Title
Solis vs. Chua Pua Hermanos
Case
G.R. No. 27054
Decision Date
Sep 9, 1927
A disputed property in Lipa, Batangas, was allegedly fraudulently conveyed by Jose H. Katigbak to relatives to evade creditors. The Supreme Court ruled the deed simulated but remanded for lack of proof of creditor status and subsidiary rescission requirements.
attachment
property
fraudulent conveyance

Case Summary (G.R. No. 27054)

Factual Background

The controversy concerned a lot in the town of Lipa, Batangas, bounded and described in the complaint, with a house of strong materials located thereon. That property was conveyed by notarial act on December 23, 1918, from Justo Reyes and his wife Maria Laygo to Jose H. Katigbak and his sister Mercedes Katigbak for the purported consideration of P10,600. On February 6, 1921, Jose H. Katigbak executed a conveyance purporting to transfer the same house and lot to Macaria Solis and Pablo S. Katigbak for the purported consideration of P40,000, acknowledged February 7, 1921. Macaria Solis was an aunt of Jose H. Katigbak; Pablo S. Katigbak was his brother. The house served as the common abode of Macaria Solis and Jose H. Katigbak. Pablo was in America at the time of trial.

Procedural History

Nearly a year after the February 6, 1921 conveyance, Chua Pua Hermanos instituted a civil action in the Court of First Instance of Batangas against Jose H. Katigbak to recover a sum of money and, in connection therewith, caused an attachment to be levied upon the lot and house. Macaria Solis filed a third-party claim in the attachment proceeding. Chua Pua Hermanos indemnified the sheriff, who maintained the levy. Thereafter Macaria Solis instituted the present action to annul the attachment and to recover P20,000 as damages for the alleged improper levy. Carlos Ilustre, as sheriff, admitted in his answer that he had levied the attachment in his official capacity. Chua Pua Hermanos answered with a general denial, special defenses, and a counterclaim alleging that the deed under which Macaria Solis claimed was simulated and fictitious and praying that it be declared void and that the attachment be continued.

Trial Court Proceedings and Disposition

The trial court found that the deed of conveyance dated February 6, 1921, executed by Jose H. Katigbak in favor of Macaria Solis and Pablo S. Katigbak was simulated and fictitious. The court further found that the conveyance had been executed for the purpose of hindering and delaying the creditors of Jose H. Katigbak. On that basis the trial court absolved the defendants from the complaint, with costs. Macaria Solis appealed from that judgment.

Issues Presented on Appeal

The principal issues presented were whether the conveyance of February 6, 1921, was simulated and fictitious; whether the conveyance was executed in fraud of creditors; whether Chua Pua Hermanos proved creditor status vis-à-vis Jose H. Katigbak at the time of the conveyance; and whether the judgment of the trial court should be sustained or reversed.

Parties’ Contentions

The plaintiff-appellant, Macaria Solis, sought annulment of the attachment and recovery of damages on the ground that the sheriff improperly levied the attachment upon property to which she held title. The defendants and cross-complainants, Chua Pua Hermanos, maintained that the deed under which Macaria Solis claimed was simulated and fictitious and asked that it be annulled and that the attachment be continued. The sheriff, Carlos Ilustre, admitted the levy but otherwise left the matter to the court.

Supreme Court’s Findings of Fact

The Court agreed with the trial court that the February 6, 1921 deed was simulated in the sense that Macaria Solis probably did not pay the P40,000 consideration recited in the instrument. The Court accepted the trial court’s finding on the absence of proof of payment of the stated consideration.

Legal Basis and Reasoning

The Court held that the trial court’s further conclusion that the conveyance was made in fraud of creditors lacked legal basis because there was no proof that Chua Pua Hermanos were creditors of Jose H. Katigbak at the time the conveyance was executed. The Court emphasized that the mere fact that Chua Pua Hermanos later instituted an action and caused an attachment to be levied did not dispense with the necessity of proving that they were creditors at the time of the conveyance. The Court noted the general rule that even a voluntary conveyance without consideration is valid as among the parties and cannot be declared fraudulent as against creditors in the absence of proof that a creditor existed who could be defrauded. The Court cited 27 C. J., 470 for that proposition. The Court explained that Art. 1297, Civil Code, which presumes gratuitous dispositions to be in fraud of creditors, presupposes the existence of creditors and therefore requires proof of such existence before a declaration of nullity. The Court further observed that the second paragraph of Art. 1297, Civil Code, which presumes fraud when an alienation is made by a person against whom a writ of attachment had been issued, likewise rests on the assumption that creditors exist who might be defrauded. The Court added that before a conveyance can be declared fraudulent as against creditors, it must appear that the debtor had no other sufficient means to which creditors might have recourse, because the action for rescission as fraud upon creditors is esse

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