G.R. No. 144169. March 28, 2001.
KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN KHE, petitioners,
vs. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY and PHILAM
INSURANCE CO., INC., respondents.
LEGAL DOCTRINE:
Actions; Rescission; Accion Pauliana; Obligations and Contracts; Prescription; Since Article 1389
of the Civil Code 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 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.
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.
Same; Same; Same; Requisites; 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.—
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.
Same; Same; Same; Prescription; Land Titles; To count the four-year period to rescind an allegedly
fraudulent contract from the date of registration of the conveyance with the Register of Deeds would
run counter to Article 1383 of the Civil Code as well as settled jurisprudence.—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.
Same; Same; Same; Same; An accion pauliana 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.—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.
Same; Same; Same; Same; Where the judgment creditor filed its complaint for accion pauliana
barely a month from its discovery that the defendant had no other property to satisfy the judgment
award against him, its action for rescission of the deeds of donation clearly had not yet prescribed.—
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.
FACTS:
Petitioner is the owner of Butuan Shipping Lines. In one of the vessels owned by the petitioner,
Philippine Agricultural Trading Corporation boarded 3,400 bags of copra to be shipped from Masbate
to Dipolog City and which said shipment of copra was insured by PhilAm. While on board, the ship
sank amounting to total loss of the shipments. Because of the loss, the insurer paid the damages to
the consignee. Having subrogated the rights of the consignee, PhilAm instituted a civil case to
recover the money paid to the consignee based on breach of contract of carriage.
While the case was pending, petitioner executed deeds of donations of parcels of land to his
children. The trial court rendered judgment against the petitioner, Khe Hong Cheng in the civil case
on December 29, 1993. After the decision became final, a writ of execution was issued but it was not
served. Therefore, an alias writ was applied for which was granted. The sheriff did not find any
property under Butuan Shipping Lines and/or Khe Hong Cheng.
In 1997, PhilAm filed complaint for annulling the deeds of donation made by herein petitioner to
his children and alleged the donation was to defraud his creditors including PhilAm. Petitioner
filed an answer stating that the action had already prescribed.
ISSUE:
Whether or not the action to rescind the donation had already prescribed. – NO
(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?)
HELD:
Article 1389 of the Civil Code simply provides that the action to claim rescission must be
commenced within four years. When the law is silent as to when the prescriptive period shall
commence, general rule must apply that it will commence when the moment the action accrues.
According to the trial court, the period began from December 29, 1993 when the civil case was
resolved. Thus, the CA maintained that the four-year period began only on January 1997, the time
when it first learned that the judgment award could not be satisfied because Khe Hong Cheng had
no more properties in his name.
An action for rescission must be the last resort of the creditors and can only be availed after the
creditor had exhausted all the properties. The herein respondent came to know only in January
1997 about the unlawful conveyances of the petitioner when, together with the sheriff and counsel,
were to attach the property of the petitioner and it was then only when they found out it is no longer
in the name of the petitioner.
Since the respondent filed accion pauliana on February 1997, a month after the discovery that
petitioner had no property in his name to satisfy the judgment, action for rescission of subject
deeds had not yet prescribed.
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.
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.”
An accion pauliana accrues only when the creditor discovers that he has no other legal
remedy for the satisfaction of his claim against the debtor other than an accion pauliana. The
accion pauliana is an action of a last resort. For as long as the creditor still has a remedy at law for
the enforcement of his claim against the debtor, the creditor will not have any cause of action against
the creditor for rescission of the contracts entered into by and between the debtor and another
person or persons.
Indeed, an accion pauliana presupposes a judgment and the issuance by the trial court of a
writ of execution for the satisfaction of the judgment and the failure of the Sheriff to enforce
and satisfy the judgment of the court. It presupposes that the creditor has exhausted the property
of the debtor. The date of the decision of the trial court against the debtor is immaterial. What is
important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of
his property. After all, the decision of the trial court against the debtor will retroact to the time when
the debtor became indebted to the creditor.
