Guzman v.

Bonnevie
GR No. 86150, 2 March 1992
FACTS:
Africa Valdez de Reynoso leased a parcel of land to Raoul S. Bonnevie and Christopher
Bonnevie, for a period of one year beginning August 8, 1976, with an agreement that
should Africa decide to sell the property, the respondent lessee shall be given the first
priority to purchase the same.
On November 1976, Africa sent a letter to the respondents that she was selling the
property for the amount of P600,000 less a mortgage loan of P100,000, giving them 30
days to exercise their right of first priority. Failure to exercise the said right, respondents
should vacate the property not later than March 1977.
On January 1977, Africa informed that the property have been sold to the petitioner,
because respondents failed to exercise their right to do such. Respondents on the other
hand informed Africa that they have not received their letter and refused to vacate the
property. And on April of the same year, Africa demanded that they vacate the property
for failure to pay rent for four months, which they refused.
Hence a complaint for ejectment was filed against them. During the pendency of the
ejectment case, respondent filed an action for annulment of the sale between Africa and
the herein petitioner and for the cancellation of the transfer certificate of title in the name
of the latter. Asking also that Africa be required to sell the property to them under the
same terms and conditions agreed upon in the Contract of Sale in favor of the petitioner.
On May 1980, the Court ruled that the respondent to vacate the premises, and deliver
possession of the property to the petitioner as well as pay the rent due to them. Upon
appeal to the Court of First Instance of Manila, affirmed the said ejection case with
modification and granted respondents petition to cancel the Deed of Sale executed
between Africa and the petitioner and ordered her to sell the property to respondent, and
for petitioner and Africa to pay respondent for damages. CA affirmed the said decision
but with modification on the amount of damages. Hence the petition.
ISSUE:
1. Whether or not the Contract of Sale executed between the parties was
rescissible?
2. Whether or not petitioner is a buyer in bad faith
HELD:
1. YES
2. YES
RATIO:
1. Even if the letter had indeed been sent to and received by the private
respondents and they did not exercise their right of first priority, Reynoso would
still be guilty of violating Paragraph 20 of the Contract of Lease which specifically

stated that the private respondents could exercise the right of first priority, all
things and conditions being equal. The Court reads this to mean that there
should be identity of the terms and conditions to be offered to the Bonnevies and
all other prospective buyers, with the Bonnevies to enjoy the right of first priority.
The selling price quoted to the Bonnevies was P600, 000.00, to be fully paid in
cash less only the mortgage lien of P100, 000.00. On the other hand, the selling
price offered to and accepted by the petitioner was only P400, 000.00, and only
P137,500.00 was paid in cash while the balance of P272,500.00 was to be paid
when the property (was) cleared of tenants or occupants. The fact that the
Bonnevies had financial problems at that time was no justification for denying
them the first option to buy the subject property. Even if the Bonnevies could not
buy it at the price quoted, Reynoso could not sell it to another for a lower price
and under more favorable terms and conditions. Only if the Bonnevies failed to
exercise their right of first priority could Reynoso lawfully sell the subject property
to others, and at that only under the same terms and conditions offered to the
Bonnevies.
The petitioner argues that assuming the Contract of Sale to be voidable, only the
parties thereto could bring an action to annul it pursuant to Article 1397 of the
Civil Code. It is stressed that private respondents are strangers to that
agreement and therefore have no personality to seek its annulment. The
respondent court correctly held that the Contract of Sale was not voidable but
rescissible. Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise
valid may nonetheless be subsequently rescinded by reason of injury to third
persons, like creditors. The status of creditors could be validly accorded the
Bonnevies for they had substantial interests that were prejudiced by the sale of
the subject property to the petitioner without recognizing their right of first priority
under the Contract of Lease.
2. A purchaser in good faith and for value is one who buys the property of another
without notice that some other person has a right to or interest in such property
and pays a full and fair price for the same at the time of such purchase or before
he has notice of the claim or interest of some other person in the property. Good
faith connotes an honest intention to abstain from taking unconscientiously
advantage of another. Tested by these principles, the petitioner cannot tenably
claim to be a buyer in good faith as it had notice of the lease of the property by
the Bonnevies and such knowledge should have cautioned it to look deeper into
the agreement to determine if it involved stipulations that would prejudice its own
interests.

