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[ GR No. L-13310, Nov 28, 1959 ]



106 Phil. 655

[ G.R. No. L-13310, November 28, 1959 ]




On February  8, 1956, while  Jose Mogat was driving a funeral car belonging to  Aurelio Alisbo and his wife, he ran over  Teresita Orsal causing her death as  a result of which Mogat was prosecuted  and convicted of homicide through  reckless imprudence in Criminal  Case No.  4923 and  sentenced to imprisonment for one year and to pay the parents of Teresita P6,000.00 as indemnity and P342.00 as actual damages.

After the decision had become final, execution was issued against Mogat as regards the indemnity of  P6,342.00 which was  returned unsatisfied  because of his  insolvency.  On April 10,  1957, the spouses Alisbo sold all  their properties to Montano Medel, including two  lots situated at  Bacolod City covered by a Torrens title.  So on May 4, 1957, the spouses Orsal, parents of Teresita, brought an action before the Court of First Instance  of  Negros  Occidental against the spouses Alisbo and Montano Medel not only to recover the indemnity of  P6,342.00 from the  spouses  because of their  subsidiary  liability but to  obtain the rescission of the sale made by them of their properties in favor of Medel on the ground that it was made in fraud of creditors.

Defendants in their answer  alleged  that the  Funeraria Alisbo wherein  the  car  driven by Mogat was used  no longer belongs to the spouses Alisbo because it was already sold  to Medel, defendant Aurelio  Alisbo  having become merely the manager of the business after its sale to Medel; that defendant spouses sold their properties to Medel for valuable consideration and without any intention to defraud the plaintiffs; that assuming that the spouses are liable subsidiarily for the indemnity awarded in the criminal case, the sale cannot be  considered fraudulent under Article 1387 of the new Civil Code because there was no judgment rendered  or  attachment issued at  the time of  the  sale against them;  and that defendant Medel purchased the properties  in good faith and for valuable  consideration.

No oral evidence was presented either  by plaintiffs or defendants for they merely submitted a stipulation of facts through their respective counsel.  And on the strength of this stipulation,  the  court  on October 8, 1957,  rendered judgment ordering the spouses Alisbo to pay  the plaintiffs the sum of P6,342.00, plus costs.  The court dismissed the complaint as to defendant Medel because there is no evidence to show that he acted in bad faith or that the sale in his favor was  made without consideration.

Plaintiffs brought the case before us on  purely questions of law.

It appears from the stipulation of facts that Jose Mogat, the driver, was  prosecuted and convicted in Criminal Case No. 4923  in  a  decision rendered  on January  18, 1957 ordering him to indemnify the parents of the deceased in the amount of P6,342.00.  This decision was ordered executed  on  March 6, 1957 but the execution was  returned by  the sheriff  unsatisfied  for  the reason  that  Medel was insolvent.  Aurelio Alisbo, owner of  the  car, received in due time a copy of the decision through his counsel, and on April  10, 1957 he sold all the properties belonging to his business to Montano Medel such that after the sale no other  properties were left with him which may be levied upon to satisfy  his subsidiary liability.

Article 1381 of the new Civil Code provides that a contract  undertaken in  fraud  of creditors when the latter cannot in  any other  manner collect the claims due them, may be rescinded, while Article 1387 also provides: "Alienations by onerous title  are also presumed fraudulent when made by  persons against whom some judgment has been rendered  in any instance or some writ of attachment has been issued."

