Philippine Supreme Court Jurisprudence


Philippine Supreme Court Jurisprudence > Year 1966 > November 1966 Decisions > G.R. No. L-18500 November 24, 1966 ARSENIO DE LA PAZ, ET AL. v. MARIO F. GARCIA, ET AL.:




PHILIPPINE SUPREME COURT DECISIONS

EN BANC

[G.R. No. L-18500. November 24, 1966.]

ARSENIO DE LA PAZ and CLAUDIA MANIO, Petitioner, v. MARIO F. GARCIA, assignee of the insolvent ENRIQUE GATBONTON and the COURT OF APPEALS, Respondents.

Tolentino, Garcia & D. R. Cruz for Petitioner.

Lino Esteban for Respondent.


SYLLABUS


1. INSOLVENCY; SALE OF PROPERTY BY THE INSOLVENT; TRANSFER NULL AND VOID. — The Insolvency Law (Act No. 1956) declares certain transfers by the insolvent fraudulent and regards them not merely rescissible but absolutely null and void.

2. ID.; ID.; ID.; PROVISIONS OF THE CIVIL CODE ON RESCISSIBLE CONTRACTS CANNOT BE INVOKED. — The provisions of the Civil Code on rescissible contracts (which assume the validity of the contract) cannot be invoked since, as already stated, the Insolvency Law regards the contracts void. Consequently, it is idle to talk of restitution, exhaustion of the debtor’s properties, sources of title, etc. on which petitioners’ elaborate arguments are based.

3. ID; ID.; ACTION TO NULLIFY SALE WHICH WAS IN FRAUD OF CREDITORS; TRANSFEROR NOT AN INDISPENSABLE PARTY. — Nor is the presence of Patria Belmonte Anonas indispensable in this proceedings. The rule is very well explained by Moran thus: "In an action for rescission of sale because of non-payment of price, or for annulment of a sale of property, the vendee is an indispensable party. In action for recovery of property against a person who purchased it from another who in turn acquired it from others by the same means or by donation or otherwise, these predecessors of defendants are indispensable parties should the transfers, if not voided, be binding upon plaintiff. But, where the transfers are immaterial to plaintiff’s title he having taken no part in any one of them, transferors are not indispensable or necessary parties, although they may be joined by defendant by a third party complaint to enforce the warranty for eviction." (1 Moran 148-149 [1963]). Hare, respondent Garcia brought the action as assignee who took no part in the alleged transaction between petitioners and their transferors or predecessors. As such he could bring this action even against petitioners only as the parties in possession of the properties.

4. ID.; ID.; TRANSFER OF PROPERTIES WITHIN 30 DAYS OF THE FILING OF PETITION CONSIDERED FRAUDULENT. — Section 70 of the Insolvency Law considers as fraudulent any transfer of properties made by the insolvent within 30 days of the filing by or against him of a petition for insolvency, unless the transfer is for valuable pecuniary consideration and is made in good faith.

5. ID.; ID.; RELATIONSHIP AS CIRCUMSTANCE INDICATING FRAUD. — It is true that in one case (Flores v. Faustino, 55 Phil., 594 (1931), this Court said that mere relationship is not "necessarily fraud." But relationship can be when taken together with other circumstances. (Oria v. McMicking, 21 Phil., 243 [1912]) ("badges of fraud;" etc.), Here the appellate court did not consider relationship standing alone. The time between the supposed purchase and filing of the petition for insolvency; the price at which the properties were sold, the sisters’ representation that they were looking for buyers of the properties at a time when the properties were supposed to be no longer the properties of the insolvent — it was in this context that relationship was viewed as indicating fraud.

