[G.R. No. 129644.

March 7, 2000]
CHINA BANKING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, PAULINO ROXAS CHUA and
KIANG MING CHU CHUA, respondents.

Facts

A residential land owned by the spouses Mr. and Mrs. Chua was levied on execution in favor of Metrobank.
The wife filed a complaint questioning the levy on the ground that the said land was a conjugal property. This has
resulted in a compromise agreement, that the levy shall only be valid to the extent shares pertaining to her
husband. Accordingly, an alias notice of levy was issued affecting the share and a certificate of sale was executed
in favor of Metrobank.

Meanwhile, Chinabank filed an action for collection of sum of money against Pacific Multi Agro Industrial
Corporation and Mr. Chua. Judgement was rendered in favor of Chinabank. The same, a certificate of sale was
executed in favor of the latter.

However, 2 years prior to the execution of sale in favor of Chinabank, Mr. Chua has already executed an
ASSIGNMENT OF RIGHTS OF REDEMPTION in favor of his son, Paulino, pertaining to his right to redeem the
undivided portion of the land sold to Metrobank.

Upon knowing that a certificate of sale was issued to Chinabank, Paulino and his mother instituted before
the RTC, averring that Paulino has a prior and better right over the right, title, interest and participation of Chinabank,
that his father sold his right to redeem the of the conjugal property in his favor. This preceded the annotation of the
levy of execution in favor of China Bank by two (2) years and the certificate of sale in favor of China Bank by more
than three (3) years.

Issue

Whether or not the assignment of the right of redemption made by Mr. Chua in favor of his son, Paulino, was
done to defraud his creditors and may be rescinded under Art. 1387 of the Civil Code.

Ruling

Yes. There was a presumption that the assignment of the right of redemption was in fraud of creditors and
maybe rescinded. Art. 1381 says that contracts which are undertaken in fraud of creditors when the latter cannot in
any manner collect the claims due them, are rescissible. The existence of fraud or intent to defraud creditors may
either be presumed in accordance with Art. 1387 of the Civil Code, or duly proved in accordance with the ordinary
rules of evidence.

The law presumes that there is fraud of creditors when:

a) There is alienation of property by gratuitous title by the debtor who has not reserved sufficient property to
pay his outstanding debts contracted before such alienation; or
b) There is alienation of property by onerous title made by a debtor against whom some judgment has been
rendered in any instance or some writ of attachment has been issued. The decision or attachment need not
refer to the property alienated and need not have been obtained by the party seeking rescission.
c) Under the third paragraph of the same article, the design to defraud creditors may be proved in any other
manner recognized by the law of evidence and these instances are referred as badges of fraud:

1. The fact that the consideration of the conveyance is fictitious or is inadequate.

2. A transfer made by a debtor after suit has begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially.
6. The fact that the transfer is made between father and son, when there are present other of the
above circumstances
7. The failure of the vendee to take exclusive possession of all the property. (Underscoring provided)

This presumption is strengthened by the fact that the conveyance has virtually left Mr. Chua other creditors with
no other property to attach.