Khe Hong Cheng v. Court of Appeals

Summary

This case involves an accion pauliana filed by Philam Insurance to rescind donations made by debtor Khe Hong Cheng to his children, allegedly in fraud of creditors. The main issue was when the four-year prescriptive period under Article 1389 of the Civil Code commenced to run. The Supreme Court ruled that accion pauliana is a subsidiary action of last resort that accrues only when the creditor discovers he has no other legal remedy to satisfy his claim. The prescriptive period begins not from registration of the fraudulent conveyance, but only after exhausting all legal means including obtaining judgment, securing writ of execution, and failing to satisfy the judgment due to debtor's lack of attachable property. Since Philam filed suit in February 1997, barely a month after discovering in January 1997 that Khe Hong Cheng had no attachable properties, the action had not prescribed. The decision clarifies the temporal requirements for accion pauliana and reinforces its nature as an extraordinary remedy.