Case Summary (G.R. No. 7003)
Procedural History
August 1909: Gutierrez Hermanos sues Oria Hermanos & Co. for ₱147,204.28 (CIF 7289).
March 1910: Second action for ₱12,318.57 (CIF 7719).
April 30 1910: Partnership dissolves; liquidation begins.
June 1 1910: Partnership assets sold to Manuel Oria y Gonzalez for ₱274,000, payable over 12 years.
September 17 1910: Judgment in CIF 7719 favoring Gutierrez Hermanos, affirmed on appeal. Execution levied; sheriff seizes Serantes; sale set for October 21.
October 18 1910: Manuel Oria claims ownership; sheriff proceeds after requiring creditor’s bond.
October 19 1911: Manuel Oria files suit for injunction, declaration of ownership, possession, and ₱10,000 damages. Trial court dismisses complaint for lack of title and damage; appeal follows.
Sale Contract Terms
– Total price ₱274,000, payable in 12 annual installments of at least ₱10,000; 3% interest on unpaid balance during last six years.
– Monthly personal stipends of ₱150 to each partner while resident in the Philippines, charged against purchase price.
– Prohibition on alienation or mortgage of vessels, real estate, branch stores without liquidator’s consent until full payment.
– Gratuitous cession of dwelling-house use in Laoang for liquidation office (two-year term).
– Partners to render up to 12 months’ assistance in management and operation.
Issue Presented
Whether the conveyance of all partnership assets, including the steamship Serantes, to an impecunious family member on heavily deferred terms was fraudulent and therefore voidable as against the creditors—specifically Gutierrez Hermanos—entitling the sheriff to levy and sell the vessel under execution.
Findings of the Trial Court
– Oria Hermanos & Co. had no other sufficient assets to satisfy Gutierrez Hermanos’s judgment.
– The sale was fraudulent as to creditors; Manuel Oria had no enforceable title or right of possession at time of levy.
– Plaintiff suffered no compensable damage.
– Complaint dismissed with costs.
Supreme Court Analysis
The Court applied the established test for fraudulent conveyance: did the transaction prejudice the rights of creditors? It identified nine “badges of fraud”:
- Gross inadequacy or fictitious consideration (deferred ₱274,000).
- Transfer while suit was pending.
- Sale on credit by an insolvent or heavily indebted debtor.
- Existence of large indebtedness (nearly ₱160,000 in pending suits).
- Transfer of nearly all assets.
- Familial relationship between transferor and transferee (father–son, uncle–nephew).
- Vendee’s failure to take exclusive possession.
- Vendee’s lack of means or business experience.
- Vendor’s willingness to enter such terms only with a family member.
Under these circumstances, the deed, although solemn in form, was a contrivance to defeat creditors. It left the partnership insolvent, its incom
Case Syllabus (G.R. No. 7003)
Facts of the Case
- In August 1909, Gutierrez Hermanos sued Oria Hermanos & Co. before the Court of First Instance of Manila for ₱147,204.28 (Case No. 7289).
- In March 1910, the same plaintiff filed another action against Oria Hermanos & Co. for ₱12,318.57 (Case No. 7719).
- On April 30, 1910, the partnership Oria Hermanos & Co. dissolved by expiration of its copartnership term and entered liquidation.
- Tomas Oria y Balbas was appointed managing partner in liquidation, representing himself and partners Casimiro Oria y Balbas and Adolfo Fuster y Robles.
- On June 1, 1910, Tomas Oria executed a contract selling all partnership assets—including the steamship Serantes—to Manuel Oria y Gonzalez.
Contract of Sale and Transfer
- Total purchase price: ₱274,000, payable in installments over 12 years, with a minimum annual payment of ₱10,000.
- Interest: 3% per annum on unpaid balance during the last six years of the term.
- Monthly payments of ₱150 to each partner while they remained in the Philippines, credited against the purchase price.
- Restriction on sale, alienation, transfer or mortgage of vessels, real estate, and branch stores listed in the inventory without written authorization of Tomas Oria until full payment.
- Gratuitous cession of required portion of the Laoang dwelling-house for use as the liquidation office for two years.
- Obligation of Tomas Oria and Adolfo Fuster to provide managerial instruction to Manuel Oria for up to 12 months (subject to Fuster’s residence in the Philippines).
- Manuel Oria’s stipulation accepting all terms, promising non-alienation and payment under the specified conditions.
Prior Litigation and Levy on the Serantes
- On September 17, 1910, the CFI rendered judgment for Gutierrez Hermanos in Case No. 7719; the Supreme Court affirmed that judgment on appeal.
- Execution issued to the Sheriff of Manila, who demanded payment from the liquidator; none was available.
- The s