Escolar Documentos
Profissional Documentos
Cultura Documentos
Art. 1381-1389
G.R. No. 86150 March 2, 1992
GUZMAN,
BOCALING
&
CO.,
vs.
RAOUL S. V. BONNEVIE, respondent.
petitioner,
CRUZ, J.:
The subject of the controversy is a parcel of land
measuring six hundred (600) square meters, more or
less, with two buildings constructed thereon, belonging
to the Intestate Estate of Jose L. Reynoso.
This property was leased to Raoul S. Bonnevie and
Christopher Bonnevie by the administratrix, Africa
Valdez de Reynoso, for a period of one year beginning
August 8, 1976, at a monthly rental of P4,000.00.
The Contract
stipulation:
of
lease
contained
the
following
2
April 1, 1977 to August 8, 1977; (2) The
sum of P7,000.00 a month, as
reasonable compensation for the
continued unlawful use and occupation
of said premises, from August 9, 1977
and every month thereafter until
defendants actually vacate and deliver
possession thereof to the plaintiff; (3)
The sum of P1,000.00 as and for
attorney's fees; and (4) The costs of
suit.
3
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 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.
4
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. 8 Good
faith connotes an honest intention to abstain from
taking unconscientious advantage of another. 9 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.
The petitioner insists that it was not aware of the right
of first priority granted by the Contract of Lease,
Assuming this to be true, we nevertherless agree with
the observation of the respondent court that:
If Guzman-Bocaling failed to inquire
about the terms of the Lease Contract,
which includes Par. 20 on priority right
given to the Bonnevies, it had only
itself to blame. Having known that the
property it was buying was under
lease, it behooved it as a prudent
person to have required Reynoso or the
broker to show to it the Contract of
Lease in which Par. 20 is contained.
Finally, the petitioner also cannot invoke the
Compromise Agreement which it says canceled the
right of first priority granted to the Bonnevies by the
Contract of Lease. This agreement was set side by the
parties thereto, resulting in the restoration of the
original rights of the private respondents under the
Contract of Lease. The Joint Motion to Remand filed by
Reynoso and the private respondents clearly declared
inter alia:
That without going into the merits of
instant petition, the parties have
agreed to SET ASIDE the compromise
agreement, dated September 24, 1979
and remand Civil Case No. 043851 of
the City Court of Manila to Branch IX
thereof for trial on the merits. 10
We find, in sum, that the respondent court did not
commit the errors imputed to it by the petitioner. On
the contrary, its decision is conformable to the
established facts and the applicable law and
jurisprudence and so must be sustained.
WHEREFORE, the petition in DENIED, with costs against
the petitioner. The challeged decision is AFFIRMED in
toto. It is so ordered.
5
Investment and Development Corporation (Ayala
Corporation) the subject property on February 1, 1985.
Petitioner further alleged that private respondent
spouses subsequently sold the property to Iolani
Dionisio on April 11, 1985. However, the sale was not
registered until one year and nine months later or at
the time petitioner was pursuing the issuance of a writ
of attachment.
Petitioner's motion was set for hearing on January 4,
1990, on which date the respondent court ordered the
issuance of an alias writ of execution and on January 8,
1990, the same was issued.
Private respondent spouses filed
thereto on the following grounds:
their
opposition
6
the sheriff of a property by virtue of a
writ of attachment may be considered
as made under authority of the court
only when the property levied upon
unquestionably
belongs
to
the
defendant. If he attach properties (sic)
other than those of defendant, he acts
beyond the limits of his authority.
Otherwise stated, the court issuing a
writ of execution is supposed to
enforce
its
authority
only
over
properties of the judgment debtor, and
should a third party appear to claim
the property levied upon by the sheriff,
the procedure laid down by the Rules is
that such claim should be the subject
of a separate and independent action.
(Emphasis supplied)
Multinational Food and Iolani Dionisio, not being parties
to the case, the property covered by TCT No. 353935
may not be levied upon to satisfy the obligations of
private respondent spouses and the Multinational
Travel Corporation.
Petitioner's contrary claim that the property belongs to
private respondent spouses, if true, requires a
rescissory action which cannot be done in the same
case, but through the filing of a separate action.
Rescission is a relief which the law grants on the
premise that the contract is valid for the protection of
one of the contracting parties and third persons from
all injury and damage the contract may cause, or to
protect some incompatible and preferential right
created by the contract. 4
Under Art. 1381 of the Civil Code, the following
contracts are rescissible:
(2)
Those
agreed
upon
in
representation of absentees, if the
latter suffer the lesion stated in the
preceeding number;
(3) Those undertaken in fraud of
creditors when the latter cannot in any
other manner collect the claims due
them;
The appellate court did not err in holding that the trial
court acted with grave abuse of discretion in resolving
these matters through mere motion of petitioner.
WHEREFORE, the decision of the Court of Appeals is
hereby AFFIRMED in toto.
SO ORDERED.
7
G.R. No. 144934
8
To document their agreement with Feliciano Nieto, the
Riveras executed a Kasulatan sa Pagtatakwil ng
Karapatan sa Pagmamay-ari ng Bahagi ng Isang Lagay
na Lupa (Written Abdication of Rights over a Portion of
a Parcel of Land)17 on November 16, 1992. Four days
later, they registered the document with the Registry of
Deeds. Two titles were then issued: TCT No. T-161784
(M) in the name of Nieto, for 4,500 sq. m. of land, and
TCT No. T-161785 (M) in the name of petitioners Adelfa,
Cynthia and Jose Rivera, over the remaining 10,529 sq.
m. of land.18
On February 18, 1993, respondents filed a complaint 19
in the Regional Trial Court of Malolos, asking that the
Kasunduan be rescinded for failure of the Riveras to
comply with its conditions, with damages. They also
sought the annulment of the Deed of Absolute Sale on
the ground of fraud, the cancellation of TCT No. T161784 (M) and TCT No. T-161785 (M), and the
reconveyance to them of the entire property with TCT
No. T-50.668 (M) restored.20
Respondents claimed that Fidela never intended to
enter into a deed of sale at the time of its execution
and that she signed the said deed on the mistaken
belief that she was merely signing copies of the
Kasunduan. According to respondents, the position
where Fidelas name was typed and where she was
supposed to sign her name in the Kasunduan was
roughly in the same location where it was typed in the
Deed of Absolute Sale. They argued that given Fidelas
advanced age (she was then around 72 at the time) 21
and the fact that the documents were stacked one on
top of the other at the time of signing, Fidela could
have easily and mistakenly presumed that she was
merely signing additional copies of the Kasunduan. 22
They also alleged that petitioners acquired possession
of the TCT through fraud and machination.
In their defense, petitioners denied the allegations and
averred that the Deed of Absolute Sale was validly
entered into by both parties. According to petitioners,
Fidela del Rosario mortgaged Lot No. 1083-C to their
predecessor in interest, Mariano Rivera, on March 9,
1987. But on the following day Fidela decided to sell
the lot to petitioners for P2,161,622.50. When Mariano
agreed (on the condition that Lot No. 1083-C will be
delivered free from all liens and encumbrances), the
Kasunduan was consequently drawn up and signed.
After that, however, Fidela informed Mariano of the
existence of Feliciano Nietos tenancy right over the lot
to the extent of 9,000 sq. m. When Mariano continued
to want the land, albeit on a much lower price of only
P601,160, as he had still to deal with Feliciano Nieto,
the parties drafted the Deed of Absolute Sale on March
10, 1987, to supersede the Kasunduan.
Petitioners likewise argued that respondents cause of
action had been barred by laches or estoppel since
more than four years has lapsed from the time the
parties executed the Deed of Absolute Sale on March
10, 1987, to the time respondents instituted their
complaint on February 18, 1993.
Petitioners also filed a counterclaim asking for moral
and exemplary damages and the payment of
attorneys fees and costs of suit.
After trial, the RTC ruled in favor of respondents:
WHEREFORE, in the light of all the foregoing,
judgment is hereby rendered:
1. Declaring the Deed of Absolute Sale
dated March 10, 1987 as null and void;
2. Annulling TCT No. T-158443 (M) and
TCT No. T-161785 (M) both in the
names of Adelfa, Cynthia and Jose, all
surnamed Rivera;
3. Declaring the plaintiffs to be the
legitimate owners of the land covered
by TCT No. T-161785 (M) and ordering
defendant Adelfa, Cynthia, and Jose, all
surnamed Rivera, to reconvey the
same to the plaintiffs;
4. Ordering the Register of Deeds of
Bulacan to cancel TCT No. T-161785
(M) and to issue in its place a new
certificate of title in the name of the
plaintiffs as their names appear in TCT
No. T-50.668;
5. Declaring TCT No. T-161784 (M) in
the name of Feliciano Nieto as valid;
6. Ordering the defendant Riveras to
pay
the
plaintiffs
solidarily
the
following amounts:
a) P191,246.98 as balance for
the 4,500 square-meter portion
given to defendant Feliciano
Nieto
b)
P200,000.00
damages
as
moral
c) P50,000.00 as exemplary
damages
d) P50,000.00
fees
as
attorneys
9
e) costs of the suit.
