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G.R.No.144169

TodayisFriday,January23,2015

RepublicofthePhilippines
SUPREMECOURT
BaguioCity
FIRSTDIVISION
G.R.No.144169March28,200
KHEHONGCHENG,aliasFELIXKHE,SANDRAJOYKHEandRAYSTEVENKHE,petitioners,
vs.
COURTOFAPPEALS,HON.TEOFILOGUADIZ,RTC147,MAKATICITYandPHILAMINSURANCECO.,INC.,
respondents.
KAPUNAN,J.:
Before the Court is a Petition for Review on Certiorari under Rule 45, seeking to set aside the decision of the
Court of Appeals dated April 10, 2000 and its resolution dated July 11, 2000 denying the motion for
reconsiderationoftheaforesaiddecision.Theoriginalcomplaintthatisthesubjectmatterofthiscaseisanaccion
pauliana an action filed by Philam Insurance Company, Inc. (respondent Philam) to rescind or annul the
donations made by petitioner Khe Hong Cheng allegedly in fraud of creditors. The main issue for resolution is
whether or not the action to rescind the donations has already prescribed. While the first paragraph of Article
1389 of the Civil Code states: "The action to claim rescission must be commenced within four years..." the
questionis,fromwhichpointoreventdoesthisprescriptiveperiodcommencetorun?
Thefactsareasfollows:
PetitionerKheHongCheng,aliasFelixKhe,istheownerofButuanShippingLines.Itappearsthatonorabout
October4,1985,thePhilippineAgriculturalTradingCorporationshippedonboardthevesselM/VPRINCEERIC,
owned by petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate, Masbate, for delivery to Dipolog City,
ZamboangadelNorte.ThesaidshipmentofcoprawascoveredbyamarineinsurancepolicyissuedbyAmerican
Home Insurance Company (respondent Philam's assured). M/V PRINCE ERlC, however, sank somewhere
between Negros Island and Northeastern Mindanao, resulting in the total loss of the shipment. Because of the
loss,theinsurer,AmericanHome,paidtheamountofP354,000.00(thevalueofthecopra)totheconsignee.
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Havingbeensubrogatedintotherightsoftheconsignee,AmericanHomeinstitutedCivilCaseNo.13357inthe
RegionalTrialCourt(RTC)ofMakati,Branch147torecoverthemoneypaidtotheconsignee,basedonbreach
ofcontractofcarriage.Whilethecasewasstillpending,oronDecember20,1989,petitionerKheHongCheng
executeddeedsofdonationsofparcelsoflandinfavorofhischildren,hereincopetitionersSandraJoyandRay
Steven.Theparceloflandwithanareaof1,000squaremeterscoveredbyTransferCertificateofTitle(TCT)No.
T3816wasdonatedtoRaySteven.PetitionerKheHongChenglikewisedonatedinfavorofSandraJoytwo(2)
parcelsoflandlocatedinButuanCity,coveredbyTCTNo.RT12838.Onthebasisofsaiddeeds,TCTNo.T
3816 was cancelled and in lieu thereof, TCT No. T5072 was issued in favor of Ray Steven and TCT No. RT
12838wascancelledandinlieuthereof,TCTNo.RT21054wasissuedinthenameofSandraJoy.
ThetrialcourtrenderedjudgmentagainstpetitionerKheHongChenginCivilCaseNo.13357onDecember29,
1993, four years after the donations were made and the TCTs were registered in the donees' names. The
decretalportionoftheaforesaiddecisionreads:
"Wherefore,inviewoftheforegoing,theCourtherebyrendersjudgmentinfavoroftheplaintiffandagainst
thedefendant,orderingthelattertopaytheformer:
1) the sum of P354,000.00 representing the amount paid by the plaintiff to the Philippine Agricultural
TradingCorporationwithlegalinterestat12%fromthetimeofthefilingofthecomplaintinthiscase
2)thesumofP50,000.00asattorney'sfees
3)thecosts.1
After the said decision became final and executory, a writ of execution was forthwith' issued on September 14,
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1995.Saidwritofexecutionhowever,wasnotserved.Analiaswritofexecutionwas,thereafter,appliedforand
granted in October 1996. Despite earnest efforts, the sheriff found no property under the name of Butuan
ShippingLinesand/orpetitionerKheHongChengtolevyorgarnishforthesatisfactionofthetrialcourt'sdecision.
