Article 1387

 Article 1387 - All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation.

Alienation by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated and need not have been obtained by the party seeking the rescission.

In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by the law of evidence.

The Statutory presumptions of fraud in Art. 1387are:

1. Alienation by gratuitous title

Example: 

R made a donation of a parcel of land to E. Before the date of the donation, R had contracted several debts. With the donation to E, the remaining property of R is not sufficient to pay all his debts. 

       2. Alienation by onerous title

Example: 

If the contract is sale in the previous example; the sale to E is not resumed fraudulent. The creditors of R must show that the conveyance will prejudice their rights. However, the presumption of fraud will arise after some judgment has been issued against him. 

Fraud Presumed - this article presumed the existence of fraud made by the debtor. Thus, in the absence of satisfactory evidence, the alienation was held fraudulent because it was made after a judgment had been rendered. This presumption is not applicable when the alienation of the property was made before the judgment. 

Rebuttal of presumption - by satisfactory and convincing evidence. 

Proof of Fraud - to determine fraudulent transactions the court established the following rules:

1. The fact that the consideration of the conveyance s inadequate 
2. A transfer made by the debtor after suit has been begun and while it is pending against him. 
3. A sale upon credit by an insolvent debtor
4. Evidence of large indebtedness or complete insolvency 
5. Transfer of all or almost all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially
6. The fact that the transfer is made between father and son when they are present any of the above circumstance
7. Failure of the vendee to take exclusive possession of all the property 

Effect of Fraud - generally it makes the obligation rescissible however if the transferee acquired the thing in good faith and for valuable consideration, rescission will not be allowed. 

G.R. No. L-25650     June 11, 1975

ISIDORA L. CABALIW and SOLEDAD SADORRA, petitioners,

vs.

SOTERO SADORRA, ENCARNACION SADORRA, EMILIO ANTONIO, ESPERANZA RANJO, ANSELMO RALA, BASION VELASCO, IGNACIO SALMAZAN, and THE HONORABLE COURT OF APPEALS, respondents.

MUNOZ PALMA, J.:

Facts: Isidora Cabaliw (2nd wife of Benigno Sadorra) filed a complaint against her husband named Benigno Sadorra for the abandonment made by the latter. They have a daughter named Soledad Sadorra. During their marriage they acquired two (2) parcels of land located in Nueva Vizcaya. On January 30, 1933, judgment was rendered requiring Benigno Sadorra to pay his wife the amount of P75.00 a month in terms of support as of January 1, 1933, and P150.00 in concept of attorney’s fees and the costs but Benigno failed to comply with the judgement of the court. Isidora filed a motion to cite Benigno Sadorra for contempt and the Court of First Instance of Manila authorized Isidora to take possession of the conjugal property, to administer the same, and to avail herself of the fruits thereof in payment of the monthly support in arrears. With this order of the Court, Isidora proceeded to Nueva Vizcaya to take possession of the aforementioned parcels of land, and it was then that she discovered that her husband had sold them to his son-in-law Sotero. On February 1, 1940, Isidora filed with the Court of First Instance of Nueva Vizcaya against her husband and Sotero Sadorra for the recovery of the lands in question on the ground that the sale was fictitious; at the same time a notice of lis pendens was filed with the Register of Deeds of Nueva Vizcaya. In May of 1940, Benigno Sadorra died.

Issue: Is there a presumption of fraud against Sotero Sadorra?

Ruling: Yes, it was stated on Art. 1387 that “Alienation by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated and need not have been obtained by the party seeking the rescission.” the presumption of fraud was established at the time of the conveyance. The fact that Sotero was living with his father-in-law and he knew that there was a judgment directing the latter to give a monthly support to his wife Isidora and that his father-in-law was avoiding payment and execution of the judgment. It was known to Sotero that his father-in-law had no properties other than those two parcels of land which were being sold to him. The fact that a vendor transfers all of his property to a third person when there is a judgment against him is a strong indication of a scheme to defraud one who may have a valid interest over his properties. The close relationship between Benigno and Sotero is called to be a badge of fraud.