FIRST DIVISION

[G.R. No. 147349. February 13, 2004]

MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA),

petitioner, vs. ALA INDUSTRIES CORPORATION, respondent.
D E C I S I O Ndsdsdsdsd
PANGANIBAN, J.:
Foreseeable difficulties that occur during the Christmas season and cause a delay do not
constitute a fortuitous event. The difficulties in processing claims during that period are not acts
of God that would excuse noncompliance with judicially approved obligations.
The Case
Before us is a Petition for Review1[1] under Rule 45 of the Rules of Court, assailing the February
28, 2001 Decision2[2] of the Court of Appeals (CA) in CA-GR CV No. 59518. The dispositive
part of the Decision reads:
WHEREFORE, the appealed final order is hereby REVERSED. The Court a quo is ordered to
issue a Writ of Execution directing the branch sheriff to enforce [Respondent] ALA Industries
unpaid claim against [Petitioner] Manila International Airport Authority (MIAA) in the total
amount of P7,171,835.53.3[3]
The Facts
The facts of the case are narrated by the CA as follows:
[Petitioner] MIAA conducted a public bidding for a contract involving the structural repair and
waterproofing of the International Passenger Terminal (IPT) and International Container
Terminal (ICT) buildings of the Ninoy Aquino International Airport (NAIA). Out of eleven
bidders, [Respondent] ALA submitted the second lowest and most advantageous bid. The
contract was awarded to [respondent] in the amount of P32,000,000.00 when it agreed to reduce

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2
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the price from P36,000.00.4[4] On June 28, 1993, the contract was executed providing, inter alia,
the following terms:
ARTICLE I
SCOPE OF WORK
1.1The CONTRACTOR shall furnish all materials, labor, tools, plans, equipment and other
services and [perform] all operations necessary to complete the structural repair and
waterproofing of IPT and ICT buildings, all in accordance with the plans and specifications and
subject to the terms and conditions of the Bid Documents. The CONTRACTOR shall likewise be
responsible for the removal, hauling, disposal of materials used in the work area including
cleaning thereof during and after completion of the work.
1.2
The CONTRACTOR guarantees and warrants the availability, quality and genuineness of
all the materials it will supply, deliver and use in the construction.
1.3
The CONTRACTOR warrants further that all works stipulated in the Contract shall be
done in good and acceptable condition and to make good at the CONTRACTORs expense any
imperfections or defects which the MIAA or its representative may discover during the progress
of the work within one (1) year from and after acceptance in writing of the said work by the
MIAA, as provided in the General Conditions and Specifications.
xxx

xxx

xxx

ARTICLE IV
CONTRACT PRICE/MANNER OF PAYMENT
4.1
In consideration of the full, satisfactory and faithful performance by the CONTRACTOR
of all its undertakings and obligations defined in and provided for under this agreement, the
MIAA agrees to pay the CONTRACTOR the total amount of PESOS: THIRTY TWO MILLION
[AND] 00/100 (P32,000,000.00) Philippine Currency, payable as follows:
4.1.1 Initial payment shall be made upon submission of work accomplishment of not less than
15%;
4.1.2 Subsequent payments shall be for work accomplished as measured, verified and approved
by MIAA. Such progress billings shall indicate actual work accomplishments and shall be
subject to the approval of MIAA, which approval shall not be unreasonably withheld.
4.1.3 Progress billings shall be paid by the MIAA periodically but not more than once a month
within 30 calendar days from receipt hereof.

The contract contains escalation clauses and price adjustments. [Respondent] made the necessary
repairs and waterproofing. After submission of its progress billings to [petitioner], [respondent]
received partial payments. Progress billing No. 6 remained unpaid despite repeated demands by
[respondent].
On June 30, 1994, [petitioner] unilaterally rescinded the contract on the ground that [respondent]
failed to complete the project within the agreed completion date. On September 16, 1994,
[petitioner] advised [respondent] of a committee formed to determine the extent of the work done
which was given until September 30, 1994 to submit its findings. Just the same, [respondent] was
not fully paid.
On October 20, 1994, [respondent] objected to the rescission made by [petitioner] and reiterated
its claims. As of the filing of the complaint for sum of money and damages on July 18, 1995,
[respondent] was seeking to recover from [petitioner] P10,376,017.00 as the latters outstanding
obligation and P1,642,112.84 due from the first to [the] fifth progress billings.
With the filing of [respondents] sur-rejoinder to [petitioners] rejoinder, the trial Court directed
the parties to proceed to arbitration on July 16, 1996. The Court a quos ruling is based on Article
XXVII of the contract that provides for arbitration.
Both parties executed a compromise agreement, assisted by their counsels, and jointly filed in
court a motion for judgment based on compromise agreement.
RTC Disposition
On November 4, 1997, the Court a quo rendered judgment approving the compromise
agreement. The pertinent portions of the compromise read as follows:
1.
As full and complete payment of its claims against [petitioner] arising from their
waterproofing contract subject of this case, [respondent] accepts [petitioner]s offer of payment in
the amount of FIVE MILLION NINE HUNDRED FORTY SIX THOUSAND TWO HUNDRED
NINETY FOUR AND 31/100 (P5,946,294.31).
2.
[Petitioner] shall pay [respondent] said amount of FIVE MILLION NINE HUNDRED
FORTY SIX THOUSAND TWO HUNDRED NINETY FOUR AND 31/100 (P5,946,294.31)
within a period of thirty (30) days from receipt of a copy of the Order of the Court approving this
Compromise Agreement.
3.
Failure of the [petitioner] to pay said amount to [respondent] within the period above
stipulated shall entitle the [respondent] to a writ of execution from this Honorable Court to
enforce all its claims5[5] pleaded in the Complaint.
4.In consideration of the Implementation of this Compromise Agreement, [respondent] agrees to
waive all its claims against the [petitioner] as pleaded in the Complaint, and [petitioner] also
5