Congregation of the Religious v. Orola

GR No. 169790, 30 April 2008
FACTS:
On April 1999, petitioner, acting through Sr. Fe Enhenco, and respondents met to talk
about the sale of the property of respondents adjacent to St. Marys Academy. Said
property is registered in the name of Manuel Laserna. Josephine Orola went to Manila
on May 1999 for the subject property and was entertained by Ma. Clarita Balleque. A
contract to sale was made between the parties where petitioners are bound to pay the
property for Php. 5,555,000.00 with 10% of the total consideration payable upon the
execution of the contract. This was signed by Sr. Enhenco as witness.
On June 7, 1999, Josephine and Antonio received the RCBC check bearing the amount
of P555,550.00 as down payment by petitioner. An extrajudicial settlement was executed
for the estate of Trinidad Andrada Laserna adjudicating to them the subject property.
Transfer Certificates were now under their names. With an undated Absolute Deed of
Sale, respondents scheduled to meet with petitioner for the remaining balance.
Petitioner did not arrive. They instead refused to pay respondents due to unreasonable
grounds. This made respondents file a complaint before the RTC with alternative causes
of action or rescission. RTC granted respondents petition.
ISSUE:
1. Whether or not the assailed contract may be rescinded under Article 1381.
2. Whether or not there was a breach by the petitioner.
3. Whether or not the award to pay for interest is justified.
HELD:
RATIO:
1. Article 1191, as presently worded, speaks of the remedy of rescission in
reciprocal obligations within the context of Article 1124 of the Old Civil Code,
which uses the term resolution. The remedy of resolution applies only to
reciprocal obligations such that a partys breach thereof partakes of a tacit
resolutory condition, which entitles the injured party to rescission. The present
article, as in the Old Civil Code, contemplates alternative remedies for the injured
party who is granted the option to pursue, as principal actions, either a rescission
or specific performance of the obligation, with payment of damages in each case.
On the other hand, rescission under Article 1381 of the Civil Code, taken from
Article 1291 of the Old Civil Code, is a subsidiary action, and is not based on a
partys breach of obligation.
2. As uniformly found by the lower courts, we likewise find that there was a
perfected contract of sale between the parties. A contract of sale carries the
correlative duty of the seller to deliver the property and the obligation of the buyer
to pay the agreed price. As there was already a binding contract of sale between
the parties, RVM had the corresponding obligation to pay the remaining balance
of the purchase price upon the issuance of the title in the name of respondents.
The supposed 2-year period within which to pay the balance did not affect the

nature of the agreement as a perfected contract of sale. In fact, we note that this
2-year period is neither reflected in any of the drafts to the contract, nor in the
acknowledgment receipt of the down payment executed by respondents
Josephine and Antonio with the conformity of Sr. Enhenco. In any event, we
agree with the CAs observation that the 2-year period to effect payment has
been mooted by the lapse of time.
3. To obviate confusion, the clear language of Article 1191 mandates that damages
shall be awarded in either case of fulfillment or rescission of the obligation. In this
regard, Article 2210 of the Civil Code is explicit that interest may, in the
discretion of the court, be allowed upon damages awarded for breach of
contract. The ineluctable conclusion is that the CA correctly imposed interest on
the remaining balance of the purchase price to cover the damages caused the
respondents by RVMs breach.

Lalicon v. NHA
GR No. 185440, 13 July 2001
FACTS:
On November 25, 1980 the National Housing Authority (NHA) executed a Deed of Sale
with Mortgage over a Quezon City lot in favor of the spouses Isidro and Flaviana Alfaro
(the Alfaros). The deed of sale provided, among others, that the Alfaros could sell the
land within five years from the date of its release from mortgage without NHA's prior
written consent. Thus:
The mortgage and the restriction on sale were annotated on the Alfaros' title on April 14,
1981.

About nine years later or on November 30, 1990, while the mortgage on the land
subsisted, the Alfaros sold the same to their son, Victor Alfaro.
After full payment of the loan or on March 21, 1991 the NHA released the
mortgage.
Six days later or on March 27 Victor transferred ownership of the land to his
illegitimate daughters. (5) On December 14, 1995 Victor mortgaged the land to
Marcela Lao Chua, Rosa Sy, Amparo Ong, and Ida See.
Subsequently, on February 14, 1997 Victor sold the property to Chua, one of the
mortgagees.