7. Dismissing the counterclaim of the
defendant Riveras;
8. Dismissing the counterclaim and the
crossclaim of defendant Feliciano Nieto.
SO ORDERED.23
The trial court ruled that Fidelas signature in the Deed
of Absolute Sale was genuine, but found that Fidela
never intended to sign the said deed. Noting the
peculiar differences between the Kasunduan and the
Deed of Absolute Sale, the trial court concluded that
the Riveras were guilty of fraud in securing the
execution of the deed and its registration in the
Registry of Deeds.24 This notwithstanding, the trial
court sustained the validity of TCT No. T-161784 (M) in
the name of Feliciano Nieto since there was no fraud
proven on Nietos part. The trial court found him to
have relied in good faith on the representations of
ownership of Mariano Rivera. Thus, Nietos rights,
according to the trial court, were akin to those of an
innocent purchaser for value.25
On the foregoing, the trial court rescinded the
Kasunduan but ruled that the P450,000 paid by
petitioners be retained by respondents as payment for
the 4,500 sq. m. portion of Lot No. 1083-C that
petitioners gave to Nieto.26 The trial court likewise
ordered petitioners to pay P191,246.98 as balance for
the price of the land given to Nieto, P200,000 as moral
damages, P50,000 as exemplary damages, P50,000 as
attorneys fees, and the costs of suit.27
On appeal to the Court of Appeals, the trial courts
judgment was modified as follows:
WHEREFORE, the judgment appealed from is
hereby AFFIRMED with the MODIFICATION that
the Deed of Absolute Sale dated March 10,
1987 is declared null and void only insofar as
Lot No. 1083-C is concerned, but valid insofar
as it conveyed Lot No. 1083-A, that TCT No.
158443 (M) is valid insofar as Lot No. 1083-A is
concerned and should not be annulled, and
increasing the amount to be paid by the
defendants-appellants
to
the
plaintiffsappellees for the 4,500 square meters of land
given to Feliciano Nieto to P323,617.50.
Costs against the defendants-appellants.
SO ORDERED.28
Petitioners motion for reconsideration was denied.
Hence, this petition.
10
case? (2) Did the Court of Appeals correctly rule that
the Deed of Absolute Sale is valid insofar as Lot 1083-A
is concerned? (3) Is the respondents cause of action
barred by prescription?
On the first issue, petitioners contend that jurisdiction
was not validly acquired because the filing fees
respondents paid was only P1,554.45 when the relief
sought was reconveyance of land that was worth
P2,141,622.50 under the Kasunduan. They contend
that respondents should have paid filing fees
amounting to P12,183.70. In support of their argument,
petitioners invoke the doctrine in Sun Insurance Office,
Ltd., (SIOL) v. Asuncion31 and attach a certification32
from the Clerk of Court of the RTC of Quezon City.
Respondents counter that it is beyond dispute that
they paid the correct amount of docket fees when they
filed the complaint. If the assessment was inadequate,
they could not be faulted because the clerk of court
made no notice of demand or reassessment,
respondents argue. Respondents also add that since
petitioners failed to contest the alleged underpayment
of docket fees in the lower court, they cannot raise the
same on appeal.33
We rule in favor of respondents. Jurisdiction was validly
acquired over the complaint. In Sun Insurance Office,
Ltd., (SIOL) v. Asuncion,34 this Court ruled that the filing
of the complaint or appropriate initiatory pleading and
the payment of the prescribed docket fee vest a trial
court with jurisdiction over the subject matter or nature
of the action. If the amount of docket fees paid is
insufficient considering the amount of the claim, the
clerk of court of the lower court involved or his duly
authorized deputy has the responsibility of making a
deficiency assessment. The party filing the case will be
required to pay the deficiency, but jurisdiction is not
automatically lost.
Here it is beyond dispute that respondents paid the full
amount of docket fees as assessed by the Clerk of
Court of the Regional Trial Court of Malolos, Bulacan,
Branch 17, where they filed the complaint. If
petitioners believed that the assessment was incorrect,
they should have questioned it before the trial court.
Instead, petitioners belatedly question the alleged
underpayment of docket fees through this petition,
attempting to support their position with the opinion
and certification of the Clerk of Court of another
judicial region. Needless to state, such certification has
no bearing on the instant case.
Petitioners also contend that the trial court does not
have jurisdiction over the case because it involves an
agricultural tenant. They insist that by virtue of
Presidential Decree Nos. 316 and 1038,35 it is the
Department of Agrarian Reform Adjudication Board
(DARAB) that has jurisdiction.36
11
restitution when proper, nevertheless they are not
entirely identical.44
In countless times there has been confusion between
rescission under Articles 1381 and 1191 of the Civil
Code. Through this case we again emphasize that
rescission of reciprocal obligations under Article 1191 is
different from rescissible contracts under Chapter 6 of
the law on contracts under the Civil Code. 45 While
Article 1191 uses the term rescission, the original term
used in Article 1124 of the old Civil Code, from which
Article 1191 was based, was resolution.46 Resolution is
a principal action that is based on breach of a party,
while rescission under Article 1383 is a subsidiary
action limited to cases of rescission for lesion under
Article 1381 of the New Civil Code, 47 which expressly
enumerates the following rescissible contracts:
ART. 1381.
rescissible:
The
following
contracts
are
12
when the party to a suit is compelled to incur expenses
to protect his interest.58
While it has been sufficiently proven that the
respondents are entitled to damages, the actual
amounts awarded by the lower court must be reduced
because damages are not intended for a litigants
enrichment, at the expense of the petitioners. 59 The
purpose for the award of damages other than actual
damages would be served, in this case, by reducing the
amounts awarded.
Respondents were amply compensated through the
award of actual damages, which should be sustained.
The other damages awarded total P300,000, or almost
equivalent to the amount of actual damages.
Practically this will double the amount of actual
damages awarded to respondents. To avoid breaching
the doctrine on enrichment, award for damages other
than actual should be reduced. Thus, the amount of
moral damages should be set at only P30,000, and the
award of exemplary damages at only P20,000. The
award of attorneys fees should also be reduced to
P20,000, which under the circumstances of this case
appears justified and reasonable.
WHEREFORE, the assailed decision of the Court of
Appeals is MODIFIED. The Deed of Absolute Sale in
question is declared NULL and VOID in its entirety.
Petitioners are ORDERED to pay respondents
P323,617.50 as actual damages, P30,000.00 as moral
damages, P20,000.00 as exemplary damages and
P20,000.00 as attorneys fees. No pronouncement as to
costs.
SO ORDERED.
THIRD DIVISION
METROPOLITAN BANK and TRUST COMPANY,
substituted
by
MERIDIAN
(SPV-AMCI)
CORPORATION,
Petitioner,
- versus INTERNATIONAL EXCHANGE BANK,
Respondent.
G.R. No. 176008
Promulgated:
August 10, 2011
DECISION
PERALTA, J.:
Before the Court are two consolidated petitions for
review on certiorari under Rule 45 of the Rules of
Court, both of which are seeking the reversal and
setting aside of the Decision1 and Resolution2 of the
Court of Appeals (CA) dated May 5, 2006 and
December 22, 2006, respectively, in CA-G.R. SP No.
00549-MIN which annulled and set aside the Orders
dated September 6, 2004 and February 14, 2005, the
Resolution dated March 15, 2005 and the Joint
Resolution dated June 8, 2005 of the Regional Trial
Court (RTC) of Misamis Oriental, Branch 17 in Civil Case
Nos. 2004-197 and 2004-200.
The pertinent factual and procedural antecedents of
the case are as follows:
Sacramento Steel Corporation (SSC) is a business
entity engaged in manufacturing and producing steel
and steel products, such as cold rolled coils and
galvanized sheets, in its own steel manufacturing plant
located at Tagoloan, Misamis Oriental.
For the purpose of increasing its capital, SSC entered
into a Credit Agreement with herein respondent
International Exchange Bank (IEB) on September 10,
2001 wherein the latter granted the former an omnibus
credit line in the amount of P60,000,000.00, a loan of
P20,000,000.00 and a subsequent credit line with a
limit of P100,000,000.00.
As security for its loan obligations, SSC executed five
separate deeds of chattel mortgage constituted over
various equipment found in its steel manufacturing
plant. The deeds of mortgage were dated September
17, 2001, February 26, 2003, April 16, 2003, May 25,
2004 and June 7, 2004.
Subsequently, SSC defaulted in the payment of its
obligations. IEB's demand for payment went unheeded.
On July 7, 2004, the IEB filed with the RTC of Misamis
Oriental an action for injunction for the purpose of
enjoining SSC from taking out the mortgaged
equipment from its premises. The case was docketed
as Civil Case No. 2004-197. Thereafter, IEB filed a
Supplemental Complaint praying for the issuance of a
writ of replevin or, in the alternative, for the payment
of SSC's outstanding obligations and attorney's fees.3
On the other hand, on July 18, 2004, SSC filed with the
same RTC of Misamis Oriental a Complaint for
annulment of mortgage and specific performance for
the purpose of compelling the IEB to restructure SSC's
outstanding obligations. SSC also prayed for the
issuance of a Temporary Restraining Order (TRO) and
writ of preliminary injunction to prevent IEB from taking
any steps to dispossess SSC of any equipment in its
steel manufacturing plant as well as to restrain it from
foreclosing the mortgage on the said equipment.4 The
RTC issued a TRO. The case was docketed as Civil Case
13
No. 2004-200 and was subsequently consolidated with
Civil Case No. 2004-197.
