A

Accion pauliana is a recissory action to set aside contracts made in fraud of creditors. It is described as an essentially subsidiary remedy accorded under Article 1383 of the Civil Code. This means it can only be instituted when the party suffering damage has no other legal means to obtain reparation for the same.

For an accion pauliana to accrue, the following requisites must concur:

1. The plaintiff asking for rescission must have a credit prior to the alienation. The date the credit antedates the alienation is important.
2. The debtor must have made a subsequent contract conveying a patrimonial benefit to a third person.
3. The creditor must have no other legal remedy to satisfy his claim.
4. The act being impugned is fraudulent.
5. The third person who received the property conveyed is an accomplice in the fraud.

An accion pauliana thus also presupposes certain prior steps:

1. A judgment against the debtor.
2. The issuance of a writ of execution for the satisfaction of the judgment.
3. The failure of the sheriff to enforce and satisfy the judgment, meaning the creditor must have exhausted the property of the debtor.

The action for rescission in fraud of creditors (accion pauliana) can be brought by the injured party (creditor) or their heir or successor-in-interest. It can also be brought by creditors by virtue of Article 1177 of the Civil Code (accion subrogatoria).

The prescriptive period for an action for rescission based on fraud of creditors (accion pauliana) is four years. This period is counted from the discovery of the fraud.

Certain alienations are presumed fraudulent in the context of accion pauliana:

• Alienations by gratuitous title are presumed fraudulent when the debtor did not reserve sufficient property to pay all debts contracted BEFORE the donation.
• Alienations by onerous title are presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. However, the design to defraud creditors must be proved by the law of evidence. The presumption of fraud in onerous alienations does not apply if the purchaser was in good faith and unaware of the relationship or circumstances indicative of collusion.