G. R. No. 12794. October 14, 1918
ELADIO ALPUERTO, PLAINTIFF AND APPELLEE, VS. JOSE PEREZ PASTOR AND MANUEL ROA, PROVINCIAL SHERIFF OF CEBU, DEFENDANTS AND APPELLANTS.
STREET, J.:
contention in this case formerly belonged to Juan Llenos, and both the
interested parties in this action claim title under him, the plaintiff as party
in possession under a contract of sale with pacto de retro, and the
defendant as purchaser at a public sale under an execution directed against
Llenos. The plaintiff, Eladio Alpuerto, asks the court to make a declaration
against the defendant, Jose Perez Pastor, to the effect that the plaintiff is
the owner thereof in full and absolute dominion. He also prays that the sale of
the property effected by the sheriff, Manuel Roa, to said defendant be declared
null.
The defendant Pastor denies the right of the plaintiff to the relief sought,
and asserts that the transaction by which the plaintiff claims to have acquired
title was simulated or fictitious and that the supposed conveyance was effected
for the purpose of defrauding the defendant as creditor of Juan Llenos. This
defendant therefore in turn prays the court to declare that he himself is the
true owner of the property and that a judgment be entered condemning the
plaintiff to surrender possession to him. From a judgment entered in the Court
of First Instance of Cebu in favor of the plaintiff, the defendants have
appealed. It appears that, pending the proceedings, the defendant Pastor has
died and an administrator, Eustaquio Lopez, has been substituted in his stead.
Throughout the opinion, however, Pastor, the name of the original party
defendant, will be used in referring to the interest now represented by the
administrator.
The plaintiff claims by virtue of the document (Exhibit A), which purports to
be a contract of sale with the privilege of repurchase. It recites a
consideration of P2,500 the payment of which is acknowledged; and the stipulated
period within which the vendor may repurchase the property is fixed at two
years. This document is signed by the two contracting parties (Juan Llenos and
Eladio Alpuerto) and is attested by two subscribing witnesses. It purports on
its face to have been executed on July 3, 1912; but it was not acknowledged
before a notary until December 3, 1914. The property in question is assessed for
the purposes of taxation at P5,000 or P6,000; and is worth more than twice the
amount which the plaintiff claims to have paid for it.
At the time of the supposed sale to Eladio Alpuerto there had been pending
for nearly two years, in the Court of First Instance of Cebu, an action in which
Jose Perez Pastor was plaintiff and Juan Llenos was defendant. In this action
the plaintiff sought to recover from Juan Llenos a considerable sum of money;
and Eladio Alpuerto, as son-in-law of Juan Llenos, was aware of this litigation
from the beginning. On January 27, 1913, or about six months after the alleged
sale of the property in question to Eladio Alpuerto, judgment was rendered in
said action in favor of the plaintiff for the sum of P3,789.13, with interest
and costs. This judgment was affirmed upon appeal to the Supreme Court on
November 20, 1914.[1] An execution was
thereafter issued on April 12, 1915, from the Court of First Instance upon said
judgment and was levied upon the property in question as the property of Juan
Llenos. Before the sale was effected the plaintiff herein, Eladio Alpuerto,
notified the sheriff that he claimed the property as his own. Nevertheless, the
sheriff proceeded under indemnification and sold the property at public sale to
Jose Perez Pastor for the sum of P1,100.
The case stated in the cross-complaint as a ground of relief to the defendant
has its basis in the rule stated in subsection 3 of article 1291 of the Civil
Code, which declares generally that a contract executed in fraud of creditors is
subject to rescission; and upon this issue the burden of proof is of course upon
Pastor, as the party assailing the transaction, to show that the transfer was
fraudulent; though it should here be remembered that proof on this point may be
accomplished by the aid of presumptions, as in other cases. (Article 1215, Civil
Code.)
The argument against the validity of the conveyance from Juan Llenos to
Eladio Alpuerto is based on two propositions, namely: (1) that said conveyance
must, under the second paragraph of article 1297, in connection with article
1227, of the Civil Code, be presumed to be fraudulent; and (2) that furthermore
the transaction is shown by the evidence to have been fraudulent in fact.
The second paragraph of article 1297 of the Civil Code says that a transfer
of property made by one against whom a condemnatory judgment has been pronounced
in either instance is to be presumed fraudulent. The cardinal question on this
branch of the case is therefore this. Was the transfer in question made after a
judgment had been entered against Juan Llenos in either instance? This in turn
depends upon the question whether the contract of sale shall be considered
effective as from the date upon which it purports to have been executed (July 3,
1912) or from the date when it was acknowledged before a notary public (December
3,1914), for in the interval between these two dates final judgment had been
rendered against Juan Llenos both in the Court of First Instance and in the
Supreme Court.
