MANUEL ORIA, plaintiff & appellant, vs.
JOSE MCMICKING, sheriff of the ⇒ Nothing of value seems to be delivered by Manuel in
City of Manila, Gutierrez Hermanos, Miguel Gutierrez de Celis, Daniel
Perez & Leopoldo Criado, defendants & appellees. [1912]
⇒ Case #1:August 1909: Gutierrez Hermanos (GH) brought an action vs Oria
Hermanos (OH) to recover P147,204.28.
⇒ Case #2: March 1910: GH instituted another action vs OH to recover
P12,318.57.
⇒ OH, on account of the expiration of their agreement of co-partnership
dissolved their relations & entered into liquidation. OH partners are brothers
Tomas Oria, Casimiro Oria & Adolfo Fuster Roble. Tomas, acting for
himself & on behalf of his other partners, entered into a contract w/his son,
Manuel Oria, for the purpose of selling & transferring to Manuel, his heirs &
assigns all properties of OH.
1. Purchase price: P274k to be paid in installments w/in 12 yrs. Payment
must not be less than P10k/year w/the balance settled at the end of the
12yr-period. During the last 6 yrs., Manuel will pay an interest of 3%/yr
on the price stipulated/part thereof unpaid at such time, provided that
there is a mutual obligation & interest payable annually.
2. Manuel will pay the 3 partners P150.00/month while they remain in the
Philippines.
3. Manuel can’t sell, alienate, transfer or mortgage, wholly or partially the
vessels, real estate & branch stores properties w/o written
authorization of Tomas as liquidator of the firm while the sale is not
fully satisfied.
4. Manuel cedes gratuitously a dwelling house in Laoang to be used by
Tomas as a liquidation office for 2 yrs.
5. Tomas & Adolfo engage & undertake to place their personal services at
the disposal of Manuel in the management & conduct of the property &
business sold during the time that they are in the Philippines & for a
maximum period of 12 yrs.
⇒ Case #2 was decided ordering OH to pay GH. Sheriff
demanded that Tomas, as liquidator, make the payment of the said
judgment. Since there were no more funds to pay the same, the sheriff
levied upon steamer Serantes & announced its sale at public auction.
Manuel wrote a letter 3 days before the sale, claiming that he was the
rightful owner of the steamer w/c was sold to him by OH. Sheriff proceeded
w/the sale wherein GH subsequently bought the steamer. Thus, Manuel
instituted this action.
⇒ Lower Court: Case was dismissed & judgment in favor of
defendants & against Manuel was rendered.
Issue & Ratio: WON the sale from OH to Manuel was valid as against GH, a
creditor of the company. – NO.
⇒ At the time of the sale, the value of the assets of OH was
P274k. When the sale was made, actions were pending against OH by one
single creditor for the aggregate sum of P160k.
⇒ Buyer was Tomas’ son & nephew of the other partners.
consideration of the sale nor did he give any security for the payments
provided for.
⇒ Buyer was 25 yrs old, w/no pretense that he owned any
property/business at the time of the sale. He was merely a student w/o
assets & w/o gainful occupation.
⇒ Manuel knew that at the time of the sale, 2 suits had already
been instituted against the company whose assets he was buying & he well
knew that if the cases should be decided against OH, judgment would be
paid out of the property he was taking over or they would not be paid at all.
⇒ Sale was w/o consideration considering that it was sold to an
impecunious (penniless) & vocationless youth who knew nothing about the
business he received & whose management skills was unknown, w/o a
penny being paid down, w/o any security whatever. It is an unusual
proceeding devoid of care & caution & outside the well-defined lines of
ordinary business transactions, as to startle any person interested in the
concern.
⇒ OH would not have made a similar contract w/a stranger.
⇒ Prohibition in the contract against the sale of certain
properties by Manuel offers no protection whatsoever to the creditors of
OH. It was not a security since the parties can waive & release it at
pleasure.
⇒ Question to ask would be: whether the conveyance was a
bona fide transaction or a trick & contrivance to defeat creditors or whether
it conserves to the debtor a special right or does it prejudice the rights of
creditors. Sale must be founded on good consideration AND made with a
bona fide intent. Defect in either element, even if contract is good between
the parties, would make it voidable as to creditors. Whatever fraud creates,
justice will destroy.
⇒ All 7 badges of fraud are present in this case:
a. The fact that the consideration of the conveyance
is fictitious or is inadequate.
b. A transfer made by a debtor after suit has been
begun and while it is pending against him.
c. A sale upon credit by an insolvent debtor.
d. Evidence of large indebtedness or complete
insolvency.
e. The transfer of all or nearly all of his property by a
debtor, especially when he is insolvent or greatly embarrassed
financially.
f. The fact that the transfer is made between father
and son, when there are present other of the above circumstances.
g. The failure of the vendee to take exclusive
possession of all the property.
⇒ The sale left the creditors w/o recourse with
nothing to satisfy their claims at the end of the long wait. Declaring the sale
 fraudulent & void as to GH was proper in so far as necessary to permit the
collection of its judgment. No proof that Manuel was the owner/entitled to
the possession of the steamer at the time of the levy & sale or that he was
damaged thereby. Thus, GH had the rt to make the levy & test the validity
of the sale in that way w/o first resorting to a direct action to annul the sale.
Creditor may attack the sale by ignoring it & seizing under his execution the
property/necessary portion thereof, w/c is the subject of the sale.
Holding: Judgment affirmed.