Khe Hong Cheng vs CA 355 SCRA 701 (2001)

FACTS:
1. Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping Lines.
2. The Philippine Agricultural Trading Corporation shipped on board the vessel M/V PRINCE ERIC,
owned by petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate, Masbate, for delivery to
Dipolog City, Zamboanga del Norte.
3. The said shipment of copra was covered by a marine insurance policy issued by American Home
Insurance Company (respondent Philam's assured).
4. M/V PRINCE ERIC sank somewhere between Negros Island and Northeastern Mindanao, resulting
in the total loss of the shipment.
5. Because of the loss, the insurer, American Home, paid the amount of P354,000.00 (the value of the
copra) to the consignee.
6. Having been subrogated into the rights of the consignee, American Home instituted a civil case to
recover the money paid to the consignee, based on breach of contract of carriage.
7. While the case was still pending, on December 20, 1989, petitioner Khe Hong Cheng executed
deeds of donations of parcels of land in favor of his children, herein co-petitioners Sandra Joy and
Ray Steven.
8. The trial court rendered judgment against petitioner in the civil case on December 29, 1993, four
years after the donations were made and the TCTs were registered in the donees names ordering
him to pay herein respondents.
9. After the said decision became final and executory, a writ of execution was forthwith. Said writ of
execution, however, was not served. An alias writ of execution was, thereafter, applied for and
granted.
10. Despite earnest efforts, the sheriff found no property under the name of Butuan Shipping Lines
and/or petitioner Khe Hong Cheng to levy or garnish for the satisfaction of the trial court's decision.
11. When the sheriff, accompanied by counsel of respondent Philam, went to Butuan City on January
17, 1997, to enforce the alias writ of execution, they discovered that petitioner Khe Hong Cheng no
longer had any property and that he had conveyed the subject properties to his children.
12. Respondent Philam filed a complaint for the rescission of the deeds of donation executed by
petitioner Khe Hong Cheng in favor of his children and for the nullification of their titles.
Respondent Philam alleged, that petitioner executed the aforesaid deeds in fraud of his creditors,
including respondent Philam.
13. The trial court denied the motion to dismiss. It held that respondent Philam's complaint had not yet
prescribed. According to the trial court, the prescriptive period began to run only from December
29, 1993, the date of the decision of the trial court in Civil Case No. 13357.
14. On appeal by petitioners, the CA affirmed the trial court's decision in favor of respondent Philam.
15. The CA declared that the action to rescind the donations had not yet prescribed. Citing Articles
1381 and 1383 of the Civil Code, the CA ruled that the four year period to institute the action for
rescission began to run only in January 1997, and not when the decision in the civil case became
final and executory on December 29, 1993. The CA reckoned the accrual of respondent Philam's
cause of action on January 1997, the time when it first learned that the judgment award could not
be satisfied because the judgment creditor, petitioner Khe Hong Cheng, had no more properties in
his name.
16. Prior thereto, respondent Philam had not yet exhausted all legal means for the satisfaction of the
decision in its favor, as prescribed under Article 1383 of the Civil Code. Petitioners motion for
reconsideration was likewise dismissed in the appellate court's resolution dated July 11, 2000.

ISSUE
1. WON the action to rescind the donations has already prescribed.
HELD
1. NO. The action to rescind the donations has already prescribed.
Ratio: 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.
- Art. 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.
The 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.
- Art. 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.
- 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.
Reasoning: 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.
Disposition The petition was DENIED for lack of merit.