G.R. No. 134685 November 19, 1999
MARIA ANTONIA SIGUAN, petitioner, vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM, respondents.

FACTS

Respondent Rosa Lim issued two dishonored checks to petitioner Maria Antonia Siguan in August 1990, leading to Lim’s conviction for violation of B.P. 22. Subsequently, petitioner discovered that on July 2, 1991, a Deed of Donation, purportedly executed by Lim on August 10, 1989, was registered, conveying four parcels of land to her children. Petitioner filed an accion pauliana (action for rescission of fraudulent contracts) against Lim and her children, alleging the donation was antedated and executed in fraud of creditors, including herself, as Lim had no sufficient remaining properties to satisfy her obligations. Lim defended that the donation was made in good faith when she had sufficient assets and was registered late due to illness.
The trial court rescinded the donation, but the Court of Appeals reversed, dismissing the complaint. The appellate court held that the Deed, being a notarized public document, carried prima facie evidence of its execution date of August 10, 1989. Since petitioner’s credit arose only in August 1990, the requirement of a pre-existing credit for accion pauliana was absent. It also ruled that fraud must prejudice the creditor seeking rescission, and petitioner could not rely on the claim of another creditor, Victoria Suarez.

ISSUE

May the Deed of Donation be rescinded on the ground that it was executed in fraud of creditors?

RULING

Yes, the Supreme Court granted the petition and reinstated the trial court’s decision, rescinding the donation. The Court held that the prima facie presumption of the execution date in a notarized document is disputable. Here, overwhelming evidence established that the Deed was antedated and actually executed much later, in 1991. The donation was registered only on July 2, 1991, and the tax declarations for the donated properties remained in Lim’s name until 1992. Crucially, Lim was already a judgment debtor to Victoria Suarez as of October 8, 1987, a fact affirmed by a final Supreme Court decision in 1997. This prior credit satisfied the requirement of a pre-existing obligation.
The legal logic is that for accion pauliana under Article 1381 of the Civil Code, the creditor must prove: (1) a credit prior to the fraudulent conveyance; (2) the debtor made a subsequent contract conveying patrimonial property; and (3) the creditor has no other legal remedy. Fraud is presumed when the debtor, after incurring an obligation, contracts away his remaining property. Lim, knowing of her existing debt to Suarez and the impending obligation from the dishonored checks to Siguan, donated substantially all her properties, leaving insufficient assets to pay her creditors. This constituted a fraudulent conveyance prejudicing creditors, warranting rescission to restore the properties to Lim’s patrimony for the satisfaction of lawful debts. The Court emphasized that the action benefits all creditors prejudiced by the fraudulent act.