agrees to waive all its claims, rights and interests pleaded in the answer, and all such other claims
that it has or may have in connection with, related to or arising from the Waterproofing Contract
subject of this case with [respondent].
Finding the aforesaid COMPROMISE AGREEMENT not to be contrary to law, moral[s], good
customs, public order, and public policy, the Court hereby approves the same and renders
judgment in conformity with the terms and conditions of the said COMPROMISE
AGREEMENT, enjoining the parties to comply with the provisions thereof strictly and in good
faith without pronouncement as to costs.
SO ORDERED.
For [petitioners] failure to pay within the period above stipulated, [respondent] filed a motion for
execution to enforce its claim in the total amount of P13,118,129.84. [Petitioner] filed a
comment and attributed the delays to its being a government agency. In its effort to render
[respondents] motion for execution moot and academic, [petitioner] paid [respondent]
P5,946,294.31 on February 2, 1998.
On February 16, 1998, the trial court denied [respondents] motion for execution. It also denied
the motion for reconsideration, ruling as follows:
The delay in complying with the Compromise Agreement having been satisfactorily explained by
the Office of the Government Counsel, the Motion for Reconsideration of the order denying
[respondents] Motion for Execution is denied.
SO ORDERED.6[6]
Ruling of the Court of Appeals
Reversing the trial court, the CA ordered it to issue a writ of execution to enforce respondents
claim to the extent of petitioners remaining balance. The appellate court ratiocinated that a
judgment rendered in accordance with a compromise agreement was immediately executory, and
that a delay of almost two months was not substantial compliance therewith.
Hence this Petition.7[7]
Issues
Petitioner raises the following issues for our consideration:
I.
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Whether or not the slight delay of petitioner in complying with its obligation under the
Compromise Agreement is a valid ground for the enforcement of private respondents claim
under the Complaint.
II.
Whether or not the delay of petitioner in complying with its obligation under the Compromise
Agreement is justified under the principle that no person shall be responsible for those events
which could not be foreseen, or which though foreseen, were inevitable.
III.
Whether or not private respondent is estopped from enforcing its claim under the Complaint
considering that it already enjoyed the benefits of the Compromise Agreement.8[8]
The foregoing may be summed up in one issue: Whether there was a fortuitous event that
excused petitioner from complying with the terms and conditions of the judicially approved
Compromise Agreement.
The Courts Ruling
The Petition has no merit.
Sole Issue:
Delay in Payment by Reason
of a Fortuitous Event
A compromise agreement is a contract whereby the parties make reciprocal concessions to
resolve their differences,9[9] thus avoiding litigation10[10] or putting an end to one that has already
commenced.11[11] Generally favored in law,12[12] such agreement is a bilateral act or transaction
that is binding on the contracting parties and is expressly acknowledged by the Civil Code as a
juridical agreement between them.13[13] Provided it is not contrary to law, morals, good customs,
public order or public policy,14[14] it is immediately executory.15[15]
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10
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Judicial Compromise
Final and Executory
In a long line of cases, we have consistently held that x x x a compromise once approved by final
orders of the court has the force of res judicata16[16] between the parties and should not be
disturbed except for vices of consent or forgery. Hence, a decision on a compromise agreement is
final and executory x x x.17[17] Such agreement has the force of law18[18] and is conclusive
between the parties.19[19] It transcends its identity as a mere contract binding only upon the parties
thereto, as it becomes a judgment that is subject to execution in accordance with the Rules.20[20]
Judges therefore have the ministerial and mandatory duty to implement and enforce it.21[21]
To be valid, a compromise agreement is merely required by law, first, to be based on real claims;
second, to be actually agreed upon in good faith.22[22] Both conditions are present in this case. The
claims of the parties are valid, and the agreement done without any fraud or vice of consent.
Without a doubt, each of the parties herein entered into Compromise Agreement freely and
voluntarily. When they carefully negotiated the terms and provisions thereof, they were
adequately assisted by their respective counsels -- petitioner, no less than by the Office of the
Government Corporate Counsel (OGCC).23[23] Each party agreed to something that neither might
have actually wanted, except for the peace that would be brought by the avoidance of a
protracted litigation. Hence, the Agreement must govern their relations.
The Christmas Season
Not a Fortuitous Event
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The failure to pay on the date stipulated was clearly a violation of the Agreement. Within thirty
days from receipt of the judicial Order approving it -- on December 20, 1997 -- payment should
have been made, but was not. Thus, nonfulfillment of the terms of the compromise justified
execution.24[24] It is the height of absurdity for petitioner to attribute to a fortuitous event its
delayed payment. Petitioners explanation is clearly a gratuitous assertion that borders on
callousness.25[25] The Christmas season cannot be cited as an act of God that would excuse a
delay in the processing of claims by a government entity that is subject to routine accounting and
auditing rules.
A fortuitous event is one that cannot be foreseen or, though foreseen, is inevitable.26[26] It has the
following characteristics:
x x x (a) [T]he cause of the unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligations, must be independent of human will; (b) it must be impossible to
foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be
impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation
in the aggravation of the injury resulting to the creditor.27[27]
None of these elements appears in this case.
First, processing claims against the government and subjecting these to the usual accounting and
auditing procedures are certainly not only foreseeable and expectable, but also dependent upon
the human will. Liquidation and payment resulting therefrom can be deliberately delayed or
speeded up.
Second, the Christmas season is not a caso fortuito, but a regularly occurring event. It is in fact
foreseeable, and its occurrence has absolutely nothing to do with the processing of claims.
Further, in order to claim exemption from liability by reason of a fortuitous event, such event
should be the sole and proximate cause of the injury to or the loss or destruction of the object of
the contract28[28] or compromise, which was the payment to be made by petitioner. Certainly, this
payment was not lost or destroyed, but merely delayed, thus causing injury to respondent.
Granting arguendo such loss or destruction, the Christmas season could not have been the sole
and proximate cause thereof.
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Third, the occurrence of the Christmas season did not at all render impossible the normal
fulfillment of the obligation of petitioner; otherwise, few claims would ever be paid during this
period. It ought to have taken appropriate measures to ensure that a delay would be avoided.
When it entered into the Agreement, it knew fully well that the 30-day period for it to pay its
obligation would end during the Christmas season. Thus, it cannot now be allowed to renege on
its commitment.
Fourth, petitioner cannot argue that it is free from any participation in the delay. It should have
laid out on the compromise table the problems that would be caused by a deadline falling during
the Christmas season. Furthermore, it should have explained to respondent that government
accounts would be examined carefully and thoroughly to the last detail, in strict compliance29[29]
with accounting and auditing rules issued by and pursuant to the constitutional mandate of the
Commission on Audit.30[30]
Indeed, the liquidation of government obligations involves a long process beginning with the
preparation of disbursement vouchers; followed by the processing of requests for allotment as
supported by vouchers, job orders and requisitions; and ending with the issuance of the
corresponding checks.31[31] Without first securing the necessary certification as to the availability
of funds and allotment against which expenditures may be properly charged,32[32] no funds shall
be disbursed; and no expenditures chargeable against any authorized allotments shall be incurred
or authorized by agency heads.
Moreover, it is important to note that under government accounting principles, no contract
involving the expenditure of public funds shall be made until there is an appropriation therefor,
the unexpended balance of which, free of other obligations, is sufficient to cover the proposed
expenditure.33[33] In the present case, there was already an antecedent appropriation for the
contract when petitioner entered into it. Obviously, prior planning had not taken into account the
liquidation process in the conduct of the compromise.
The sheer neglect shown by petitioner in failing to consider these matters aggravated the
resulting injury suffered by respondent. The former cannot be allowed to hide now behind its
government cloak.
Fortuitous Event
Negated by Negligence
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30
31
32
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The act-of-God doctrine requires all human agencies to be excluded from creating the cause of
the mischief.34[34] Such doctrine cannot be invoked to protect a person who has failed to take
steps to forestall the possible adverse consequences of loss35[35] or injury. Since the delay in
payment in the present case was partly a result of human participation -- whether from active
intervention or neglect -- the whole occurrence was humanized and was therefore outside the
ambit of a caso fortuito.
Furthermore, none of the requisites we have earlier mentioned are present in this case, a fact that
clearly prevents petitioner from being excused from liability.36[36] Under the rules of evidence,
the burden of proving that a loss is due to a caso fortuito rests upon the party invoking it.37[37]
This responsibility, it failed to discharge.
Verily, an assiduous scrutiny of the records convinces us that it was negligent,38[38] and that it
thereby incurred a delay in the performance of its contractual obligation under the judicial
compromise. It thus created an undue risk or injury to respondent by failing to exercise that
reasonable degree of care, precaution or vigilance that the circumstances justly demanded,39[39]
and that an ordinarily prudent person would have done.40[40]
Court Without Power to Alter
a Judicial Compromise
The principle of autonomy of contracts must be respected.41[41] The Compromise Agreement was
a contract perfected by mere consent;42[42] hence, it should have been respected. Item 3 thereof
provided that failure of petitioner to pay within the stipulated period would entitle respondent to
a writ of execution to enforce all the claims that had been pleaded by the latter in the Complaint.
This provision must be upheld, because the Agreement supplanted the Complaint itself. Although
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judicial approval was not required for the perfection of that Agreement once it was granted, it
could not and must not be disturbed except for vices of consent or forgery.43[43]
No such infirmity can be found in the subject Compromise Agreement. Its terms are clear and
leave no doubt as to their intention. Thus, the literal meaning of its stipulations must control.44[44]
It must be strictly interpreted and x x x understood as including only matters specifically
determined therein or which, by necessary inference from its wording, must be deemed
included.45[45]
The lower court was without power to relieve petitioner from an obligation it had voluntarily
assumed, simply because the Agreement later turned out to be unwise, disastrous or foolish.46[46]
It had no authority to impose upon the parties a judgment different from or against the terms and
conditions of their Compromise Agreement.47[47] It could not alter a contract by construction or
make a new one for the parties; its duty is confined to the interpretation of the one which they
have made for themselves without regard to its wisdom or folly as the court cannot supply
material stipulations or read into the contract words which it does not contain.48[48] It could not
even set aside its judgment without declaring in an incidental hearing that the Agreement was
vitiated by any of the grounds enumerated in Article 2038 of the Civil Code.49[49] Above all,
neither the Agreement nor the courts approval of it was ever questioned or assailed by the
parties.
Basic is the rule that if a party fails or refuses to abide by a compromise agreement, the other
may either enforce it or regard it as rescinded and insist upon the original demand.50[50] For
failure of petitioner to abide by the judicial compromise, respondent chose to enforce it. The
latters course of action was in accordance with the very stipulations in the Agreement that the
lower court could not change.51[51]
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44
45
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48
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Respondent is thus entitled to a writ of execution for the total amount contained in the
Compromise Agreement. The Court cannot reduce it. The partial payment made by petitioner
does not at all contravene Article 1229 of the Civil Code,52[52] which is applicable only to
contracts that are the subjects of litigation, not to final and executory judgments.53[53]
Estoppel Inapplicable
Petitioners attempt to put respondent in estoppel must be struck down. In estoppel, a person, who
by his act or conduct has induced another to act in a particular manner, is barred from adopting
an inconsistent position, attitude or course of conduct that thereby causes loss or injury to
another.54[54] No such inconsistency is present here. From the very start, respondent was already
asking the courts to enforce all its claims, pursuant to the Agreement. It has not shown any act or
conduct that would leads us to believe that by accepting petitioners partial payment, it has
dropped all claims to which it is entitled.
Certainly, an obligation may be extinguished by payment,55[55] but this rule applies when the
creditor receives and acknowledges full payment56[56] from the debtor. Respondent has neither
acknowledged full payment nor led petitioner to believe that it has. Lack of reservation or protest
does not ipso facto constitute a waiver of claims. Because estoppel should be applied with
caution, the action that gives rise to it must be deliberate and unequivocal.57[57]
In the present case, respondent continued to pursue the execution of its total demand of
P13,118,129.84, even after receiving P5,946,294.31 from petitioner. This continued pursuit
signified the formers intent not to waive its total claim. Hence, it cannot be considered estopped
from enforcing such claim.
The appellate court was correct in strictly following the Agreement by deducting the amount
received by respondent from the latters total claim. Besides, questions raised on appeal must be
within the issues framed by the parties and, consequently, issues not raised in the trial court

52
53
54
55
56
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cannot be raised for the first time on appeal.58[58] Any assertion of equity must finally be struck
down when dilatory schemes exist.59[59]
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs
against petitioner.
SO ORDERED.
SECOND DIVISION

[G.R. No. 119466. November 25, 1999]

SALVADOR ADORABLE and LIGAYA ADORABLE, petitioners, vs. COURT OF APPEALS,
HON. JOSE O. RAMOS, FRANCISCO BARENG and SATURNINO BARENG, respondents.
DECISION
MENDOZA, J.:

This is a petition for review under Rule 45 of the decisioni[1] of the Court of Appeals, dated
January 6, 1995, sustaining the dismissal by Branch 24 of the Regional Trial Court, Echague,
Isabela, of the complaint filed by petitioners, spouses Salvador and Ligaya Adorable, for lack of
cause of action.
The facts are as follows:
Private respondent Saturnino Bareng was the registered owner of two parcels of land, one
identified as Lot No. 661-D-5-A, with an area of 20,000 sq. m., covered by TCT No. T-162837,
and the other known as Lot No. 661-E, with an area of 4.0628 hectares, covered by TCT No. T60814, both of which are in San Fabian, Echague, Isabela. Petitioners were lessees of a 200 sq.m.
portion of Lot No. 661-D-5-A.
On April 29, 1985, Saturnino Bareng and his son, private respondent Francisco Bareng, obtained
a loan from petitioners amounting to twenty six thousand pesos (P26,000), in consideration of
which they promised to transfer the possession and enjoyment of the fruits of Lot No. 661-E.
On August 3, 1986, Saturnino sold to his son Francisco 18,500 sq.m. of Lot No. 661-D-5-A. The
conveyance was annotated on the back of TCT No. T-162873. In turn, Francisco sold on August
27, 1986 to private respondent Jose Ramos 3,000 sq.m. of the lot. The portion of land being
rented to petitioners was included in the portion sold to Jose Ramos. The deeds of sale
evidencing the conveyances were not registered in the office of the register of deeds.
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As the Barengs failed to pay their loan, petitioners complained to Police Captain Rodolfo Saet of
the Integrated National Police (INP) of Echague through whose mediation a Compromise
Agreement was executed between Francisco Bareng and the Adorables whereby the former
acknowledged his indebtedness of P56,385.00 which he promised to pay on or before July 15,
1987. When the maturity date arrived, however, Francisco Bareng failed to pay. A demand letter
was sent to Francisco Bareng, but he refused to pay.
Petitioners, learning of the sale made by Francisco Bareng to Jose Ramos, then filed a complaint
with the Regional Trial Court, Branch 24, Echague, Isabela for the annulment or rescission of the
sale on the ground that the sale was fraudulently prepared and executed.
During trial, petitioners presented as witness Jose Ramos. After his testimony, the next hearing
was set on August 4 and 5, 1990. On said hearing dates, however, petitioners were absent. The
trial court therefore ordered the presentation of evidence for petitioners terminated and allowed
private respondents to present their evidence ex parte. On February 15, 1991, the trial court
rendered judgment dismissing the complaint for lack of cause of action, declaring the contract of
sale between Francisco Bareng and Jose Ramos valid and ordering Francisco Bareng to pay the
amount he owed petitioners.
On appeal, the Court of Appeals affirmed the decision of the Regional Trial Court, with
modification as to the amount of Francisco Barengs debt to petitioners.
Hence, this petition for review, raising the following issues: (1) whether the Court of Appeals
erred in dismissing the complaint for lack of cause of action; (2) whether petitioners enjoyed
legal preference to purchase the lots they lease; and (3) whether the Court of Appeals erred in
sustaining the lower courts order terminating petitioners presentation of evidence and allowing
private respondents to present their evidence ex parte.
In sustaining the decision of the trial court dismissing the complaint for lack of cause of action,
the Court of Appeals premised its decision on Rule 3, 2 of the former Rules of Court which
provided:
Parties in interest. Every action must be prosecuted and defended in the name of the real
party in interest. All persons having an interest in the subject of the action and in obtaining the
relief demanded shall be joined as plaintiffs. All persons who claim an interest in the controversy
or who are necessary to a complete determination or settlement of the questions involved therein
shall be joined as defendants.
A real party in interest is one who would be benefited or injured by the judgment, or who is
entitled to the avails of the suit. Interest, within the meaning of this rule, should be material,
directly in issue and to be affected by the decree, as distinguished from a mere incidental interest
or in the question involved.ii[2] Otherwise put, an action shall be prosecuted in the name of the
party who, by the substantive law, has the right sought to be enforced.iii[3]
Petitioners anchor their interest on their right as creditors of Francisco Bareng, as well as on their
claim of preference over the sale of the contested lot.iv[4] They contend that the sale between

Francisco Bareng and Jose Ramos prejudiced their interests over the property as creditors of
Francisco Bareng. Moreover, they claim that, under Commonwealth Act No. 539, they have a
preferential right, as tenants or lessees, to purchase the land in question.
The petition has no merit.
First. We hold that, as creditors, petitioners do not have such material interest as to allow them to
sue for rescission of the contract of sale. At the outset, petitioners right against private
respondents is only a personal right to receive payment for the loan; it is not a real right over the
lot subject of the deed of sale.
A personal right is the power of one person to demand of another, as a definite passive subject,
the fulfillment of a prestation to give, to do, or not to do. On the other hand, a real right is the
power belonging to a person over a specific thing, without a passive subject individually
determined, against whom such right may be personally exercised.v[5] In this case, while
petitioners have an interest in securing payment of the loan they extended, their right to seek
payment does not in any manner attach to a particular portion of the patrimony of their debtor,
Francisco Bareng.
Nor can we sustain petitioners claim that the sale was made in fraud of creditors. Art. 1177 of the
Civil Code provides:
The creditors, after having pursued the property in possession of the debtor to satisfy their
claims, may exercise all the rights and bring all the actions of the latter for the same purpose,
save those which are inherent in his person; they may also impugn the actions which the debtor
may have done to defraud them. (Emphasis added)
Thus, the following successive measures must be taken by a creditor before he may bring an
action for rescission of an allegedly fraudulent sale: (1) exhaust the properties of the debtor
through levying by attachment and execution upon all the property of the debtor, except such as
are exempt by law from execution; (2) exercise all the rights and actions of the debtor, save those
personal to him (accion subrogatoria); and (3) seek rescission of the contracts executed by the
debtor in fraud of their rights (accion pauliana). Without availing of the first and second
remedies, i.e., exhausting the properties of the debtor or subrogating themselves in Francisco
Barengs transmissible rights and actions, petitioners simply undertook the third measure and
filed an action for annulment of the sale. This cannot be done.
Indeed, an action for rescission is a subsidiary remedy; it cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the same.vi[6] Thus, Art.
1380 of the Civil Code provides:
The following contracts are rescissible:
....

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the
claims due them;
Petitioners have not shown that they have no other means of enforcing their credit. As the Court
of Appeals pointed out in its decision:
In this case, plaintiffs-appellants had not even commenced an action against defendantsappellees Bareng for the collection of the alleged indebtedness. Plaintiffs-appellants had not even
tried to exhaust the property of defendants-appellees Bareng. Plaintiffs-appellants, in seeking for
the rescission of the contracts of sale entered into between defendants-appellees, failed to show
and prove that defendants-appellees Bareng had no other property, either at the time of the sale
or at the time this action was filed, out of which they could have collected this (sic) debts.
Second. Nor do petitioners enjoy any preference to buy the questioned property. In Aldecoa v.
Hongkong and Shanghai Banking Corporation,vii[7] it was held that in order that one who is not
obligated in a contract either principally or subsidiarily may maintain an action for nullifying the
same, his complaint must show the injury that would positively result to him from the contract in
which he has not intervened, with regard at least to one of the contracting parties.
Petitioners attempt to establish such legal injury through a claim of preference created under
C.A. No. 539, the pertinent provision of which provides:
SEC. 1. The President of the Philippines is authorized to acquire private lands or any interest
therein, through purchase or expropriation, and to subdivide the same into home lots or small
farms for resale at reasonable prices and under such conditions as he may fix to their bona fide
tenants or occupants or to private individuals who will work the lands themselves and who are
qualified to acquire and own lands in the Philippines.
This statute was passed to implement Art. XIII, 4 of the 1935 Constitution which provided that
The Congress may authorize, upon payment of just compensation, the expropriation of lands to
be subdivided into small lots and conveyed at cost to individuals. It is obvious that neither under
this provision of the former Constitution nor that of C.A. No. 539 can petitioners claim any right
since the grant of preference therein applies only to bona fide tenants, after the expropriation or
purchase by the government of the land they are occupying.viii[8] Petitioners are not tenants of the
land in question in this case. Nor has the land been acquired by the government for their benefit.
Third. Finally, we hold that no error was committed by the Court of Appeals in affirming the
order of the trial court terminating the presentation of petitioners evidence and allowing private
respondents to proceed with theirs because of petitioners failure to present further evidence at the
scheduled dates of trial.
Petitioners contend that since their counsel holds office in Makati, the latters failure to appear at
the trial in Isabela at the scheduled date of hearing should have been treated by the court with a
sense of fairness.ix[9]

This is more a plea for compassion rather than explanation based on reason. We cannot find
grave abuse of discretion simply because a court decides to proceed with the trial of a case rather
than postpone the hearing to another day, because of the absence of a party. That the absence of a
party during trial constitutes waiver of his right to present evidence and cross-examine the
opponents witnesses is firmly supported by jurisprudence.x[10] To constitute grave abuse of
discretion amounting to lack or excess of jurisdiction, the refusal of the court to postpone the
hearing must be characterized by arbitrariness or capriciousness. Here, as correctly noted by the
Court of Appeals, petitioners counsel was duly notified through registered mail of the scheduled
trials.xi[11] His only excuse for his failure to appear at the scheduled hearings is that he comes
from Makati. This excuse might hold water if counsel was simply late in arriving in the
courtroom. But this was not the case. He did not appear at all.
WHEREFORE, the petition for review is DENIED, and the decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24190

