G.R. No. L-7762; March 25, 1913
BEHN, MEYER & CO., LTD., plaintiff-appellant, vs. JOSE MCMICKING, Sheriff of Manila, defendant-appellant.

FACTS

The Manila Trading and Supply Company obtained a judgment against Tan Pian. While Tan Pian’s motion for a new trial was pending, the judgment creditor secured an execution. Meanwhile, on September 8, 1911, with knowledge of the judgment, Tan Pian executed a bill of sale transferring all his property to Behn, Meyer & Co., Ltd., in partial satisfaction of a pre-existing debt of about P28,000 owed to them. The property transferred was worth significantly less than the debt. The sheriff levied upon and sold this property to satisfy the Manila Trading Company’s judgment. Behn, Meyer & Co., Ltd. sued the sheriff for damages. The trial court consolidated this case with supplementary proceedings initiated by the judgment creditor to set aside the transfer as fraudulent. The trial court found the conveyance valid and rendered judgment for Behn, Meyer & Co., Ltd. Both parties appealed.

ISSUE

Whether the conveyance of property by a judgment debtor to a creditor, in partial satisfaction of a pre-existing debt, is fraudulent and void as to other creditors, despite the presumption of fraud under Article 1297 of the Civil Code.

RULING

No. The conveyance is valid. The presumption of fraud arising under Article 1297 of the Civil Code, due to the transfer occurring after a judgment was rendered against the debtor, is a rebuttable presumption. It is overcome by evidence that the sale was bona fide and for a valuable consideration. Here, the transfer was made to satisfy, pro tanto, a legitimate and undisputed pre-existing debt owed by Tan Pian to Behn, Meyer & Co., Ltd. The value of the property transferred was less than the amount of the debt. Following the precedent in Peña vs. Mitchell, if a real debt exists and the transfer extinguishes the debt to the extent of the property’s value, the transaction is legal. The intention of the parties to prefer one creditor over others, or the effect of depriving other creditors of recourse, does not invalidate the transfer. The conveyance was not simulated but was a real transaction for adequate consideration. The decision of the trial court is affirmed.