When the sheriff, accompanied by counsel of respondent Philam, went to Butuan City on January 17, 1997, to
enforcethealiaswritofexecution,theydiscoveredthatpetitionerKheHongChengnolongerhadanyproperty
andthathehadconveyedthesubjectpropertiestohischildren.
OnFebruary25,1997,respondentPhilamfiledacomplaintwiththeRegionalTrialCourtofMakatiCity,Branch
147,fortherescissionofthedeedsofdonationexecutedbypetitionerKheHongChenginfavorofhischildren
andforthenullificationoftheirtitles(CivilCaseNo.97415).RespondentPhilamalleged,interalia,thatpetitioner
KheHongChengexecutedtheaforesaiddeedsinfraudofhiscreditors,includingrespondentPhilam.2
Petitioners subsequently filed their answer to the complaint a quo. They moved for its dismissal on the ground
thattheactionhadalreadyprescribed.TheypositedthattheregistrationofthedeedsofdonationonDecember
27,1989constitutedconstructivenoticeandsincethecomplaintaquowas filed only on February 25, 1997, or
morethanfour(4)yearsaftersaidregistration,theactionwasalreadybarredbyprescription.3
Actingthereon,thetrialcourtdeniedthemotiontodismiss.ItheldthatrespondentPhilam'scomplainthadnotyet
prescribed. According to the trial court, the prescriptive period began to run only from December 29, 1993, the
dateofthedecisionofthetrialcourtinCivilCaseNo.13357.4
Onappealbypetitioners,theCAaffirmedthetrialcourt'sdecisioninfavorofrespondentPhilam.TheCAdeclared
thattheactiontorescindthedonationshadnotyetprescribed.CitingArticles1381and1383oftheCivilCode,
theCAbasicallyruledthatthefouryearperiodtoinstitutetheactionforrescissionbegantorunonlyinJanuary
1997, and not when the decision in the civil case became final and executory on December 29, 1993. The CA
reckonedtheaccrualofrespondentPhilam'scauseofactiononJanuary1997,thetimewhenitfirstlearnedthat
the judgment award could not be satisfied because the judgment creditor, petitioner Khe Hong Cheng, had no
more properties in his name. Prior thereto, respondent Philam had not yet exhausted all legal means for the
satisfactionofthedecisioninitsfavor,asprescribedunderArticle1383oftheCivilCode.5
The Court of Appeals thus denied the petition for certiorari filed before it, and held that the trial court did not
commit any error in denying petitioners' motion to dismiss. Their motion for reconsideration was likewise
dismissedintheappellatecourt'sresolutiondatedJuly11,2000.
PetitionersnowassailtheaforesaiddecisionandresolutionoftheCAallegingthat:
I
PUBLIC RESPONDENT GRAVELY ERRED AND ACTED IN GRAVE ABUSE OF DISCRETION WHEN IT
DENIEDTHEPETITIONTODISMISSTHECASEBASEDONTHEGROUNDOFPRESCRIPTION.
II
PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PRESCRIPTION
BEGINS TO RUN WHEN IN JANUARY 1997 THE SHERIFF WENT TO BUTUAN CITY IN SEARCH OF
PROPERTIES OF PETITIONER FELIX KHE CHENG TO SATISFY THE JUDGMENT IN CIVIL CASE
NO.13357 AND FOUND OUT THAT AS EARLY AS DEC. 20, 1989, PETITIONERS KHE CHENG
EXECUTEDTHEDEEDSOFDONATIONSINFAVOROFHISCOPETITIONERSTHATTHEACTIONFOR
RESCISSIONACCRUEDBECAUSEPRESCRIPTIONBEGANTORUNWHENTHESEDONATIONSWERE
REGISTERED WITH THE REGISTER OF DEEDS IN DECEMBER 1989, AND WHEN THE COMPLAINT
WAS FILED ONLY IN FEBRUARY 1997, MORE THAN FOUR YEARS HAVE ALREADY LAPSED AND
THEREFORE,ITHASALREADYPRESCRIBED.6
Essentially,theissueforresolutionposedbypetitionersisthis:Whendidthefour(4)yearprescriptiveperiodas
providedforinArticle1389oftheCivilCodeforrespondentPhilamtofileitsactionforrescissionofthesubject
deedsofdonationcommencetorun?