6. ID.; ID.; DIFFERENCE IN THE PURCHASE PRICE AND THAT OF REDEMPTION EVIDENCE OF FRAUD. — Suffice it to say that there is absolutely no evidence that Anonas was motivated by generosity in making a sale at a financial sacrifice. Nor is there evidence that the difference between the price at which Anonas bought the lands and the price at which she sold them to petitioners represents the price paid for the right of redemption. This is merely a conjecture, which invites an equally plausible conjecture, namely, that the transaction between the insolvent and Anonas was in truth a loan for P9,000, the amount of P1,000 being interest in excess of that allowed by law. This might explain why the insolvent’s right to redeem was embodied in a private document. This might likewise explain the conduct of the sisters Maria and Claudia Manio in offering the properties for sale when et that time the same properties were supposed to be properties of Anonas Indeed, the Civil Code states in article 1603 that "In case of doubt, a contract purporting to be a sale with a right to repurchase shall be construed as an equitable mortgage."cralaw virtua1aw library

7. ID.; ID.; TRANSFER OF INSOLVENT’S HOUSE TO PETITIONERS WITHIN THE PERIOD PROHIBITED BY LAW. — It is claimed that the sale was made on September 2, 1952 and that for the purposes of determining whether the transfer was made within the 30-day period in section 70 of the Insolvency Law, that date and not the date of registration of the sale (October 14, 1952) should be considered. For this purpose, petitioners invoked Manalansan v. Manalang, G.R. No. L-13646, July 26, 1960 for authority that "there is no registry of buildings in this jurisdiction apart from the lands on which they stand, so that there is no legal compulsion to register, as notice to third persons, transactions over or dealings on buildings that do not belong to the owners of the lands on which they stand." There may indeed be no separate register for buildings, but this does not mean that transactions regarding buildings may not be recorded in the registry of deeds where the land, on which the building are erected, is registered. And there may indeed be no legal duty to register such transactions, but, if notwithstanding the absence of such a duty the vendee registers the sale to him of a building, as the petitioners in this case did, then he cannot escape the effects of the registration. (See Civil Code acts, 708-709 CF. Associated Ins. & Surety Co. v. Iya; Iya v. Valino, 56 Off. Gaz., 942 [1958]). The appellate court correctly considered the date of registration of the sale to petitioners in determining whether the sale is prohibited by the Insolvency Law.


D E C I S I O N


REGALA, J.:


This is a petition to review the decision of the Court of Appeals. The facts are summarized in the following portion of the appealed decision:jgc:chanrobles.com.ph

"It appears that on July 21, 1952, insolvent Enrique Gatbonton and his wife Maria Manio executed a deed of absolute sale whereby they sold three parcels of land in question [situated in the barrios of Cebu, Mataas na Kahoy and Bangad, Cabanatuan City] in favor of Patria Belmonte Anonas the deed having been duly recorded in the registry of deeds of Nueva Ecija and the corresponding titles issued in the latter’s name. On the same date both parties entered into a so-called memorandum-agreement by virtue of which the insolvent and his wife were given until December 31, 1952, the right to repurchase parcels of land for P10,000, the memorandum agreement appearing in a private document. On October 16, 1952, before the period for repurchase had expired, Patria Belmonte Anonas sold by way of absolute sale for the sum of P9,000 the three parcels of land in question in favor of appellants who are brothers-in-law of insolvent [insolvent’s wife, Maria Manio, being a sister of petitioner Claudia Manio]. Said insolvent and his wife, on their part, executed on September 2, 1952, a dead of absolute sale for P3,500 of the two-story residential house in question [situated at 37 Sanciangco Street, Cabanatuan City] in favor of appellants."cralaw virtua1aw library

To this narration should be added the fact that on October 21, 1952, that is, five days after the supposed sale of the lands to petitioner, Enrique Gatbonton filed a petition for voluntary insolvency. Respondent Mario S. Garcia was subsequently appointed assignee in the insolvency case.

On December 10, 1952, respondent Garcia filed this case in the Court of Nueva Ecija to recover from petitioners the ownership and possession of the lands and the house. He alleged that the redemption of the lands was made by the insolvent through petitioners "to prevent the said three parcels of land from coming into the hands of the assignees . . . or prevent the same from being distributed ratably among the creditors of the insolvent, or defeat the object of, or hinder, delay or obstruct the operation of this insolvency proceedings, and Arsenio de la Paz and Claudia Manio [petitioners] knew at the time of the transfer of the said three parcels of land that Enrique Gatbonton was insolvent or in contemplation of insolvency and the transfer of the said parcels of land was made in the ordinary and usual course of business of the said Enrique Gatbonton." Respondent Garcia averred that the transfer of the house to petitioners was made for the same purpose.

