G.R. No. 28495 , March 31, 1928
ASIA BANKING CORPORATION, plaintiff-appellant, vs. ASUNCION NABLE JOSE and LICHAUCO & CO., INC., defendants-appellees.

FACTS

Asia Banking Corporation (Bank) obtained a judgment against Lichauco & Co., Inc. (Corporation) for a debt of P146,242.11. To satisfy the judgment, the Bank caused the sheriff to levy upon and sell certain haciendas. The Bank purchased the properties at the sheriff’s sale for P70,000. However, the Bank was unable to register its sheriff’s deed because a prior deed, dated January 16, 1922, had already been registered, conveying the same haciendas from the Corporation to Asuncion Nable Jose for a stated consideration of P70,000. The Bank filed an action to annul the deed to Nable Jose, alleging it was a simulated and fraudulent conveyance executed without consideration while the Corporation was insolvent, for the purpose of hindering the Bank’s collection of its claim. Nable Jose defended the deed as genuine, claiming the P70,000 consideration represented a loan she obtained and advanced to the Corporation.

ISSUE

Was the deed of conveyance from Lichauco & Co., Inc. to Asuncion Nable Jose a fraudulent conveyance that should be annulled to satisfy the judgment debt owed to Asia Banking Corporation?

RULING

YES, in part. The Supreme Court found that the consideration for the deed was grossly inadequate. The Court determined that the true consideration paid by Nable Jose was only P34,000, not the stated P70,000. At the time of the conveyance, the Corporation was insolvent. The payment of this obligation (the P34,000) was made while the corporation was insolvent and on account of an obligation that was due and enforceable, which constitutes a fraudulent conveyance under Article 1292 of the Civil Code. However, the Court also found that Nable Jose had a prior equitable lien on the property for the amount of P34,000 plus interest. The Court decreed that if the Bank paid Nable Jose this amount with interest by a specified date, the Bank would become the sole owner of the haciendas, the deed to Nable Jose would be cancelled, and the Bank’s sheriff’s deed could be registered. If the Bank failed to make the payment, the property would remain with Nable Jose subject to her lien. No costs were awarded.