G.R. No. L-18500 November 24, 1966
ARSENIO DE LA PAZ and CLAUDIA MANIO, petitioners, vs. MARIO F. GARCIA, assignee of the insolvent ENRIQUE GATBONTON and the COURT OF APPEALS, respondents.

FACTS

On July 21, 1952, Enrique Gatbonton and his wife Maria Manio executed a deed of absolute sale over three parcels of land in favor of Patria Belmonte Anonas. On the same date, a private memorandum-agreement gave Gatbonton and his wife the right to repurchase the lands until December 31, 1952. On October 16, 1952, before the repurchase period expired, Anonas sold the same lands by absolute sale to petitioners Arsenio de la Paz and Claudia Manio (the latter being the sister of Gatbonton’s wife, Maria Manio) for P9,000. Earlier, on September 2, 1952, Gatbonton and his wife executed a deed of absolute sale over their two-story residential house in favor of the same petitioners for P3,500. On October 21, 1952, five days after the sale of the lands to petitioners, Gatbonton filed a petition for voluntary insolvency. Respondent Mario F. Garcia was appointed assignee. The assignee filed an action to recover the lands and the house, alleging the transfers were made to prevent the properties from coming into the hands of the assignee and to hinder, delay, or obstruct the insolvency proceedings, and that petitioners knew Gatbonton was insolvent or in contemplation of insolvency. The trial court and the Court of Appeals declared the transfers null and void.

ISSUE

Whether the transfers of the lands and the house to the petitioners are fraudulent and void under the Insolvency Law, and not merely rescissible under the Civil Code.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, declaring the transfers null and void under the Insolvency Law. The Court held that the provisions of the Civil Code on rescissible contracts were inapplicable as the Insolvency Law regards such fraudulent transfers as absolutely null and void. The Court found the transfers fraudulent based on the following circumstances: (1) the relationship of petitioner Claudia Manio to the insolvent’s wife; (2) the sale of the lands by Anonas to petitioners for P9,000, which was less than the P10,000 she allegedly paid, while the insolvent’s right to repurchase was still extant; (3) the execution of a private memorandum agreement for repurchase, indicating an attempt to hide the real purpose of the transaction; and (4) the representation by the insolvent’s wife and her sister that they were looking for buyers for the lands to settle with claimants, when the lands were supposedly already owned by Anonas. Regarding the house, the Court held that the date of registration of the sale (October 14, 1952), which was within 30 days of the filing of the insolvency petition (October 21, 1952), was correctly considered in determining fraud under Section 70 of the Insolvency Law, notwithstanding the earlier date of the deed. The presence of Patria Belmonte Anonas was not indispensable to the action, as the assignee, who took no part in the transactions, could bring the action against the petitioners in possession of the properties.