Cheng v. Court of Appeals
REITERATIONFacts
The Antecedents: On October 4, 1985, Philippine Agricultural Trading Corporation shipped 3,400 bags of copra aboard M/V PRINCE ERIC, owned by petitioner Khe Hong Cheng's Butuan Shipping Lines, from Masbate to Dipolog City; the shipment was insured by American Home Insurance Company (Philam's predecessor via subrogation). The vessel sank between Negros and Northeastern Mindanao, causing total loss; American Home paid P354,000 to the consignee and became subrogated. On December 20, 1989, while Civil Case No. 13357 for breach of contract of carriage was pending, Khe Hong Cheng donated a 1,000 sqm lot (TCT T-3816) to son Ray Steven Khe and two lots (TCT RT-12838) to daughter Sandra Joy Khe; new TCTs (T-5072 and RT-21054) were issued upon registration on December 27, 1989. The donations explicitly reserved sufficient property for prior debts. On December 29, 1993, RTC Makati Br. 147 ruled against Khe Hong Cheng for P354,000 plus interest, attorney's fees of P50,000, and costs; judgment became final and executory. Procedural History: Writ of execution issued September 14, 1995, returned unsatisfied; alias writ granted October 1996, also unserved as no properties found under Khe Hong Cheng or Butuan Shipping. On January 17, 1997, sheriff and Philam counsel visited Butuan City, discovering properties donated. Philam filed accion pauliana (Civil Case No. 97-415) on February 25, 1997, for rescission of donations and nullification of donees' titles, alleging fraud. Petitioners answered, moving dismissal on prescription from December 27, 1989 registration; RTC denied, reckoning from 1993 judgment. CA affirmed, starting period from January 1997 discovery post-exhaustion per Arts. 1381, 1383; denied MR. The Petition: Petitioners argue grave abuse by CA in denying dismissal; prescription ran from December 27, 1989 registration (constructive notice under PD 1529 Sec. 52), making 1997 complaint time-barred under Art. 1389's four years. They claim registration trumps Civil Code, and cause accrued upon registration during pendency.
Issue(s)
When does the four-year prescriptive period under Article 1389 of the Civil Code for an accion pauliana commence to run? Whether petitioners waived objection to venue.
Ruling
The petition is DENIED for lack of merit. The accion pauliana has not prescribed, as the period commenced in January 1997 upon discovery of no levyable properties after execution attempts. Venue objection deemed waived.
Ratio Decidendi
On Issue 1 (Prescription): Article 1389 mandates four years for rescission but is silent on starting point, thus governed by Art. 1150 counting from accrual (legal possibility of suit). Accion pauliana is subsidiary per Art. 1383, requiring exhaustion of remedies: judgment, writ of execution, sheriff's failure after levy attempts. Requisites include pre-existing credit (here, 1985 loss subrogated), subsequent donation (1989), no other remedy (1997 discovery), fraud, and third-party complicity. Prescription accrues only post-exhaustion, not registration (PD 1529 Sec. 52 yields to Civil Code); otherwise, violates subsidiary nature, as in Siguan v. Lim (318 SCRA 725, quoting Tolentino) and Adorable v. CA (319 SCRA 201, requiring successive measures: exhaust properties, subrogate rights, then rescind). Even with 1989 knowledge, suit premature amid pending case; judgment retroacts to debt date. Donations reserved sufficient assets, belying fraud knowledge then. Filing February 25, 1997 (one month post-January 17, 1997 discovery) timely. On Issue 2 (Venue): Improper venue (real action in Butuan RTC) waived; must be raised in motion to dismiss pre-answer (Rule 16 Sec. 1) or as affirmative defense (Sec. 6); neither done.
Main Doctrine
An accion pauliana is a subsidiary remedy under Article 1383 of the Civil Code, available only after the creditor has exhausted all other legal means to obtain reparation, such as execution on the debtor's properties. The four-year prescriptive period under Article 1389 commences not from the registration of the fraudulent conveyance or constructive notice thereof, but from the moment the cause of action accrues, i.e., when the creditor discovers, through failed execution, that the debtor has no other properties to satisfy the judgment. For the action to prosper, five requisites must concur: (1) a pre-existing credit prior to the alienation; (2) a subsequent conveyance by the debtor conferring patrimonial benefit on a third person; (3) exhaustion of other remedies by the creditor; (4) fraud in the impugned act; and (5) complicity of the third person if the title is onerous. The judgment enforcing the credit retroacts to its constitution, rendering the decision date immaterial so long as the credit antedates the alienation. Constructive notice via registration under PD 1529, Sec. 52 does not trigger prescription, as it would contravene the subsidiary nature of the action and allow premature suits before exhaustion.