RTC: 1990 sale of the land to their son Victor, and the subsequent sale of the same to
Chua, made in violation of NHA rules and regulations. It ruled that, although the Alfaros
clearly violated the five-year prohibition, the NHA could no longer rescind its sale to them
since its right to do so had already prescribed, applying Article 1389 of the New Civil
Code. The NHA and the Lalicons, who intervened, filed their respective appeals to the
Court of Appeals (CA).
CA: CA reversed the RTC decision and found the NHA entitled to rescission. The CA
declared TCT 277321 in the name of the Alfaros and all subsequent titles and deeds of
sale null and void. It ordered Chua to reconvey the subject land to the NHA but the latter
must pay the Lalicons the full amount of their amortization, plus interest, and the value of
the improvements they constructed on the property.
ISSUE:
1. Whether or not the CA erred in holding that the Alfaros violated their contract with
the NHA;
2. Whether or not the NHAs right to rescind has prescribed; and
3. Whether or not the subsequent buyers of the land acted in good faith and their
rights, therefore, cannot be affected by the rescission.
HELD:
1. NO
2. NO
3. NO

RATIO:
1. The contract between the NHA and the Alfaros forbade the latter from selling the
land within five years from the date of the release of the mortgage in their favor.
The five-year restriction against resale, counted from the release of the property
from the NHA mortgage, measures out the desired hold that the government felt
it needed to ensure that its objective of providing cheap housing for the homeless
is not defeated by wily entrepreneurs. The restriction clause is more of a
condition on the sale of the property to the Alfaros rather than a condition on the
mortgage constituted on it.
The Lalicons claim that the NHA unreasonably
ignored their letters that asked for consent to the resale of the subject property.
They also claim that their failure to get NHA's prior written consent was not such
a substantial breach that warranted rescission. But the NHA had no obligation to
grant the Lalicons' request for exemption from the five-year restriction as to
warrant their proceeding with the sale when such consent was not immediately
forthcoming. And the resale without the NHA's consent is a substantial breach.
The essence of the government's socialized housing program is to preserve the
beneficiary's ownerships for a reasonable length of time, here at least within five
years from the time he acquired it free from any encumbrance.
2. NHA sought annulment of the Alfaros' sale to Victor because they violated the
five-year restriction against such sale provided in their contract. Thus, the CA
correctly ruled that such violation comes under Article 1191 where the applicable
prescriptive period is that provided in Article 1144 which is 10 years from the time
the right of action accrues. The NHA's right of action accrued on February 18,
1992 when it learned of the Alfaros' forbidden sale of the property to Victor.
Since the NHA filed its action for annulment of sale on April 10, 1998, it did so
well within the 10-year prescriptive period.
3. Since the five-year prohibition against alienation without the NHA's written
consent was annotated on the property's title, the Lalicons very well knew that
the Alfaros' sale of the property to their father, Victor, even before the release of
the mortgage violated that prohibition.
Lastly, since mutual restitution is required in cases involving rescission under
Article 1191, the NHA must return the full amount of the amortizations it received
for the property, plus the value of the improvements introduced on the same, with
6% interest per annum from the time of the finality of this judgment.

Siguan v. Lim
GR No. 134685, 13 July 2001
FACTS:
Rosa Lim (Lim) issued two Metrobank checks in the sums of P300,000 and P241,668,
respectively, payable to cash.
Upon presentment by petitioner Siguan with the drawee bank, the checks were
dishonored for the reason account closed. Demands to make good the checks proved
futile. Lim was charged with violation of BP 22, and found guilty. CA affirmed this
decision on appeal. However on appeal to the SC, Lim was acquitted, though her civilly
liable in the amount of P169,000, as actual damages, plus legal interest, was retained.
Subsequently, Lim executed a Deed of Donation (DoD) conveying the following parcels
of land in favor of her children, registered with the Office of the Register of Deeds of
Cebu City. New transfer certificates of title were thereafter issued in the names of the
donees.
Siguan filed an accion pauliana against Lim and her children before in RTC Cebu City to
rescind the DoD and to declare as null and void the new TCTs issued for the lots
covered by the questioned deed. Petitioner claimed that through the DoD, Lim had
fraudulently transferred all her real property to her children in bad faith and in fraud of
creditors, including her. She further alleged that Lim confederated with her children in
antedating the DoD to petitioners and other creditors prejudice; and that Lim, at the time
of the fraudulent conveyance, left no sufficient properties to pay her obligations.
Lim denied any liability to petitioner. She maintained that the DoD was not antedated
but was made in good faith at a time when she had sufficient property. She alleged that
the Deed of Donation was registered only on 2 July 1991 because she was seriously ill.