Thepetitioniswithoutmerit.
Article1389oftheCivilCodesimplyprovidesthat,"Theactiontoclaimrescissionmustbecommencedwithinfour
years."Sincethisprovisionoflawissilentastowhentheprescriptiveperiodwouldcommence,thegeneralrule,
i.e.,fromthemomentthecauseofactionaccrues,therefore,applies.Article1150oftheCivilCodeisparticularly
instructive:
Art.1150.Thetimeforprescriptionforallkindsofactions,whenthereisnospecialprovisionwhichordains
otherwise,shallbecountedfromthedaytheymaybebrought.
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Indeed,thisCourtenunciatedtheprinciplethatitisthelegalpossibilityofbringingtheactionwhichdeterminesthe
startingpointforthecomputationoftheprescriptiveperiodfortheaction.7Article1383oftheCivilCodeprovides
asfollows:
Art. 1383. An action for rescission is subsidiary it cannot be instituted except when the party suffering
damagehasnootherlegalmeanstoobtainreparationforthesame.
Itisthusapparentthatanactiontorescindoranaccionpaulianamustbeoflastresort,availedofonlyafterall
other legal remedies have been exhausted and have been proven futile. For an accion pauliana to accrue, the
followingrequisitesmustconcur:
1)Thattheplaintiffaskingforrescissionhasacreditpriorto,thealienation,althoughdemandablelater2)
Thatthedebtorhasmadeasubsequentcontractconveyingapatrimonialbenefittoathirdperson3)That
the creditor has no other legal remedy to satisfy his claim, but would benefit by rescission of the
conveyancetothethirdperson4)Thattheactbeingimpugnedisfraudulent5)Thatthethirdpersonwho
receivedthepropertyconveyed,ifbyoneroustitle,hasbeenanaccompliceinthefraud.8(Emphasisours)
WequotewithapprovalthefollowingdisquisitionoftheCAonthematter:
An accion pauliana accrues only when the creditor discovers that he has no other legal remedy for the
satisfactionofhisclaimagainstthedebtorotherthananaccionpauliana.Theaccionpaulianaisanaction
ofalastresort.Foraslongasthecreditorstillhasaremedyatlawfortheenforcementofhisclaimagainst
thedebtor,thecreditorwillnothaveanycauseofactionagainstthecreditorforrescissionofthecontracts
entered into by and between the debtor and another person or persons. Indeed, an accion pauliana
presupposesajudgmentandtheissuancebythetrialcourtofawritofexecutionforthesatisfactionofthe
judgmentandthefailureoftheSherifftoenforceandsatisfythejudgmentofthecourt.Itpresupposesthat
thecreditorhasexhaustedthepropertyofthedebtor.Thedateofthedecisionofthetrialcourtagainstthe
debtor is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all, the decision of the trial court against the debtor will
retroacttothetimewhenthedebtorbecameindebtedtothecreditor.9
Petitioners,however,maintainthatthecauseofactionofrespondentPhilamagainstthemfortherescissionofthe
deeds of donation accrued as early as December 27, 1989, when petitioner Khe Hong Cheng registered the
subjectconveyanceswiththeRegisterofDeeds.RespondentPhilamallegedlyhadconstructiveknowledgeofthe
executionofsaiddeedsunderSection52ofPresidentialDecreeNo.1529,quotedinfra,asfollows:
Section 52. Constructive knowledge upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or
enteredintheOfficeoftheRegisterofDeedsfortheprovinceorcitywherethelandtowhichitrelateslies,
beconstructivenoticetoallpersonsfromthetimeofsuchregistering,filing,orentering.