The solution of the problem thus presented requires us to consider the
combined effect of articles 1225 and 1227 of the Civil Code. Article 1225
declares that a private document legally recognized shall have, with regard to
those who sign it and their privies (causahabientes), the same force as a public
instrument.
The expression “legally recognized” (reconocido legalmente), as here used,
must be taken to mean recognized, or acknowledged, by the person, or persons,
executing or emitting the document—in this case the vendor, Juan Llenos, and the
vendee, Eladio Alpuerto. The act of legal recognition occurred, we assume, when
the document was signed by the parties and delivered in the presence of the
attesting witnesses, who were called upon to bear witness to the
transaction.
Concerning the meaning of the expression “privies” (causahabientes), in this
article, the following passage is found in the Commentary of Manresa:
“The said word denotes the idea of succession, not only by right of heirship
and testamentary legacy, but also that of succession by singular title, derived
from acts inter vivos, and for special purposes; hence, an assignee of
a credit, and one subrogated to it, etc., will be privies; in short, he, who, by
succession is placed in the position of one of those who contracted the
juridical relation and executed the private document and appears to be
substituting him in his personal rights and obligations, is a privy.” (Manresa,
Codigo Civil, pp. 492 and 493.)
Under the interpretation thus placed upon the meaning of the term “privies,”
it is clear that Jose Perez Pastor, the purchaser at the public sale under an
execution directed against Juan Llenos, must be considered a privy or successor
in interest of the execution debtor. He is therefore undoubtedly bound ‘by the
instrument which conveyed the property to Eladio Alpuerto—and this from the date
of the execution of that instrument as a private document— unless this result is
prohibited by article 1227 of the Civil Code, which reads as follows:
“The date of a private instrument shall be considered, with regard to third
persons, only from the date on which it may have been filed or entered in a
public registry, from the death of any one of those who signed it, or from the
date on which it may have been delivered to a public official by virtue of his
office.”
In considering this article it is important to bear in mind that it has
reference merely to the probative value of the document with respect to the date
of its execution, and is not intended to lay down any rule concerning the
efficacy of the act or acts evidenced by the document. (Manresa, Codigo
Civil, vol. 8, p. 501.) The importance of the rule here declared is
therefore most conspicuously revealed in the situation where the document itself
contains the only competent evidence before the court bearing upon the date upon
which the instrument in question was executed as a private document.
This can be most conveniently exhibited by means of illustrations based on
the language of the text itself. For instance, let it be supposed that a
document is produced bearing the signatures of the parties who participated in
it and purporting to have been executed upon a certain date, prior to the date
upon which the document was filed or inscribed in a public register. In such
case the instrument can take effect, as against third persons, only from the
date when it was so filed or inscribed. Again, let it be supposed, a document is
produced bearing the signatures of the parties who partfcipated in it and
purporting to have been executed upon a certain date; and it appears that the
instrument has at no time been elevated into a public document or filed or
inscribed in a public register. It is, however, proved that one of the signatory
parties has died upon a certain date subsequent to that upon which the
instrument purports to have been executed. In this case the instrument can take
effect, as against third persons, only from the date of the death of the
deceased signatory party. Again, be it supposed, a document is produced in court
bearing the signature^ of the parties and purporting to have been executed upon
a certain date. The instrument has at no time been elevated into a public
document and it is not shown that either of the signatory parties is dead. In
this case the instrument can take effect, as against third persons, only from
the date when the document was filed in court, this being considered to be
delivery to a public official by virtue of his office.
All of these illustrations have reference to the situation where the document
itself contains the only evidence before the court bearing upon the date of its
original execution; and the execution of the instrument is supposed to be proved
by force of the act of notarial acknowledgment or by proof that the names of the
parties signed to the document are genuine. It must be borne in mind in this
connection that article 1227 is not primarily or exclusively concerned with
instruments which after being executed originally as private documents are at a
later date elevated to the status of public documents. On the contrary, it deals
primarily with private documents, and the instrument in question may at all
times remain a private document. It is quite obvious for instance that, to use
two of the illustrations found in article 1227, a private document is not
converted into a public document either by the death of one of the signatory
parties or by the fact that it is delivered to a public official by virtue of
his office. The due execution of such instruments must therefore be proved when
they are introduced in court, if not made self-proving by notarial
acknowledgment, which operates to raise them to the status of public
documents.
