Case Summary (G.R. No. 129644)
Judgment in Favor of China Bank (1985)
In Civil Case No. 85-31257, China Bank obtained judgment against Pacific Multi Agro-Industrial Corp. and Alfonso for P1.8 million, P350,000, and P350,000 on three promissory notes, plus interest, penalties, attorney’s fees, and costs.
Execution and Sale of Conjugal Share (1986–1987)
An alias levy on Alfonso’s half-share was issued in September 1986, annotated on TCT on September 15, and a certificate of sale in favor of Metrobank was registered on December 22, 1987. The defendants’ appeal was dismissed by the CA in September 1988.
Assignment and Redemption by Paulino (1988–1989)
On November 21, 1988, Alfonso executed an “Assignment of Rights to Redeem” in favor of his son Paulino, who redeemed the one-half share the same day. Both the assignment and redemption were annotated on TCT on March 14, 1989.
Subsequent Levy and Sale to China Bank (1991–1992)
China Bank’s deputy sheriff levied on Alfonso’s remaining interest on February 4, 1991. A certificate of sale dated April 13, 1992, in China Bank’s favor, was annotated on TCT on May 4, 1992.
Civil Case No. 63199 Before Pasig RTC (1993–1994)
Paulino and Kiang filed suit against China Bank, asserting Paulino’s prior right over the property by virtue of his redemption two years before China Bank’s annotation. The RTC granted damages, attorney’s fees, permanent injunction, and ordered cancellation of China Bank’s annotations on July 15, 1994.
Court of Appeals Affirmation (1997)
The CA affirmed the RTC, finding China Bank remiss for not redeeming under Rule 39 and holding the father-to-son assignment valid due to Paulino’s payment of the redemption price and independent means.
Issue Before the Supreme Court
Whether Alfonso’s 1988 assignment of his right to redeem was a fraudulent conveyance under Civil Code Article 1387 and therefore rescissible in favor of China Bank.
Legal Presumptions and Badges of Fraud
Article 1387 presumes gratuitous alienations fraudulent when they leave insufficient assets to satisfy existing debts or occur after judgment or attachment. The presumption arises here because China Bank’s judgment dated 1985 pre-dated Alfonso’s 1988 assignment. Jurisprudential “badges of fraud” include inadequate consideration, transfer after suit, debtor’s insolvency, transfer of all assets, familial transfers amid insolvency, and retention of possession by the assignor.
Application to the Present Case
At the time of the assignment, Alfonso was insolvent with no other property to satisf
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Facts of the Case
- Alfonso Roxas Chua and his wife Kiang Ming Chu Chua owned residential land in San Juan, Metro Manila, covered by TCT No. 410603.
- February 2, 1984: A notice of levy was inscribed on TCT 410603 in Civil Case No. 82-14134 (Metrobank vs. Pacific Multi Commercial Corp. and Alfonso Chua).
- Kiang Ming Chu Chua sued to limit enforcement of the levy to Alfonso’s conjugal share; parties compromised to restrict levy to ½ undivided portion.
- June 19, 1985: China Bank sued Pacific Multi Agro-Industrial Corp. and Alfonso Chua in Civil Case No. 85-31257 on three promissory notes totaling ₱2.5 million.
- November 7, 1985: RTC Manila rendered judgment in favor of China Bank for the principal sums, interest, penalties, attorney’s fees and costs.
- September 8, 1986: Alias levy on the ½ undivided portion of TCT 410603 was annotated for Metrobank; sale certificate issued December 22, 1987.
- September 29, 1988: CA dismissed Pacific Multi’s and Alfonso’s appeal in CA-G.R. No. CV-14681.
- November 21, 1988: Alfonso executed an “Assignment of Rights to Redeem” granting his ½ redemption right to his son Paulino Roxas Chua.
- Same day: Paulino redeemed the ½ undivided portion, with annotation recorded March 14, 1989.
- February 4, 1991: Deputy Sheriff levied on Alfonso’s ½ interest in TCT 410603 for China Bank’s judgment; sale certificate dated April 13, 1992 and annotated May 4, 1992.
Procedural History
- RTC Pasig, Civil Case No. 63199 (May 20, 1993): Paulino and Kiang filed suit to declare Paulino’s rights prior and superior to China Bank’s, seeking cancellation of annotations in favor of China Bank.
- July 15, 1994: RTC Pasig rendered judgment awarding moral and exemplary damages, attorney’s fees, costs, and made preliminary injunction permanent; ordered cancellation of China Bank annotations.
- June 26, 1997: Court of Appeals affirmed RTC Pasig decision in CA-G.R. CV No. 46735, holding that China Bank failed to redeem under Rules of Court and that Paulino’s assignment predated China Bank’s levy.
- March 7, 2000: Supreme Court granted certiorari, raising the issue of fraudulent