PetitionersargumentthattheCivilCodemustyieldtotheMortgageandRegistrationLawsismisplaced,forinno
waydoesthisimplythatthespecificprovisionsoftheformermaybealltogetherignored.Tocountthefouryear
prescriptiveperiodtorescindanallegedlyfraudulentcontractfromthedateofregistrationoftheconveyancewith
theRegisterofDeeds,asallegedbythepetitioners,wouldruncountertoArticle1383oftheCivilCodeaswellas
settled jurisprudence. It would likewise violate the third requisite to file an action for rescission of an allegedly
fraudulentconveyanceofproperty,i.e.,thecreditorhasnootherlegalremedytosatisfyhisclaim.
Anaccionpaulianathuspresupposesthefollowing:1)Ajudgment2)theissuancebythetrialcourtofawritof
executionforthesatisfactionofthejudgment,and3)thefailureofthesherifftoenforceandsatisfythejudgment
ofthecourt.Itrequiresthatthecreditorhasexhaustedthepropertyofthedebtor:Thedateofthedecisionofthe
trial court is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent
alienationbythedebtorofhisproperty.Afterall,thedecisionofthetrialcourtagainstthedebtorwillretroactto
thetimewhenthedebtorbecameindebtedtothecreditor.
Tolentino,anotedcivilist,explained:
"xxx[T]herefore, credits with suspensive term or condition are excluded, because the accion pauliana
presupposes a judgment and unsatisfied execution, which cannot exist when the debt is not yet
demandable at the time the rescissory action is brought. Rescission is a subsidiary action, which
presupposesthatthecreditorhasexhaustedthepropertyofthedebtorwhichisimpossibleincreditswhich
cannotbeenforcedbecauseofasuspensivetermorcondition.
While it is necessary that the credit of the plaintiff in the accion pauliana must be prior to the fraudulent
alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be subsequent to the
alienation,itismerelydeclaratorywithretroactiveeffecttothedatewhenthecreditwasconstituted."10
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These principles were reiterated by the Court when it explained the requisites of an accion pauliana in greater
detail,towit:
"The following successive measures must be taken by a creditor before he may bring an action for
rescission of an allegedly fraudulent sale: (1) exhaust the properties of the debtor through levying by
attachmentandexecutionuponallthepropertyofthedebtor,exceptsuchasareexemptfromexecution
(2)exercisealltherightsandactionsofthedebtor,savethosepersonaltohim(accionsubrogatoria)and
(3)seekrescissionofthecontractsexecutedbythedebtorinfraudoftheirrights(accionpauliana).Without
availing of the first and second remedies, i.e.. exhausting the properties of the debtor or subrogating
themselves in Francisco Bareg's transmissible rights and actions. petitioners simply: undertook the third
measureandfiledanactionforannulmentofsale.Thiscannotbedone."11(Emphasisours)
In the same case, the Court also quoted the rationale of the CA when it upheld the dismissal of the accion
paulianaonthebasisoflackofcauseofaction:
"Inthiscase,plaintiffsappellantshadnotevencommencedanactionagainstdefendantsappelleesBareng
for the collection of the alleged indebtedness, Plaintiffsappellants had not even tried to exhaust the
propertyofdefendantsappelleesBareng,Plaintiffsappellants,inseekingtherescissionofthecontractsof
sale entered into between defendantsappellees, failed to show and prove that defendantsappellees
Barenghadnootherproperty,eitheratthetimeofthesaleoratthetimethisactionwasfiled,outofwhich
theycouldhavecollectedthis(sic)debts."(Emphasisours)
EvenifrespondentPhilamwasaware,asofDecember27,1989,thatpetitionerKheHongChenghadexecuted
thedeedsofdonationinfavorofhischildren,thecomplaintagainstButuanShippingLinesand/orpetitionerKhe
HongChengwasstillpendingbeforethetrialcourt.RespondentPhilamhadnoinkling,atthetime,thatthetrial
courtsjudgmentwouldbeinitsfavorandfurther,thatsuchjudgmentwouldnotbesatisfiedduetothedeedsof
donationexecutedbypetitionerKheHongChengduringthependencyofthecase.HadrespondentPhilamfiled
hiscomplaintonDecember27,1989,suchcomplaintwouldhavebeendismissedforbeingpremature.Notonly
wereallotherlegalremediesfortheenforcementofrespondentPhilam'sclaimsnotyetexhaustedatthetimethe
needs of donation were executed and registered. Respondent Philam would also not have been able to prove
then that petitioner Khe Hong Cheng had no more property other than those covered by the subject deeds to
satisfyafavorablejudgmentbythetrialcourt.