TC: ordered the rescission of the DoD, declared TCTs void, Lims to pay Siguan
P10,000 as moral damages; P10,000 as attorneys fees; and P5,000 as
expenses of litigation
CA: reversed decision, thus appeal.
Petitioner's argument: CA decision contrary to Oria vs McMicking ruling, which
enumerated circumstances for existence of fraud. They also contended that CA
misapplied the Rules of Court, and that they overlooked NCC Art 759 which
provides: The donation is always presumed to be in fraud of creditors when at
the time of the execution thereof the donor did not reserve sufficient property to
pay his debts prior to the donation. In this case, Lim made no reservation of
sufficient property to pay her creditors prior to the execution of the DoD.
Respondents argue that (a) having agreed on the law and requisites of accion
pauliana, petitioner cannot take shelter under a different law; (b) petitioner cannot
invoke the credit of Victoria Suarez, who is not a party to this case, to support her
accion pauliana; (c) CA correctly applied or interpreted Section 23 of Rule 132 of
the Rules of Court; (d) petitioner failed to present convincing evidence that the
DoD was antedated and executed in fraud of petitioner; and (e) CA correctly
struck down the awards of damages, attorneys fees and expenses of litigation
because there is no factual basis therefor in the body of the TCs decision.

ISSUE:
Whether or not the Deed of Donation executed by respondent Rosa Lim in favor of her
children may be rescinded for being in fraud of her alleged creditor.
HELD:
NO
RATIO:
The action to rescind contracts in fraud of creditors is known as accion pauliana. For this
action to prosper, the following requisites must be present: (1) the plaintiff asking for
rescission has a credit prior to the alienation, although demandable later; (2) the debtor
has made a subsequent contract conveying a patrimonial benefit to a third person; (3)
the creditor has no other legal remedy to satisfy his claim; (4) the act being impugned is
fraudulent; (5) the third person who received the property conveyed, if it is by onerous
title, has been an accomplice in the fraud.
The general rule is that rescission requires the existence of creditors at the time of the
alleged fraudulent alienation, and this must be proved as one of the bases of the judicial
pronouncement setting aside the contract. Without any prior existing debt, there can
neither be injury nor fraud. While it is necessary that the credit of the plaintiff in the
accion pauliana must exist prior to the fraudulent alienation, the date of the judgment
enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is
merely declaratory, with retroactive effect to the date when the credit was constituted.
Even assuming arguendo that petitioner became a creditor of LIM prior to the celebration
of the contract of donation, still her action for rescission would not fare well because the
third requisite was not met. Under Article 1381 of the Civil Code, contracts entered into
in fraud of creditors may be rescinded only when the creditors cannot in any manner
collect the claims due them. Also, Article 1383 of the same Code provides that the action
for rescission is but a subsidiary remedy which cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the same. The
term subsidiary remedy has been defined as the exhaustion of all remedies by the
prejudiced creditor to collect claims due him before rescission is resorted to. It is,
therefore, essential that the party asking for rescission prove that he has exhausted all
other legal means to obtain satisfaction of his claim. Petitioner neither alleged nor
proved that she did so. On this score, her action for the rescission of the questioned
deed is not maintainable even if the fraud charged actually did exist.