14
UNSATISFIED
JUDGMENT,
WHICH
UNSATISFIED
JUDGMENT IS ABSENT IN THE CASE AT BAR.
(B) WHETHER OR NOT THE HONORABLE COURT OF
APPEALS ERRED WHEN IT RULED THAT THE TRIAL
COURT COMMITTED GRAVE ABUSE OF DISCRETION IN
ALLOWING
PETITIONER'S
COMPLAINT-ININTERVENTION.17
In G.R. No. 176131, petitioner CSMC raises the
following grounds:
I. THE HONORABLE COURT ERRED IN NOT PASSING
UPON THE ISSUE THAT HEREIN RESPONDENT IBANK IS
GUILTY OF FORUM-SHOPPING.
II. THE HONORABLE COURT ERRED IN NOT RULING
THAT HEREIN RESPONDENT IBANK'S FAILURE TO FILE A
MOTION FOR RECONSIDERATION TO THE ORDER DATED
08 JUNE 2005 IS FATAL TO ITS PETITION.
III. THE HONORABLE COURT ERRED IN RULING THAT
THE ORDER OF JUDGE SEALANA-ABBU ADMITTING THE
INTERVENTION OF HEREIN PETITIONER CSMC IS
WITHOUT LEGAL BASIS.18
In a Manifestation and Motion dated September 26,
2007, petitioner Metrobank manifested that it no
longer has any interest in pursuing the instant case as
the loan obligation owed by SSC to it has been sold by
the latter to a corporation known as Meridian (SPVAMC) Corporation (Meridian). Accordingly, Metrobank
prayed that it be substituted by Meridian as petitioner
in the instant case.19
In a Resolution20 dated November 12, 2007, this Court
granted Metrobank's Motion.
At the outset, the Court takes note that no arguments
or questions were raised by petitioners with respect to
the September 6, 2004 Order and March 15, 2005
Resolution of the RTC which were annulled by the CA.
Hence, the only issues left for resolution in the instant
petition are whether or not petitioners Metrobank and
CSMC may be allowed to intervene in Civil Case Nos.
2004-197 and 2004-200.
The Court will dwell first on the issues raised by
Metrobank in G.R. No. 176008.
In its first assigned error, Metrobank contends that the
CA erred in ruling that its Complaint-in-Intervention is
in the nature of an accion pauliana.
The Court does not agree.
A perusal of Metrobank's Complaint-in-Intervention
would show that its main objective is to have the
chattel mortgages executed by SSC in favor of IEB
rescinded. This is clearly evident in its prayer, which
reads as follows:
as
and
by
way
of
exemplary
15
this case. No evidence was presented nor even an
allegation was offered to show that Metrobank had
availed of the abovementioned remedies before it tried
to question the validity of the contracts of chattel
mortgage between IEB and SSC.
Metrobank also contends that in order to apply the
concept of, and the rules pertaining to, accion
pauliana, the subject matter must be a conveyance,
otherwise valid, which is undertaken in fraud of
creditors. Metrobank claims that since there is no
conveyance involved in the contract of chattel
mortgage between SSC and IEB, which Metrobank
seeks to rescind, the CA erred in ruling that the latter's
Complaint-in-Intervention is an accion pauliana.
The Court is not persuaded.
In the instant case, the contract of chattel mortgage
entered into by and between SSC and IEB involves a
conveyance of patrimonial benefit in favor of the latter
as the properties subject of the chattel mortgage stand
as security for the credit it extended to SSC. In a very
recent case involving an action for the rescission of a
real estate mortgage,27 while this Court found that
some of the elements of accion pauliana were not
present, it found that a mortgage contract involves the
conveyance of a patrimonial benefit.
In sum, Metrobank may not be allowed to intervene
and pray for the rescission of the chattel mortgages
executed by SSC in favor of IEB. The remedy being
sought by Metrobank is in the nature of an accion
pauliana which, under the factual circumstances
obtaining in the present case, may not be allowed.
Based on the foregoing, the Court finds no error in the
ruling of the CA that the RTC committed grave abuse of
discretion in allowing Metrobank's intervention.
The Court will now proceed to resolve the issues raised
by petitioner CSMC in G.R. No. 176131.
Firstly, CSMC contends that IEB was forum shopping
when it filed a petition for certiorari with the CA
seeking, among others, the enjoinment of the
commercial operation of the subject machineries and
equipment
when
its
Opposition28
to
the
implementation of the Capacity Lease Agreement
between SSC and CSMC is still pending determination
by the RTC.
The Court does not agree.
Forum shopping has been defined as an act of a party,
against whom an adverse judgment has been rendered
in one forum, of seeking and possibly getting a
favorable opinion in another forum, other than by
appeal or a special civil action for certiorari, or the
institution of two or more actions or proceedings
grounded on the same cause on the supposition that
16
his interest and for the court to settle all conflicting
claims.34 Intervention is allowed to avoid multiplicity
of suits more than on due process considerations.35 To
warrant intervention under Rule 19 of the Rules of
Court, two requisites must concur: (1) the movant has
a legal interest on the matter in litigation; and (2)
intervention must not unduly delay or prejudice the
adjudication of the rights of the parties, nor should the
claim of the intervenor be capable of being properly
decided in a separate proceeding.36
In the present case, CSMC, being a lessee of the
subject properties, has a legal interest therein. The RTC
correctly held, thus:
Under the Rules of Court, intervention is permissive
and maybe permitted by the Court when the applicant
shows facts which satisfy the requirements of the law
authorizing intervention. (Firestone Ceramics Inc. vs.
CA 313 SCRA 522) Records of the case showed that on
August 30, 2004, an agreement was finalized and
entered
into
by
applicant
Chuayuco
and
defendant/plaintiff Sacramento Steel Corporation
whereby the former shall lease and make use of the
machineries of Sacramento Steel under the Capacity
Lease Agreement (CLA). One of the terms and
condition[s] under [the] CLA was for the monthly lease
payments to take effect upon signing of the contract. A
person seeking to intervene in a suit must show that
he has legal interest which must be actual and
material, direct and immediate. He must show that he
will either gain or lose by direct legal operation and
effect of a judgment. (Hrs. of Nicolas Orosa vs. Migrino
218 SCRA 311) The Court finds that Chuayuco had a
constituted and sufficient legal interest in the
machineries subject of the litigation which is actual and
material. Any disposition of the case will adversely
affect the standing of the intervenor.37
Moreover, considering that CSMC's interest is limited
only to the operation of the subject machineries
pursuant to its lease contract with SSC, its intervention
would not unduly delay or prejudice the adjudication of
the rights of SSC and IEB. CSMC's intervention should
be treated as one pro interesse suo which is a mode of
intervention in equity wherein a stranger desires to
intervene for the purpose of asserting a property right
in the res, or thing, which is the subject matter of the
litigation, without becoming a formal plaintiff or
defendant, and without acquiring control over the
course of a litigation, which is conceded to the main
actors therein.38
Lastly, the Court does not agree with the CA when it
ruled that the applicable provision is Rule 3, Section 19
(erroneously cited as Section 20) of the Rules of Court
on transfer of interest and substitution of parties. Being
a mere lessee of the subject properties, CSMC is a
stranger insofar as the dispute between SSC and IEB is
concerned. The action filed by IEB against SSC is an
17
about October 4, 1985, 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. The said
shipment of copra was covered by a marine insurance
policy issued by American Home Insurance Company
(respondent Philam's assured). M/V PRINCE ERlC,
however, sank somewhere between Negros Island and
Northeastern Mindanao, resulting in the total loss of
the shipment. Because of the loss, the insurer,
American Home, paid the amount of P354,000.00 (the
value of the copra) to the consignee.1wphi1.nt
Having been subrogated into the rights of the
consignee, American Home instituted Civil Case No.
13357 in the Regional Trial Court (RTC) of Makati ,
Branch 147 to recover the money paid to the
consignee, based on breach of contract of carriage.
While the case was still pending, or 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. The
parcel of land with an area of 1,000 square meters
covered by Transfer Certificate of Title (TCT) No. T-3816
was donated to Ray Steven. Petitioner Khe Hong Cheng
likewise donated in favor of Sandra Joy two (2) parcels
of land located in Butuan City, covered by TCT No. RT12838. On the basis of said deeds, TCT No. T-3816 was
cancelled and in lieu thereof, TCT No. T-5072 was
issued in favor of Ray Steven and TCT No. RT-12838
was cancelled and in lieu thereof, TCT No. RT-21054
was issued in the name of Sandra Joy.
The trial court rendered judgment against petitioner
Khe Hong Cheng in Civil Case No.13357 on December
29, 1993, four years after the donations were made
and the TCTs were registered in the donees' names.