July 13, 1926

GEORGE L. PARKS, plaintiff-appellant,

vs.
PROVINCE OF TARLAC, MUNICIPALITY OF TARLAC, CONCEPCION CIRER, and
JAMES HILL, her husband, defendants-appellees.
Jos. N. Wolfson for appellant.
Provincial Fiscal Lopez de Jesus for the Province and Municipality of Tarlac.
No appearance for the other appellees.
AVANCEA, C. J.:
On October 18, 1910, Concepcion Cirer and James Hill, the owners of parcel of land No. 2
referred to in the complaint, donated it perpetually to the municipality of Tarlac, Province of
Tarlac, under certain conditions specified in the public document in which they made this
donation. The donation was accepted by Mr. Santiago de Jesus in the same document on behalf
of the municipal council of Tarlac of which he was the municipal president. The parcel thus
donated was later registered in the name of the donee, the municipality of Tarlac. On January 15,
1921, Concepcion Cirer and James Hill sold this parcel to the herein plaintiff George L. Parks.
On August 24, 1923, the municipality of Tarlac transferred the parcel to the Province of Tarlac

which, by reason of this transfer, applied for and obtained the registration thereof in its name, the
corresponding certificate of title having been issued to it.
The plaintiff, George L. Parks, alleging that the conditions of the donation had not been
complied with and invoking the sale of this parcel of land made by Concepcion Cirer and James
Hill in his favor, brought this action against the Province of Tarlac, the municipality of Tarlac,
Concepcion Cirer and James Hill and prayed that he be declared the absolute owner entitled to
the possession of this parcel, that the transfer of the same by the municipality of Tarlac to the
Province of Tarlac be annulled, and the transfer certificate issued to the Province of Tarlac
cancelled.
The lower court dismissed the complaint.
The plaintiff has no right of action. If he has any, it is only by virtue of the sale of this parcel
made by Concepcion Cirer and James Hill in his favor on January 15, 1921, but that sale cannot
have any effect. This parcel having been donated by Concepcion Cirer and James Hill to the
municipality of Tarlac, which donation was accepted by the latter, the title to the property was
transferred to the municipality of Tarlac. It is true that the donation might have been revoked for
the causes, if any, provided by the law, but the fact is that it was not revoked when Concepcion
Cirer and James Hill made the sale of this parcel to the plaintiff. Even supposing that causes
existed for the revocation of this donation, still, it was necessary, in order to consider it revoked,
either that the revocation had been consented to by the donee, the municipality of Tarlac, or that
it had been judicially decreed. None of these circumstances existed when Concepcion Cirer and
James Hill sold this parcel to the plaintiff. Consequently, when the sale was made Concepcion
Cirer and James Hill were no longer the owners of this parcel and could not have sold it to the
plaintiff, nor could the latter have acquired it from them.
But the appellant contends that a condition precedent having been imposed in the donation and
the same not having been complied with, the donation never became effective. We find no merit
in this contention. The appellant refers to the condition imposed that one of the parcels donated
was to be used absolutely and exclusively for the erection of a central school and the other for a
public park, the work to commence in both cases within the period of six months from the date
of the ratification by the partes of the document evidencing the donation. It is true that this
condition has not been complied with. The allegation, however, that it is a condition precedent is
erroneous. The characteristic of a condition precedent is that the acquisition of the right is not
effected while said condition is not complied with or is not deemed complied with. Meanwhile
nothing is acquired and there is only an expectancy of right. Consequently, when a condition is
imposed, the compliance of which cannot be effected except when the right is deemed acquired,
such condition cannot be a condition precedent. In the present case the condition that a public
school be erected and a public park made of the donated land, work on the same to commence
within six months from the date of the ratification of the donation by the parties, could not be
complied with except after giving effect to the donation. The donee could not do any work on the
donated land if the donation had not really been effected, because it would be an invasion of

another's title, for the land would have continued to belong to the donor so long as the condition
imposed was not complied with.
The appellant also contends that, in any event, the condition not having been complied with,
even supposing that it was not a condition precedent but subsequent, the non-compliance thereof
is sufficient cause for the revocation of the donation. This is correct. But the period for bringing
an action for the revocation of the donation has prescribed. That this action is prescriptible, there
is no doubt. There is no legal provision which excludes this class of action from the statute of
limitations. And not only this, the law itself recognizes the prescriptibility of the action for the
revocation of a donation, providing a special period of five years for the revocation by the
subsequent birth of children (art. 646, Civil Code), and one year for the revocation by reason of
ingratitude. If no special period is provided for the prescription of the action for revocation for
noncompliance of the conditions of the donation (art. 647, Civil Code), it is because in this
respect the donation is considered onerous and is governed by the law of contracts and the
general rules of prescription. Under the law in force (sec. 43, Code of Civ. Proc.) the period of
prescription of this class of action is ten years. The action for the revocation of the donation for
this cause arose on April 19, 1911, that is six months after the ratification of the instrument of
donation of October 18, 1910. The complaint in this action was presented July 5, 1924, more
than ten years after this cause accrued.
By virtue of the foregoing, the judgment appealed from is affirmed, with the costs against the
appellant. So ordered.
Street, Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 112127 July 17, 1995

CENTRAL PHILIPPINE UNIVERSITY, petitioner,
vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE LOPEZ, REDAN LOPEZ AND REMARENE
LOPEZ, respondents.

BELLOSILLO, J.:
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the decision of the Court of Appeals which reversed that of
the Regional Trial Court of Iloilo City directing petitioner to reconvey to private respondents the property donated to it by their predecessor-ininterest.

Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the Board of Trustees of the Central Philippine College (now
Central Philippine University [CPU]), executed a deed of donation in favor of the latter of a parcel of land identified as Lot No. 3174-B-1 of the
subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was issued in the name of
the donee CPU with the following annotations copied from the deed of donation
1. The land described shall be utilized by the CPU exclusively for the establishment and use of a medical college with
all its buildings as part of the curriculum;
2. The said college shall not sell, transfer or convey to any third party nor in any way encumber said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college shall be under obligation to erect a
cornerstone bearing that name. Any net income from the land or any of its parks shall be put in a fund to be known as
the "RAMON LOPEZ CAMPUS FUND" to be used for improvements of said campus and erection of a building thereon.
1

On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr., filed an action for
annulment of donation, reconveyance and damages against CPU alleging that since 1939 up to the time
the action was filed the latter had not complied with the conditions of the donation. Private respondents
also argued that petitioner had in fact negotiated with the National Housing Authority (NHA) to exchange
the donated property with another land owned by the latter.
In its answer petitioner alleged that the right of private respondents to file the action had prescribed; that it
did not violate any of the conditions in the deed of donation because it never used the donated property
for any other purpose than that for which it was intended; and, that it did not sell, transfer or convey it to
any third party.
On 31 May 1991, the trial court held that petitioner failed to comply with the conditions of the donation and
declared it null and void. The court a quo further directed petitioner to execute a deed of the
reconveyance of the property in favor of the heirs of the donor, namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the annotations at the back
of petitioner's certificate of title were resolutory conditions breach of which should terminate the rights of
the donee thus making the donation revocable.
The appellate court also found that while the first condition mandated petitioner to utilize the donated
property for the establishment of a medical school, the donor did not fix a period within which the
condition must be fulfilled, hence, until a period was fixed for the fulfillment of the condition, petitioner
could not be considered as having failed to comply with its part of the bargain. Thus, the appellate court
rendered its decision reversing the appealed decision and remanding the case to the court of origin for
the determination of the time within which petitioner should comply with the first condition annotated in the
certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted annotations in the
certificate of title of petitioner are onerous obligations and resolutory conditions of the donation which
must be fulfilled non-compliance of which would render the donation revocable; (b) in holding that the
issue of prescription does not deserve "disquisition;" and, (c) in remanding the case to the trial court for
the fixing of the period within which petitioner would establish a medical college. 2
We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the deed of donation
executed by Don Ramon Lopez, Sr., gives us no alternative but to conclude that his donation was
onerous, one executed for a valuable consideration which is considered the equivalent of the donation
itself, e.g., when a donation imposes a burden equivalent to the value of the donation. A gift of land to the
City of Manila requiring the latter to erect schools, construct a children's playground and open streets on