Caltex Inc. v. PNOC Shipping

GR No. 134685, 13 July 2001
FACTS:
PSTC and Luzon Stevedoring Corporation (LUSTEVECO) entered into an Agreement of
Assumption of Obligations, which provides the PSTC shall assume all obligations of
LUSTEVECO with respect to certain claims enumerated in the Annexes of the
Agreement. This Agreement also provides that PSTC shall control the conduct of any
litigation pending which may be filed with respect to such claims, and that LUSTEVECO
appoints and constitutes PSTC as its attorney-in-fact to demand and receive any claim
out of the countersuits and counterclaims arising from said claims. Among the actions
mentioned is Caltex v. Luzon Stevedoring Corporation, which was then pending appeals
before the IAC. The IAC affirmed the decision of the CFI ordering LUSTEVECO to pay
Caltex P 103,659.44 with legal interest. When the decision became final and executory,
a writ of execution was issued in favour of Caltex, but such judgement was not satisfied
because of the prior foreclosure of LESTEVECOs properties.
Upon learning of the Agreement between PSTC and LUSTEVECO, Caltex demanded
payment from PSTC and brought the action. The RTC ruled in favour of Caltex but the
CA revered on appeal. CA ruled that Caltex has no personality to sue PSTC, that noncompliance with the Agreement could only be questioned by signatories of the contract,
and that only LUSTEVECO and PSTC who can enforce the agreement. The CA also
rendered fatal the omission of LUSTEVECO, as real party in interest, as party
defendant, and the Caltex is not a beneficiary of a stipulation pour atrui because there is
no stipulation, which clearly and deliberately favours Caltex.
ISSUE:
1. Whether PSTC is bound by the Agreement when it assumed all the obligations of
LUSTEVECO;
2. Whether Caltex is a real party in interest to file an action to recover from PSTC
the judgment debt against LUSTEVECO.
HELD:
1. YES
2. YES
RATIO:
1. When PSTC assumed all the properties, business and assets of LUSTEVECO
pertaining to LUSTEVECOs tanker and bulk business, PSTC also assumed all of
LUSTEVECOs obligations pertaining to such business. The assumption of
obligations was stipulated not only in the Agreement of Assumption of Obligations
but also in the Agreement of Transfer. The Agreement specifically mentions the
case between LUSTEVECO and Caltex, docketed as AC-G.R. CV No. 62613,
then pending before the IAC. The Agreement provides that PSTC may demand
and receive any claim out of counter-suits or counterclaims arising from the
actions enumerated in the Annexes.

PSTC is bound by the Agreement. PSTC cannot accept the benefits without
assuming the obligations under the same Agreement. PSTC cannot repudiate its
commitment to assume the obligations after taking over the assets for that will
amount to defrauding the creditors of LUSTEVECO. It will also result in failure of
consideration since the assumption of obligations is part of the consideration for
the transfer of the assets from LUSTEVECO to PSTC. Failure of consideration
will revert the assets to LUSTEVECO for the benefit of the creditors of
LUSTEVECO. Thus, PSTC cannot escape from its undertaking to assume the
obligations of LUSTEVECO as stated in the Agreement.
The Agreement, under Article 1291 of the Civil Code, is also a novation of
LUSTEVECOs obligations by substituting the person of the debtor. Under Article
1293 of the Civil Code, a novation, which consists in substituting a new debtor in
place of the original debtor, cannot be made without the consent of the creditor.
Here, since the Agreement novated the debt without the knowledge and consent
of Caltex, the Agreement cannot prejudice Caltex. Thus, the assets that
LUSTEVECO transferred to PSTC in consideration, among others, of the
novation, or the value of such assets, remain even in the hands of PSTC subject
to execution to satisfy the judgment claim of Caltex.
2. Article 1313 of the Civil Code provides that [c]reditors are protected in cases of
contracts intended to defraud them. Further, Article 1381 of the Civil Code
provides that contracts entered into in fraud of creditors may be rescinded when
the creditors cannot in any manner collect the claims due them. Article 1381
applies to contracts where the creditors are not parties, for such contracts
are usually made without their knowledge.Thus, a creditor who is not a party
to a contract can sue to rescind the contract to prevent fraud upon him. Or, the
same creditor can instead choose to enforce the contract if a specific provision in
the contract allows him to collect his claim, and thus protect him from fraud.
Ordinarily, one who is not a privy to a contract may not bring an action to enforce
it. However, this case falls under the exception. In Oco v. Limbaring, 481 SCRA
348 (2006), we ruled: The parties to a contract are the real parties in interest in
an action upon it, as consistently held by the Court. Only the contracting parties
are bound by the stipulation in the contract; they are the ones who would benefit
from and could violate it. Thus, one who is not a party to a contract, and for
whose benefit it was not expressly made, cannot maintain an action on it. One
cannot do so, even if the contract performed by the contracting parties would
incidentally inure to ones benefit. As an exception, parties who have not taken
part in a contract may show that they have a real interest affected by its
performance or annulment. In other words, those who are not principally or
subsidiarily obligated in a contract, in which they had no intervention, may
show their detriment that could result from it. x x x
Even if PSTC did not expressly assume to pay the creditors of LUSTEVECO,
PSTC would still be liable to Caltex up to the value of the assets transferred. The
transfer of all or substantially all of the unencumbered assets of LUSTEVECO to
PSTC cannot work to defraud the creditors of LUSTEVECO. A creditor has a real
interest to go after any person to whom the debtor fraudulently transferred its
assets.