The decretal portion of the aforesaid decision reads:
"Wherefore, in view of the foregoing, the Court
hereby renders judgment in favor of the
plaintiff and against the defendant, ordering
the latter to pay the former:
1) the sum of P354,000.00 representing the
amount paid by the plaintiff to the Philippine
Agricultural Trading Corporation with legal
interest at 12% from the time of the filing of
the complaint in this case;
2) the sum of P50,000.00 as attorney's fees;
3) the costs.1
After the said decision became final and executory, a
writ of execution was forthwith' issued on September
14, 1995. Said writ of execution however, was not
18
not commit any error in denying petitioners' motion to
dismiss. Their motion for reconsideration was likewise
dismissed in the appellate court's resolution dated July
11, 2000.
Petitioners now assail the aforesaid decision and
resolution of the CA alleging that:
I
PUBLIC RESPONDENT GRAVELY ERRED AND
ACTED IN GRAVE ABUSE OF DISCRETION WHEN
IT DENIED THE PETITION TO DISMISS THE CASE
BASED ON THE GROUND OF PRESCRIPTION.
II
PUBLIC RESPONDENT COURT OF APPEALS
GRAVELY
ERRED
IN
HOLDING
THAT
PRESCRIPTION BEGINS TO RUN WHEN IN
JANUARY 1997 THE SHERIFF WENT TO BUTUAN
CITY IN SEARCH OF PROPERTIES OF PETITIONER
FELIX KHE CHENG TO SATISFY THE JUDGMENT
IN CIVIL CASE NO.13357 AND FOUND OUT THAT
AS EARLY AS DEC. 20, 1989, PETITIONERS KHE
CHENG EXECUTED THE DEEDS OF DONATIONS
IN FAVOR OF HIS CO-PETITIONERS THAT THE
ACTION FOR RESCISSION ACCRUED BECAUSE
PRESCRIPTION BEGAN TO RUN WHEN THESE
DONATIONS WERE REGISTERED WITH THE
REGISTER OF DEEDS IN DECEMBER 1989, AND
WHEN THE COMPLAINT WAS FILED ONLY IN
FEBRUARY 1997, MORE THAN FOUR YEARS
HAVE ALREADY LAPSED AND THEREFORE, IT
HAS ALREADY PRESCRIBED.6
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?
The petition is without merit.
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:
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.
19
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.
Tolentino, a noted civilist, explained:
"xxx[T]herefore, credits with suspensive term
or condition are excluded, because the accion
pauliana
presupposes
a
judgment
and
unsatisfied execution, which cannot exist when
the debt is not yet demandable at the time the
rescissory action is brought. Rescission is a
subsidiary action, which presupposes that the
creditor has exhausted the property of the
debtor which is impossible in credits which
20
petitioner Khe Hong Cheng was still pending before the
trial court. Respondent Philam had no inkling, at the
time, that the trial courts 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
needs 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.
It bears stressing that petitioner Khe Hong Cheng even
expressly declared and represented that he had
reserved to himself property sufficient to answer for his
debts contracted prior to this date:
"That the DONOR further states, for the same
purpose as expressed in the next preceding
paragraph, that this donation is not made with
the object of defrauding his creditors having
reserved to himself property sufficient to
answer his debts contracted prior to this
date".12
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.1wphi1.nt
A final point. Petitioners now belatedly raise on appeal
the defense of improper venue claiming that
respondent Philam's complaint is a real action and
should have been filed with the RTC of Butuan City
since the property subject matter or the donations are
located therein. Suffice it to say that petitioners are
already deemed to have waived their right to question
the venue of the instant case. Improper venue should
be objected to as follows 1) in a motion to dismiss filed
within the time but before the filing of the answer; 13 or
21
(d) its resolution of October 4, 1977,
denying the motion to set aside the
entry of judgment.
Santiago de Erquiaga was the owner of 100% or 3,100
paid-up shares of stock of the Erquiaga Development
Corporation which owns the Hacienda San Jose in
Irosin, Sorsogon (p. 212, Rollo). On November 4,1968,
he entered into an Agreement with Jose L. Reynoso to
sell to the latter his 3,100 shares (or 100%) of Erquiaga
Development Corporation for P900,000 payable in
installments on definite dates fixed in the contract but
not later than November 30, 1968. Because Reynoso
failed to pay the second and third installments on time,
the total price of the sale was later increased to
P971,371.70 payable on or before December 17, 1969.
The difference of P71,371.70 represented brokers'
commission and interest (CFI Decision, pp. 75, 81, 90,
99,Rollo).
As of December 17, 1968, Reynoso was able to pay the
total sum of P410,000 to Erquiaga who thereupon
transferred all his shares (3,100 paid-up shares) in
Erquiaga Development Corporation to Reynoso, as well
as the possession of the Hacienda San Jose, the only
asset of the corporation (p. 100, Rollo). However, as
provided in paragraph 3, subparagraph (c) of the
contract to sell, Reynoso pledged 1,500 shares in favor
of Erquiaga as security for the balance of his obligation
(p. 100, Rollo). Reynoso failed to pay the balance of
P561,321.70 on or before December 17, 1969, as
provided in the promissory notes he delivered to
Erquiaga. So, on March 2, 1970, Erquiaga, through
counsel, formally informed Reynoso that he was
rescinding the sale of his shares in the Erquiaga
Development Corporation (CFI Decision, pp. 81-100,
Rollo).
As recited by the Court of Appeals in its decision under
review,
the
following
developments
occurred
thereafter:
On March 30, 1970, private respondent
Santiago de Erquiaga filed a complaint
for
rescission
with
preliminary
injunction against Jose L. Reynoso and
Erquiaga Development Corporation, in
the Court of First Instance of Sorsogon,
Branch I (Civil Case No. 2446).** After
issues have been joined and after trial
on the merits, the lower court rendered
judgment (on September 30, 1972),***
the dispositive portion of which reads
as follows:
In
view
of
the
foregoing, judgment is
hereby
rendered
in
favor of the plaintiff
and
against
the
defendant
Jose
L.
Reynoso, rescinding the
sale of 3,100 paid up
shares of stock of the
Erquiaga Development
Corporation
to
the
defendant,
and
ordering:
(a) The defendant to return and
reconvey to the plaintiff the 3,100 paid
up shares of stock of the Erquiaga
Development Corporation which now
stand in his name in the books of the
corporation;
(b) The defendant to render a full
accounting of the fruits he received by
virtue of said 3,100 paid up shares of
stock of the Erquiaga Development
Corporation, as well as to return said
fruits received by him to plaintiff
Santiago de Erquiaga;
(c) The plaintiff to return to the
defendant the amount of P100,000.00
plus legal interest from November
4,1968,
and
the
amount
of
P310,000.00 plus legal interest from
December 17, 1968, until paid;
(d) The defendant to pay the plaintiff
as actual damages the amount of
P12,000.00;
(e) The defendant to pay the plaintiff
the amount of P50,000.00 as attorney's
fees; and
(f) The defendant to pay the costs of
this suit and expenses of litigation.
(Annex A-Petition.)
The parties did not appeal therefrom
and it became final and executory.
On March 21, 1973, the CFI of Sorsogon
issued an Order, pertinent portions of
which reads:
It will be noted that
both parties having
decided not to appeal,
the
decision
has
become
final
and
executory.
Nevertheless, the Court
22
finds merit in the
contention
of
the
plaintiff
that
the
payment
to
the
defendant of the total
sum of P410,000.00
plus
the
interest,
should be held in
abeyance
pending
rendition
of
the
accounting
by
the
defendant of the fruits
received by him on
account of the 3,100
shares of the capital
stock
of
Erquiaga
Development
Corporation. The same
may be said with
respect to the sums
due the plaintiff from
the
defendant
for
damages
and
attorney's fees. Indeed
it is reasonable to
suppose, as contended
by the plaintiff, that
when such accounting
is
made
and
the
accounting, as urged
by plaintiff, should refer
not
only
to
the
dividends due from the
shares of stock but to
the products of the
hacienda which is the
only
asset
of
the
Erquiaga Development
Corporation,
certain
sums may be found
due to the plaintiff from
the defendant which
may
partially
or
entirely off set (sic) the
amount
adjudged
against him in the
decision.
It is the sense of the
court that the fruits
referred to in the
decision include not
only
the
dividends
received, if any, on the
3,100 shares of stocks
but more particularly
the products received
by the defendant from
the
hacienda.
The
hacienda
and
the
products
thereon
produced
constitute
the physical assets of
the
Erquiaga
Development
Corporation
represented
by
the
shares of stock and it
would be absurd to
suppose
that
any
accounting could be
made by the defendant
without
necessarily
taking into account the
products
received
which could be the only
basis for determining
whether dividends are
due or not on account
of the investment. The
hacienda
and
its
natural
fruits
as
represented
by
the
shares of stock which
the defendant received
as
manager
and
controlling stockholder
of
the
Erquiaga
Development
Corporation can not be
divorced
from
the
certificates of stock in
order
to
determine
whether the defendant
has correctly reported
the income of the
corporation
or
concealed part of it for
his
personal
advantage. It is hardly
necessary for the Court
to restate an obvious
fact that on both legal
and equitable grounds,
the
Erquiaga
Development
Corporation
and
defendant
Jose
Reynoso are one and
the same persons as
far as the obligation to
account
for
the
products
of
the
hacienda is concerned,'
(pp. 4-6, Annex 1,
Answer.)