The commentator Manresa, discussing article 1227, observes with discernment
that there may be other facts than those mentioned in said article which should
be received as determinative of the date from which the instrument should be
considered to be effective against third persons. Thus, if it should appear
that, subsequent to the date upon which the document purports to have been
executed, one of the signatory parties had lost his penhand by amputation, this
should be accepted as being fully conclusive that the instrument was in fact
executed before such occurrence. (Manresa, Codigo Civil, vol. 8, p.
503.) In the same connection Manresa says that if a third person is affected
with notice of the existence of a private document or by any act of his own
recognizes its existence, it will have effect, as against him, from the date of
such notice or recognition. (Opus citat., id.) These observations all go to show
that article 1227 states a presumption which may be rebutted.
The question then arises. Is there anything in article 1227, or elsewhere,
which prohibits the introduction of the testimony of attesting witnesses, or
other persons who may be present when a private document is executed, to prove
that the act was accomplished upon the date stated therein to be date of its
execution? We are of the opinion that such testimony is admissible, even as
against third parties.
This conclusion is fully supported by the opinion of the supreme court of
Spain in the case of Alvarez vs. Yañez (117 Juris. Civil, 663, decided
April 16, 1910). The facts in that case were that by private documents dated
respectively August 2 and August 3, 1908, Alvarez purchased four tracts of land.
On August 17, of the same year Carlos Vega sold, by public instrument, to Yañez
several tracts of land, three of which, each less than a hectare in extent, were
adjacent to part of the land purchased by Alvarez who, upon learning of the
sale, brought his action, under article 1523 of the Civil Code, to be subrogated
to the buyer, exercising his right of retracto legal. The defendant
answered that on August 17, 1908, plaintiff was not the owner of any land
adjacent to that acquired on that date by defendant, the contention being “that
the private documents upon which the complaint was based, in addition to the
fact that they are not proof of ownership, were not presented at any public
office until September 1, 1908, when they were presented for the payment of the
tax on real estate, which was fourteen days after defendant purchased the
properties in contest * * *.”
The trial court permitted plaintiff to produce witnesses for the purpose of
proving that the private documents relied upon by him were in fact executed and
delivered upon the dates therein recited and that plaintiff went into possession
under them, and upon that evidence made finding in accordance with plaintiff’s
contentions, and held that the right to take over the purchase retracto
existed. The defendant appealed to the supreme court of Spain, and argued that
by its ruling the Audiencia had disregarded article 1227 of the Civil Code, the
specific contention being that as against persons who are not parties to them
private documents must be treated as though their existence commenced only from
the date upon which they are made of public record. This contention was
overruled, the Court saying:
“It cannot be denied that the appellant Constantino Vega is to be regarded as
a third person, because he was not a party to the two contracts of sale by
virtue of which Vicente Alvarez acquired from Ildefonso Alvarez the ownership of
the three tracts of country real estate from which he derives his right to be
subrogated as purchaser of four other tracts adjacent thereto sold, with others,
by Carlos Vega to the defendant by public instrument dated August 17, 1908.
Nevertheless, it is not to be inferred from this fact, as appellant contends,
that the legal dates of the two first contracts, evidenced by private documents,
are not those which are recited therein, but that as regards third persons, in
accordance with Art. 1227 of the Civil Code, they must be regarded as dated on
the day * * * on which they were noted in the tax office. That article
establishes a legal presumption which must yield to contrary evidence, and the
trial court, basing its conclusion on the testimony of the witnesses, has
established the finding, which we cannot disturb, that the dates recited in
these documents are the true dates upon which the contracts were made.”
Clearly articles 1225 and 1227 should be construed in such manner as to
harmonize with each other and to give effect, so far as possible, to the
legislative intent expressed in each; and the only interpretation of article
1227 which can be adopted consistently with the meaning of article 1225 is that
the rule announced in article 1227 has reference exclusively to the situation
where there is no accredited evidence before the court, independent of the
recitals of the document itself, showing the date upon which it was in fact
executed.
It has been settled in many decisions that a document which originates as a
private document and never rises above that status will, under article 1225, be
given full effect as such. (Samson vs. Salvilla and Sierra, 12 Phil.
