G.R. No. 191178 - Anchor Savings Bank vs. Furigay

Case Summary (G.R. No. 191178)

Factual Background

ASB originally filed a verified complaint for sum of money and damages with an application for replevin against CTS and the Furigays on April 21, 1999 (Civil Case No. 99-865, RTC Makati). On November 7, 2003 the RTC in that case rendered judgment in favor of ASB, awarding principal, interest, penalties, liquidated damages, attorney’s fees and costs. During pendency of the Makati case, spouses Henry and Gelinda Furigay executed a Deed of Donation (dated March 8, 2001) transferring various registered Pangasinan properties to their minor children; Transfer Certificate of Title (TCT) Nos. 21743, 21742, 21741 and 21740 were issued in the children’s names (registration dated April 4, 2001). ASB later filed a Complaint for Rescission of Deed of Donation, Title and Damages (Civil Case No. A-3040, RTC Alaminos), alleging the donations were made in fraud of creditors and seeking annulment of the donations, cancellation/reversion of the TCTs, and damages.

Allegations in ASB’s Rescission Complaint

ASB alleged: (1) that CTS and the Furigays had obtained a loan from ASB and defaulted, prompting the Makati action; (2) that the spouses were registered owners of several Pangasinan parcels and executed deeds of donation to their children on March 8, 2001, with new titles issued to the minors; (3) that the donations were intended to defraud ASB as creditor, invoking Article 1387 and related Civil Code provisions; and (4) claimed actual, moral and exemplary damages, attorney’s fees (25% of recoverable amount), and costs. ASB sought rescission and reversion of titles to the spouses.

Respondents’ Procedural Challenge and RTC Ruling

Respondents moved to dismiss the rescission complaint, contending lack of jurisdiction over persons and subject matter due to improper service of summons and alleged failure to pay correct docket fees; they also asserted prescription. RTC Branch 55 initially denied dismissal (Order of Sept. 29, 2006), but on reconsideration (Feb. 27, 2007) the RTC dismissed the complaint on two grounds: (1) lack of jurisdiction over subject matter due to ASB’s failure to pay correct filing fees — the RTC characterized the action as a real action affecting title, requiring docket fees computed from fair market value/zonal valuation and observed omissions in ASB’s complaint (no current tax declaration/zonal valuation, unspecified actual damages and attorney’s fees); and (2) prescription — the RTC held the four-year prescriptive period to rescind for fraud ran from registration of the deed (April 4, 2001) and ASB’s complaint filed on October 14, 2005 was beyond four years.

Court of Appeals’ Ruling on Appeal

On appeal the CA disagreed with the RTC concerning the filing-fees dismissal, finding the absence of specific damage and attorney’s fees amounts in the complaint did not establish evident bad faith and noting ASB’s willingness to pay additional fees if required. On prescription, however, the CA affirmed dismissal on another ground: prematurity of ASB’s accion pauliana. The CA held that an accion pauliana is subsidiary and accrues only when all requisites are present — critically including that the creditor has no other legal remedy to satisfy its claim. The CA found ASB failed to allege in its complaint that it had exhausted available remedies (e.g., levying upon the debtor’s properties, execution against property, exercise of subrogatory remedies) or that the Makati judgment had become final and unsatisfied. Because the CA deemed the third requisite (no other legal remedy) unestablished, the CA concluded the action was premature and dismissible.

Legal Principles on Cause of Action and Subsidiary Nature of Rescission

The Supreme Court affirmed the CA’s analysis of the procedural requirements for pleading a cause of action. Citing Rule 2, Sections 1 and 2, Revised Rules of Court, the Court reiterated that a complaint must allege the ultimate facts constituting a complete cause of action so that a valid judgment can be rendered on the pleadings. For an accion pauliana (rescission for fraud against creditors), the remedy is subsidiary by operation of Article 1383 of the Civil Code and related provisions: it is available only after the creditor has exhausted the debtor’s properties and other legal remedies, and the complaint must allege the essential requisites in order to show accrual of the cause of action. The essential requisites enumerated and applied were: (1) creditor’s preexisting credit; (2) subsequent alienation/conveyance by debtor; (3) creditor’s lack of other legal remedy such that rescission would benefit him; (4) fraudulent character of the act; and (5) if the transferee took by onerous title, that transferee’s complicity in the fraud.

Application of Precedent on Accrual and Prescription

The Court relied on and summarized relevant precedent (including Khe Hong Cheng v. Court of Appeals) which holds that the four-year prescriptive period for rescission begins to run from the moment the accion pauliana accrues, not from the date of registration of the challenged deed or the date of execution of the conveyance. Accrual occurs when it becomes legally possible to bring the action — typically after

Case Syllabus (G.R. No. 191178)

Procedural Posture and Nature of the Petition

Petition for review on certiorari filed by petitioner Anchor Savings Bank (ASB) under Rule 45 of the 1997 Rules of Civil Procedure, assailing the May 28, 2009 Decision and the January 22, 2010 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 90123, which dismissed ASB’s appeal.
The CA’s assailed resolution denied separate motions for reconsideration of both parties.
The Supreme Court resolved the case by denying the petition; decision penned by Justice Mendoza; concurring justices listed.