23
In the same Order, the CFI of Sorsogon
appointed a receiver upon the filing of
a bond in the amount of P100,000.00.
The reasons of the lower court for
appointing a receiver 'were that the
matter of accounting of the fruits
received by defendant Reynoso as
directed in the decision will take time;
that plaintiff Erquiaga has shown
sufficient and justifiable ground for the
appointment of a receiver in order to
preserve the Hacienda which has
obviously been mismanaged by the
defendant to a point where the
amortization of the loan with the
Development Bank of the Philippines
has been neglected and the arrears in
payments have risen to the amount of
P503,510.70 as of October 19, 1972,
and there is danger that the
Development Bank of the Philippines
may institute foreclosure proceedings
to the damage and prejudice of the
plaintiff.' (p. 7, Id.)
On April 26, 1973, defendant Jose L.
Reynoso died and he was substituted
by his surviving spouse Africa Valdez
Vda. de Reynoso and children, as party
defendants.
Defendants
filed
a
petition
for
certiorari with a prayer for a writ of
preliminary injunction seeking the
annulment of the aforementioned
Order of March 21, 1973. On June 28,
1973, the Court of Appeals rendered
judgment dismissing the petition with
costs against the petitioners, ruling
that said Order is valid and the
respondent court did not commit any
grave abuse of discretion in issuing the
same (Annex 2, Id.). Petitioners
brought the case up to the Supreme
Court on a petition for review on
certiorari which was denied by said
tribunal in a Resolution dated February
5, 1974 (Annex 3, Id.). Petitioners'
motion for reconsideration thereof was
likewise denied by the Supreme Court
on March 29,1974.
Upon motion of Erquiaga, the CFI of
Sorsogon issued an order, dated
February 12,1975,
dissolving the
receivership and ordering the delivery
of the possession of the Hacienda San
Jose to Erquiaga, the filing of bond by
said Erquiaga in the amount of
P410,000.00
conditioned
to
the
payment of whatever may be due to
the substituted heirs of deceased
defendant Reynoso (petitioners herein)
after the approval of the accounting
report submitted by Reynoso. Said
order
further
directed
herein
petitioners to allow counsel for
Erquiaga
to
inspect,
copy
and
photograph certain documents related
to the accounting report (Annex B,
Petition).
On March 3,1975, the CFI of Sorsogon
approved
the
P410,000.00
bond
submitted by Erquiaga and the
possession, management and control
of the hacienda were turned over to
Erquiaga
(Annex
C,
Petition).
Petitioners
(Reynosos)
filed
their
motion for reconsideration which the
CFI of Sorsogon denied in an Order,
dated June 23, 1975 (Annex D, Id.).
In an Omnibus Motion, dated July
25,1975, filed by Erquiaga, and over
the objections interposed thereto by
herein petitioners (Reynosos), the CFI
of Sorsogon issued an Order, dated
October 9, 1975, the dispositive portion
of which reads:
WHEREFORE, in view of
the foregoing, on the
first
count,
the
defendants
are
directed (to deliver) to
the plaintiff or his
counsel within five (5)
days from receipt of
this order the 1,600
shares of stock of the
Erquiaga Development
Corporation which are
in their possession.
Should the defendants
refuse or delay in
delivering such shares
of stock, as prayed for,
the
plaintiff
is
authorized:
(a) To call and hold a special meeting of
the stockholders of the Erquiaga
Development Corporation to elect the
members of the Board of Directors;
(b) In the said meeting the plaintiff is
authorized to vote not only the 1,500
24
shares of stock in his name but also the
1,600 shares in the name and
possession of the defendants;
(c) The question as to who shall be
elected members of the Board of
Directors and officers of the board is
left to the discretion of the plaintiff;
(d) The members of the board and the
officers who are elected are authorized
to execute any and all contracts or
agreements under such conditions as
may be required by the Development
Bank for the purpose of restructuring
the loan of the Erquiaga Development
Corporation with the said bank.
On the second count,
the prayer to strike out
all expenses alleged[ly]
incurred
by
the
defendants
in
the
production of the fruits
of Hacienda San Jose
and
declaring
the
obligation
of
the
plaintiff
under
paragraph (c) of the
judgment to pay the
defendant the sum of
P410,000.00
with
interest
as
fully
compensated by the
fruits earned by the
defendants from the
property, as well as the
issuance of a writ of
execution against the
defendants to pay the
plaintiffs
P62,000.00
under paragraphs (e)
and (d) and costs of
litigation
under
paragraph (f) of the
judgment of September
30, 1972, is denied.
The defendants are
once more directed to
comply with the order
of February 12, 1975,
by
answering
the
interrogatories
propounded by counsel
for the plaintiff and
allowing said counsel
or his representative to
inspect,
copy
and
photograph
the
documents mentioned
by the plaintiff during
reasonable hours of
any working day within
twenty (20) days from
receipt of this order,
should the defendants
persist in their refusal
or failure to comply
with the order, the
plaintiff may inform the
court seasonably so
that the proper action
may be taken. (Annex J,
Id.)
Hence, the present petition for
certiorari, prohibition and mandamus
instituted
by
the
substituted
defendants, heirs of the deceased
defendant Jose L. Reynoso against the
CFI of Sorsogon and (plaintiff) Santiago
de Erquiaga. (pp. 276- 281, Rollo.)
On May 31, 1976, the Court of Appeals rendered
judgment holding that:
IN VIEW OF ALL THE FOREGOING, this
court finds that the respondent court
had acted with grave abuse of
discretion or in excess of jurisdiction in
issuing the assailed order of October 9,
1975 (Annex A, Petition) insofar only as
that part of the Order (1) giving private
respondent voting rights on the 3,100
shares of stock of the Erquiaga
Development Corporation without first
divesting petitioners of their title
thereto and ordering the registration of
the same in the corporation books in
the name of private respondent,
pursuant to Section 10, Rule 39 of the
Revised Rules of Court; (2) authorizing
corporate meetings and election of
members of the Board of Directors of
said corporation and (3) refusing to
order the reimbursement of the
purchase price of the 3,100 shares of
stock in the amount of P410,000.00
plus interests awarded in said final
decision of September 30, 1972 and
the set-off therewith of the amount of
P62,000.00 as damages and attorney's
fees in favor of herein private
respondent are concerned. Let writs of
certiorari and prohibition issue against
the aforesaid acts, and the writ of
preliminary
injunction
heretofore
25
issued is hereby made permanent only
insofar as (1), (2) and (3) above are
concerned. As to all other matters
involved in said Order of October 9,
1975, the issuance of writs prayed for
in the petition are not warranted and
therefore denied.
FINALLY, to give effect to all the
foregoing, with a view of putting an
end to a much protracted litigation and
for the best interest of the parties, let a
writ of mandamus issue, commanding
the respondent Judge to order (1) the
Clerk of Court of the CFI of Sorsogon to
execute the necessary deed of
conveyance to effect the transfer of
ownership of the entire 3,100 shares of
stock of the Erquiaga Development
Corporation to private respondent
Santiago Erquiaga in case of failure of
petitioners to comply with the Order of
October 9, 1975 insofar as the delivery
of the 1,600 shares of stock to private
respondent is concerned, within five (5)
days from receipt hereof; and (2) upon
delivery by petitioners or transfer by
the Clerk of Court of said shares of
stock to private respondent, as the
case may be, to issue a writ of
execution ordering private respondent
to pay petitioners the amount of
P410,000.00
plus
interests
in
accordance with the final decision of
September 30, 1972 in Civil Case No.
2448, setting-off therewith the amount
of P62,000.00 adjudged in favor of
private
respondent,
and
against
petitioners'
predecessor-in-interest,
Jose L. Reynoso, in the same decision,
as damages and attorney's fees. (pp.
289-290, Rollo.)
It may be seen from the foregoing narration of facts
that as of the time the Court of Appeals rendered its
decision on May 31, 1976 (now under review) only the
following have been done by the parties in compliance
with the final judgment in the main case (Civil Case No.
2446):
1. The Hacienda San Jose was returned
to Erquiaga on March 3, 1975 upon
approval of Erquiaga's surety bond of
P410,000 in favor of Reynoso;
2. Reynoso has returned to Erquiaga
only the pledged 1,500 shares of stock
of
the
Erquiaga
Development
Corporation, instead of 3,100 shares,
26
We address first the third assignment of error for it will
be futile to discuss the first and second if, after all, the
decision complained of is already final, and the entry of
judgment which the Court of Appeals directed to be
made in its resolution of August 24,1977 (p. 316, Rollo)
was proper. After examining the records, we find that
the Court of Appeals' decision is not yet final. The entry
of judgment was improvident for the Court of Appeals,
in its resolution of December 13, 1976, suspended the
proceedings before it "pending the parties' settlement
negotiations" as prayed for in their joint motion (p.
313, Rollo). Without however giving them an ultimatum
or setting a deadline for the submission of their
compromise agreement, the Court of Appeals, out of
the blue, issued a resolution on August 24, 1977
ordering the Judgment Section of that Court to enter
final judgment in the case (p. 316, Rollo).
