Short answer. Possibly, but only if you have no other way to collect. Article 1381 makes contracts undertaken in fraud of creditors rescissible, but only when the creditor cannot collect the claim due to him in any other manner. If you still have other assets or remedies to pursue against your debtor, rescission is not yet available.
What the law says
Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them
Civil Code, Article 1381 — Which Contracts Are Rescissible. Read the full provision →
Fraud on creditors is one of five rescissible categories
Article 1381 lists the contracts the law treats as rescissible, and a transfer made to defraud creditors is one of them: those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. A transfer that a debtor arranges specifically to place property beyond a creditor's reach falls within this category, alongside contracts entered by guardians or representatives that cause a significant loss, and contracts over property already under litigation entered into without the proper knowledge or approval.
The condition that limits your remedy
The article does not give every creditor of a fraudulent transfer an automatic right to rescind. The rule is conditioned on the phrase "when the latter cannot in any other manner collect the claims due them." This means rescission of a fraudulent transfer is treated as a last resort, available only once the creditor has no other adequate way of satisfying the debt. If your debtor still owns other property or income you could pursue to collect what is owed, that alternative avenue generally has to be exhausted, or shown to be unavailable, before rescission of the specific transfer becomes the remedy.
Why the law imposes this limit
Rescission undoes a completed transaction and can affect the person who received the property, who may or may not have known about the fraud. Because rescission reaches beyond the debtor to disturb someone else's acquisition, the law reserves it for situations where the creditor genuinely has no other path to recovery. This is why simply showing bad intent on the debtor's part is not, by itself, enough. The creditor also has to show that other means of collecting the debt are unavailable or have already been tried without success.
What this means for your situation
Before pursuing rescission of the transfer, take stock of what other assets or remedies remain against your debtor. If nothing else is left to satisfy the debt, and the transfer genuinely left your debtor without enough to pay what he owes you, you are in the situation Article 1381 addresses. If other property or means of collection do exist, that gap needs to be addressed first, since the article's own wording makes the absence of any other remedy a condition for rescission on this ground, not merely a favorable circumstance.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- The Wellex Group, Inc. vs. U-Land Airlines, Co., Ltd, G.R. No. 167519, January 14, 2015 — read the decision on LawPhil →
- Congregation of the Religious of the Virgin Mary, etc. vs. Emilio Orola, et al, G.R. No. 169790, April 30, 2008 — read the decision on LawPhil →
- Union Bank of the Phil. vs. Sps. Alfredo Ong etc, G.R. No. 152347, June 21, 2006 — read the decision on LawPhil →
- Dr. Restituto C. Buenviaje vs. Spouses Jovito R. and Lydia B. Salonga, et al, G.R. No. 216023, October 5, 2016 — read the decision on LawPhil →