ItbearsstressingthatpetitionerKheHongChengevenexpresslydeclaredandrepresentedthathehadreserved
tohimselfpropertysufficienttoanswerforhisdebtscontractedpriortothisdate:
"ThattheDONORfurtherstates,forthesamepurposeasexpressedinthenextprecedingparagraph,that
this donation is not made with the object of defrauding his creditors having reserved to himself property
sufficienttoanswerhisdebtscontractedpriortothisdate".12
As mentioned earlier, respondent Philam only learned about the unlawful conveyances made by petitioner Khe
HongChenginJanuary1997whenitscounselaccompaniedthesherifftoButuanCitytoattachthepropertiesof
petitionerKheHongCheng.Theretheyfoundthathenolongerhadanypropertiesinhisname.Itwasonlythen
thatrespondentPhilam'sactionforrescissionofthedeedsofdonationaccruedbecausethenitcouldbesaidthat
respondent Philam had exhausted all legal means to satisfy the trial court's judgment in its favor. Since
respondent Philam filed its complaint for accion pauliana against petitioners on February 25, 1997, barely a
month from its discovery that petitioner Khe Hong Cheng had no other property to satisfy the judgment award
againsthim,itsactionforrescissionofthesubjectdeedsclearlyhadnotyetprescribed.
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Afinalpoint.Petitionersnowbelatedlyraiseonappealthedefenseofimpropervenueclaimingthatrespondent
Philam's complaint is a real action and should have been filed with the RTC of Butuan City since the property
subjectmatterorthedonationsarelocatedtherein.Sufficeittosaythatpetitionersarealreadydeemedtohave
waivedtheirrighttoquestionthevenueoftheinstantcase.Impropervenueshouldbeobjectedtoasfollows1)in
amotiontodismissfiledwithinthetimebutbeforethefilingoftheanswer13or2)intheanswerasanaffirmative
defenseoverwhich,inthediscretionofthecourt,apreliminaryhearingmaybeheldasifamotiontodismisshad
beenfiled.14 Having failed to either file a motion to dismiss on the ground of improper of venue or include the
sameasanaffirmativedefenseintheiranswer,petitionersaredeemedtohavetheirrighttoobjecttoimproper
venue.
WHEREFORE,premisesconsidered,thepetitionisherebyDENIEDforlackofmerit.
SOORDERED.
Davide,Jr.,Puno,Pardo,andYnaresSantiago,JJ.,concur.
Footnote
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1Rollo,p.106107.
2Id.,at5055.
3Id.,at5760.
4Id.,at7071.
5Id.,at4447.
6Id.,at16.
7ConstanciaC.Tolentinovs.CA,etat.,162SCRA66,72.
8 Siguan vs. Lim, 318 SCRA 725, 735, quoting TOLENTINO, ARTHUR M., CIVIL CODE OF THE
PHILIPPINES576(1991)citing8Manresa756,2Castan543555,and3Camus207.
9SeeNote1,at4445.
10Tolentino,NewCivilCode,VolumeIV,1973,ed.,atp.543.
11Adorablevs.CA,319SCRA201,207(1999).
12Annex"K".
13Section1,Rule16,1997RulesofCourt.
14Section6,Rule16,1997RulesofCourt.
TheLawphilProjectArellanoLawFoundation

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