On the other hand, petitioners contended that the transfers of the parcels of land from the insolvent to Patria Belmonte Anonas and thence to them were made in good faith and for valuable consideration and were recorded in the registry of deeds and that, in fact, titles were issued to Anonas and to them.

Simplicio Lising likewise intervened but it is unnecessary to detail here his claim since it was dismissed by the trial court whose decision became final when Lising failed to file a brief in the Court of Appeals.

After hearing the lower court declared the transfers null and void. Petitioners appealed to the Court of Appeals but they again lost. Hence this appeal.

Petitioners’ arguments are based on Civil Code provisions on rescissible contracts. Thus they contend —

(1) That under articles 1381 (3) a sale may be rescinded if it is in fraud of creditors but that since petitioners derived their title not from the insolvent but from Partia Belmonte Anonas, the sale to them can not be rescinded without first rescinding the sale to Anonas.

(2) That the sale to Anonas cannot be rescinded without making her a party to this action.

(3) That the sale to petitioners cannot be rescinded because it has not been shown that the creditors of the insolvent cannot recover in any other way, as required by article 1383.

(4) That, pursuant to article 1385, the appellate court should have ordered the return of the price which petitioners paid for the lands and the house, with interest, because rescission requires mutual restitution.

Petitioners, in our opinion, have missed the point. The decision of the Court of Appeals is based not on the Civil Code but on the Insolvency Law (Act No. 1956) which declares certain transfers to be fraudulent and regards them not merely rescissible but absolutely null and void. Respondent Garcia brought this suit on the theory that the purchase of the properties by petitioners on October 16, 1952 was in reality redemption by Enrique Gatbonton who, only five days later, was to file a petition for voluntary insolvency, and that this scheme was resorted to in an effort to place the properties beyond the reach of Gatbonton’s creditors. This theory was upheld by the appellate court. This is clear from the following passage of its decision:jgc:chanrobles.com.ph

" [A]ppellants contend that the sale of the three parcels of land under controversy in favor of Patria. Belmonte Anonas was made by the insolvent in good faith and for a valuable consideration several months before he was declared insolvent by the lower court. Appellee [respondent Garcia] maintains, however, that it appearing that on October 20, 1952, Enrique Gatbonton had petitioned for voluntary insolvency, the transaction was fraudulent considering the circumstances surrounding the same. We agree with appellee in this respect . . ."cralaw virtua1aw library

The Court of Appeals likewise held the transfer of the house fraudulent for having been made within 30 days of the filing of the petition for insolvency.

It’s clear, therefore, that the provisions of the Civil Code on rescissible contracts (which assume the validity of the contract) cannot be invoked since, as already stated, the Insolvency Law regards the contracts void. Consequently, it is idle to talk of restitution, exhaustion of the debtor’s properties, sources of title, etc. on which petitioners’ elaborate arguments are based.

Nor is the presence of Patria Belmonte Anonas indispensable in this proceedings. The rule is very well explained by Moran thus:jgc:chanrobles.com.ph

"In an action for rescission of sale because of non-payment of price, or for annulment of a sale of property, the vendee is an indispensable party. In action for recovery of property against a person who purchased it from another who in turn acquired it from others by the same means or by donation or otherwise, these predecessors of defendants are indispensable parties should the transfers, if not voided, be binding upon plaintiff. But, where the transfers are immaterial to plaintiff’s title he having taken no part in any one of them, transferor’s are not indispensable or necessary parties, although they may be joined by defendant by a third party complaint to enforce the warrant for eviction." (1 Moran 148-149 [1963]).

Here, respondent Garcia brought the action as assignee who took no part in the alleged transactions between petitioners and their transferors or predecessors. As such, he could bring this action even against petitioners only as the parties in possession of the properties.

This brings us to the heart of the matter. Section 70 of the Insolvency Law considers as fraudulent any transfer of properties made by the insolvent within 30 days of the filing by or against him of a petition for insolvency, unless the transfer is for valuable pecuniary consideration and is made in good faith.