We hold that the directive was precipitate and
premature. Erquiaga received the order on September
2, 1977 and filed on September 12, 1977 (p. 317,
Rollo) a motion for reconsideration which the Court of
Appeals denied on October 4, 1977 (p. 322, Rollo). The
order of denial was received on October 14, 1977 (p. 7,
Rollo). On October 28, 1977, Erquiaga filed in this Court
a timely motion for extension of time to file a petition
for review, and the petition was filed within the
extension granted by this Court.
We now address the petitioners' first and second
assignments of error.
After deliberating on the petition for review, we find no
reversible error in the Court of Appeals' decision
directing the clerk of court of the trial court to execute
a deed of conveyance to Erquiaga of the 1,600 shares
of stock of the Erquiaga Development Corporation still
in Reynoso's name and/or possession, in accordance
with the procedure in Section 10, Rule 39 of the Rules
of Court. Neither did it err in annulling the trial court's
order: (1) allowing Erquiaga to vote the 3,100 shares of
Erquiaga Development Corporation without having
effected the transfer of those shares in his name in the
corporate books; and (2) authorizing Erquiaga to call a
special meeting of the stockholders of the Erquiaga
Development Corporation and to vote the 3,100
shares, without the pre-requisite registration of the
shares in his name. It is a fundamental rule in
Corporation Law (Section 35) that a stockholder
acquires voting rights only when the shares of stock to
be voted are registered in his name in the corporate
books.
Until registration is accomplished, the
transfer, though valid between the
parties, cannot be effective as against
the corporation. Thus, the unrecorded
transferee cannot enjoy the status of a
stockholder; he cannot vote nor be
27
San Jose which Reynoso received from the time the
hacienda was delivered to him on November 4,1968
until it was placed under receivership by the court on
March 3, 1975. However, since Reynoso has not yet
given an accounting of those fruits, it is only fair that
Erquiaga's obligation to deliver to Reynoso the legal
interest earned by his money, should await the
rendition and approval of his accounting. To this extent,
the decision of the Court of Appeals should be
modified. For it would be inequitable and oppressive to
require Erquiaga to pay the legal interest earned by
Reynoso's P410,000 since 1968 or for the past 20 years
(amounting to over P400,000 by this time) without first
requiring Reynoso to account for the fruits of
Erquiaga's hacienda which he allegedly squandered
while it was in his possession from November 1968 up
to March 3, 1975.
WHEREFORE, the petition for review is granted. The
payment of legal interest by Erquiaga to Reynoso on
the price of P410,000 paid by Reynoso for Erquiaga's
3,100 shares of stock of the Erquiaga Development
Corporation should be computed as provided in the
final judgment in Civil Case No. 2446 up to September
30,1972, the date of said judgment. Since Reynoso's
judgment liability to Erquiaga for attorney's fees and
damages in the total sum of P62,000 should be set off
against the price of P410,000 that Erquiaga is
obligated to return to Reynoso, the balance of the
judgment in favor of Reynoso would be only P348,000
which should earn legal rate of interest after
September 30,1972, the date of the judgment.
However, the payment of said interest by Erquiaga
should await Reynoso's accounting of the fruits
received by him from the Hacienda San Jose. Upon
payment of P348,000 by Erquiaga to Reynoso,
Erquiaga's P410,000 surety bond shall be deemed
cancelled. In all other respects, the decision of the
Court of Appeals in CA-G.R. No, 04811-SP is affirmed.
No pronouncement as to costs.
SO ORDERED.
28
The complaint claimed that Reyes had informed
Harrison Lumber to vacate the Property before the end
of January 1995. Reyes also informed Keng 5 and
Harrison Lumber that if they failed to vacate by 8
March 1995, he would hold them liable for the penalty
of P400,000 a month as provided in the Contract to
Sell. The complaint further alleged that Lim connived
with Harrison Lumber not to vacate the Property until
the
P400,000
monthly
penalty
would
have
accumulated and equaled the unpaid purchase price of
P18,000,000.
On 3 May 1995, Keng and Harrison Lumber filed their
Answer6 denying they connived with Lim to defraud
Reyes. Keng and Harrison Lumber alleged that Reyes
approved their request for an extension of time to
vacate the Property due to their difficulty in finding a
new location for their business. Harrison Lumber
claimed that as of March 1995, it had already started
transferring some of its merchandise to its new
business location in Malabon.7
On 31 May 1995, Lim filed his Answer8 stating that he
was ready and willing to pay the balance of the
purchase price on or before 8 March 1995. Lim
requested a meeting with Reyes through the latters
daughter on the signing of the Deed of Absolute Sale
and the payment of the balance but Reyes kept
postponing their meeting. On 9 March 1995, Reyes
offered to return the P10 million down payment to Lim
because Reyes was having problems in removing the
lessee from the Property. Lim rejected Reyes offer and
proceeded to verify the status of Reyes title to the
Property. Lim learned that Reyes had already sold the
Property to Line One Foods Corporation ("Line One") on
1 March 1995 for P16,782,840. After the registration of
the Deed of Absolute Sale, the Register of Deeds
issued to Line One TCT No. 134767 covering the
Property. Lim denied conniving with Keng and Harrison
Lumber to defraud Reyes.
On 2 November 1995, Reyes filed a Motion for Leave to
File Amended Complaint due to supervening facts.
These included the filing by Lim of a complaint for
estafa against Reyes as well as an action for specific
performance and nullification of sale and title plus
damages before another trial court.9 The trial court
granted the motion in an Order dated 23 November
1995.
In his Amended Answer dated 18 January 1996, 10 Lim
prayed for the cancellation of the Contract to Sell and
for the issuance of a writ of preliminary attachment
against Reyes. The trial court denied the prayer for a
writ of preliminary attachment in an Order dated 7
October 1996.
On 6 March 1997, Lim requested in open court that
Reyes be ordered to deposit the P10 million down
29
Rule 57 to 61 of the 1997 Rules on Civil
Procedure.
2. Whether the Court of Appeals erred in
finding the trial court could issue the
questioned Orders on grounds of equity when
there is an applicable law on the matter, that
is, Rules 57 to 61 of the 1997 Rules on Civil
Procedure.17
The Courts Ruling
Reyes contentions are without merit.
Reyes points out that deposit is not among the
provisional remedies enumerated in the 1997 Rules of
Civil Procedure. Reyes stresses the enumeration in the
Rules is exclusive. Not one of the provisional remedies
in Rules 57 to 6118 applies to this case. Reyes argues
that a court cannot apply equity and require deposit if
the law already prescribes the specific provisional
remedies which do not include deposit. Reyes invokes
the principle that equity is "applied only in the absence
of, and never against, statutory law or x x x judicial
rules of procedure."19 Reyes adds the fact that the
provisional remedies do not include deposit is a matter
of dura lex sed lex.20
The instant case, however, is precisely one where there
is a hiatus in the law and in the Rules of Court. If left
alone, the hiatus will result in unjust enrichment to
Reyes at the expense of Lim. The hiatus may also
imperil restitution, which is a precondition to the
rescission of the Contract to Sell that Reyes himself
seeks. This is not a case of equity overruling a positive
provision of law or judicial rule for there is none that
governs this particular case. This is a case of silence or
insufficiency of the law and the Rules of Court. In this
case, Article 9 of the Civil Code expressly mandates the
courts to make a ruling despite the "silence, obscurity
or insufficiency of the laws."21 This calls for the
application of equity,22 which "fills the open spaces in
the law."23
Thus, the trial court in the exercise of its equity
jurisdiction may validly order the deposit of the P10
million down payment in court. The purpose of the
exercise of equity jurisdiction in this case is to prevent
unjust enrichment and to ensure restitution. Equity
jurisdiction aims to do complete justice in cases where
a court of law is unable to adapt its judgments to the
special circumstances of a case because of the
inflexibility of its statutory or legal jurisdiction. 24 Equity
is the principle by which substantial justice may be
attained in cases where the prescribed or customary
forms of ordinary law are inadequate.25
30
There is also no plausible or justifiable reason for Reyes
to object to the deposit of the P10 million down
payment in court. The Contract to Sell can no longer be
enforced because Reyes himself subsequently sold the
Property to Line One. Both Reyes and Lim are now
seeking rescission of the Contract to Sell. Under Article
1385 of the Civil Code, rescission creates the obligation
to return the things that are the object of the contract.
Rescission is possible only when the person demanding
rescission can return whatever he may be obliged to
restore. A court of equity will not rescind a contract
unless there is restitution, that is, the parties are
restored to the status quo ante.34
DECISION
PANGANIBAN, J.:
Under the terms of the subject Contract, "actual
possession"
cannot
be
equated
with
"actual
occupancy." Inasmuch as the housing unit was
physically occupied by parties other than those
intended to be benefited by the housing program of
the Social Security System, there was a clear violation
of the Contract. Since respondent did not comply with
his obligations, rescission is proper.
