GR 129644; (March, 2000) (Digest)
G.R. No. 129644 ; March 7, 2000
CHINA BANKING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, PAULINO ROXAS CHUA and KIANG MING CHU CHUA, respondents.
FACTS
Spouses Alfonso and Kiang Chua owned a conjugal property. In a prior case, Metropolitan Bank obtained a judgment against Alfonso, leading to a levy on his one-half conjugal share. This was settled via a compromise, recognizing the levy’s validity only over Alfonso’s share. Separately, China Bank obtained a money judgment against Alfonso and a corporation. After the prior levy, Alfonso executed an “Assignment of Rights to Redeem” his levied share to his son, Paulino, who then redeemed it from Metropolitan Bank. These acts were annotated on the title in March 1989. Later, China Bank, to enforce its own judgment, levied on Alfonso’s interest in the same property in February 1991. Paulino and Kiang sued China Bank, asserting Paulino’s prior right via the 1988 assignment and 1989 redemption.
ISSUE
Whether the “Assignment of Rights to Redeem” executed by Alfonso Chua in favor of his son Paulino is fraudulent and rescissible, thereby rendering China Bank’s subsequent levy valid.
RULING
The Supreme Court granted China Bank’s petition, rescinded the assignment, and upheld the bank’s levy. The legal logic centers on the rescission of fraudulent conveyances under Article 1387 of the Civil Code. A conveyance to defraud creditors is rescissible even if for valuable consideration; it must be both for consideration and made in good faith. Here, the presumption of fraud arose because the assignment was made by a debtor (Alfonso) to a close relative (his son) while he was heavily indebted and insolvent, with no other property to satisfy creditors. Paulino’s admission that he knew of his father’s dire financial state fortified this presumption. The transaction, though annotated earlier, was a trick to place the property beyond a creditor’s reach. Consequently, China Bank, as a prejudiced creditor, could properly seek rescission of that conveyance under the Civil Code, independent of the redemption rules in the Rules of Court. The earlier annotation did not confer an indefeasible right because the underlying transaction was voidable. Therefore, Alfonso’s interest remained leviable for his debt to China Bank, making its 1991 levy valid against his one-half share.