the land was considered an onerous donation. 3 Similarly, where Don Ramon Lopez donated the subject
parcel of land to petitioner but imposed an obligation upon the latter to establish a medical college
thereon, the donation must be for an onerous consideration.
Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of the event which
constitutes the condition. Thus, when a person donates land to another on the condition that the latter
would build upon the land a school, the condition imposed was not a condition precedent or a suspensive
condition but a resolutory one. 4 It is not correct to say that the schoolhouse had to be constructed before
the donation became effective, that is, before the donee could become the owner of the land, otherwise, it
would be invading the property rights of the donor. The donation had to be valid before the fulfillment of
the condition. 5 If there was no fulfillment or compliance with the condition, such as what obtains in the
instant case, the donation may now be revoked and all rights which the donee may have acquired under it
shall be deemed lost and extinguished.
The claim of petitioner that prescription bars the instant action of private respondents is unavailing.
The condition imposed by the donor, i.e., the building of a medical school upon the land donated,
depended upon the exclusive will of the donee as to when this condition shall be fulfilled. When
petitioner accepted the donation, it bound itself to comply with the condition thereof. Since the
time within which the condition should be fulfilled depended upon the exclusive will of the
petitioner, it has been held that its absolute acceptance and the acknowledgment of its obligation
provided in the deed of donation were sufficient to prevent the statute of limitations from barring
the action of private respondents upon the original contract which was the deed of donation. 6
Moreover, the time from which the cause of action accrued for the revocation of the donation and
recovery of the property donated cannot be specifically determined in the instant case. A cause of action
arises when that which should have been done is not done, or that which should not have been done is
done. 7 In cases where there is no special provision for such computation, recourse must be had to the
rule that the period must be counted from the day on which the corresponding action could have been
instituted. It is the legal possibility of bringing the action which determines the starting point for the
computation of the period. In this case, the starting point begins with the expiration of a reasonable period
and opportunity for petitioner to fulfill what has been charged upon it by the donor.
The period of time for the establishment of a medical college and the necessary buildings and
improvements on the property cannot be quantified in a specific number of years because of the presence
of several factors and circumstances involved in the erection of an educational institution, such as
government laws and regulations pertaining to education, building requirements and property restrictions
which are beyond the control of the donee.
Thus, when the obligation does not fix a period but from its nature and circumstances it can be inferred
that a period was intended, the general rule provided in Art. 1197 of the Civil Code applies, which
provides that the courts may fix the duration thereof because the fulfillment of the obligation itself cannot
be demanded until after the court has fixed the period for compliance therewith and such period has
arrived. 8
This general rule however cannot be applied considering the different set of circumstances existing in the
instant case. More than a reasonable period of fifty (50) years has already been allowed petitioner to avail
of the opportunity to comply with the condition even if it be burdensome, to make the donation in its favor
forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a
term of the obligation when such procedure would be a mere technicality and formality and would serve

no purpose than to delay or lead to an unnecessary and expensive multiplication of suits. 9 Moreover,
under Art. 1191 of the Civil Code, when one of the obligors cannot comply with what is incumbent upon
him, the obligee may seek rescission and the court shall decree the same unless there is just cause
authorizing the fixing of a period. In the absence of any just cause for the court to determine the period of
the compliance, there is no more obstacle for the court to decree the rescission claimed.
Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts referring to
incidental circumstances of a gratuitous contract should be resolved in favor of the least transmission of
rights and interests. 10 Records are clear and facts are undisputed that since the execution of the deed of
donation up to the time of filing of the instant action, petitioner has failed to comply with its obligation as
donee. Petitioner has slept on its obligation for an unreasonable length of time. Hence, it is only just and
equitable now to declare the subject donation already ineffective and, for all purposes, revoked so that
petitioner as donee should now return the donated property to the heirs of the donor, private respondents
herein, by means of reconveyance.
WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991 is REINSTATED
and AFFIRMED, and the decision of the Court of Appeals of 18 June 1993 is accordingly MODIFIED.
Consequently, petitioner is directed to reconvey to private respondents Lot No. 3174-B-1 of the
subdivision plan Psd-1144 covered by Transfer Certificate of Title No. T-3910-A within thirty (30) days
from the finality of this judgment.
Costs against petitioner.
SO ORDERED.

CODE OF PROFESSIONAL RESPONSIBILITY

(Promulgated June 21, 1988)
CHAPTER I. THE LAWYER AND SOCIETY
CANON 1 - A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY THE LAWS OF THE LAND
AND PROMOTE RESPECT FOR LAW OF AND LEGAL PROCESSES.
Rule 1.01 - A lawyer shall not engage in unlawful, dishonest, immoral or
deceitful conduct.
Rule 1.02 - A lawyer shall not counsel or abet activities aimed at defiance of
the law or at lessening confidence in the legal system.
Rule 1.03 - A lawyer shall not, for any corrupt motive or interest, encourage
any suit or proceeding or delay any man's cause.
Rule 1.04 - A lawyer shall encourage his clients to avoid, end or settle a
controversy if it will admit of a fair settlement.
CANON 2 - A LAWYER SHALL MAKE HIS LEGAL SERVICES AVAILABLE IN AN EFFICIENT AND
CONVENIENT MANNER COMPATIBLE WITH THE INDEPENDENCE, INTEGRITY AND
EFFECTIVENESS OF THE PROFESSION.
Rule 2.01 - A lawyer shall not reject, except for valid reasons, the cause of
the defenseless or the oppressed.

Rule 2.02 - In such cases, even if the lawyer does not accept a case, he shall
not refuse to render legal advice to the person concerned if only to the
extent necessary to safeguard the latter's rights.
Rule 2.03 - A lawyer shall not do or permit to be done any act designed
primarily to solicit legal business.
Rule 2.04 - A lawyer shall not charge rates lower than those customarily
prescribed unless the circumstances so warrant.
CANON 3 - A LAWYER IN MAKING KNOWN HIS LEGAL SERVICES SHALL USE ONLY TRUE,
HONEST, FAIR, DIGNIFIED AND OBJECTIVE INFORMATION OR STATEMENT OF FACTS.
Rule 3.01 - A lawyer shall not use or permit the use of any false, fraudulent,
misleading, deceptive, undignified, self-laudatory or unfair statement or
claim regarding his qualifications or legal services.
Rule 3.02 - In the choice of a firm name, no false, misleading or assumed name
shall be used. The continued use of the name of a deceased partner is
permissible provided that the firm indicates in all its communications that
said partner is deceased.
Rule 3.03 - Where a partner accepts public office, he shall withdrawal from
the firm and his name shall be dropped from the firm name unless the law
allows him to practice law currently.
Rule 3.04 - A lawyer shall not pay or give anything of value to
representatives of the mass media in anticipation of, or in return for,
publicity to attract legal business.
CANON 4 - A LAWYER SHALL PARTICIPATE IN THE DEVELOPMENT OF THE LEGAL SYSTEM BY
INITIATING OR SUPPORTING EFFORTS IN LAW REFORM AND IN THE IMPROVEMENT OF THE
ADMINISTRATION OF JUSTICE.
CANON 5 - A LAWYER SHALL KEEP ABREAST OF LEGAL DEVELOPMENTS, PARTICIPATE IN
CONTINUING LEGAL EDUCATION PROGRAMS, SUPPORT EFFORTS TO ACHIEVE HIGH STANDARDS
IN LAW SCHOOLS AS WELL AS IN THE PRACTICAL TRAINING OF LAW STUDENTS AND ASSIST
IN DISSEMINATING THE LAW AND JURISPRUDENCE.
CANON 6 - THESE CANONS SHALL APPLY TO LAWYERS IN GOVERNMENT SERVICES IN THE
DISCHARGE OF THEIR TASKS.
Rule 6.01 - The primary duty of a lawyer engaged in public prosecution is not
to convict but to see that justice is done. The suppression of facts or the
concealment of witnesses capable of establishing the innocence of the accused
is highly reprehensible and is cause for disciplinary action.
Rule 6.02 - A lawyer in the government service shall not use his public
position to promote or advance his private interests, nor allow the latter to
interfere with his public duties.
Rule 6.03 - A lawyer shall not, after leaving government service, accept
engagement or employment in connection with any matter in which he had
intervened while in said service.

CHAPTER II. THE LAWYER AND THE LEGAL PROFESSION

CANON 7 - A LAWYER SHALL AT ALL TIMES UPHOLD THE INTEGRITY AND DIGNITY OF THE
LEGAL PROFESSION AND SUPPORT THE ACTIVITIES OF THE INTEGRATED BAR.

Rule 7.01 - A lawyer shall be answerable for knowingly making a false

statement or suppressing a material fact in connection with his application
for admission to the bar.
Rule 7.02 - A lawyer shall not support the application for admission to the
bar of any person known by him to be unqualified in respect to character,
education, or other relevant attribute.
Rule 7.03 - A lawyer shall not engage in conduct that adversely reflects on
his fitness to practice law, nor shall he whether in public or private life,
behave in a scandalous manner to the discredit of the legal profession.

CANON 8 - A LAWYER SHALL CONDUCT HIMSELF WITH COURTESY, FAIRNESS AND CANDOR
TOWARDS HIS PROFESSIONAL COLLEAGUES, AND SHALL AVOID HARASSING TACTICS AGAINST
OPPOSING COUNSEL.

Rule 8.01 - A lawyer shall not, in his professional dealings, use language
which is abusive, offensive or otherwise improper.
Rule 8.02 - A lawyer shall not, directly or indirectly, encroach upon the
professional employment of another lawyer, however, it is the right of any
lawyer, without fear or favor, to give proper advice and assistance to those
seeking relief against unfaithful or neglectful counsel.

CANON 9 - A LAWYER SHALL NOT, DIRECTLY OR INDIRECTLY, ASSIST IN THE

UNAUTHORIZED PRACTICE OF LAW.

