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FIRST DIVISION

NOTICE TIME: _ _ _ _ _ _ _ _ _ __

Sirs/Mesdames:
Please take notice that the Court, First Division, issued a
Resolution dated January 30, 2019 which reads as follows:

"G.R. No. 205093 (Zenaida B. Saddul v. Joseph F. Losloso

and Elizabeth F. Losloso). - This is a petition for review on
certiorari1 under Rule 45 of the Revised Rules of Court assailing the
January 26, 2012 Decision2 and November 8, 2012 Resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 117526. The CA reversed
and set aside the March 26, 2010 Order4 of Branch 27 of the Regional
Trial Court (RTC) of Bayombong, Nueva Vizcaya in Civil Case No.
6933 and dismissed the amended complaint for accion pauliana filed
by petitioner, Zenaida B. Saddul, against respondents, Joseph F.
Losloso and Elizabeth F. Losloso, for lack of merit.

Spouses Herminigildo Dela Cruz and Norma Caringal (spouses

Dela Cruz) obtained a loan from petitioner in the amount of
P5,680,000.00 upon the assurance that they are of sound and stable
financial status. This loan was secured by a chattel mortgage covering
certain motor vehicles, as well as post-dated checks payable on
different occasions. When the first check became due and
demandable, petitioner presented it to the drawee bank for payment
but it was dishonored for being drawn on a closed account. The
second check was similarly dishonored. Petitioner tried to
communicate with the spouses Dela Cruz and reach them personally
but to no avail. 5

- over - nine (9) pages ...

140/

Rollo, pp. 3-19.

2
Id. at 21-31. Penned by Associate Justice Edwin D. Sorongon and concurred in by Associate
Justices Noel G. Tijam (now a member of this Court) and Romeo F. Barza.
3
Id. at 40-41.
4
Jd.atlll-114.
5
Id. at 22.

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 RESOLUTION 2 G.R. No. 205093
January 30, 2019

Subsequently, petitioner learned that, on December 31, 2008

and January 9, 2009, spouses Dela Cruz were able to transfer, by way
of sale, two parcels of land in favor of their son, Harold Dela Cruz, his
wife Clariss, and Clariss' siblings, herein respondents Joseph and
Elizabeth Losloso. 6 Since petitioner could not effect any extrajudicial
demand on the spouses Dela Cruz due to their unknown whereabouts,
she decided to institute an accion pauliana against respondents by
seeking the rescission of the deeds of absolute sale entered into by
respondents and the spouses Dela Cruz, the cancellation of the
certificates of title in the name of respondents, and the restoration of
the same to the spouses Dela Cruz. 7

In their answer, respondents denied the allegations in the

amended complaint and, by way of special and affirmative defenses,
moved for its dismissal for failure to state a cause of action
considering that accion pauliana is a subsidiary remedy which can
only be instituted after all remedies available have been exhausted by
the creditor. 8 According to respondents, petitioner failed to show that
she has exhausted all other available legal remedies to satisfy her
claim before instituting the complaint. 9 Respondents also pointed out
that the spouses Dela Cruz's loan was secured by a chattel mortgage
over various motor vehicles. Petitioner should have first sought these
personal properties for the full and complete satisfaction of the loan
instead of prematurely filing a complaint for ace ion pauliana. 10

On July 1, 2009, respondents filed a motion to set a hearing on

the special and affirmative defenses pleaded in their answer.
However, the RTC denied it in its March 26, 2010 Order, 11 holding
that it is not mandated to grant the motion under the rules. It also did
not find the motion impressed with merit and held that, while the
action for rescission is subsidiary in nature, petitioner's allegation that
she is unable to collect despite having filed a separate civil case for
collection of sum of money against the spouses Dela Cruz already
sufficiently stated her cause of action against respondents. 12

Feeling aggrieved, respondents filed a petition for certiorari

before the CA assailing the March 26, 2010 Order 13 of the RTC.