In holding the transfer of the lands and the house in question void for being fraudulent, the Court of Appeals said:jgc:chanrobles.com.ph

"In the first place, appellant Claudia Manio and Maria Manio, insolvent’s wife, are sisters. In the second place, Patria Belmonte Anonas allegedly purchased the three parcels of land from the insolvent for P10,000 and yet she sold them to appellants for P9,000 only at a time when the period of repurchase by the insolvent and his wife had not expired. In the third place, it was indeed a rare coincidence that Patria Belmonte Anonas should have sold the parcels of land originally belonging to the insolvent and his wife to the latter’s brother-in-law and half sister for an amount less than what she had paid when she acquired them. In the fourth place, if the purpose of the sale made by the insolvent was perfectly legal, we see no reason why in the same date he and Patria Balmonte Anonas had to execute a private document known as memorandum agreement so as to give the former an option to repurchase the parcels of land. By so doing, we believe that the insolvent and appellants wanted to hide the real purpose of the transaction, which could have been no other than to prevent the insolvent’s creditors from taking hold of the parcels of land in question. That this was the real purpose is strengthened by the fact that one Miguel Veneracion who had deposited palay in the insolvent’s warehouse found himself without his palay as he did not see it anymore when he went there and instead saw insolvent’s wife and her sister appellant Claudia Manio, who informed him that they were looking for buyers for the parcels of land in question in order to settle with all claimants and depositors of the insolvent out of the proceeds of the sale after paying the credit of Patria Belmonte Anonas in the amount P10,000. Later on Veneracion found out, however, that the parcels of lands were transferred to appellants.

"As to the sale of the two-story residential house, appellants claim that it could not have been in fraud of creditors since it was executed on September 2, 1952, beyond the 30-day period from the filing of the petition for insolvency. Such a claim merits no serious consideration it appearing that the deed of sale was recorded in the registry of deeds on October 14, 1952, that is, only six days before the petition for voluntary insolvency was filed by Enrique Gatbonton."cralaw virtua1aw library

Petitioners dispute the finding of fraud and argue that the relationship which the petitioners bear to the insolvent, instead of justifying a finding of fraud, support the inference that petitioners probably decided to buy the lands in question from Patria Belmonte Anonas to forestall the possibility of their passing into the hands of other parties in the event Gatbonton was unable to repurchase his properties.

It is true that in one case (Flores v. Faustino, 5 Phil. 594 ([1931]), this Court said that mere relationship is not "necessarily fraud." But relationship can be when taken together with other circumstances. 1 Here the appellate court did not consider relationship standing alone. The time between the supposed purchase and the filing of the petition for insolvency; the price at which the properties were sold; the sisters’ representation that they were looking for buyers of the properties at a time when the properties were supposed to be no longer the properties of the insolvent — it was in this context that relationship was viewed as indicating fraud.

Petitioners try to explain the difference between the price at which Patria Belmonte Anonas supposedly bought the land (P10,000) and the price at which she sold them to petitioners (P9,000) by contending that as owner, Anonas could even give the lands free as donation. And, "for all we know, Gatbonton paid valuable consideration for that right to redeem, and his consideration could be the difference between P10,000 that Anonas paid him, and the price of P9,000 that she received from appellants when she resold the same lands to them."cralaw virtua1aw library

Suffice it to say that there is absolutely no evidence that Anonas was motivated by generosity in making a sale at a financial sacrifice. Nor is there evidence that the difference between the price at which Anonas bought the lands and the price at which she sold them to petitioners represents the price paid for the right of redemption. This is merely a conjecture which invites an equally plausible conjecture, namely, that the transaction between the insolvent and Anonas was in truth a loan for P9,000, the amount of P1,000 being interest in excess of that allowed by law. This might explain why the insolvent’s right to redeem was embodied in a private document. This might likewise explain the conduct of the sisters Maria and Claudia Manio in offering the properties for sale when at that time the same properties were supposed to be properties of Anonas. Indeed, the Civil Code states in article 1603 that "In case of doubt, a contract purporting to be a sale with a right to repurchase shall be construed as an equitable mortgage."cralaw virtua1aw library

