UNIVERSAL FOOD CORPORATION VS.

CA and shall have absolute control and supervision over the

laboratory assistants and personnel and in the purchase
and safekeeping of the chemicals used in the preparation
FACTS: of said Mafran sauce and that said positions are permanent
in nature.
This is a petition for certiorari by the UFC against
In line with the terms and conditions of the Bill of
the CA decision of February 13, 1968 declaring the BILL
Assignment, Magdalo Francisco was appointed Chief
OF ASSIGNMENT rescinded, ordering UFC to return to
Chemist with a salary of P300.00 a month. Magdalo
Magdalo Francisco his Mafran sauce trademark and to pay
Francisco kept the formula of the Mafran sauce secret to
his monthly salary of P300.00 from Dec. 1, 1960 until the
himself. Thereafter, however, due to the alleged scarcity
return to him of said trademark and formula.
and high prices of raw materials, on November 28, 1960,
Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a
In 1938, plaintiff Magdalo V. Francisco, Sr.
Memorandum duly approved by the President and General
discovered a formula for the manufacture of a food
Manager Tirso T. Reyes that only Supervisor Ricardo
seasoning (sauce) derived from banana fruits popularly
Francisco should be retained in the factory and that the
known as MAFRAN sauce. It was used commercially since
salary of plaintiff Magdalo V. Francisco, Sr., should be
1942, and in the same year plaintiff registered his
stopped for the time being until the corporation should
trademark in his name as owner and inventor with the
resume its operation.
Bureau of Patents. However, due to lack of sufficient
capital to finance the expansion of the business, in 1960, On December 3, 1960, President and
said plaintiff secured the financial assistance of Tirso T. General Manager Tirso T. Reyes, issued a memorandum to
Reyes who, after a series of negotiations, formed with Victoriano Francisco ordering him to report to the factory
others defendant Universal Food Corporation eventually and produce "Mafran Sauce" at the rate of not less than
leading to the execution on May 11, 1960 of the 100 cases a day so as to cope with the orders of the
aforequoted "Bill of Assignment" (Exhibit A or 1). corporation's various distributors and dealers, and with
instructions to take only the necessary daily employees
On May 31, 1960, Magdalo Francisco entered into without employing permanent employees. Again, on
contract with UFC stipulating among other things that he December 6, 1961, another memorandum was issued by
be the Chief Chemist and Second Vice-President of UFC the same President and General Manager instructing the
Assistant Chief Chemist Ricardo Francisco, to recall all Francisco is not entitled to rescission valid?
daily employees who are connected in the production of
Mafran Sauce and also some additional daily employees RULING:
for the production of Porky Pops. On December 29, 1960,
another memorandum was issued by the President and 1. No. Certain provisions of the bill would lead
General Manager instructing Ricardo Francisco, as Chief one to believe that the formula itself was transferred. To
Chemist, and Porfirio Zarraga, as Acting Superintendent, quote, “the respondent patentee "assign, transfer and
to produce Mafran Sauce and Porky Pops in full swing convey all its property rights and interest over said
starting January 2, 1961 with further instructions to hire Mafran trademark and formula for MAFRAN SAUCE
daily laborers in order to cope with the full blast operation. unto the Party of the Second Part," and the last
Magdalo V. Francisco, Sr. received his salary as Chief paragraph states that such "assignment, transfer and
Chemist in the amount of P300.00 a month only until his conveyance is absolute and irrevocable (and) in no case
services were terminated on November 30, 1960. On shall the PARTY OF THE First Part ask, demand or sue
January 9 and 16, 1961, UFC, acting thru its President and for the surrender of its rights and interest over said
General Manager, authorized Porfirio Zarraga and Paula MAFRAN trademark and mafran formula."
de Bacula to look for a buyer of the corporation including
its trademarks, formula and assets at a price of not less “However, a perceptive analysis of the entire
than P300,000.00. Due to these successive memoranda, instrument and the language employed therein would lead
without plaintiff Magdalo V. Francisco, Sr. being recalled one to the conclusion that what was actually ceded and
back to work, he filed the present action on February 14, transferred was only the use of the Mafran sauce formula.
1961. Then in a letter dated March 20, 1961, UFC requested This was the precise intention of the parties.”
said plaintiff to report for duty, but the latter declined the
request because the present action was already filed in The SC had the following reasons to back up the
court. above conclusion. First, royalty was paid by UFC to
Magdalo Francisco. Second, the formula of said Mafran
ISSUES: sauce was never disclosed to anybody else. Third, the Bill
1. Was the Bill of Assignment really one that acknowledged the fact that upon dissolution of said
