G.R. No. L-13310; November 28, 1959
Teofilo Orsal, et al., plaintiffs-appellants, vs. Aurelio Alisbo, et al., defendants-appellees.

FACTS

On February 8, 1956, Jose Mogat, while driving a funeral car owned by spouses Aurelio Alisbo, ran over and killed Teresita Orsal. Mogat was convicted of homicide through reckless imprudence in Criminal Case No. 4923 and sentenced to pay the parents of Teresita, the spouses Orsal, P6,342.00 as indemnity and damages. After the decision became final, execution was issued against Mogat but returned unsatisfied due to his insolvency. On April 10, 1957, the spouses Alisbo sold all their properties, including two lots in Bacolod City, to Montano Medel. On May 4, 1957, the spouses Orsal filed an action against the spouses Alisbo and Medel to recover the indemnity from the Alisbos based on their subsidiary liability and to rescind the sale to Medel on the ground of fraud against creditors. The defendants claimed the sale was for valuable consideration, in good faith, and that no judgment or attachment existed against the Alisbos at the time of the sale. The parties submitted a stipulation of facts, and the trial court, based thereon, ordered the Alisbos to pay P6,342.00 but dismissed the complaint against Medel for lack of evidence of bad faith or lack of consideration. Plaintiffs appealed on pure questions of law.

ISSUE

Whether the sale of properties by the spouses Alisbo to Montano Medel can be rescinded on the ground of fraud against creditors, and whether Medel can be considered a purchaser in bad faith.

RULING

The Supreme Court affirmed the trial court’s judgment holding the spouses Alisbo subsidiarily liable for the indemnity awarded in the criminal case, pursuant to Article 103 of the Revised Penal Code. The Court found that the Alisbos acted in bad faith by disposing of all their properties knowing their subsidiary liability for their driver’s insolvency. Regarding the rescission of the sale to Medel, the Court identified circumstances constituting “badges of fraud” under established jurisprudence: (1) the transfer was made after the Alisbos knew of the judgment against their insolvent driver; (2) they transferred all properties without leaving assets to satisfy the judgment; and (3) Aurelio Alisbo continued as manager of the sold business. However, citing Abaya vs. Enriquez, the Court held that rescission for fraud under Article 1387 of the Civil Code requires proof of the buyer’s complicity in the fraud, not merely the presumption arising from such badges. As the stipulation of facts provided insufficient direct evidence of Medel’s complicity, the Court set aside the portion of the decision dismissing the complaint against Medel and remanded the case to the trial court for the presentation of evidence on the character of Medel’s purchase. The rest of the decision was affirmed.