G.R. No. 36923 ; November 24, 1933
EMILIO GASTON, plaintiff-appellee, vs. JOSE HERNAEZ and ELEUTERIA CHONG VELOSO, defendants-appellants.

FACTS

Plaintiff Emilio Gaston was the joint and several surety for two loans obtained by defendant Jose Hernaez. When Hernaez defaulted, Gaston was sued by the creditors. Judgments were rendered against both Hernaez and Gaston. Gaston paid part of the debts and sought reimbursement from Hernaez, but the sheriff could not find any property of Hernaez to levy upon. It was discovered that prior to the judgments, Hernaez had executed a deed of sale (Exhibit A) assigning all his hereditary rights and interests in his father’s intestate estate to his mother-in-law, co-defendant Eleuteria Chong Veloso, for a stated sum. Gaston filed this action to annul the deed of sale as fraudulent and to recover damages.

ISSUE

Whether the deed of sale (Exhibit A) executed by Jose Hernaez in favor of Eleuteria Chong Veloso is fraudulent and therefore null and void as against the creditor, Emilio Gaston.

RULING

Yes, the deed of sale is null and void. The Supreme Court affirmed the trial court’s judgment annulling the transfer. The assignment carried the presumption of fraud under Article 1297 of the Civil Code because it was made by a debtor in favor of a relative (his mother-in-law) while actions for the recovery of debts were pending against him. The evidence showed Hernaez knew the hereditary rights were his only valuable property and that he had no other means to pay his obligations, including those where Gaston was surety. The circumstances indicated the sale was without actual consideration and executed to defraud creditors. The defense of res judicata, based on the probate court’s approval of the transfer in the intestate proceedings, was rejected as it was not raised in the answer, the plaintiff was not a party to those proceedings, and the fraudulent nature of the transfer vitiated the act.

AI Generated by Armztrong.