G.R. No. L-12642, October 26, 1917

FACTS:
Eleuteria Chiong Veloso filed an action to recover a parcel of land in Cebu City and the house thereon. The property was levied upon by Sheriff Manuel Roa via an execution sale to satisfy a judgment against Eleuteria’s sister, Maximina Chiong Veloso. The levy covered the house and an undivided three-fourths interest in the lot, which Maximina owned prior to December 8, 1911. Eleuteria owned the remaining one-fourth undivided interest.

Eleuteria claimed ownership as the purchaser from Pedro Cui, to whom Maximina had sold the property on December 8, 1911, under a contract with a pacto de retro (right to repurchase within one year). The defendants contended that Maximina’s sale to Cui was fraudulent, intended to hinder her creditors, and that Eleuteria’s subsequent purchase from Cui on December 6, 1912 (two days before the redemption period expired) was made in collusion with and for the benefit of Maximina.

The judgment debt arose from a loan obtained by Maximina and her husband in 1907 from funds belonging to minors represented by their guardian, Martin M. Levering. An action was filed against Maximina on November 1, 1911, and judgment was rendered on January 30, 1912. After partial satisfaction from other property, an execution was issued on November 6, 1912, leading to the levy on December 23, 1912, and a final sale on May 8, 1913, where the guardian (by then Teodoro Velez) purchased the property.

ISSUE:
1. Was the sale by Maximina to Cui on December 8, 1911, executed with intent to defraud her creditors?
2. Was Eleuteria acting as the agent or accomplice of Maximina in buying the property from Cui on December 6, 1912?

RULING:
1. No, the sale was not fraudulent. The Court found no clear proof that Maximina executed the sale to Cui with intent to defraud her creditors. While the sale occurred after suit was begun but before judgment, Maximina retained other valuable properties subject to execution, which were sufficient to cover the debt. The alienation was not gratuitous, and mere inadequacy of price (P3,000 for property worth P7,000-P8,000) in a pacto de retro transaction, where redemption was anticipated, does not itself establish fraud. The presumption of fraud under Article 1297 of the Civil Code did not apply, and the circumstances did not satisfy the recognized badges of fraud.
2. No, Eleuteria was not acting as Maximina’s agent or accomplice. The defendants failed to prove collusion. While the timing of Eleuteria’s purchase (coinciding with Maximina obtaining a loan) raised suspicion, the evidence did not establish that Eleuteria used Maximina’s funds or acted at her behest. The testimonies of Eleuteria, Maximina, and their brother, though interested, were uncontradicted, and the burden of proving fraud rested with the defendants, which they did not meet.

DISPOSITIVE:
The judgment of the lower court was reversed. Judgment was entered in favor of plaintiff Eleuteria Chiong Veloso for the recovery of the premises. The defendants were also ordered to pay Eleuteria P1,650 as damages representing rents collected from the property during its detention. No costs were awarded.

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