Philippine Supreme Court Jurisprudence

Philippine Supreme Court Jurisprudence > Year 1927 > September 1927 Decisions > G.R. No. 27178 September 10, 1927 - TIMOTEO UNSON v. SMITH, BELL & CO.

050 Phil 654:



[G.R. No. 27178. September 10, 1927.]

Voluntary insolvency of ’Central Capiz." TIMOTEO UNSON ET AL., claimants-appellees, v. SMITH, BELL & CO. ET AL., creditors-appellants.

Block, Johnston & Greenbaum and Alejandro de Aboitiz Pinaga for Appellants.

Felipe Ysmael for Appellees.


1. INSOLVENCY; ASSIGNEE; COMPROMISE. — Under statute authorizing the assignee to defend actions pending against the insolvent at the time of the adjudication in the same manner and with like effect as it might have been defended by the insolvent, the assignee has the power to make compromise; and in the absence of collusion or breach of trust, his action will be binding.

2. ID.; ATTACHMENT; PREFERENTIAL LIEN OF ATTACHING CREDITOR. — An attachment regularly issued and not dissolved by a subsequent adjudication of insolvency creates a provisional lien in favor of the attaching creditor which will entitle him to preference in the distribution of the assets of the insolvent, in the absence of a finding, upon issue made by the defendant in the attachment, that the attachment was obtained upon false allegations of fact.

3. ID.; ELECTION OF ASSIGNEE; PARTICIPATION OF SECURED CREDITOR IN ELECTION. — The fact that a creditor who has a valid attachment against an insolvent participates, illegally, in the election of the assignee, does not have the effect of depriving him of his lien. The law does not so declare; and a consequence of this kind cannot be deduced by implication, since forfeitures are not favored and will not be raised by the court in the absence of express provision.



This appeal has been brought by Smith, Bell & Co. and others, as ordinary creditors of the Capiz Central, a voluntary insolvent now in course of liquidation in the Court of First Instance of Iloilo, for the purpose of reversing an order of said court dated September 24, 1925, admitting the claims of Timoteo Unson and wife in the amount of P30,000; of Jose Altavas, in the amount of P8,000; and Antonio Belo, in the amount of P11,000; declaring that said three credits are preferential claims, and ordering that they shall be first satisfied out of the assets of the insolvent before payment of any part of the claims of other simple creditors.

A part of the same order that is now under appeal in this case was the subject of consideration in a previous appeal prosecuted to this court by another creditor (Voluntary Insolvency of the Capiz Central. Unson v. Urquijo, Zuloaga & Escubi, R. G. No. 26293.) 1 It is therefore unnecessary to repeat the facts set forth in the opinion of this court upon that appeal; and we shall limit our discussion to such features of the case as seem to be necessary to the proper understanding of the decision.

It appears that when this insolvency proceeding was instituted by the Capiz Central in the Court of First Instance of Iloilo, there were then pending against it, in the Court of First Instance of Capiz, three damage suits instituted by the claimant-appellees, Unson and wife, Jose Altavas, and Antonio Belo. Each of the plaintiffs in these cases had obtained an attachment against the property of the Capiz Central, which attachments were sued out in the sequence of the order of their names, as above written. The institution of the insolvency proceeding in the Court of First Instance of Iloilo had the effect of temporarily stopping the proceedings in the three damage suits; but the assignee in insolvency presently obtained permission from the court of insolvency in Iloilo for the continuation of the proceedings in the Capiz court. The latter court accordingly resumed proceedings in the cases mentioned, but no contentious trials were had, owing to the fact that the respective plaintiffs and the assignee in insolvency compromised the cases. By the terms of the compromise agreements the claims of the plaintiff were recognized as just, in the respective amounts mentioned in the order which is now under appeal. Said compromise agreements were accordingly approved by the Capiz court, with the reservation in each case that the determination of the question whether the credits of the three plaintiffs were entitled to preference by reason of the attachments which they had respectively sued out should be left to the court of insolvency in Iloilo. Accordingly, the three claims, which had now been reduced to judgment in the Capiz court, were presented to the court in Iloilo in order that the latter court might give recognition to the compromise judgments and pass upon the question of the preferential right. In determining these points the Iloilo court entered the order now under appeal, recognizing the three credits in the amounts adjudged by the Capiz court and declaring that they are entitled, successively, to preference over claims of unprepared creditors.