There is no question that the spouses Alisbo, owners of the car, are subsidiary liable  for the indemnity awarded the plaintiffs  in the criminal case under Article 103 of the Revised Penal Code  and therefore the trial court did not err in  ordering them to pay  said plaintiffs  the amount of P6,342.00  which  their driver was ordered  to  pay in the criminal  case.  It cannot  also  be disputed that said spouses acted in  bad faith or to defraud their creditors when they disposed of all their properties in favor of Montano Medel knowing  full well that their driver has already been ordered  to pay an  indemnity of P6,342.00 for which under the law they are subsidiarily liable.   It is true that strictly speaking they are  not considered parties in the criminal  case where  the award was made, but virtually they are  as held by this Court in the case of  Miranda vs. Malate Garage & Taxicab, Inc.,  Off. Gaz., No. 11, p. 5145, July 31,  1956.  In that case,"we said: "It is true that an employer,  strictly speaking,  is not a party in a criminal case instituted against his employee but in substance and effect he is  considering the subsidiary  liability  imposed upon him by law."   And in another case,  we made  this strong pronouncement:
"After very careful reflection,  we  have arrived at the opinion that the judgment of conviction, in the absence of any collusion between the defendant and the offended  party, should bind the person subsidiarily liable. *  * *  In other words, the employer becomes ipso facto subsidiarily liable  upon his driver's conviction and upon proof of the latter's insolvency, in the same way that acquittal wipes out not only the employee's primary civil liability but also his employer's subsidiary  liability  for  such criminal negligence."  (Martinez vs. Barredo, 45 Off. Gaz., No. 11, p. 4922)
The question that  now arises  is: Is there any evidence to show  that Montano Medel  has  acted  with  complicity or with knowledge of the fraudulent intent  of the spouses  Alisbo when they sold to  him all their properties under the circumstances?  Can he be considered as a purchaser in bad faith?

It is regrettable that no oral evidence was presented by either party, especially by plaintiffs relative to the character in which Montano Medel acquired the property in question, while on the other hand the stipulation of facts the parties have submitted contains very meager information on the matter.   Nevertheless, there are in this case circumstances  or indications  which, in-line with a  well-known ruling laid down by this Court in a similar case, may be considered as badges of fraud which may affect the validity of the transaction not  only as regards the vendor but also the vendee.   Thus, in Oria vs. McMicking,  21 Phil., 24S, this Court said:
"In the consideration of whether  or not  certain transfers were fraudulent,  courts  have  laid  down  certain rules by which the fraudulent character of the transaction  may be  determined. The following are  some  of the circumstances attending sales which have been denominated by the courts badges of fraud:
  1. The  fact that the consideration of the conveyances is fictitious or is inadequate.
  2. A transfer made by a debtor after suit has been 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."
At least three of the circumstances above  indicated as determinative of the existence of fraud may be said to be existing in the instant case, to wit:  (1) the transfer of the properties was made by the spouses Alisbo after knowing that a judgment of indemnity was rendered against their driver  who  is insolvent for  which they are subsidiarily liable; (2) defendant spouses transferred all their properties  without leaving anything behind which may be levied upon to satisfy the judgment of indemnity; and (3) according to the admission of defendants themselves, after the sale of the funeral business to Medel, Aurelio Alisbo continued to be  the manager of the business.  This is  an indication that the transfer is a mere scheme to circumvent the civil liability  of the spouses more so when  there  is no  clear evidence that the consideration of the sale has been actually paid.

Considering  our ruling  in  Abaya  vs. Enriquez,  G.  R. No. L-8988, May 17, 1957, where the sale was made even after the judgment has been rendered against the vendor, that the transaction cannot be rescinded  on  the ground of fraud unless the complicity of the buyer in the fraud imputed  to  the vendor is established by  other means than the presumption of fraud under Article 1387, and having in mind  on the  other hand that there is no clear proof of such  direct complicity  other  than  the suspicious circumstances we have pointed out above, which constitute badges of fraud incriminatory  to the purchaser, it is the sense of this Court to remand this  case to the trial court in order to give  the parties an opportunity  to  present evidence relative to this matter so that no undue harshness may be committed against  the  purchaser if the sale be now rescinded merely on the strength of those circumstances.

Wherefore, the  decision appealed from  is modifiied  in the sense that that portion which dismisses the complaint as to defendant Montano Medel for lack of sufficient proof as regards the character in which he bought the properties in question, is  set aside.  The  rest  of the  decision  is affirmed, and the case is remanded  to the lower court for further proceedings, without  pronouncement as to  costs.

Paras, C. J.,  Bengzon, Padilla, Montemayor, Labrador, Endencia, Barrera, and  Gutierrez David, JJ.,  concur.