ART.

1387-1390
LAMADO, CAMILLE B.

Art. 1387.
All contracts by virtue of which the debtor alienates
property by gratuitous title are presumed to have
been entered into in fraud of creditors, when the
donor did not reserve sufficient property to pay all
debts contracted before the donation.
Alienations by onerous title are also presumed
fraudulent when made by persons against whom
some judgment has been issued. The decision or
attachment need not refer to the property alienated,
and need not have been obtained by the party
seeking the rescission.
In addition to these presumptions, the design to
defraud creditors may be proved in any other manner
recognized by the law of evidence. (1297a)

Example

Alienation by gratuitous title

made a donation of a parcel of land to E. Before the date of th

nation, R had contracted several debts. With the donation to
e remaining property of R Is not sufficient to pay all his debts

der the first paragraph, the donation is presumed fraudulent unless proved other

Alienation by onerous title

Suppose in the preceding example, the contract is sale.

-not presumed fraudulent. The creditor must show that the conveyance
will
prejudice their rights.
However, the presumption will arise in case the sale was made after
Some judgment has been rendered against him or some writ of attachment has b
ssued against him.

Suppose again that c, a creditor of R has obtained a

judgement or writ of attachment in his favor. Then R sold
to D another parcel of land which has not been levied
upon or attached.

The sale to D is also presumed fraudulent because the law says

the decision or attachment need not refer to the property alienated.

n consideration of whether or not certain transfers are fraudulent, courts

Have laid down certain rules by which the fraudulent character of the transaction
May be determined. It has been denominated by the courts as badges of fraud

BADGES OF FRAUD

The fact that the consideration of the conveyance is fictitious of inadeq

(2) A transfer made by the debtor after a suit has begun and
while it is pending against him.
(3) A sale upon credit by an insolvent debtor.
(4)The transfer of all or nearly all his property by a debtor,
especially when he is insolvent or greatly embarrassed financially.
(5) Evidence of large indebtedness or complete
insolvency
(6) Transfer made between father and son,when there
are present some or any of the above circumstances

(7) Failure of vendee to take exclusive possession of the

property sold.
(8) At the time of the conveyance, the vendee was living
with the vendor and the former knew what there was a
judgment against the latter;
(9) It was known to the vendee that the vendor had no
properties other that that sold to him.

(10) The certificate of title covering the lands sold

remained In the name of the vendor who declared
them for taxation purposes and paid taxes, a duty
assumed by his heirs after his death.
11) Where it appears that
the sale was in English and the venor being illiterate
his wife did not join the sale
the price was inadequate
the notirization of the sale was made on the day following the alleged
humbmarking of the document
the boundaries of the lot sold were not stated.

ART. 1388.
WHOEVER ACQUIRES IN BAD FAITH THE THINGS ALIENATED IN
FRAUD OF CREDITORS, SHALL INDEMNIFY THE LATTER FOR
DAMAGES SUFFERED BY THEM ON ACCOUNT OF THE ALIENATION,
WHENEVER, DUE TO ANY CAUSE, IT SHOULD BE IMPOSSIBLE FOR
HIM TO RETURN THEM.
IF THERE ARE TWO OR MORE ALIENATIONS,
THE FIRST ACQUIRER SHALL BE LIABLE FIRST, AND SO ON
SUCCESSIVELY. (1298A)

ability of purchaser in bad faith, who acquired the object of the contract alienate
aud of the creditors, must return the same if the sale is rescinded and should it
mpossible for him to return it due to any cause, he must indemnify the former.

Should there be two or more alienations, the first acquirer shall be

liable first, and so on.

Example
S sold his car to B in order to avoid the payment of his debt to C, his
creditor. B knew of his purpose
--if the sale is rescinded,B must return the car or if not possible, C is
entitled to be idemnified for damages by B.

Suppose b transferred the car to D who also acted in bad faith

Then D sold it to E who did not know of the prev.conveyance.

--As the first acquirer , B is liable first.. If he cannot pay then D will be liable

Art. 1389.
The action to claim rescission must be commenced
within four years.
For persons under guardianship and for absentees,
the period of four years shall not begin until the
termination of the former's incapacity, or until the
domicile of the latter is known.

Periods for filing action for rescission.

AS A GENERAL RULE,THE ACTION TO RESCIND CONTRACTS
UST BE COMMENCED WITHIN FOUR YEARS FROM THE DATE
THE CONTRACT WAS ENTERED INTO.
EXCEPTIONS ARE:
(1)For persons under guardianship, the period shall begin from the termination
of incapacity
(2)For absentee, from the time the domicile is known.

COMPUTATION OF THE FOUR YEAR PERIOD

wledge of the contract- the code of commission has given the opinion that
riod should be counted from the time the creditor knows of the contract. Because
plied from paragraph two until the domicile of the latter is known

elebration of the contract- it is submitted that where the action for rescission
ased on fraud, the period must be counted from the time of the celebration of the
ract.

Finality of judgement- in a case decided under article 1911, where the fulfillmen
the obligation of the seller became impossible because of a judgment rendered
ainst the seller.The action for rescission must be commenced within four years fr
e date the judgement became final and executory as per entry of the judgement

ccrual of cause of action- according to the supreme court the general rule i.e ,fro
moment the cause of action accrues, applies under art.1150, the time of prescrip
be counted from the day the action may be brought.

PERSONS ENTITLED TO BRING THE ACTION FOR RESCISSION

1) THE INJURED PARTY OR THE DEFRAUDED CREDITOR
2) HIS HEIRS,ASSIGNS,OR SUCCESSORS IN INTEREST
3) THE CREDITORS OF THE ABOVE ENTITLED TO SUBROGATION

CHAPTER 7
VOIDABLE CONTRACTS
Art. 1390. The following contracts are voidable or annullable,
even though there may havevbeen no damage to the
contracting parties:
(1)Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a
proper action in court. They are susceptible of ratification.

Voidable or annullable contracts are those which possess all the Essential
requisites of a valid contract but one of the parties is legally incapable of giving
Consent, or consent is vitiated by mistake, violence, intimidation, undue influence
or fraud.
2 types of voidable contracts

e where one of the parties is incapable of giving consent to a contract;

hose where the consent is vitiated by mistake, violence, intimidation, u

nce or fraud.

y are valid and binding between the parties unless

ulled by a proper action in court. Once ratified,
y become absolutely valid and can no longer be annul