- over -
140

6
Id.
Id.
Rollo, p. 87.
9
Id. at 91.
10
Id. at 85.
II Id.atlll-114.
12 Id. at 113-114.
13
Supra note 2.

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 RESOLUTION 3 G.R. No. 205093
January 30, 2019

As mentioned, the CA reversed and set aside the said Order in

its January 26, 2012 Decision,1 4 thus the dispositive portion of which
states:

WHEREFORE, the petition is GRANTED.

The assailed Order promulgated on March 26, 2010
of the Regional Trial Court, of Bayombong, Nueva
Vizcaya, Branch 27, is ANNULLED and SET
ASIDE. Consequently, the complaint for accion
pauliana is DISMISSED for lack of merit without
prejudice to whatever proper legal recourse the
private respondent might take against the Spouses
Herminigildo Dela Cruz and Norma Caringal.

SO ORDERED. 15

Petitioner filed a motion for reconsideration, 16 but the CA

denied it through its November 8, 2012 Resolution. 17

Hence, this petition.

The issue to be resolved in this case is whether the CA erred in

ruling that the RTC gravely abused its discretion when it denied
hearing respondents' affirmative defense that petitioner's amended
complaint was premature and dismissible for its failure to state a
cause of action for ace ion pauliana.

The appeal lacks merit.

The trial court has the discretion to conduct a preliminary

hearing on affirmative defenses pleaded in the answer. However,
when the defenses invoked by defendants as grounds for the dismissal
of the action appear to be indubitable, a preliminary hearing should be
conducted. 18 We adopt the following conclusions of the CA: 19

Having settled that a preliminary hearing is

subject to the discretion of the trial court, this leads
Us to the more important question on whether the
issues raised in the case at bar appears to be
indubitable or not.

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140
/

14
Rollo, pp. 21-31.
15
Id. at 31.
16
Id. at 32-38.
17
Supra note 3.
18
Gochan v. Gochan, G.R. No. 146089, December 13, 2001, 372 SCRA 256, 270.
19
Rollo, pp. 25-31.

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RESOLUTION 4 G.R. No. 205093
January 30, 2019

At the onset, [petitioner] filed a complaint for

Accion Pauliana pursuant to Article 1381 of the
Civil Code claiming that the conveyance of
properties made by the Spouses Dela Cruz
immediately after incurring a loan is a classic
example of a conveyance entered into in fraud of
creditors considering that the latter did not reserve
adequate properties to pay off the debts contracted
before the disposal. The action to rescind contracts
under Article 1381 of the Civil Code which is the
basis of [petitioner's] complaint has the following
essential requisites, to wit:

1. the plaintiff asking for

rescission has a credit prior to the
alienation, although demandable
later;
2. the debtor has made a
subsequent contract conveying a
patrimonial benefit to a third person;
3. the creditor has no other legal
remedy to satisfy his claim;
4. the act being impugned is
fraudulent;
5. the third person who received
the property conveyed, if it is by
onerous title, has been an accomplice
in the fraud. (Citations omitted.)

For [petitioner's] suit to prosper, it must allege

and contain the above enumerated elements. There
is no question with regard to the first two elements
considering that the same have remained
undisputed. The pith of the present controversy lies
on the third element that an accion pauliana can be
availed of only when there is no other available
legal remedy for the creditor to satisfy his claim.

In a string of cases, the Supreme Court held that

an accion pauliana is a remedy of last resort. This
means that this action only accrues when the
creditor has no other legal remedies to satisfy his
claim against the plaintiff. The disquisition by the
Court of Appeals stamped with the Supreme
Court's imprimatur in the case of Keh Hong Cheng
vs. Court of Appeals, et al. is particularly
instructive, thus:

xx xx

An accion pauliana accrues only

when the creditor discovers that he
has no other legal remedy for the

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140
/

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RESOLUTION 5 G.R. No. 205093
January 30, 2019

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 [debtor) 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. (Emphasis in the
original; citation omitted.)