And what of the transfer of the insolvent’s house to petitioner? It is claimed that the sale was made on September 2, 1952 and that for purposes of determining whether the transfer was made within the 30-day period in section 70 of the Insolvency Law, that date and not the date of registration of the sale (October 14, 1952) should be considered. For this purpose, petitioners invoke Manalansan v. Manalang 108 Phil., 1041 for authority that there is no registry of buildings in this jurisdiction apart from the lands on which they stand, so that there is no legal compulsion to register, as notice to third persons, transactions over or dealings on building that do not belong to the owners of the lands on which they stand." There may indeed be no separate register for buildings, but this does not mean that transactions regarding building may not be recorded in the registry of deeds where the land, which the buildings are erected, is registered. And there may indeed be no legal duty to register such transactions, but, if notwithstanding the absence of such a duty the vendee registers the sale to him of a building, as the petitioners in this case did, then he cannot escape the effect of the registration. (See Civ. Code Arts. 708-709. Cf. Associated Ins. & Surety Co. v. Iya; Iya v. Valino, 56 Off. Gaz. 948 ([1958]). The appellate court correctly considered the date of registration of the sale to petitioners in determining whether the sale is prohibited by the Insolvency Law.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioners.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

Endnotes:



1. See e.g., Oria v. McMicking, 21 Phil. 243 (1912) ("badges of fraud;" sale to a son and nephew); Alpuerto v. Perez Pastor; 38 Phil. 785 (1918) (sale to a son-in-law); Gaston v. Hernaez, 58 Phil. 823 (1933) (transfer to a mother-in-law); Regalado v. Luchsinger & Co., 5 Phil. 625 (1906) (sale to a son).




Back to Home | Back to Main




















chanrobles.com





ChanRobles On-Line Bar Review

ChanRobles Internet Bar Review : www.chanroblesbar.com

ChanRobles MCLE On-line

ChanRobles Lawnet Inc. - ChanRobles MCLE On-line : www.chanroblesmcleonline.com






November-1966 Jurisprudence                 

  • G.R. No. L-24320 November 12, 1966 CITIZENS LABOR UNION-CCLU v. COURT OF INDUSTRIAL RELATIONS, ET AL.

  • G.R. No. L-23250 November 12, 1966 NATIVIDAD TRINIDAD VDA. DE CARVAJAL v. MARIA NATIVIDAD FLORENCIA CORONADO, ET AL.

  • G.R. No. L-21865 November 12, 1966 NATIONAL POWER CORPORATION v. FELIPE GATUANGCO, ET AL.

  • G.R. No. L-21989 November 12, 1966 SHELL COMPANY OF THE PHILIPPINES v. FRANCISCO E. SANTOS, ET AL.

  • G.R. Nos. L-24762 L-24841, L-24854, L-24872 November 14, 1966 RICARDO ROSAL v. MANILA ELECTRIC COMPANY

  • G.R. No. L-22774 November 21, 1966 FRANCISCO JUSTINIANO v. WORKMEN’S COMPENSATION COMMISSION, ET AL.

  • G.R. No. L-22282 November 21, 1966 MANUEL SUAREZ v. MUNICIPALITY OF NAUJAN, ORIENTAL MINDORO

  • G.R. No. L-18966 November 22, 1966 VICENTE BANTOTO, ET AL. v. SALVADOR BOBIS, ET AL.

  • G.R. No. L-18281 November 22, 1966 IN RE: TSE VIW v. REPUBLIC OF THE PHIL.

  • G.R. No. L-21270 November 22, 1966 PEOPLE OF THE PHIL. v. MANUEL DADIS

  • G.R. No. L-21058 November 23, 1966 ILOCOS NORTE ELECTRIC COMPANY, INC. v. MUNICIPALITY OF LAOAG, ET AL.

  • G.R. No. L-19075 November 23, 1966 ESTEFANIA DE GUZMAN v. PEOPLE OF THE PHIL., ET AL.

