Siguan v.

Lim
November 19, 1999 | Davide, J.

Doctrine: As general rule, rescission requires existence of creditors at the time of the alleged fraud,
and this must be proved as one of the bases of the judicial pronouncement setting aside the contract.
Without any prior existing debt, there can neither be no injury nor fraud.

Case Summary: Respondent Lim issued 2 checks to satisfy her debts to Petitioner Siguan but these
were later on dishonored upon presentment in the bank. A criminal case was instituted against Lim for
violation of BP 22 for which the RTC found Lim guilty. During this time, Lim donated parcels of land
to her children. Thus, petitioner instituted an accion pauliana asking for the rescission of the donation
for being prejudicial to her interest as Lim’s creditor. CA reversed RTC’s decision and dismissed the
accion pauliana. Court affirmed CA’s decision and held that the petitioner was not able to prove that
she had exhausted other legal means to obtain reparation for the same because an action for rescission
is supposed to be a subsidiary remedy only. Other requirements were also not met.

Facts:
 On 25 and 26 August 1990 respondent Rosa Lim issued two Metrobank checks in the sums of
P300,000 and P241,668, respectively, payable to “cash” to satisfy her debts to petitioner Maria
Antonia Siguan. Upon presentment by petitioner with the drawee bank, the checks were dishonored
because the account was already “closed”. Demands to make good the checks proved futile.
 A criminal case for violation of Batas Pambansa Blg. 22 was filed against Lim. On 29 December
1992, the RTC of Cebu City a quo convicted Lim as charged.
 Lim was also convicted of estafa by the RTC of Quezon City filed Victoria Suarez. This was
affirmed by CA. However, the Supreme Court acquitted Lim but found her civilly liable in the
amount of P169,000.
 On 2 July 1991, a Deed of Donation conveying parcels of land and purportedly executed by Lim on
10 August 1989 in favor of her children, was registered with the Register of Deeds of Cebu. New
transfer certificates of title were thereafter issued in the names of the donees.
 On 31 December 1994, trial court ordered the rescission of the questioned deed of donation; 2)
declared null and void the transfer certificates of title issued in the name of Lim’s children; 3)
ordered Registered of Deeds of Cebu to cancel said titles and to reinstate the previous titles in the
name of Lim; 4) directed the Lims to pay the petitioner jointly and severally, the sum of P10,000
moral damages, P10,000 attorney’s fees, P5,000 as expenses of litigation.
 On 20 February 1998, CA reversed RTC’s decision and dismissed petitioner’s accion pauliana,
because two requisites for said action was absent:
1. there must be a credit existing prior to the celebration of the contract; and
2. there must be a fraud, or the intent to commit the fraud.

Petitioner’s Claim
- On 23 June 1993 petitioner filed an accion pauliana against Lim and her children. Petitioner
claimed therein that sometime in July 1991 Lim, through a Deed of Donation, fraudulently
transferred all her real property to her children in bad faith and in fraud of creditor, including her;
that Lim conspired and confederated with her children in antedating the questioned Deed.
o Accion pauliana – action to rescind contracts in fraud of creditors.

Respondents’ Comment
- Lim denied any liability to petitioner. She claimed that her convictions in criminal cases 22127-
28 were erroneous, which was the reason she appealed to the CA.
 - As regards the questioned Deed of Donation, she asserted that it was not antedated but was made
in good faith at a time when she had sufficient property. The Deed was registered only 2 July
1991 because she was seriously ill.

Issue: WON the Deed of Donation executed by respondent Rosa Lim in favor of her children was made
in fraud of petitioner and, therefore, rescissible. - No

Ruling:
The facts of the RTC and the CA regarding the execution of the Deed are conflicting, therefore, the Court
has jurisdiction to review errors of fact of the case.
For accion pauliana to prosper, the following must be present:
 plaintiff asking for rescission has a credit prior to the alienation;
 debtor has made a subsequent contract conveying a patrimonial benefit to a 3rd party;
 creditor has no other legal remedy to satisfy his claim;
 act impugned is fraudulent;
 the 3rd person who received the property conveyed (if by onerous title), has been an accomplice in
the fraud.

As general rule, rescission requires existence of creditors at the time of the alleged fraud, and this must be
proved as one of the bases of the judicial pronouncement setting aside the contract. Without any prior
existing debt, there can neither be no injury nor fraud.

- The Deed of Donation executed is a public document, having been acknowledged before a notary
public. It is evidence of the fact which gave rise to its execution and of its date (Sec. 23, Rule
132, Rules of Court) Court is not convinced that it was antedated.
“SEC. 23. Public documents as evidence. – xxx All other public documents are evidence,
even against a third person, of the fact which gave rise to their execution and of the date of
the latter. This includes “Documents acknowledged before a notary public except last wills
and testaments…”
- Contracts entered in fraud may be rescinded only when the creditors cannot in any manner collect
the claims due them. Action for rescission is a subsidiary remedy only. The petitioner was not
able to prove that she had exhausted other legal means to obtain reparation for the same.
o Subsidiary remedy – the exhaustion of all remedies by the prejudiced creditor to collect
claims due him before rescission is resorted to.
- Fourth requisite for accion pauliana not present either. Art. 759 of Civil Code states that donation
is always presumed to be in fraud of creditors when the donor did not reserve sufficient property
to pay his debts prior to donation. Petitioner’s alleged credit existed only a year after the deed of
donation was executed. She cannot be said to have been prejudiced or defrauded by such
alienation. In addition, when the Deed was executed, Lim had properties such as farming lands, a
house and lot, residential lots which were sufficient to cover the debts.
- In an attempt to support the case for rescission, petitioner brought up the criminal case involving
Victoria Suarez. However, Suarez, albeit a creditor prior to the alienation, is not a party to the
accion pauliana. Only the creditor who brought the action for rescission can benefit from the
rescission (Art. 1384, Civil Code). The revocation is only to the extent of the plaintiff creditor’s
unsatisfied credit; as to the excess, alienation is maintained.
- As for the awards of moral damages, etc., the trial court made these awards without stating any
justification in their ratio decidendi.

Disposition: CA decision affirmed in toto.