The foregoing finds backing in a much recent

consolidated cases of Metropolitan Bank, et al. vs.
International Exchange Bank and Chuayuco Steel
Manufacturing vs. International Exchange Bank,
viz:

Under Article 1381 of the Civil

Code, an accion pauliana is an
action to rescind contracts in fraud of
creditors.

However, jurisprudence is clear

that the following successive
measures must be taken by a
creditor before he may bring an
action for rescission of an allegedly
fraudulent contract: (1) exhaust
the properties of the debtor
through levying by attachment
and execution upon all the

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140/

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RESOLUTION 6 G.R. No. 205093
January 30, 2019

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). It is thus
apparent that an action to rescind, or
an accion pauliana, must be of last
resort, availed of only after the
creditor has exhausted all the
properties of the debtor not exempt
from execution or after all other legal
remedies have been exhausted and
have been proven futile. (Emphasis
in the original; citation omitted.)

Here, it was not shown that [petitioner] has

exhausted other legal remedies to obtain relief other
than the institution of an accion pauliana. In fact,
what appears is that the loan was secured by a
chattel mortgage, thus, giving [petitioner] another
option in law to satisfy [her] claim against the
Spouses Dela Cruz thereby precluding them from
directly filing a complaint for accion pauliana. Her
claim that the properties subject of the chattel
mortgage [has] been attached by [other] creditors
becomes of no moment in light of the fact that she
did not exhaust other available remedies before
resorting to accion pauliana. Worse, there is still no
judgment or order of execution for the satisfaction
of her claim against the Spouses Dela Cruz upon
which [petitioner's] complaint was grounded.
Hence, her accion pauliana case has clearly no leg
to stand on. Besides, the filing of accion pauliana
cannot be justified based solely on her sweeping
conclusion that her credit cannot be fully satisfied
with. [Petitioner's] suit clearly lacks a cause of
action if not prematurely filed.

xx xx

It also appears that [petitioner's] complaint,

aside from being prematurely filed, failed to show
either that the Spouses Dela Cruz have no other
properties to satisfy a judgment award should her
collection case be decided in her favor. Clearly, she
has no material interest in the rescission of the
contract between the Spouses Dela Cruz and
[respondents]. Besides, her allegations of fraud are

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140 f' I

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 RESOLUTION 7 G.R. No. 205093
January 30, 2019

just mere presumptions sans concrete evidence or

even pronouncement by the competent court that
said spouses have the intention of defrauding her.

Based on the foregoing, there is merit in

[respondents'] contention that the court a quo
arbitrarily exercised its discretion in denying their
motion not because of the discretionary nature of a
preliminary hearing but due to the fact that there is
basically no cause of action against them for accion
pauliana. We find that the refusal to have a
preliminary·hearing notwithstanding the patent want
of cause of action is really a capricious exercise of
discretion brushing aside fundamental legal tenets
consistently applied in many Supreme Court
decisions having similar facts obtaining in the
present case.

In sum, We are convinced of the merits of

[respondents'] case that the court a quo erred in
denying to hear their affirmative defenses despite
the obvious feeble cause of [petitioner's] complaint.
For [risk] of being repetitive, just to accentuate Our
point, accion pauliana applies only when a creditor
cannot recover what is due him, in which case, the
creditor, armed with a favorable judgment, x x x
must prove that she earnestly sought other
properties to satisfy her judgment award but to no
avail. Otherwise, such disposition cannot just be
simply declared to have been disposed in [fraud] of
the creditors. Such is wanting in the present case,
hence, the dismissal of the complaint is in order. 20

Indeed, we have held that, before an action can properly be

commenced, all the essential elements of the cause of action must be
in existence, that is, the cause of action must be complete. All valid
conditions precedent to the institution of the particular action, whether
prescribed by statute, fixed by agreement of the parties, or implied by
law, must be performed or complied with before commencing the
action, unless the conduct of the adverse party has been such as to
prevent or waive performance or excuse non-performance of the
condition. 21