Factual Background — Underlying Loan Case (Civil Case No. 99-865)

On April 21, 1999, ASB filed a verified complaint for sum of money and damages with application for replevin against Ciudad Transport Services, Inc. (CTS), its president Henry H. Furigay, his wife Gelinda C. Furigay, and a John Doe; docketed as Civil Case No. 99-865 before RTC Branch 143, Makati City.
On November 7, 2003, the RTC rendered judgment in favor of ASB ordering defendants CTS, Henry H. Furigay and Genilda (Gelinda) C. Furigay to pay: (1) principal Php 8,695,202.59 as of April 12, 1999; (2) interest 12% per annum until fully paid; (3) penalty charge 12% per annum until fully paid; (4) liquidated damages 10% of total amount due; (5) attorney’s fees Php100,000; and (6) costs of suit.

Factual Background — Donation and Subsequent Transfers

While Civil Case No. 99-865 was pending, respondents Henry H. Furigay and Gelinda C. Furigay executed a Deed of Donation on March 8, 2001, donating registered properties in Alaminos, Pangasinan, to their minor children Hegem C. Furigay and Herriette C. Furigay.
Transfer Certificate of Title (TCT) Nos. 21743, 21742, 21741, and 21740 were subsequently issued in the names of Hegem and Herriette Furigay; registration of the deed is stated in the record as having been entered in the Register of Deeds of Alaminos, Pangasinan, on April 4, 2001 (as used in the RTC’s prescription analysis).

ASB’s Civil Case for Rescission (Civil Case No. A-3040)

ASB filed a Complaint for Rescission of Deed of Donation, Title and Damages against the spouses Furigay and their children, docketed as Civil Case No. A-3040 before RTC Branch 55, Alaminos, Pangasinan.
Material allegations in ASB’s complaint included:
- Existence of the prior loan and default by CTS and the Furigays leading to Civil Case No. 99-865 and the RTC decision of November 7, 2003.
- That spouses Furigay were registered owners of specified Pangasinan properties covered by earlier TCTs (Nos. 19721, 21678, 21679, 21682).
- Execution of a Deed of Donation on March 8, 2001 in favor of minor children, resulting in issuance of TCT Nos. 21743, 21742, 21741, and 21740.
- Assertion that the donation was made with intent to defraud creditors, invoking Article 1387 and Article 1381 of the New Civil Code; request that the TCTs be cancelled and titles reverted to Henry and Gelinda Furigay.
- Claims for damages: alleged actual/compensatory damages (man-hours and administrative expenses), moral damages P1,000,000.00, exemplary damages P200,000.00, attorney’s fees equivalent to 25% of amounts collected, and costs of suit.

Procedural Defense by Respondents and Early RTC Rulings

Respondents moved to dismiss the rescission complaint, principally arguing lack of jurisdiction due to improper service of summons by ASB and failure to pay necessary legal/docket fees.
RTC Order dated September 29, 2006 denied the motion to dismiss. Respondents sought reconsideration, alleging prescription of ASB’s action.
After ASB opposed the motion for reconsideration, RTC on February 27, 2007 reconsidered and dismissed the complaint on two grounds:
- Lack of jurisdiction over the subject matter for failure of ASB to state the correct filing/docket fees and allegation of bad faith in evading correct fees; the court treated the complaint as affecting title/possession of real property and computed docket fees based on fair market value per current tax declaration or zonal valuation (which ASB failed to state).
- Prescription: RTC held action for rescission grounded on fraud should be filed within four years from discovery of fraud, and that registration of the deed of donation on April 4, 2001 constituted notice to the world; ASB filed only on October 14, 2005, thus after four years from registration, and the action prescribed.
ASB sought reconsideration of the RTC dismissal but was denied.

Court of Appeals Ruling and Reasoning

On appeal, the CA agreed with ASB that dismissal for failure to pay correct docket fees was improper: absence of specific amounts of actual damages and attorney’s fees did not by itself show evident bad faith; ASB had manifested willingness to pay additional docket fees if found insufficient.
On the issue of prescription and accrual, the CA found ASB’s action premature and thus dismissible:
- Emphasized the subsidiary nature of action for rescission (accion pauliana) and that it accrues only when all five requisites are present: (1) plaintiff had credit prior to alienation; (2) debtor made subsequent contract conveying patrimonial benefit to third person; (3) creditor has no other legal remedy to satisfy claim but would benefit by rescission; (4) act is fraudulent; and (5) third person donee, if by onerous title, is accomplice in fraud.
- Found ASB failed to satisfy the third requirement because ASB did not allege in its complaint that it had resorted to all legal remedies to obtain satisfaction of its claim (e.g., whether the decision in Civil Case No. 99-865 had become final and executory, whether execution yielded negative result, whether sheriff failed to satisfy judgment despite levy).
- Noted skip-tracing reports presented by ASB were insufficient: not prepared/executed by the sheriff and did not demonstrate exhaustion of debtor’s property.
- Consequently, CA held the accion pauliana had not yet accrued and the