Universal Food Corporation vs CA that only the superintendent be retained in the
corporation, and recalling several employees
Topic: Rescission; Article 1380 connected with the manufacture of the
Mafran Sauce. Because of the multiple
memoranda issued and without plaintiff
Facts: Magdalo being recalled back to work, he filed
the action for the rescission of the Bill of
Plaintiff Magdalo Francisco invented a
Assignment. A month later, defendant sent a
formula popularly known as Mafran Sauce
letter to plaintiff requesting him to report for
which has a trademark registered under his
duty but the latter declined as the case was
name. Because he did not have a sufficient
already pending in court.
capital to finance the expansion of his
business, he entered into a contract with RTC Ruling: Dismissed the plaintiffs'
defendant Universal Food Corporation, after complaint as well as the defendant's claim for
a series of negotiations with its President and damages and attorney's fees, with costs
General Manager, Tirso Reyes, A “Bill of against the former
Assignment” was executed on May 11, 1960.
CA Ruling: Ruled in favor of plaintiff
Plaintiff Magdalo was appointed as Chief Magdalo, ordered defendant corporation
Chemist with a monthly salary of Php 300.00 return to plaintiff Magdalo his Mafran sauce
while plaintiff Victoriano Francisco was trademark and formula, to pay him his
appointed as auditor and superintendent monthly salary of P300.00 from December 1,
receiving Php 250.00 as monthly salary. 1960, until the return to him of said
When Plaintiff Magdalo prepares the secret trademark and formula, plus attorney's fees in
materials inside the laboratory, he never the amount of P500.00, with costs against
allowed anyone to accompany him in order to defendant.
keep the secret formula to himself. At one
point the President and General Manager Issue:
requested that Magdalo allow one or two of Whether or not the rescission of the Bill of
his family members to observe his Assignment is proper
preparation of the Mafran Sauce but the latter
refused although he expressed a willingness Held:
to share the formula as long as it is kept in a
safe, for future purposes in case he gets Yes. The Supreme Court held that the general
incapacitated. rule in the rescission of a contract is that the
same will not be permitted for a slight or
Due to the scarcity and high prices of the raw casual breach, but only for such substantial
materials, defendant issued a memorandum and fundamental breach as would defeat the
ordering that the salary of plaintiff Magdalo very object of the parties in making the
be stopped for the time being until the agreement. Article 1383 of the New Civil
operations of the corporation resume. Code provides that rescission is a subsidiary
Another memorandum was issued ordering remedy which cannot be instituted except
when the party suffering damage has no other 2. A transfer made by a debtor
legal means to obtain reparation for the same. after suit has been begun and while it is
In the case at bar, petitioner corporation pending against him.
violated the Bill of Assignment by 3. A sale upon credit by an
terminating the services of Magdalo insolvent debtor.
Francisco without lawful and justifiable 4. Evidence of large
cause. It evident in the Bill of Assignment indebtedness or complete insolvency.
that one of the considerations was that 5. The transfer of all or nearly
Magdalo be employed permanently by the all of his property by a debtor, especially
when he is insolvent or greatly
corporation, as stated in the contract that his embarrassed financially.
monthly salary of Php 300.00 should
6. The fact that the transfer is
continue “unless death or other disabilities
made between father and son; when there
supervened.” are present other of the above
circumstances.
Article 1385 of the new Civil Code provides
that rescission creates the obligation to return
7. The failure of the vendee to
take exclusive possession of all the
the things which were the object of the property.
contract. The Supreme Court ordered
The case at bar presents every one of the
petitioner Universal Corporation to return
badges of fraud above enumerated. Tested
and restore to plaintiff Magdalo the right to
by the inquiry, does the sale prejudice the
the use of his Mafran sauce trademark and
rights of creditors, the result is clear. The
formula, to pay Magdalo his monthly salary
sale in the form in which it was made
of P300 from December 1, 1960, until the
leaves the creditors substantially without
date of finality of the judgment with legal
recourse. The property of the company is
interest until fully paid plus attorney’s fees.
gone, its income is gone, the business
Oria vs Mcmicking itself is likely to fail, the property is being
dissipated, and is depreciating in value.
In the consideration of whether or not As a result, even if the claims of the
certain transfers were fraudulent, courts creditors should live twelve years and the
have laid down certain rules by which the creditors themselves wait that long, it is
fraudulent character of the transaction more than likely that nothing would be
may be determined. The following are found to satisfy their claims at the end of
some of the circumstances attending sales the long wait. (Regalado vs. Luchsinger
which have been denominated by the & Co., 5 Phil. Rep., 625; art. 1297, Civil
courts badges of fraud: Code, par. 1; Manresa's Commentaries,
vol. 8, pp. 713-719.)
1. The fact that the
consideration of the conveyance is ctitious Since the record shows that there was no
or is inadequate. property with which the judgment in
question could be paid, the defendants
were obliged to resort to and levy upon
the steamer in suit. The court below was respondents. Petitioner claimed that
correct in nding the sale fraudulent and there was fraudulent transfer leaving no
void as to Gutierrez Hermanos in so far sufficient properties to pay her
obligations with her and that the deed of
as was necessary to permit the donation was not antedated. During the
collection of its hearing of the case, petitioner presented
judgment. As a corollary, the court evidence on Rosa's civil liability to one
below found that the evidence failed to Victoria Suarez in the amount of
show that the plaintiff was the owner or P169,000.
For her defense, Rosa denied liability
entitled to the possession of the steamer
and the alleged antedating of the deed.
in question at the time of the levy and sale
The trial court rendered judgment in
complained of, or that he was damaged favor of petitioner, ordered the
thereby. Defendant had the right to make rescission of the contract and declared
the levy and test the validity of the sale in the titles in the name of Rosa's children
that way, without rst resorting to a direct null and void.
action to annul the sale. The creditor may On appeal, the Court of Appeals
attack the sale by ignoring it and seizing reversed the trial court and dismissed
under his execution the property, or any the accion pauliana. It ruled that the
necessary portion thereof, which is the deed of donation was not fraudulent
transfer as respondent debtor Rosa still
subject of the sale.
owns 4 parcels of land sufficient to cover
For these reasons the judgment is af rmed, her debts to petitioner, that the
without special nding as to costs. So notarized deed of donation, a public
document in the absence of convincing
ordered.
evidence that the notary and the parties
antedated the instrument, is evidence of
the fact that gave rise to its execution
Siguan vs. Lim and of the date thereof.
Facts: Issue: WON the CA erred in dismissing
the rescission?
Respondent Rosa was charged by
petitioner with two counts of violation Held: No. The Supreme Court held that
of Batas Pambansa Blg. 22 for issuing contracts undertaken in fraud of creditors
checks, in the total amount of P541,668, are rescissible when the latter cannot in
dishonored by the bank for the reason of any other manner collect the claims due
"account closed." The conviction was them; that rescission is but a subsidiary
affirmed by the Court of Appeals and is remedy which cannot be instituted except
now pending review with this Court.
when the party suffering damage has no
Petitioner Siguan, thereafter filed accion
other legal means to obtain reparation for
pauliana against respondent Rosa to
rescind, the notarized deed of donation the same. In the case at bar, respondent
over 4 parcels of land Rosa executed in Rosa has 4 other real properties, hence,
favor of her three children, the other the presumption of fraud will not come
into play; and that a party cannot invoke
the credit of others to justify rescission of
the deed of donation. CA decision
affirmed in toto.