Rule 9.01 - A lawyer shall not delegate to any unqualified person the
performance of any task which by law may only be performed by a member of the
bar in good standing.
Rule 9.02 - A lawyer shall not divide or stipulate to divide a fee for legal
services with persons not licensed to practice law, except:
chanroblesvirtuallawlibrary

(a) Where there is a pre-existing agreement with a partner or associate that,

upon the latter's death, money shall be paid over a reasonable period of time
to his estate or to persons specified in the agreement; or
(b) Where a lawyer undertakes to complete unfinished legal business of a
deceased lawyer; or

(c) Where a lawyer or law firm includes non-lawyer employees in a retirement

plan even if the plan is based in whole or in part, on a profit sharing
agreement.

CHAPTER III. THE LAWYER AND THE COURTS

CANON 10 - A LAWYER OWES CANDOR, FAIRNESS AND GOOD FAITH TO THE COURT.

Rule 10.01 - A lawyer shall not do any falsehood, nor consent to the doing of
any in Court; nor shall he mislead, or allow the Court to be misled by any
artifice.
Rule 10.02 - A lawyer shall not knowingly misquote or misrepresent the
contents of a paper, the language or the argument of opposing counsel, or the
text of a decision or authority, or knowingly cite as law a provision already
rendered inoperative by repeal or amendment, or assert as a fact that which
has not been proved.
Rule 10.03 - A lawyer shall observe the rules of procedure and shall not
misuse them to defeat the ends of justice.

CANON 11 - A LAWYER SHALL OBSERVE AND MAINTAIN THE RESPECT DUE TO THE COURTS
AND TO JUDICIAL OFFICERS AND SHOULD INSIST ON SIMILAR CONDUCT BY OTHERS.

Rule 11.01 - A lawyer shall appear in court properly attired.

Rule 11.02 - A lawyer shall punctually appear at court hearings.
Rule 11.03 - A lawyer shall abstain from scandalous, offensive or menacing
language or behavior before the Courts.
Rule 11.04 - A lawyer shall not attribute to a Judge motives not supported by
the record or have no materiality to the case.
Rule 11.05 - A lawyer shall submit grievances against a Judge to the proper
authorities only.

CANON 12 - A LAWYER SHALL EXERT EVERY EFFORT AND CONSIDER IT HIS DUTY TO
ASSIST IN THE SPEEDY AND EFFICIENT ADMINISTRATION OF JUSTICE.

Rule 12.01 - A lawyer shall not appear for trial unless he has adequately
prepared himself on the law and the facts of his case, the evidence he will
adduce and the order of its proferrence. He should also be ready with the
original documents for comparison with the copies.

Rule 12.02 - A lawyer shall not file multiple actions arising from the same
cause.
Rule 12.03 - A lawyer shall not, after obtaining extensions of time to file
pleadings, memoranda or briefs, let the period lapse without submitting the
same or offering an explanation for his failure to do so.
Rule 12.04 - A lawyer shall not unduly delay a case, impede the execution of a
judgment or misuse Court processes.
Rule 12.05 - A lawyer shall refrain from talking to his witness during a break
or recess in the trial, while the witness is still under examination.
Rule 12.06 - A lawyer shall not knowingly assist a witness to misrepresent
himself or to impersonate another.
Rule 12.07 - A lawyer shall not abuse, browbeat or harass a witness nor
needlessly inconvenience him.
Rule 12.08
except:

lawyer

shall

avoid

testifying

in

behalf

of

his

client,

chanroblesvirtuallawlibrary

(a) on formal matters, such as the mailing, authentication or custody of an

instrument, and the like; or
(b) on substantial matters, in cases where his testimony is essential to the
ends of justice, in which event he must, during his testimony, entrust the
trial of the case to another counsel.

CANON 13 - A LAWYER SHALL RELY UPON THE MERITS OF HIS CAUSE AND REFRAIN FROM
ANY IMPROPRIETY WHICH TENDS TO INFLUENCE, OR GIVES THE APPEARANCE OF
INFLUENCING THE COURT.

Rule 13.01 - A lawyer shall not extend extraordinary attention or hospitality

to, nor seek opportunity for cultivating familiarity with Judges.
Rule 13.02 - A lawyer shall not make public statements in the media regarding
a pending case tending to arouse public opinion for or against a party.
Rule 13.03 - A lawyer shall not brook or invite interference by another branch
or agency of the government in the normal course of judicial proceedings.

CHAPTER IV. THE LAWYER AND THE CLIENT

CANON 14 - A LAWYER SHALL NOT REFUSE HIS SERVICES TO THE NEEDY.

Rule 14.01 - A lawyer shall not decline to represent a person solely on

account of the latter's race, sex. creed or status of life, or because of his
own opinion regarding the guilt of said person.
Rule 14.02 - A lawyer shall not decline, except for serious and sufficient
cause, an appointment as counsel de officio or as amicus curiae, or a
request from the Integrated Bar of the Philippines or any of its chapters for
rendition of free legal aid.
Rule 14.03 - A lawyer may not refuse to accept representation of an indigent
client if:
chanroblesvirtuallawlibrary

(a) he is not in a position to carry out the work effectively or competently;

(b) he labors under a conflict of interest between him and the prospective
client or between a present client and the prospective client.
Rule 14.04 - A lawyer who accepts the cause of a person unable to pay his
professional fees shall observe the same standard of conduct governing his
relations with paying clients.

CANON 15 - A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS
DEALINGS AND TRANSACTIONS WITH HIS CLIENTS.

Rule 15.01. - A lawyer, in conferring with a prospective client, shall

ascertain as soon as practicable whether the matter would involve a conflict
with another client or his own interest, and if so, shall forthwith inform the
prospective client.
Rule 15.02.- A lawyer shall be bound by the rule on privilege communication in
respect of matters disclosed to him by a prospective client.
Rule 15.03. - A lawyer shall not represent conflicting interests except by
written consent of all concerned given after a full disclosure of the facts.
Rule 15.04. - A lawyer may, with the written consent of all concerned, act as
mediator, conciliator or arbitrator in settling disputes.
Rule 15.05. - A lawyer when advising his client, shall give a candid and
honest opinion on the merits and probable results of the client's case,
neither overstating nor understating the prospects of the case.
Rule 15.06. - A lawyer shall not state or imply that he is able to influence
any public official, tribunal or legislative body.
Rule 15.07. - A lawyer shall impress upon his client compliance with the laws
and the principles of fairness.
Rule 15.08. - A lawyer who is engaged in another profession or occupation
concurrently with the practice of law shall make clear to his client whether
he is acting as a lawyer or in another capacity.

CANON 16 - A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS
CLIENT THAT MAY COME INTO HIS PROFESSION.

Rule 16.01 - A lawyer shall account for all money or property collected or
received for or from the client.
Rule 16.02 - A lawyer shall keep the funds of each client separate and apart
from his own and those of others kept by him.
Rule 16.03 - A lawyer shall deliver the funds and property of his client when
due or upon demand. However, he shall have a lien over the funds and may apply
so much thereof as may be necessary to satisfy his lawful fees and
disbursements, giving notice promptly thereafter to his client. He shall also
have a lien to the same extent on all judgments and executions he has secured
for his client as provided for in the Rules of Court.
Rule 16.04 - A lawyer shall not borrow money from his client unless the
client's interest are fully protected by the nature of the case or by
independent advice. Neither shall a lawyer lend money to a client except, when
in the interest of justice, he has to advance necessary expenses in a legal
matter he is handling for the client.

CANON 17 - A LAWYER OWES FIDELITY TO THE CAUSE OF HIS CLIENT AND HE SHALL BE
MINDFUL OF THE TRUST AND CONFIDENCE REPOSED IN HIM.
CANON 18 - A LAWYER SHALL SERVE HIS CLIENT WITH COMPETENCE AND DILIGENCE.

Rules 18.01 - A lawyer shall not undertake a legal service which he knows or
should know that he is not qualified to render. However, he may render such
service if, with the consent of his client, he can obtain as collaborating
counsel a lawyer who is competent on the matter.
Rule 18.02 - A lawyer shall not handle any legal matter without adequate
preparation.
Rule 18.03 - A lawyer shall not neglect a legal matter entrusted to him, and
his negligence in connection therewith shall render him liable.
Rule 18.04 - A lawyer shall keep the client informed of the status of his case
and shall respond within a reasonable time to the client's request for
information.

CANON 19 - A LAWYER SHALL REPRESENT HIS CLIENT WITH ZEAL WITHIN THE BOUNDS OF
THE LAW.

Rule 19.01 - A lawyer shall employ only fair and honest means to attain the

lawful objectives of his client and shall not present, participate in

presenting or threaten to present unfounded criminal charges to obtain an
improper advantage in any case or proceeding.
Rule 19.02 - A lawyer who has received information that his client has, in the
course of the representation, perpetrated a fraud upon a person or tribunal,
shall promptly call upon the client to rectify the same, and failing which he
shall terminate the relationship with such client in accordance with the Rules
of Court.
Rule 19.03 - A lawyer shall not allow his client to dictate the procedure in
handling the case.

CANON 20 - A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.

Rule 20.01 - A lawyer shall be guided by the following factors in determining

his fees:
(a) the time spent and the extent of the service rendered or required;
chanroblesvirtuallawlibrary

(b) the novelty and difficulty of the questions involved;

(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of acceptance of
the proffered case;
(f) The customary charges for similar services and the schedule of fees of the
IBP chapter to which he belongs;
(g) The amount involved in the controversy and the benefits resulting to the
client from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or established; and
(j) The professional standing of the lawyer.
Rule 20.02 - A lawyer shall, in case of referral, with the consent of the
client, be entitled to a division of fees in proportion to the work performed
and responsibility assumed.
Rule 20.03 - A lawyer shall not, without the full knowledge and consent of the
client, accept any fee, reward, costs, commission, interest, rebate or
forwarding allowance or other compensation whatsoever related to his
professional employment from anyone other than the client.