The Case
31
"On reports that numerous violations have
been committed by some of the housing
awardees in connection with the conditions
governing their sales, SSS conducted an
investigation on the matter. The investigation
revealed that in the case of [Respondent]
David, he committed two (2) violations of his
deed of conditional sale, to wit: (1) neither the
[respondent] nor his immediate family resided
and/or occupied the said housing unit, and (2)
he allowed a certain Buenaventura Penus to
possess and occupy the property.
"As a consequence of these violations, SSS
sent a letter to David formally revoking,
terminating and/or rescinding the deed of
conditional sale. However, the latter refused to
vacate and surrender possession of the subject
property, prompting SSS to institute a
complaint with the Quezon City RTC on March
28, 1996 revoking the deed of conditional sale
and likewise praying for the issuance of a writ
of possession in its favor.
"During the pre-trial of the case, the court
observed that while the complaint was
captioned 'Petition for Recovery of Possession
with [P]rayer for Issuance of a Writ of
Possession,' an examination of its body shows
that the prayer was actually for the rescission
of the deed of conditional sale. For this reason,
the court ordered the amendment of the
complaint
and
in
compliance
thereto,
[petitioner] submitted its amended complaint
on March 19, 1997.
"[Respondent] David denied the alleged
violations of the deed of conditional sale,
stating that Buenaventura Penus, alluded to by
the [petitioner] as possessor-occupant of the
subject property, was in fact a caretaker until
and after the necessary renovations and
modifications on the house were made.
"In a [D]ecision dated July 1, 1998, the court a
quo dismissed the complaint and adjudged the
[petitioner] liable for costs. The dispositive
portion of the trial court's decision reads:
'WHEREFORE, in the light of the
foregoing, the Amended Complaint is
dismissed, with costs against the
plaintiff.
'SO ORDERED.'
"In dismissing the complaint, the court ruled
that the [petitioner] failed to prove that the
[respondent] purchased the subject property
for the use and benefit of another undisclosed
party and not for his exclusive use, or that the
defendant
sold,
assigned,
encumbered,
mortgaged, leased, subleased or in any
manner altered or disposed of the subject
property or his rights thereto at any other time.
In arriving at its [D]ecision, the lower court
Issue:
Conditions
32
simple possession. It contends that the material
occupation of the property by other persons ran
counter to the objective of the Social Security System
(SSS) housing program to restrict the use and
enjoyment of the housing units to SSS employees and
their immediate families only.
Petitioner likewise submits that the appellate court
erred in believing the claim of respondent that the
house was uninhabitable when it was delivered to him
in 1992. His claim was belied by his acceptance of the
property without protest, as well as by the fact that his
alleged caretakers had lived there from 1992 to 1996.
Petitioner adds that he should have used his available
money to improve the property, if the unit was indeed
unlivable, instead of fully settling in advance in
December 1992 the unpaid balance of its purchase
price.
Propriety of Review
At the outset, the Court stresses that a question of law
has arisen from petitioner's contention that simple
possession under Article 531 of the Civil Code is not
the same as "actual occupancy and possession at all
times," as required of respondent under the Deed.
Such question -- of what law, rule or principle is to
govern a given state of facts -- is decidedly one of
law.10 It may be raised in this appeal by certiorari under
Rule 45 of the Rules of Court.
33
this Contract, and shall subject the VENDEE to
the penalties provided for in paragraphs (11)
and (12) hereof, including administrative
sanctions, when warranted, in the event x x x
the VENDEE has been found to have committed
a misrepresentation/falsification in his/her
application for an Employee Housing Loan."15
Actual
Occupancy
Possession at All Times
and
34
it without any whimper of protest on October 23, 1992,
and even paid the housing loan in full in December of
the same year. If it was indeed uninhabitable, he
should have refused to accept it or immediately
protested its condition.
On the other hand, there is enough documentary
evidence to debunk his claim. The report of petitioner's
Internal Audit Service31 significantly established that
509 of the 728 awardees -- presumably situated
similarly as he was -- had occupied their units in
compliance with the assailed requirement. The
Interview Slip32 submitted in evidence by petitioner
also showed that Penus and his wife, and later
Domingo, had lived in the unit since 1992. In the face
of these facts, it is difficult to believe the defense of
respondent. For how could the units be habitable to
many others, but not to him?
Likewise, this Court takes judicial notice of the fact that
low-cost houses such as those offered by petitioner 33
are usually core or shell units without adequate
divisions, ceilings, cabinets, paint and, in some cases,
electrical connections -- features that have to be
installed, completed or refurbished by the awardees.
The idea, of course, is to provide immediate but
affordable living spaces that they can work at
improving, according to their needs and finances and
while living therein. Certainly, at P172,978.85 (the cost
of the house and lot in this case), it is but fair to accept
the lack of amenities.
Neither can respondent assail the validity of the
Contract as a one-sided "take it or leave it" agreement.
To begin with, a contract of adhesion -- wherein one
party imposes a ready-made form of contract on the
other -- is not strictly against the law. 34 The terms of
the agreement cannot be modified, but can be freely
rejected in its entirety, by the other party. On the other
hand, the latter's adherence thereto would mean
consent.35 We need only to remind respondent that
contractual obligations between the parties have the
force of law and must be complied with in good faith. 36
We therefore do not see any reason to discuss
respondent's added arguments, other than to say that
the objectives of low-cost housing -- mandated under
the social justice provisions of the Constitution 37 -- are
too important to be sidetracked by lame, untimely and
unfounded excuses. Such excuses do nothing but harm
to the salutary efforts of providing the underprivileged
and the homeless with cheap but decent houses. It is
for this reason that we regard this case as no ordinary
skirmish over contractual relations.
Rescission
In view of the foregoing discussion, we rule that
rescission of the Contract is the proper recourse. Article
1191 of the Civil Code provides:
"Art. 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
35
However, this Court holds that the forfeiture provision
under paragraph 12 does not apply to the payment
made by respondent. The plain and simple reason is
that he did not pay the purchase price by installment,
but instead paid it in full in December 1992 -- two
months after the delivery of the unit. Hence, that
payment was beyond the ambit of Republic Act 6552,
otherwise known as the Realty Installment Buyer Act or
the Maceda Law.
Doctrinally, mutual restitution must follow rescission.
Under Article 1385 of the Civil Code, "rescission creates
the obligation to return the things which were the
object of the contract, together with their fruits, and
the price with its interests x x x." 43 Moreover, "[t]o
rescind is to declare a contract void at its inception and
to put an end to it as though it never was." 44 Hence,
rescission restores the parties to their relative
positions, as if no contract has been made. Paragraph
11, cited above, supports the mutual restitution
required in rescission.
Respondent is thus obliged to return the house and lot
sold, as well as rental payments he may have earned,
if any. On the other hand, petitioner is mandated to
refund to him his full payment of P172,978.85 plus
legal interest of 6 percent per annum, as well as the
value of substantial improvements introduced by him,
as appraised by petitioner. Indeed, stipulated in the
Deed is such appraisal by the vendor,45 upon transfer
of the property to petitioner or to any of its eligible
employees. This condition is reasonably and justly
applicable and proper in the present case.
WHEREFORE, this Petition is hereby GRANTED and the
assailed Decision SET ASIDE. The Deed of Conditional
Sale is CANCELLED. Petitioner is ORDERED to pay
respondent P172,978.85, plus the legal interest and
the value of any substantial improvements thereon.
Respondent is ORDERED to vacate immediately Block
18, Lot 8, SSS Housing, North Fairview, Quezon City;
and to surrender possession thereof to petitioner. No
costs.
SO ORDERED.
36
covered
87020.
by
TCT
No.
37
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 Deed of
Donation.
On the other hand, 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) the Court of Appeals correctly applied or
interpreted Section 23 of Rule 132 of the Rules of
Court; (d) petitioner failed to present convincing
evidence that the Deed of Donation was antedated and
executed in fraud of petitioner; and (e) the Court of
Appeals correctly struck down the awards of damages,
attorney's fees and expenses of litigation because
there is no factual basis therefor in the body of the trial
court's decision.
The primordial issue for resolution is whether the
questioned Deed of Donation was made in fraud of
petitioner and, therefore, rescissible. A corollary issue
is whether the awards of damages, attorney's fees and
expenses of litigation are proper.
We resolve these issues in the negative.
The rule is well settled that the jurisdiction of this Court
in cases brought before it from the Court of Appeals via
Rule 45 of the Rules of Court is limited to reviewing
errors of law. Findings of fact of the latter court are
conclusive, except in a number of instances. 11 In the
case at bar, one of the recognized exceptions
warranting a review by this Court of the factual
findings of the Court of Appeals exists, to wit, the
factual findings and conclusions of the lower court and
Court of Appeals are conflicting, especially on the issue
of whether the Deed of Donation in question was in
fraud of creditors.
Art. 1381 of the Civil Code enumerates the contracts
which are rescissible, and among them are "those
contracts undertaken in fraud of creditors when the
latter cannot in any other manner collect the claims
due them."
38
performance of a duty by a public officer. And these
include notarial documents, like the subject deed of
donation. Section 19, Rule 132 of the Rules of Court
provides:
Sec. 19. Classes of docum/ents. For
the purpose of their presentation in
evidence, documents are either public
or private.
Public documents are:
(a) . . .
(b) Documents acknowledged before a
notary public except last wills and
testaments. . . .