  • G.R. No. L-19716 November 23, 1966 HERMINIGILDO GUEVARA v. JOSE M. SANTOS

  • G.R. No. L-23239 November 23, 1966 MARTINIANO P. VIVO v. GAUDENCIO CLORIBEL

  • G.R. No. L-22676 November 23, 1966 B. J. SERVER v. EPIFANIA CAR

  • G.R. No. L-19407 November 23, 1966 JUANA SOBERANO, ET AL. v. MANILA RAILROAD COMPANY, ET AL.

  • G.R. No. L-19051 November 23, 1966 A. D. SANTOS, INC. v. ZOSIMO DABOCOL

  • G.R. No. L-23791 November 23, 1966 CHUNG TE v. NG KIAN GIAB, ET AL.

  • G.R. No. L-19495 November 24, 1966 COMMISSIONER OF INTERNAL REVENUE v. LILIA YUSAY GONZALES, ET AL.

  • G.R. No. L-22553 November 24, 1966 PEOPLE OF THE PHIL. v. URBANO DAMASO

  • G.R. No. L-18500 November 24, 1966 ARSENIO DE LA PAZ, ET AL. v. MARIO F. GARCIA, ET AL.

  • G.R. No. L-22102 November 24, 1966 JUAN PARANPAN v. PERFECTO B. QUERUBIN, ET AL.

  • G.R. No. L-20714 November 24, 1966 IN RE: HUI ENG v. REPUBLIC OF THE PHIL.

  • G.R. No. L-23246 November 24, 1966 URBANO DE VENECIA, ET AL. v. AQUILINO DEL ROSARIO, ET AL.

  • G.R. No. L-21378 November 28, 1966 REPUBLIC FLOUR MILLS WORKERS ASSOCIATION v. ANDRES REYES, ET AL.

  • G.R. No. L-17125 November 28, 1966 BERNABE MIRASOL v. ANTONIO MAGSUCI, ET AL.

  • G.R. No. L-19633 November 28, 1966 PEOPLE OF THE PHIL., ET AL. v. EULOGIO MENCIAS, ET AL.

  • G.R. No. L-22000 November 29, 1966 ESTELITA BERNABE v. ANDRES BOLINAS, JR., ET AL.

  • G.R. No. L-15142 November 29, 1966 RAMON DUTERTE, ETC., ET AL. v. FLORENCIO MORENO. ET AL.

  • G.R. No. L-21018 November 29, 1966 IN RE: ALEJANDRO TAN TIU v. REPUBLIC OF THE PHIL.

  • G.R. No. L-18297 November 29, 1966 COMMISSIONER OF INTERNAL REVENUE v. CADWALLEDER PACIFIC COMPANY

  • G.R. No. L-19616 November 29, 1966 NEMESIA V. ALAMA v. MACAPANTON ABBAS, ET AL.

  • G.R. No. L-19667 November 29, 1966 COMMISSIONER OF INTERNAL REVENUE v. AMERICAN RUBBER COMPANY, ET AL.

  • G.R. No. L-20813 November 29, 1966 IN RE: JACINTO UY TIAN HUA, JR. v. REPUBLIC OF THE PHIL.

  • G.R. No. L-20814 November 29, 1966 IN RE: CARMEN DY v. REPUBLIC OF THE PHIL.

  • G.R. No. L-21108 November 29, 1966 REPUBLIC OF THE PHIL. v. LEONOR DE LA RAMA, ET AL.

  • G.R. No. L-24563 November 29, 1966 MILAGROS PACHECO RIVERA v. ARSENIO SANTOS

  • G.R. No. L-21352 November 29, 1966 ANTONIO J. VILLEGAS v. AUDITOR GENERAL, ET AL.

  • G.R. No. L-21582 November 29, 1966 TALISAY-SILAY MILLING CO., INC., ET AL. v. COURT OF INDUSTRIAL RELATIONS, ET AL.

  • G.R. No. L-21917 November 29, 1966 CARLOS M. GURREA v. MANUELA RUIZ VDA. DE GURREA

  • G.R. No. L-22288 November 29, 1966 ASUNCION ABORDO, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. L-22526 November 29, 1966 PEDRO PACIS v. ALBERTO V. AVERIA, ET AL.