Rule 20.04 - A lawyer shall avoid controversies with clients concerning his
compensation and shall resort to judicial action only to prevent imposition,
injustice or fraud.

CANON 21 - A LAWYER SHALL PRESERVE THE CONFIDENCE AND SECRETS OF HIS CLIENT
EVEN AFTER THE ATTORNEY-CLIENT RELATION IS TERMINATED.

Rule 21.01 - A lawyer shall not reveal the confidences or secrets of his
client except;
(a) When authorized by the client after acquainting him of the consequences of
the disclosure;
(b) When required by law;
(c) When necessary to collect his fees or to defend himself, his employees or
associates or by judicial action.
Rule 21.02 - A lawyer shall not, to the disadvantage of his client, use
information acquired in the course of employment, nor shall he use the same to
his own advantage or that of a third person, unless the client with full
knowledge of the circumstances consents thereto.
Rule 21.03 - A lawyer shall not, without the written consent of his client,
give information from his files to an outside agency seeking such information
for auditing, statistical, bookkeeping, accounting, data processing, or any
similar purpose.
Rule 21.04 - A lawyer may disclose the affairs of a client of the firm to
partners or associates thereof unless prohibited by the client.
Rule 21.05 - A lawyer shall adopt such measures as may be required to prevent
those whose services are utilized by him, from disclosing or using confidences
or secrets of the clients.
Rule 21.06 - A lawyer shall avoid indiscreet conversation about a client's
affairs even with members of his family.
Rule 21.07 - A lawyer shall not reveal that he has been consulted about a
particular case except to avoid possible conflict of interest.

CANON 22 - A LAWYER SHALL WITHDRAW HIS SERVICES ONLY FOR GOOD CAUSE AND UPON
NOTICE APPROPRIATE IN THE CIRCUMSTANCES.

Rule 22.01 - A lawyer may withdraw his services in any of the following
case:
(a) When the client pursues an illegal or immoral course of conduct in
connection with the matter he is handling;
chanroblesvirtuallawlibrary

(b) When the client insists that the lawyer pursue conduct violative of these
canons and rules;
(c) When his inability to work with co-counsel will not promote the best
interest of the client;
(d) When the mental or physical condition of the lawyer renders it difficult
for him to carry out the employment effectively;
(e) When the client deliberately fails to pay the fees for the services or
fails to comply with the retainer agreement;
(f) When the lawyer is
(g) Other similar cases.

elected

or

appointed

to

public

office;

and

Rule 22.02 - A lawyer who withdraws or is discharged shall, subject to a

retainer lien, immediately turn over all papers and property to which the
client is entitled, and shall cooperative with his successor in the orderly
transfer of the matter, including all information necessary for the proper
handling of the matter.

FIRST DIVISION
[G.R. No. 144169. March 28, 2001]
KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN KHE,
petitioners, vs. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY
and PHILAM INSURANCE CO., INC., respondents.
DECISION
KAPUNAN, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45, seeking to set aside the
decision of the Court of Appeals dated April 10, 2000 and its resolution dated July 11, 2000
denying the motion for reconsideration of the aforesaid decision. The original complaint that is
the subject matter of this case is an accion pauliana-- an action filed by Philam Insurance
Company, Inc. (respondent Philam) to rescind or annul the donations made by petitioner Khe
Hong Cheng allegedly in fraud of creditors. The main issue for resolution is whether or not the
action to rescind the donations has already prescribed. While the first paragraph of Article 1389
of the Civil Code states: The action to claim rescission must be commenced within four years...
the question is, from which point or event does this prescriptive period commence to run?
The facts are as follows:
Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping Lines. It appears
that on or about October 4, 1985, the Philippine Agricultural Trading Corporation shipped on
board the vessel M/V PRINCE ERIC, owned by petitioner Khe Hong Cheng, 3,400 bags of
copra at Masbate, Masbate, for delivery to Dipolog City, Zamboanga del Norte. The said

shipment of copra was covered by a marine insurance policy issued by American Home
Insurance Company (respondent Philam's assured). M/V PRINCE ERIC, however, sank
somewhere between Negros Island and Northeastern Mindanao, resulting in the total loss of the
shipment. Because of the loss, the insurer, American Home, paid the amount of P354,000.00 (the
value of the copra) to the consignee.
Having been subrogated into the rights of the consignee, American Home instituted Civil Case
No. 13357 in the Regional Trial Court (RTC) of Makati, Branch 147 to recover the money paid
to the consignee, based on breach of contract of carriage. While the case was still pending, or on
December 20, 1989, petitioner Khe Hong Cheng executed deeds of donations of parcels of land
in favor of his children, herein co-petitioners Sandra Joy and Ray Steven. The parcel of land with
an area of 1,000 square meters covered by Transfer Certificate of Title (TCT) No. T-3816 was
donated to Ray Steven. Petitioner Khe Hong Cheng likewise donated in favor of Sandra Joy two
(2) parcels of land located in Butuan City, covered by TCT No. RT-12838. On the basis of said
deeds, TCT No. T-3816 was cancelled and in lieu thereof, TCT No. T-5072 was issued in favor of
Ray Steven and TCT No. RT-12838 was cancelled and in lieu thereof, TCT No. RT-21054 was
issued in the name of Sandra Joy.
The trial court rendered judgment against petitioner Khe Hong Cheng in Civil Case No. 13357
on December 29, 1993, four years after the donations were made and the TCTs were registered in
the donees names. The decretal portion of the aforesaid decision reads:
Wherefore, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff
and against the defendant, ordering the latter to pay the former:
1) the sum of P354,000.00 representing the amount paid by the plaintiff to the Philippine
Agricultural Trading Corporation with legal interest at 12% from the time of the filing of the
complaint in this case;
2) the sum of P50,000.00 as attorneys fees;
3) the costs.xii[1]
After the said decision became final and executory, a writ of execution was forthwith issued on
September 14, 1995. Said writ of execution, however, was not served. An alias writ of execution
was, thereafter, applied for and granted in October 1996. Despite earnest efforts, the sheriff
found no property under the name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng
to levy or garnish for the satisfaction of the trial court's decision. When the sheriff, accompanied
by counsel of respondent Philam, went to Butuan City on January 17, 1997, to enforce the alias
writ of execution, they discovered that petitioner Khe Hong Cheng no longer had any property
and that he had conveyed the subject properties to his children.
On February 25, 1997, respondent Philam filed a complaint with the Regional Trial Court of
Makati City, Branch 147, for the rescission of the deeds of donation executed by petitioner Khe
Hong Cheng in favor of his children and for the nullification of their titles (Civil Case No. 97-

415). Respondent Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the
aforesaid deeds in fraud of his creditors, including respondent Philam.xiii[2]
Petitioners subsequently filed their answer to the complaint a quo. They moved for its dismissal
on the ground that the action had already prescribed. They posited that the registration of the
deeds of donation on December 27, 1989 constituted constructive notice and since the complaint
a quo was filed only on February 25, 1997, or more than four (4) years after said registration, the
action was already barred by prescription.xiv[3]
Acting thereon, the trial court denied the motion to dismiss. It held that respondent Philam's
complaint had not yet prescribed. According to the trial court, the prescriptive period began to
run only from December 29, 1993, the date of the decision of the trial court in Civil Case No.
13357.xv[4]
On appeal by petitioners, the CA affirmed the trial court's decision in favor of respondent
Philam. The CA declared that the action to rescind the donations had not yet prescribed. Citing
Articles 1381 and 1383 of the Civil Code, the CA basically ruled that the four year period to
institute the action for rescission began to run only in January 1997, and not when the decision in
the civil case became final and executory on December 29, 1993. The CA reckoned the accrual
of respondent Philam's cause of action on January 1997, the time when it first learned that the
judgment award could not be satisfied because the judgment creditor, petitioner Khe Hong
Cheng, had no more properties in his name. Prior thereto, respondent Philam had not yet
exhausted all legal means for the satisfaction of the decision in its favor, as prescribed under
Article 1383 of the Civil Code.xvi[5]
The Court of Appeals thus denied the petition for certiorari filed before it, and held that the trial
court did not commit any error in denying petitioners' motion to dismiss. Their motion for
reconsideration was likewise dismissed in the appellate court's resolution dated July 11, 2000.
Petitioners now assail the aforesaid decision and resolution of the CA alleging that:
I
PUBLIC RESPONDENT GRAVELY ERRED AND ACTED IN GRAVE ABUSE OF
DISCRETION WHEN IT DENIED THE PETITION TO DISMISS THE CASE BASED
ON THE GROUND OF PRESCRIPTION.
II
PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PRESCRIPTION BEGINS TO RUN WHEN IN JANUARY 1997 THE SHERIFF WENT
TO BUTUAN CITY IN SEARCH OF PROPERTIES OF PETITIONER FELIX KHE
CHENG TO SATISFY THE JUDGMENT IN CIVIL CASE NO. 13357 AND FOUND OUT
THAT AS EARLY AS DEC. 20, 1989, PETITIONERS KHE CHENG EXECUTED THE
DEEDS OF DONATIONS IN FAVOR OF HIS CO-PETITIONERS THAT THE ACTION
FOR RESCISSION ACCRUED BECAUSE PRESCRIPTION BEGAN TO RUN WHEN