Rep., 497, 505; Taguinot vs. Municipality of Tanay, 9 Phil. Rep., 396,
401; Guillermo vs. Matienzo, 8 Phil. Rep., 368, 372; Irureta, Goyena
vs. Tambunting, 1 Phil. Rep., 490, 493.) It follows that article 1227
does not, as against the signatory parties and their successors in interest,
postpone the operation of an instrument, proved as a private document, if it is
shown by competent evidence that it was in fact executed upon the date recited
therein as the date of its execution. If this were not true, the result would be
that a person having rights under an instrument, provable as a private document,
might lose those rights by reason of the happening of some one of the
occurrences mentioned in article 1227. The contrary conclusion is evidently the
proper one, that is, that if a party has rights under an instrument, provable as
a private document, and it is so proved, it will prevail from the true and
proven date of its execution with all the effect attributable to it under
article 1225.
The expression “third parties” (terceros) as used in article 1227, evidently
means persons who have not intervened in the execution of the document. It has
been so interpreted by the supreme court of Spain and by this court. (Lao
Simbieng vs. Palencia, 18 Phil. Rep., 325, 328; Easton vs. E.
Diaz & Co. and Sheriff of Albay, 32 Phil. Rep., 181; decision of the supreme
court of Spain of April 16, 1910, already cited.) Manresa is therefore in error
in supposing that it has the more limited meaning of persons who have not
intervened in the execution of the document and are neither heirs nor successors
in interest of those who signed the same. (Manresa, Codigo Civil, vol.
8, p. 501.)
In the case now before us the two witnesses examined with reference to the
execution of the document in question testify that it was originally executed
and delivered on July 13,1912, the date stated upon its face. For the purpose of
disposing of this branch of the case without further discussion, we
provisionally accept this statement as true and deduce the conclusion that the
presumption stated in paragraph 2 of article-1297 of the Civil Code is not
applicable.
This brings us to the question whether the transaction evidenced by Exhibit A
should be pronounced fraudulent in fact. Upon turning to the evidence for the
purpose of determining this question, the following circumstances are revealed,
namely: (1) The grantee is the son-in-law of the grantor; (2) at the time
conveyance is made an action is pending against the grantor to recover several
thousand pesos of money; and of the pendency of this action the grantee has full
knowledge; (3) the debtor has no other property out of which the judgment, if
recovered, can be satisfied; (4) the consideration for the transfer is less than
half of the value of the property in question. These circumstances are familiar
badges of fraud, and their combined effect is such, we think, as to raise a
presumption of fraud, even apart from the legal presumption expressed in article
1297, and to impose upon the vendee the burden of proving the bona
fides of the transaction by a preponderance of evidence and to the
satisfaction of the court.
We are of the opinion that the proof adduced not only fails to remove the
imputation of fraud thus cast upon the transaction but strongly tends to
engender the suspicion that the transaction was wholly fictitious. It is true
that both the plaintiff himself and Simon Batuigas, one of the subscribing
witnesses, declared in the clearest terms that the transaction took place on
July 3, 1912, as claimed; that two thousand pesos of money changed hands in the
act; and that the balance of the consideration consisted in the satisfaction and
release of a debt for five hundred pesos owing from Juan Llenos to Eladio
Alpuerto. It should not escape notice that neither Juan Llenos nor the other
attesting witness, Geronimo Godinez, were examined as to the circumstances
attending the transaction; and no explanation is given as to why these witnesses
were not produced.
Where the law imposes the burden of proof upon a party to establish the
bona fides of such a transaction as this, against a presumption of
fraud, it is his duty, if he expects to be believed, to lay before the court, so
far as is within his power, a complete and true revelation of all circumstances
surrounding the affair; and where he suppresses evidence or negligently fails to
call a witness supposed to know the facts, it may be presumed that the testimony
of the witness, if adduced, would be unfavorable.
The plaintiff did not try to show where or how he acquired the two thousand
pesos of ready money with which the purchase was made, and it does not appear
that his resources are sufficient to enable him readily to command that sum. The
proof of the existence of the debt of five hundred pesos which Juan Llenos is
supposed to have owed to the plaintiff and which constituted the balance of the
purchase price over and above the amount which was paid in cash rests almost
exclusively on the statement of the plaintiff himself. Upon these important
points the testimony of Juan Llenos, if adduced, might possibly have shed some
light; and the latter might in addition have explained something about what
became of the money. The effect of these observations cannot be evaded by saying
that the defendant might himself have summoned Juan Llenos and examined him in
court. The burden of proof was on the plaintiff; and the defendant could not be
expected to call one of the principles in the transaction which was
impeached.
It is of course somewhat perplexing to a court to weigh the uncontradicted
testimony of a witness against mere presumptions ; but it should not be
forgotten that a presumption of fraud stands as a witness, though mute, pointing
the finger of denunciation at the questioned transaction, and the imputation
thus cast upon it can only be removed by a full and honest revelation sufficient
to convince the court that the fraudulent intent did not exist.
