Case Digest: Lee v. Bangkok Bank

GR. No. 173349, February 9, 2011




Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI), both owned by petitioners, entered into two separate Credit Line Agreements (CLAs) with Respondent Bangkok Bank Public Company, Limited.

The Lee family executed guarantees in favor of Bangkok Bank. Prior to the granting of the CLAs, Bangkok Bank conducted a property check on the Lee family and required Samuel to submit a list of his properties. Bangkok Bank, however, did not require the setting aside, as collateral, of any particular property to answer for any future unpaid obligation.

MDEC, MHI, and three other corporations owned by the Lee family filed before the Securities and Exchange Commission (SEC) a Consolidated Petition for the Declaration of a State of Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver. The SEC issued a Suspension Order enjoining the Lee corporations from disposing of their property.

Bangkok Bank instituted an action before the RTC, Branch 141 in Makati City to recover the loans extended to MDEC and MHI under the guarantees and was granted writ of attachment.

While enforcing the writs of preliminary attachment, Bangkok Bank discovered that the spouses Lee had executed a real estate mortgage over the subject Antipolo properties in favor of Asiatrust; and that the mortgage had previously been annotated on the titles.

Believing the REM and the foreclosure sale to be fraudulent, Bangkok Bank did not redeem the subject properties. As there had been no effort to redeem the properties, consequently, the TCTs covering the subject properties were consolidated in the name of Asiatrust.

Bangkok filed a suit in the RTC, which found no concrete proof of the alleged fraud committed by the Lee family and Asiatrust, more so, that of a collusion or conspiracy between them. Consequently, it ruled that Art. 1381(3) of the Civil Code does not apply. The appellate court reversed this decision, holding that fraud was perpetrated pursuant to the presumption in the second paragraph of Art. 1387 of the Civil Code, which provides that “alienations by onerous title are also presumed fraudulent when made by persons against whom … some writ of attachment has been issued.”

ISSUE: Whether or not the February 23, 1998 REM executed over the subject Antipolo properties and the April 15, 1998 foreclosure sale were committed in fraud of petitioners’ other creditors, and, as a consequence of such fraud, the questioned mortgage could, therefore, be rescinded


The petition is meritorious.

CIVIL LAW: Presumption of fraud

The presumption of fraud established under Art. 1387 does not apply to registered lands IF “the judgment or attachment made is not also registered.” In this case, while a judgment was made against the spouses Lee in favor of SBC on January 30, 1998, this, however, was not annotated on the titles of the subject properties. In fact, there is no showing that the judgment has ever been annotated on the titles of the subject properties.

Even assuming that Art. 1387 of the Code applies, the execution of a mortgage is not contemplated within the meaning of alienation by onerous title under the said provision. This term is “particularly applied to absolute conveyances of real property” and must involve a “complete transfer from one person to another.” A mortgage does not contemplate a transfer or an absolute conveyance of a real property.

Petition is GRANTED.