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 against the debtor will
retroact to the time when the debtor became indebted to the creditor.

Petitioners, however, maintain that the cause of action of respondent Philam against
them for the rescission of the deeds of donation accrued as early as December 27, 1989,
when petitioner Khe Hong Cheng registered the subject conveyances with the Register
of Deeds. Respondent Philam allegedly had constructive knowledge of the execution of
said deeds under Section 52 of Presidential Decree No. 1529, quoted infra, as follows:

SECTION 52. Constructive knowledge upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting
registered land shall, if registered, filed or entered in the Office of the Register of
Deeds for the province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such registering, filing, or
entering.

Petitioners argument that the Civil Code must yield to the Mortgage and Registration
Laws is misplaced, for in no way does this imply that the specific provisions of the
former may be all together ignored. To count the four year prescriptive period to rescind
an allegedly fraudulent contract from the date of registration of the conveyance with the
Register of Deeds, as alleged by the petitioners, would run counter to Article 1383 of the
Civil Code as well as settled jurisprudence. It would likewise violate the third requisite
to file an action for rescission of an allegedly fraudulent conveyance of property, i.e., the
creditor has no other legal remedy to satisfy his claim.

An accion pauliana thus presupposes the following: 1) A judgment; 2) the issuance by
the trial court of a writ of execution for the 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 decision of the trial
court is immaterial. What is important is that 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 against the debtor will retroact to the time when the debtor became indebted to the
creditor.

x x x x

Even if respondent Philam was aware, as of December 27, 1989, that petitioner Khe
Hong Cheng had executed the deeds of donation in favor of his children, the complaint
against Butuan Shipping Lines and/or petitioner Khe Hong Cheng was still pending
before the trial court. Respondent Philam had no inkling, at the time, that the trial court's
judgment would be in its favor and further, that such judgment would not be satisfied
due to the deeds of donation executed by petitioner Khe Hong Cheng during the
pendency of the case. Had respondent Philam filed his complaint on December 27, 1989,
such complaint would have been dismissed for being premature. Not only were all other
legal remedies for the enforcement of respondent Philam's claims not yet exhausted at
the time the deeds of donation were executed and registered. Respondent Philam would
also not have been able to prove then that petitioner Khe Hong Cheng had no more
property other than those covered by the subject deeds to satisfy a favorable judgment by
the trial court.

x x x x

As mentioned earlier, respondent Philam only learned about the unlawful conveyances
made by petitioner Khe Hong Cheng in January 1997 when its counsel accompanied the
sheriff to Butuan City to attach the properties of petitioner Khe Hong Cheng. There they
found that he no longer had any properties in his name. It was only then that respondent

Philam's action for rescission of the deeds of donation accrued because then it could be
said that respondent Philam had exhausted all legal means to satisfy the trial court's
judgment in its favor. Since respondent Philam filed its complaint for accion pauliana
against petitioners on February 25, 1997, barely a month from its discovery that
petitioner Khe Hong Cheng had no other property to satisfy the judgment award against
him, its action for rescission of the subject deeds clearly had not yet prescribed."

From the foregoing, it is clear that the four-year prescriptive period commences to run
neither from the date of the registration of the deed sought to be rescinded nor from the
date the trial court rendered its decision but from the day it has become clear that there
are no other legal remedies by which the creditor can satisfy his claims. [Emphases in
the original]