involves transfer of the formula for Mafran sauce itself? Corporation, the patentee rights and interests of said
2. Was petitioner’s contention that Magdalo trademark shall automatically revert back to Magdalo
Francisco. Fourth, paragraph 3 of the Bill declared only
the transfer of the use of the Mafran sauce and not the Siguan vs. Lim
formula itself which was admitted by UFC in its answer.
Fifth, the facts of the case undeniably show that what was G.R. No. 134686, 19 November 1999
transferred was only the use. Finally, our Civil Code allows
only “the least transmission of right, hence, what better FACTS:
way is there to show the least transmission of right of the
transfer of the use of the transfer of the formula itself.” On 25 and 26 August 1990, respondent issued two Metrobank
checks to petitioner. However, the checks were dishonored for
the reason account closed. After demands to make good the
2. No. Petitioner’s contention that Magdalo
checks proved futile, a criminal case for violation of Batas
Francisco’s petition for rescission should be denied Pambansa Blg. 22 was filed by the petitioner with the Regional
because under Article 1383 of the Civil Code of the Trial Court (RTC) of Cebu City. The lower court convicted the
Philippines rescission can not be demanded except when respondent. On 31 July 1990 respondent was also charged with
the party suffering damage has no other legal means to estafa by a certain Victoria Suarez. Respondent was acquitted
obtain reparation, was of no merit because “it is predicated but held civilly liable.
on a failure to distinguish between a rescission for breach
of contract under Article 1191 of the Civil Code and a On 2 July 1991, a Deed of Donation conveying the parcels of
rescission by reason of lesion or economic prejudice, under land and purportedly executed by respondent on 10 August
Article 1381, et seq.” This was a case of reciprocal 1989 in favor of her children was registered. On 23 June 1993,
obligation. Article 1191 may be scanned without disclosing petitioner filed an accion pauliana against respondent and her
anywhere that the action for rescission thereunder was children to rescind the questioned Deed of Donation. She
alleges that respondent and her children conspired to
subordinated to anything other than the culpable breach of
fraudulently transfer all her real property to her children in bad
his obligations by the defendant. Hence, the reparation of
faith and in fraud of creditors, including her.
damages for the breach was purely secondary. Simply put,
unlike Art. 1383, Art. 1191 allows both the rescission and The trial court ordered the rescission of the deed of donation.
the payment for damages. Rescission is not given to the But upon appeal, the CA reversed the decision contending that
party as a last resort, hence, it is not subsidiary in nature. two of the requisites for filing an accion pauliana were absent,
namely, (1) there must be a credit existing prior to the
celebration of the contract; and (2) there must be a fraud, or at
least the intent to commit fraud, to the prejudice of the creditor Article 1387, first paragraph, of the Civil Code provides: All
seeking the rescission. The CA argues the deed of donation contracts by virtue of which the debtor alienates property by
appears to have been executed in 1989 prior to any credit. gratuitous title are presumed to have been entered into in
fraud of creditors when the donor did not reserve sufficient
ISSUES: property to pay all debts contracted before the donation.
Likewise, Article 759 of the same Code, second paragraph,
Whether or not the Deed of Donation executed by respondent states that the donation is always presumed to be in fraud of
Rosa Lim in favor of her children be rescinded for being in fraud creditors when at the time thereof the donor did not reserve
of her alleged creditor, petitioner Maria Antonia Siguan. sufficient property to pay his debts prior to the donation.

RULING: For this presumption of fraud to apply, it must be established

that the donor did not leave adequate properties which
No. The alleged debt of respondent in favor of petitioner was creditors might have recourse for the collection of their credits
incurred in August 1990, while the deed of donation was existing before the execution of the donation. As earlier
purportedly executed on 10 August 1989. Article 1381 of the discussed, petitioners alleged credit existed only a year after
Civil Code enumerates the contracts which are rescissible, and the deed of donation was executed. She cannot, therefore, be
among them are those contracts undertaken in fraud of said to have been prejudiced or defrauded by such alienation.
creditors when the latter cannot in any other manner collect Evidence also disclose that respondent still had other
the claims due them. The action to rescind contracts in fraud of properties when the deed of donation was executed.
creditors is known as accion pauliana. For this action to prosper,
the following requisites must be present: (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.
The fourth requisite for an accion pauliana to prosper is not
present either.