It bears repeating that notarial documents, except last
wills and testaments, are public documents and are
evidence of the facts that gave rise to their execution
and of their date.
In the present case, the fact that the questioned Deed
was registered only on 2 July 1991 is not enough to
overcome the presumption as to the truthfulness of the
statement of the date in the questioned deed, which is
10 August 1989. Petitioner's claim against LIM was
constituted only in August 1990, or a year after the
questioned alienation. Thus, the first two requisites for
the rescission of contracts are absent.
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." 19 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. 20 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." 21
The fourth requisite for an accion pauliana to prosper is
not present either.
39
situated at Hindag-an,
St. Bernard, Southern
Leyte, and covered by
Tax Declaration No.
13571. 25
During her cross-examination, LIM declared that the
house and lot mentioned in no. 1 was bought by her in
the amount of about P800,000 to P900,000. 26 Thus:
ATTY. FLORIDO:
Q These properties at
the Sto. Nio Village,
how much did you
acquire this property?
A
Including
residential
P800,000.00
P900,000.00.
the
house
to
40
In her further attempt to support her action for
rescission, petitioner brings to our attention the 31 July
1990 Decision 30 of the RTC of Quezon City, Branch 92,
in Criminal Case No. Q-89-2216. LIM was therein held
guilty of estafa and was ordered to pay complainant
Victoria Suarez the sum of P169,000 for the obligation
LIM incurred on 8 October 1987. This decision was
affirmed by the Court of Appeals. Upon appeal,
however, this Court acquitted LIM of estafa but held
her civilly liable for P169,000 as actual damages.
It should be noted that the complainant in that case,
Victoria Suarez, albeit a creditor prior to the questioned
alienation, is not a party to this accion pauliana. Article
1384 of the Civil Code provides that rescission shall
only be to the extent necessary to cover the damages
caused. Under this Article, only the creditor who
brought the action for rescission can benefit from the
rescission; those who are strangers to the action
cannot benefit from its effects. 31 And the revocation is
only to the extent of the plaintiff creditor's unsatisfied
credit; as to the excess, the alienation is maintained. 32
Thus, petitioner cannot invoke the credit of Suarez to
justify rescission of the subject deed of donation.
Now on the propriety of the trial court's awards of
moral damages, attorney's fees and expenses of
litigation in favor of the petitioner. We have pored over
the records and found no factual or legal basis therefor.
The trial court made these awards in the dispositive
portion of its decision without stating, however, any
justification for the same in the ratio decidendi. Hence,
the Court of Appeals correctly deleted these awards for
want of basis in fact, law or equity.
WHEREFORE, the petition is hereby DISMISSED and the
challenged decision of the Court of Appeals in CA-G.R.
CV. No. 50091 is AFFIRMED in toto.
No pronouncement as to costs.
SO ORDERED.
41
P350,000.00 representing the unpaid principal of the
promissory note, plus 12% interest per annum and an
additional amount equivalent to 1/10 of 1% per day of
the total amount due, as penalty both from and after
September 14, 1983, until fully paid; under the third
cause of action, to pay the plaintiff the further sum of
P350,000.00, representing the unpaid principal of the
promissory note, plus 12% interest per annum and an
additional amount equivalent to 1/10 % of 1% per day
of the total amount due as penalty both from and after
September 14, 1983, until fully paid; and to pay the
same plaintiff the amount equivalent to 10% of the
foregoing sums, as and for attorneys fees, such
amount to bear the same rate of interest as the
principal obligation under each promissory note,
compounded monthly, until fully paid; and to pay the
costs of suit.
SO ORDERED.[1]
On September 8, 1986, an alias notice of levy on
execution on the one-half () undivided portion of TCT
410603 belonging to Alfonso Chua was issued in
connection with Civil Case 82-14134. The notice was
inscribed and annotated at the back of TCT 410603 on
September 15, 1986 and a certificate of sale covering
the one-half undivided portion of the property was
executed in favor of Metropolitan Bank and Trust
Company. The certificate of sale was inscribed at the
back of said TCT on December 22, 1987.
Meanwhile, Pacific Multi Agro-Industrial Corporation
and Alfonso Roxas Chuas appeal was dismissed by the
Court of Appeals on September 29, 1988 for failure to
file brief.[2]
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.[3]
Paulino redeemed said one-half share on the very same
day. The instrument was inscribed at the back of TCT
410603 as Entry No. 7629, and the redemption of the
property by Paulino was inscribed as Entry No. 7630,
both dated March 14, 1989.[4]
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. 8531257, in favor of China Bank and inscribed at the back
of TCT 410603 as Entry No. 01896 on May 4, 1992.[5]
c)
42
found that Paulino redeemed the one-half portion of
the property, using therefor the amount of P100,000.00
which he withdrew from his savings account as
evidenced by his bankbook and the receipts of
Metrobank for his payment of the redemption price.
The court noted that Paulino at that time was already
of age and had his own source of income.
On appeal, the Court of Appeals affirmed the ruling of
the trial court. It held that petitioner China Bank had
been remiss in the exercise of its rights as creditor; and
that it should have exercised its right of redemption
under Sections 29 and 30, Rule 39 of the Rules of
Court.
The issues raised by petitioner before us essentially
boil down to 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.
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. Article 1387 reads:
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.
43
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
insolvency.
of
large
indebtedness
or
complete
44
Code clearly states that conveyances made by the
debtor to defraud his creditor may be rescinded.
WHEREFORE, the petition is GRANTED. The decision of
the Court of Appeals in CA-G.R. CV No. 46735 is
REVERSED and SET ASIDE. The permanent injunction
enjoining petitioner, the Sheriff of Manila, the Register
of Deeds of San Juan, their officers, representatives,
agents and persons acting on their behalf from causing
the transfer of possession, ownership and title of the
property covered by TCT No. 410603 in favor of
petitioner is LIFTED. The Assignment of Rights to
Redeem dated November 21, 1988 executed by
Alfonso Roxas Chua in favor of Paulino Roxas Chua is
ordered RESCINDED. The levy on execution dated
February 4, 1991 and the Certificate of Sale dated April
30, 1992 in favor of petitioner are DECLARED VALID
against the one-half portion of the subject property.
SO ORDERED.
45
name of Butuan Shipping Lines and/or petitioner Khe
Hong Cheng to levy or garnish for the satisfaction of
the trial court's decision. 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.
On February 25, 1997, respondent Philam filed a
complaint with the Regional Trial Court of Makati City,
Branch 147, 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 (Civil
Case No.97-415). Respondent Philam alleged, inter
alia, that petitioner Khe Hong Cheng executed the
aforesaid deeds in fraud of his creditors, including
respondent Philam.2
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 registration of the deeds of donation
on December 27, 1989 constituted constructive notice
and since the complaint a quo was filed only on
February 25, 1997, or more than four (4) years after
said registration, the action was already barred by
prescription.3
Acting thereon, 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. 13357.4
On appeal by petitioners, the CA affirmed the trial
court's decision in favor of respondent Philam. 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 basically 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.
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.5
46
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. 7 Article 1383 of
the Civil Code provides as follows:
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.
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. For an accion pauliana to
accrue, the following requisites must concur:
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; 5) That the third
person who received the property conveyed, if
by onerous title, has been an accomplice in the
fraud.8 (Emphasis ours)
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
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rescissory action is brought. Rescission is a
subsidiary action, which presupposes that the
creditor has exhausted the property of the
debtor which is impossible in credits which
cannot be enforced because of a suspensive
term or condition.
While it is necessary that the credit of the
plaintiff in the accion pauliana must be 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."10
These principles were reiterated by the Court when it
explained the requisites of an accion pauliana in
greater detail, to wit:
"The following successive measures must be
taken by a creditor before he may bring an
action for rescission of an allegedly fraudulent
sale: (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 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). Without availing
of the first and second remedies, i.e..
exhausting the properties of the debtor or
subrogating themselves in Francisco Bareg's
transmissible rights and actions. petitioners
simply: undertook the third measure and filed
an action for annulment of sale. This cannot be
done."11 (Emphasis ours)
In the same case, the Court also quoted the rationale
of the CA when it upheld the dismissal of the accion
pauliana on the basis of lack of cause of action:
"In this case, plaintiffs appellants had not even
commenced an action against defendantsappellees Bareng for the collection of the
alleged indebtedness, Plaintiffs-appellants had
not even tried to exhaust the property of
defendants-appellees
Bareng,
Plaintiffsappellants, in seeking the rescission of the
contracts of sale entered into between
defendants-appellees, failed to show and prove
that defendants-appellees Bareng had no other
property, either at the time of the sale or at the
time this action was filed, out of which they
could have collected this (sic) debts."
(Emphasis ours)
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already deemed to have waived their right to question
the venue of the instant case. Improper venue should
be objected to as follows 1) in a motion to dismiss filed
within the time but before the filing of the answer; 13 or
2) in the answer as an affirmative defense over which,
in the discretion of the court, a preliminary hearing
may be held as if a motion to dismiss had been filed. 14
Having failed to either file a motion to dismiss on the
ground of improper of venue or include the same as an
affirmative defense in their answer, petitioners are