Case Digest (G.R. No. 152347)
Facts:
Union Bank of the Philippines sued Sps. Alfredo Ong and Susana Ong and Jackson Lee for rescission of a sale of a Greenhills house-and-lot after the Ongs, who owned 70% of Baliwag Mahogany Corporation (BMC), executed a Continuing Surety Agreement on October 10, 1990 to secure a P40,000,000 credit line to BMC and sold the property to Lee for P12,500,000.00 on October 22, 1991, the transfer being registered the following day; BMC filed for rehabilitation on November 22, 1991. The RTC, in Civil Case No. 61601, declared the sale void on September 27, 1999, the Court of Appeals reversed on December 5, 2001, and the Supreme Court denied review on June 21, 2006.
Issues:
- Did the Ong–Lee sale constitute a conveyance in fraud of creditors warranting rescission under Article 1381 of the Civil Code?
- Was Section 70 of the Insolvency Law applicable to render the sale void as a transfer by an insolvent within thirty days of a petition?
- Was Union Bank required to prove that the Ongs had no other leviable assets before obtaining rescission?
Ruling:
The petition was DENIED and the CA decision was AFFIRMED. The Court held that the sale was not rescinded for fraud of creditors and that Section 70 of the Insolvency Law did not void the transaction.
Ratio:
The Court found that the notarized deed, receipts, and witness testimony established valid and sufficient consideration and that the purchaser held registrable title and acted in good faith, thereby invoking the presumption of regularity which Union Bank failed to overcome. As a rescissory remedy under accion pauliana (Article 1381) is subsidiary, the creditor must show it cannot collect by other means; Union Bank did not prove the Ongs were insolvent or had no other leviable assets, and Section 70 of the Insolvency Law applies only to transfers by the insolvent/debtor and excepts transfers made in good faith for valuable consideration; moreover, BMC’s separate juridical personality prevented imputing its insolvency to the Ongs.
Doctrine:
- For rescission under Article 1381 of the Civil Code, the creditor must prove fraudulent intent and that he cannot otherwise collect the claim.
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