**Facts:**
Petitioner Air France filed a complaint for sum of money and damages against respondents Multinational Travel Corporation of the Philippines, Fiorello Panopio, and Vicky Panopio in the Regional Trial Court of Manila, Branch 27.
1. On August 31, 1987, the court rendered a decision in favor of Air France, ordering the respondents to pay jointly and severally the sum of P2,518,698.66 with legal interest per annum from September 22, 1986, until fully paid, plus P50,000.00 as attorney’s fees.
2. On December 29, 1989, Air France moved for the issuance of an alias writ of execution due to the unsatisfied judgment and for the declaration of the sale to Iolani Dionisio of a parcel of land (covered by TCT No. 353935 in the name of Multinational Food Corporation) as fraudulent.
3. Air France alleged that the Panopio spouses owned 91% of Multinational Food and Catering Corporation with the remaining shares owned by close associates, and despite its non-operational status, the corporation acquired property from Ayala Corporation on February 1, 1985.
4. The Panopio spouses subsequently sold this property to Iolani Dionisio on April 11, 1985, but only registered the sale a year and nine months later, coinciding with Air France’s pursuit of a writ of attachment.
5. The respondent court issued an alias writ of execution on January 4, 1990, and it was released on January 8, 1990.
6. The Panopio spouses opposed the motion, arguing that the court lacked jurisdiction as Iolani Dionisio, the buyer, was not a party to the case and the proper remedy was an independent civil action.
7. On January 19, 1990, the trial court noted the failure of Iolani Dionisio and Multinational Food to answer the allegations and issued an order on November 19, 1990, finding the sale as fraudulent.
8. Respondents filed for reconsideration, which was denied on February 15, 1991. They then sought relief from the Court of Appeals, alleging grave abuse of discretion by the trial court.
9. On February 24, 1992, the Court of Appeals annulled the trial court’s orders and enjoined Air France from further proceedings against the said property.
**Issues:**
1. Whether the trial court had jurisdiction to declare the sale to Iolani Dionisio as fraudulent.
2. Whether the proper remedy to challenge fraudulent conveyance lies within the proceedings of the initial case or requires a separate rescissory action.
**Court’s Decision:**
The Supreme Court affirmed the decision of the Court of Appeals, addressing each issue as follows:
1. **Jurisdiction to Declare Sale Fraudulent:**
– The Court held that the trial court could not exercise jurisdiction over the property registered to Multinational Food since it did not belong to the judgment debtors. A third party, Iolani Dionisio, not being a party to the case, invalidated such jurisdiction.
2. **Proper Remedy for Fraudulent Conveyance:**
– The Supreme Court reiterated that a rescissory action is necessary to annul fraudulent transactions, requiring a full-fledged independent civil action, not a mere motion within existing proceedings. Citing Article 1383 of the Civil Code, they confirmed that rescissory actions must be handled separately to protect the rights of all parties involved.
**Doctrine:**
– The enforcement of judgments can only be extended to properties unquestionably belonging to the judgment debtor (Bayer Philippines, Inc. v. Agana).
– Rescissory actions (accion pauliana) must be brought independently and cannot be resolved through motions within existing cases, per Article 1383 and Article 1389 of the Civil Code.
– Third-party claims over properties levied under a writ of execution require separate litigation to resolve (Herald Publishing v. Ramos).
**Class Notes:**
– **Judgment Execution:** Courts can enforce judgments only against properties of the judgment debtor.
– **Rescissory Actions:** Contracts deemed fraudulent against creditors can only be annulled through independent civil actions (Art. 1381, Civil Code). They are subsidiary and cannot be raised via summary motions (Art. 1383, Civil Code).
– **Third-Party Claims in Property:** Separate actions are required for third-party claims on levied properties.
– **Accion Pauliana:** Rescissory actions must be initiated within four years as per Art. 1389, Civil Code.
– **Due Process:** Non-parties to a case must be allowed due process before their properties can be implicated in judgment execution.
**Historical Background:**
This case reflects the legal framework and procedural rigor necessary to protect the rights of individuals and organizations not initially implicated in a legal dispute. The insistence on separating the proper channels for rescissory actions underscores the judicious approach towards potential fraudulent activities and the protection of creditors’ rights in Philippine jurisprudence.
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