Further, the rules of procedure require that the complaint must

contain a concise statement of the ultimate or essential facts
constituting the plaintiffs cause of action. The test of the sufficiency
of the facts alleged in the complaint is whether or not, admitting the

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140 /
,/

20 Id.
21
Anchor Savings Bank v. Furigay, G.R. No. 191178, March 13, 2013, 693 SCRA 384, 395.

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 RESOLUTION 8 G.R. No. 205093
January 30, 2019

facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer of plaintiff. The focus is on the
sufficiency, not the veracity, of the material allegations. Failure to
make a sufficient allegation of a cause of action in the complaint
warrants its dismissal. 22

Here, petitioner filed an amended complaint for accion

pauliana, an action for rescission, which is subsidiary in nature, and
which may only be filed when the party suffering damage has no other
legal means to obtain reparation for the same. 23 However, the
amended complaint failed to allege the ultimate facts constituting its
cause of action and the prerequisites that must be complied with
before the action may be instituted. Petitioner alleged that she filed a
case for collection of a sum of money against the spouses Dela Cruz
before Branch 30, RTC ofBambang, Nueva Vizcaya, which allegedly
had already been decided on July 16, 2009 and which judgment
remained unsatisfied as properties owned by the spouses Dela Cruz
are yet to be found and attached. 24 Nonetheless, petitioner did not
attach in the amended complaint proof of failure to execute the
decision.

Moreover, the spouses Dela Cruz's loan was secured by a

Memorandum of Chattel Mortgage25 covering five motor vehicles.
Petitioner alleged in the amended complaint that these vehicles
became the subject of a writ of preliminary attachment and notice of
attachment issued by the RTC of Cauayan City, and a writ of
attachment and notice of attachment issued by the RTC of Ilagan City
in other civil cases for sum of money filed against the spouses Dela
Cruz. Further, these vehicles are now in the possession of the sheriffs
of the said courts. 26 However, the writs and notices attached to the
petition do not indicate which personal properties of spouses Dela
Cruz have been attached. In a notice of levy of personal properties and
real estate attached to the petition, 27 two vehicles were ordered to be
attached by the RTC of Ilagan City, which vehicles were also
mortgaged to petitioner. Even then, the amended complaint did not
indicate any effort on the part of petitioner to pursue her rights over
these and the other motor vehicles subject of the Memorandum of
Chattel Mortgage. The only conclusion that may be made in light of
the circumstances is that petitioner failed to exhaust all possible

- over -
140

22
Id. at 396
23 Id.
24
Rollo, pp. 48-49.
25
Id. at 56-58.
26
Id. at 47-48; 75, 77-79.
27
Id. at 79.

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 RESOLUTION 9 G.R. No. 205093
January 30, 2019

remedies before instituting a complaint for accion pauliana, which

consequently makes the amended complaint dismissible.

All told, the Court finds the allegations in petitioner's amended

complaint insufficient to establish her cause of action against
respondents. Hence, the CA correctly dismissed it for being
premature.

WHEREFORE, the petition is DENIED. The January 26,

2012 Decision and November 8, 2012 Resolution of the Court of
Appeals in CA-G.R. SP No. 117526 which annulled and set aside the
March 26, 2010 Order of the Regional Trial Court of Bayombong,
Nueva Vizcaya, Branch 27, in Civil Case No. 6933 and dismissed the
amended complaint are hereby AFFIRMED.

SO ORDERED."

Very truly yours,

LIBRA,l>A C. BUENAJ, '\

DivisH/n Clerk of Court').·'
140

Atty. Reonel B. Saddul Court of Appeals (x)

Counsel for Petitioner Manila
Banggot, Bambang (CA-G.R. SP No. 117526)
3702 Nueva Vizcaya
Atty. Jose Romeo S. Dela Cruz
Counsel for Respondents
Panganiban Street, Gate No. 4, Public Market
Santiago City, 3311 Isabela

The Hon. Presiding Judge

Regional Trial Court, Branch 27
Bayombong, 3700 Nueva Vizcaya
(Civil Case No. 6933)

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