G.R. No. L-12794; October 14, 1918
ELADIO ALPUERTO, plaintiff-appellee, vs. JOSE PEREZ PASTOR and MANUEL ROA, provincial sheriff of Cebu, defendants-appellants.

FACTS:
Eladio Alpuerto filed an action seeking a declaration of full ownership over three parcels of land and the nullification of a sheriff’s sale of the same properties to Jose Perez Pastor. Alpuerto claimed title under a contract of sale with pacto de retro (right of repurchase) executed in his favor by Juan Llenos on July 3, 1912, for P2,500. The document was not notarized until December 3, 1914. At the time of the purported sale, a money claim lawsuit by Pastor against Llenos was pending. Pastor obtained a final judgment against Llenos on January 27, 1913, which was affirmed by the Supreme Court on November 20, 1914. Subsequently, an execution was levied on the subject properties as belonging to Llenos. Despite Alpuerto’s claim of ownership, the sheriff sold the properties at public auction to Pastor. Pastor defended by alleging that the sale to Alpuerto was simulated and executed to defraud him, a creditor of Llenos.

ISSUE:
Was the contract of sale with pacto de retro (Exhibit A) executed by Juan Llenos in favor of Eladio Alpuerto fraudulent and therefore rescissible under the Civil Code?

RULING:
Yes. The Supreme Court reversed the lower court’s judgment and declared the contract annulled as fraudulent.

The Court held that the conveyance was presumptively fraudulent under Article 1297 of the Civil Code, as it was made after a condemnatory judgment had been rendered against the vendor, Juan Llenos. The Court ruled that for purposes of determining the effective date of the transaction against third persons like Pastor (a judgment creditor), the relevant date is when the private document was given a public character. Since the document was only notarized on December 3, 1914after the final judgment against Llenosthe transfer is deemed to have taken effect as of that later date, falling within the period that gives rise to the presumption of fraud.

Furthermore, the Court found the transaction fraudulent in fact. The evidence showed that Alpuerto, as Llenos’s son-in-law, was aware of the pending litigation; the consideration (P2,500) was disproportionately low compared to the property’s value (assessed at P5,000-P6,000); and Alpuerto failed to present the instrumental witnesses to the deed or provide a satisfactory explanation for the long delay in notarization. The transaction, taken as a whole, was designed to place the property beyond the reach of Llenos’s creditor.

Consequently, the complaint was dismissed. The contract (Exhibit A) was annulled, and Eustaquio Lopez, as administrator of Pastor’s estate, was declared the rightful owner by virtue of the sheriff’s sale.