THESE DONATIONS WERE REGISTERED WITH THE REGISTER OF DEEDS IN

DECEMBER 1989, AND WHEN THE COMPLAINT WAS FILED ONLY IN FEBRUARY
1997, MORE THAN FOUR YEARS HAVE ALREADY LAPSED AND THEREFORE, IT
HAS ALREADY PRESCRIBED.xvii[6]
Essentially, the issue for resolution posed by petitioners is this: When did the four (4) year
prescriptive period as provided for in Article 1389 of the Civil Code for respondent Philam to
file its action for rescission of the subject deeds of donation commence to run?
The petition is without merit.
Article 1389 of the Civil Code simply provides that, The action to claim rescission must be
commenced within four years. Since this provision of law is silent as to when the prescriptive
period would commence, the general rule, i.e, from the moment the cause of action accrues,
therefore, applies. Article 1150 of the Civil Code is particularly instructive:
Art. 1150. The time for prescription for all kinds of actions, when there is no special provision
which ordains otherwise, shall be counted from the day they may be brought.
Indeed, this Court enunciated the principle that it is the legal possibility of bringing the action
which determines the starting point for the computation of the prescriptive period for the
action.xviii[7] Article 1383 of the Civil Code provides as follows:
Art. 1383. An action for rescission is subsidiary; it cannot be instituted except when the party
suffering damage has no other legal means to obtain reparation for the same.
It is thus apparent that an action to rescind or an accion pauliana must be of last resort, availed
of only after all other legal remedies have been exhausted and have been proven futile. For an
accion pauliana to accrue, the following requisites must concur:
1) That the plaintiff asking for rescission has a credit prior to the alienation, although
demandable later; 2) That the debtor has made a subsequent contract conveying a patrimonial
benefit to a third person; 3) That the creditor has no other legal remedy to satisfy his claim, but
would benefit by rescission of the conveyance to the third person; 4) That the act being
impugned is fraudulent; 5) That the third person who received the property conveyed, if by
onerous title, has been an accomplice in the fraud.xix[8] (Emphasis ours)
We quote with approval the following disquisition of the CA on the matter:
An accion pauliana accrues only when the creditor discovers that he has no other legal remedy
for the satisfaction of his claim against the debtor other than an accion pauliana. The accion
pauliana is an action of a last resort. For as long as the creditor still has a remedy at law for the
enforcement of his claim against the debtor, the creditor will not have any cause of action against
the creditor for rescission of the contracts entered into by and between the debtor and another
person or persons. Indeed, an accion pauliana presupposes a judgment and the issuance by the
trial court of a writ of execution for the satisfaction of the judgment and the failure of the Sheriff

to enforce and satisfy the judgment of the court. It presupposes that the creditor has exhausted
the property of the debtor. The date of the decision of the trial court against the debtor is
immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all, the decision of the trial court against the debtor
will retroact to the time when the debtor became indebted to the creditor.xx[9]
Petitioners, however, maintain that the cause of action of respondent Philam against them for the
rescission of the deeds of donation accrued as early as December 27, 1989, when petitioner Khe
Hong Cheng registered the subject conveyances with the Register of Deeds. Respondent Philam
allegedly had constructive knowledge of the execution of said deeds under Section 52 of
Presidential Decree No. 1529, quoted infra, as follows:
Section 52. Constructive knowledge upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed or entered in the Office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing,
or entering.
Petitioners argument that the Civil Code must yield to the Mortgage and Registration Laws is
misplaced, for in no way does this imply that the specific provisions of the former may be all
together ignored. To count the four year prescriptive period to rescind an allegedly fraudulent
contract from the date of registration of the conveyance with the Register of Deeds, as alleged by
the petitioners, would run counter to Article 1383 of the Civil Code as well as settled
jurisprudence. It would likewise violate the third requisite to file an action for rescission of an
allegedly fraudulent conveyance of property, i.e., the creditor has no other legal remedy to satisfy
his claim.
An accion pauliana thus presupposes the following: 1) A judgment; 2) the issuance by the trial
court of a writ of execution for the satisfaction of the judgment, and 3) the failure of the sheriff to
enforce and satisfy the judgment of the court. It requires that the creditor has exhausted the
property of the debtor. The date of the decision of the trial court is immaterial. What is important
is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of his
property. After all, the decision of the trial court against the debtor will retroact to the time when
the debtor became indebted to the creditor.
Tolentino, a noted civilist, explained:
xxx[T]herefore, credits with suspensive term or condition are excluded, because the accion
pauliana presupposes a judgment and unsatisfied execution, which cannot exist when the debt is
not yet demandable at the time the rescissory action is brought. Rescission is a subsidiary action,
which presupposes that the creditor has exhausted the property of the debtor which is impossible
in credits which cannot be enforced because of a suspensive term or condition.
While it is necessary that the credit of the plaintiff in the accion pauliana must be prior to the
fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment

be subsequent to the alienation, it is merely declaratory with retroactive effect to the date when
the credit was constituted.xxi[10]
These principles were reiterated by the Court when it explained the requisites of an accion
pauliana in greater detail, to wit:
The following successive measures must be taken by a creditor before he may bring an action for
rescission of an allegedly fraudulent sale: (1) exhaust the properties of the debtor through levying
by attachment and execution upon all the property of the debtor, except such as are exempt from
execution; (2) exercise all the rights and actions of the debtor, save those personal to him (accion
subrogatoria); and (3) seek rescission of the contracts executed by the debtor in fraud of their
rights (accion pauliana). Without availing of the first and second remedies, i.e., exhausting the
properties of the debtor or subrogating themselves in Francisco Baregs transmissible rights and
actions, petitioners simply undertook the third measure and filed an action for annulment of sale.
This cannot be done.xxii[11] (Emphasis ours)
In the same case, the Court also quoted the rationale of the CA when it upheld the dismissal of
the accion pauliana on the basis of lack of cause of action:
In this case, plaintiffs appellants had not even commenced an action against defendants-appellees
Bareng for the collection of the alleged indebtedness. Plaintiffs-appellants had not even tried to
exhaust the property of defendants-appellees Bareng. Plaintiffs-appellants, in seeking the
rescission of the contracts of sale entered into between defendants-appellees, failed to show and
prove that defendants-appellees Bareng had no other property, either at the time of the sale or at
the time this action was filed, out of which they could have collected this (sic) debts. (Emphasis
ours)
Even if respondent Philam was aware, as of December 27, 1989, that petitioner Khe Hong Cheng
had executed the deeds of donation in favor of his children, the complaint against Butuan
Shipping Lines and/or petitioner Khe Hong Cheng was still pending before the trial court.
Respondent Philam had no inkling, at the time, that the trial court's judgment would be in its
favor and further, that such judgment would not be satisfied due to the deeds of donation
executed by petitioner Khe Hong Cheng during the pendency of the case. Had respondent Philam
filed his complaint on December 27, 1989, such complaint would have been dismissed for being
premature. Not only were all other legal remedies for the enforcement of respondent Philams
claims not yet exhausted at the time the deeds of donation were executed and registered.
Respondent Philam would also not have been able to prove then that petitioner Khe Hong Chneg
had no more property other than those covered by the subject deeds to satisfy a favorable
judgment by the trial court.
It bears stressing that petitioner Khe Hong Cheng even expressly declared and represented that
he had reserved to himself property sufficient to answer for his debts contracted prior to this
date:

That the DONOR further states, for the same purpose as expressed in the next preceding
paragraph, that this donation is not made with the object of defrauding his creditors having
reserved to himself property sufficient to answer his debts contracted prior to this date.xxiii[12]
As mentioned earlier, respondent Philam only learned about the unlawful conveyances made by
petitioner Khe Hong Cheng in January 1997 when its counsel accompanied the sheriff to Butuan
City to attach the properties of petitioner Khe Hong Cheng. There they found that he no longer
had any properties in his name. It was only then that respondent Philam's action for rescission of
the deeds of donation accrued because then it could be said that respondent Philam had
exhausted all legal means to satisfy the trial court's judgment in its favor. Since respondent
Philam filed its complaint for accion pauliana against petitioners on February 25, 1997, barely a
month from its discovery that petitioner Khe Hong Cheng had no other property to satisfy the
judgment award against him, its action for rescission of the subject deeds clearly had not yet
prescribed.
A final point. Petitioners now belatedly raise on appeal the defense of improper venue claiming
that respondent Philams complaint is a real action and should have been filed with the RTC of
Butuan City since the property subject matter of the donations are located therein. Suffice it to
say that petitioners are already deemed to have waived their right to question the venue of the
instant case. Improper venue should be objected to as follows 1) in a motion to dismiss filed
within the time but before the filing of the answer;xxiv[13] or 2) in the answer as an affirmative
defense over which, in the discretion of the court, a preliminary hearing may be held as if a
motion to dismiss had been filed.xxv[14] Having failed to either file a motion to dismiss on the
ground of improper of venue or include the same as an affirmative defense in their answer,
petitioners are deemed to have their right to object to improper venue.
WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.
SO ORDERED.

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