Holcim Cement v. Losloso

GR No. 203871, 15 January 2014
FACTS:
Petitioner Holcim Philippines, Inc. sued respondents, Spouses Losloso, Spouses Dela
Cruz, Sevillana Spouses and two other individuals. In the Regional Trial Court of Nueva
Vizcaya for collection of money and rescission of contracts, Holcim, which is engaged in
the business of cement manufacturing and distribution, sought payment from the Dela
Cruz spouses constituting unpaid purchases of cement. In addition, Holcim prayed for
the rescission of contracts executed by the Dela Cruz and Sevillana spouses in favour of
their co-respondents, relatives of the former, conveying parcels of land to the vendees.
Holcim theorized that these contracts were executed to deplete the assets of the Dela
Cruz spouses, obviating eventual satisfaction of its credit.
The defendants (save for the Dela Cruz spouses) sought the dismissal of the complaint
for failure to state a cause of action. The movants called attention to the absence of any
allegation in Holcims complaint, that it had exhausted principal remedies against the
Dela Cruz spouses before resorting to the subsidiary remedy of rescission.
ISSUE:
Whether or not Holcim has a cause of action to rescind the contract against
respondents.
HELD:
NO
RATIO:
In the case at bar, Holcim, the creditor of the Dela Cruz spouses has yet to obtain a
judgement against the latter to collect on tis credit. Indeed, its collection suit was still
pending below when this appeal was filed. For Holcim to include in such suit the cause
of action for rescission of the contracts entered into by the Dela Cruz and Sevillana
spouses with their co-respondents is to bypass the successive remedies antecedent to
an accion pauliana, namely, execution of judgement credit and accion subrogatoria.
Being successive remedies, these can only be availed of one at a time.
Also, contrary to Holcims contention, failure to state a cause of action is the ground to
dismiss a prematurely filed action for rescission. Holcims complaint for rescission is
fatally defective for not meeting the third requisite for accion pauliana.

China Banking v. Court of Appeals

GR No. 129644, 7 March 2000
FACTS:
Alfonso Roxas Chua and his wife Kiang Ming Chu Chua were the owners of a residential
land in San Juan, Metro Manila, covered by Transfer Certificate of Title No. 410603.
On June 19, 1985, petitioner China Bank filed with the Regional Trial Court of Manila,
Branch 29, an action for collection of sum of money against Pacific Multi Agro-Industrial
Corporation and Alfonso Chua, which was docketed as Civil Case No. 85-31257.
On November 7, 1985, the trial court promulgated its decision in favor of China Banking
Corporation.
On November 21, 1988, Alfonso Roxas Chua executed a public instrument denominated
as "Assignment of Rights to Redeem," whereby he assigned his rights to redeem the
one-half undivided portion of the property to his son, private respondent Paulino Roxas
Chua. Paulino redeemed said one-half share on the very same day.
On the other hand, in connection with Civil Case No. 85-31257, another notice of levy on
execution was issued on February 4, 1991 by the Deputy Sheriff of Manila against the
right and interest of Alfonso Roxas Chua in TCT 410603. Thereafter, a certificate of sale
on execution dated April 13, 1992 was issued by the Sheriff of Branch 39, RTC Manila in
Civil Case No. 85-31257, in favor of China Bank and inscribed at the back of TCT
410603 as Entry No. 01896 on May 4, 1992.
On May 20, 1993, Paulino Roxas Chua and Kiang Ming Chu Chua instituted Civil Case
No. 63199 before the RTC of Pasig, Metro Manila against China Bank, averring that
Paulino has a prior and better right over the rights, title, interest and participation of
China Banking Corporation in TCT 410603.
The trial court rendered a decision on July 15, 1994 in favor of private respondent
Paulino Roxas Chua. On appeal, the Court of Appeals affirmed the ruling of the trial
court
ISSUE:
Whether or not the assignment of the right of redemption made by Alfonso Roxas Chua
in favor of private respondent Paulino was done to defraud his creditors and may be
rescinded under Article 1387 of the Civil Code.
HELD:
YES
RATIO:
Under Article 1381(3) of the Civil Code, contracts, which are undertaken in fraud of
creditors when the latter cannot in any manner collect the claims due them, are
rescissible. The existence of fraud or intent to defraud creditors may either be presumed