It is not to be denied, that the secrecy of a transaction like that now under
consideration, arising from the fact that the conveyance was effected by a
private document, is a circumstance tending to cast suspicion upon it. Strong
considerations of public policy require that in such case the parties should be
held to strict proof of good faith; and this court cannot give its approval to a
doctrine which would permit the property of a failing and impleaded debtor to be
put beyond the reach of his creditors by a trick such as we believe was
attempted in this case. When a legal proceeding is ended and the sheriff goes to
take the property of the debtor in execution, he is not infrequently met with
the story that the property now belongs to some other person ; and a document is
produced to prove it which nobody, except the immediate parties, ever heard of
before. The courts must be excused if they refuse to listen with childish
credulity to pretensions of this character.
We do not overlook the circumstance that the supposed sale in this case was
effected by a contract with pacto de retro; and where such a sale is
made, as frequently occurs, to secure money intended as a mere loan, the
consideration is naturally less than the true value of the property. In such
case, if the bona fides of the original contract is not under
suspicion, the fact that the consideration for the sale is less than the value
of the property is not indicative of fraud. But where the original sale is
presumptively tainted with fraud, the entire transaction from the time of the
making of the contract until the consolidation of the title in the purchaser
should be considered as a whole, and as having about the same effect as if the
title had been absolutely transferred at once. Otherwise the contract of sale
with pacto de retro could be used as an instrument to shield parties in
their efforts to defraud creditors. This cannot be permitted.
In this connection reliance is placed by the appellee upon the case of Chiong
Veloso vs. Roa and Levering (37 Phil. Rep., 63) ; and it is urged that
said decision affords support for the view that the transaction in question,
having been accomplished by means of a contract of sale with pacto de
retro, cannot be considered fraudulent. It must be remembered, however,
that the original sale by contract of pacto de retro was made in the
case last cited to a purchaser who was admittedly a purchaser for value and in
good faith; and the question was not so much whether the original transaction
was fraudulent as whether the failure of the debtor to redeem was fraudulent, it
being the theory of the defendant that the plaintiff had colluded with the
debtor (who was a sister) and had redeemed the property with her money or for
her benefit. Moreover, it was found in that case that at the time of the
original conveyance the debtor had other property more than sufficient to
satisfy any judgment that might be recovered in the pending action.
The conclusion to which we come is that the questioned transaction, if not
actually simulated, was made in fraud of creditors and must be annulled. The
judgment entered in this cause in the court below must accordingly be reversed;
and judgment will be here entered dismissing the complaint of Eladio Alpuerto
and requiring him to surrender the three parcels of property described in the
complaint to Eustaquio Lopez, as administrator of the estate of Jose Perez
Pastor, deceased. It is also declared that the document (Exhibit A), purporting
to be a contract of sale conveying the property in question from Juan Llenos to
Eladio Alpuerto, acknowledged before a notary public upon December 3, 1914, was
executed in fraud of creditors and the same is hereby annulled. No special
adjudication as to costs will be made. So ordered.
Torres, Johnson, Carson, and Avanceña, JJ., concur.
Fisher, J., dissents with whom concurs Malcolm, J.
[1] R. G. No. 9221, not published.
DISSENTING OPINION
FISHER, J., dissenting:
While we concur fully with the views expressed in the majority opinion
concerning the interpretation of articles 1225 and 1227 of the Civil Code, we
are unable to agree with the conclusion that the transaction here in dispute is
fraudulent in fact. Assuming for the sake of the argument that the circumstances
surrounding the transaction, if unexplained, would warrant the presumption of
fraud, we consider that the presumption has been overcome in this case by the
positive and uncontradicted testimony of the plaintiff and of Batuigas that the
money was in fact paid as recited in the deed. The record shows that plaintiff
was possessed of sufficient means to permit him to make such a purchase; and
while it is true that the consideration named was less than the full value of
the property, the difference is no greater than is usual in sales under
pacto de retro such as this purports to have been. This difference in
value, rather than tending to show a fraudulent intent, tends to negative it.
During the period within which the right to repurchase is reserved, which in
this case was two years, any judgment creditor of the vendor may exercise the
right to redeem. Consequently, in case of the simulation of a sale of this kind,
it is rather to be expected that the value will be inflated than
understated.
As regards the failure to call the other subscribing witnesses, this court,
following the general trend of judicial opinion, has held that no unfavorable
presumption arises in such a case when it appears that the witnesses were
equally available to both parties. The fact that a party refrains from cumbering
the record with merely corroborative evidence should not be considered to his
prejudice.