in accordance with Article 1387 of the Civil Code or duly proved in accordance with the
ordinary rules of evidence.
This presumption is strengthened by the fact that the conveyance has virtually left
Alfonsos other creditors with no other property to attach. It should be noted that the
presumption of fraud or intention to defraud creditors is not just limited to the two
instances set forth in the first and second paragraphs of Article 1387 of the Civil Code.
Under the third paragraph of the same article, the design to defraud creditors may be
proved in any other manner recognized by the law of evidence. In the early case of Oria
vs. Mcmicking, the Supreme Court considered the following instances as badges of
fraud: 1. The fact that the consideration of the conveyance is fictitious or is inadequate.
2. A transfer made by a debtor after suit has begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor. 4. Evidence of large indebtedness or
complete insolvency. 5. The transfer of all or nearly all of his property by a debtor,
especially when he is insolvent or greatly embarrassed financially. 6. The fact that the
transfer is made between father and son, when there are presents other of the above
circumstances. 7. The failure of the vendee to take exclusive possession of all the
property.
Existence of fraud or intent to defraud creditors may either be presumed in accordance
with Article 1387 of the Civil Code or duly proved as the case may be. After Metrobank
foreclosed his conjugal share in TCT 410603, the only property that Alfonso Roxas Chua
had was his right to redeem the same, it forming part of his patrimony. "Property" under
civil law comprehends every species of title, inchoate or complete, legal or equitable.
In the case at bar, the presumption that the conveyance is fraudulent has not been
overcome. At the time a judgment was rendered in favor of China Bank against Alfonso
and the corporation, Paulino was still living with his parents in the subject property.
Paulino himself admitted that he knew his father was heavily indebted and could not
afford to pay his debts. The transfer was undoubtedly made between father and son at a
time when the father was insolvent and had no other property to pay off his creditors.
Hence, it is of no consequence whether or not Paulino had given valuable consideration
for the conveyance. Petition is granted.

Provincial Sheriff v. Court of Appeals

GR No. 25152, 26 February 1968
FACTS:
An action for recovery of a sum of money was filed on June 4, 1960, by Cirilo D. Cabral
and Zacarias Perez (both are the petitioners) against Elpidio Agustin and Manuel Flores
in the Court of First Instance of Bulacan. Elpidio has a business, the Modern Furniture
Store. On January 9, 1961 a fire broke out and destroyed Elpidios store. On January
12, 1961 Elpidio surrendered his license to operate to the municipal treasury. Not long
thereafter, Elpidios brother, Marciano (respondent), erected a store in the same site
where Elpidios store burned down; Marciano named his store MODERN FURNITURE
STORE. On February 20, 1961, for business purposes, Marciano secured a new
license and privilege tax to operate the store. And on the same date, Elpidio verbally
transferred "Modern Furniture Store" to his brother Marciano.
On July 13, 1961, the Court of First Instance of Bulacan, in the aforementioned case,
rendered judgment against Elpidio (who had confessed judgment) and Manuel Flores
jointly and severally, for P10,685.15 plus interest and P500.00 attorney's fees. CA
affirmed the decision.
On May 3, 1963, the Provincial Sheriff levied some of the pieces of furniture found in
"Modern Furniture Store." Stating that said properties do not belong to Elpidio Agustin
but to him, Marciano filed a third party claim with the sheriff. An indemnity bond,
however, was posted by the judgment creditors (Cabral and Perez) in the sheriff's favor,
so he issued notice that the properties levied upon will be sold at public auction on May
18, 1963.
On May 17, 1963. Marciano filed in the Court of First Instance of Pampanga the present
action, against judgment creditors Cabral and Perez and the sheriff, to be declared
owner of the pieces of furniture levied upon, with preliminary injunction and damages. A
writ of preliminary injunction was issued enjoining the sheriff from proceeding with the
sale. The Court of First Instance dismissed the complaint but the CA reversed the
decision of the lower court and claimed that Marciano is the owner.
ISSUE:
Whether or not Article 1387 of the NCC has an application in this case.
HELD:
NO
RATIO:
Article 1387 of the New Civil Code applies only when there has in fact been an alienation
or transfer, whether gratuitously or by onerous title. Since there was in fact no transfer of
the store or its furniture in the case at bar, Article 1387 aforementioned finds no
application. And appellants do not contend this the transfer merely of the name and style
"Modern Furniture, Store" would be fraudulent. Such transfer has in the circumstances
no effect on Marciano Agustin's ownership of the pieces of furniture in question.