There are three propositions which appear to cover all controversial ground in this appeal. These will be dealt with in what appears to be their most natural order.

In the first place, it is contended for the appellants that an assignee in insolvency has no authority to enter into a compromise agreement in litigation to which he is a party and that consequently the judgments of the Capiz court, approving these agreements, were erroneous. We are of the opinion that this contention is not well-founded. The assignee in insolvency represents the mass of creditors, and the Insolvency Law recognizes his authority to prosecute an action on behalf of the insolvent and to defend any action pending at the time of the adjudication "in the same manner and with like effect as it might have been defended by the insolvent" (Act No. 1956, sec. 33). This authority naturally involves the right to enter into accord with the creditor with respect to the amount due and to make concessions by compromise. As long as the assignee acts in good faith, his authority to control the litigation seems to us unquestionable. Of course, if in any case it should be discovered that the assignee has acted collusively with the adverse party or has used bad faith in the performance of the trust reposed in him, the court, upon proper proceedings, at the instance of any creditor, would not be without power to give relief. In the case before us, no criticism is made of the assignee on the ground that he has acted in bad faith.

In the second place, it is contended that the Iloilo court erred in declaring that the credits pertaining to Unson, Altavas and Belo are entitled to preference by virtue of the attachments that had been sued out by them more than thirty days before the insolvency proceedings were begun. In the appeal of Urquijo, Zuloaga and Escubi (R. G. No. 26293, supra) we held that the attachments now under criticism had been regularly issued, that is, had been obtained in compliance with legal requirements. This means that the attaching creditors acquired provisional liens which must be given effect in the absence of a judicial finding that the writs were sued out upon false allegation is of fact. We are unable to discover from this record that the Capiz Central, or the assignee who succeeded it as defendant in the litigation instituted in the Capiz court, ever made any issue in that court upon the point of the falsity of the grounds of attachment. In combating an attachment the debtor party occupies substantially the position of an active litigant, and in order to be rid of the attachment or to obtain damages for the wrongful suing out of the writ, it is necessary for him to tender an issue and obtain a judicial declaration to the effect that the ground stated in the plaintiff’s affidavit upon which the writ was procured was non-existent. When it appears, as here, that an attachment has been regularly sued out, and there is nothing to show that the truth of the ground of attachment has ever been challenged by the defendant in the attach- ment, the lien must be given effect.

In the third place, as against the preferential claims of Jose Altavas and Antonio Belo, it is pointed out that they took part in the election of the assignee. It is therefore insisted that they have thereby waived their attachment lien, or should be considered estopped from asserting it. In this connection attention is directed to section 29 of Act No. 1956, wherein it is, among other things, declared that no claimant having an attachment on property of the debtor, duly recorded and not dissolved under the Act, shall be permitted to vote any part of his secured claim, at the election of the assignee, though after valuation of the security he may vote the residue. Again, in section 59 of the same Act it is, among other things, declared that a creditor having an attachment on property of the debtor shall be admitted as a creditor for the balance of the debt only, after deducting the value of the security.

These provisions do not seem to us to have the effect attributed to them by the appellants. The provision in section 29 undoubtedly prohibits the attaching creditor from voting his claim in the election of the assignee in so far as it is secured; and if a lienholder attempts to vote at such election, his right to do so can be challenged by any other creditor, and the ruling of the court upon his right to vote can thus be obtained. But the law does not declare that the voting of a claim by a creditor contrary to the provision cited shall have the effect of depriving him of his lien. A consequence of this kind cannot be deduced by mere implication. Forfeitures are not favored, and will not be raised by the court in the absence of express provision.

In conclusion we observe that the contentions made by the appellants in this case have been considered as if they had presented open questions in this litigation. Whether they should be so considered is an extremely debatable point, if reference be had to the issues involved in the appeal of Urquijo, Zuloaga and Escubi, in the same insolvency (R. G. No. 26293, supra), already decided by this court. In that case Urquijo, Zuloaga and Escubi had a claim for a large amount of money, which claim was found to be in part of a preferential nature and in part unsecured, and upon appeal to this court they combated the preferential right of the same three claimants who are now appellees here. As regards the unsecured part of their claim Urquijo, Zuloaga and Escubi were clearly in precisely the same right as the present claimant-appellants. But this court overruled the appeal in that case in so far as the appellants attacked the preferential right of the appellees, with the result that the preferential right was upheld. Does it not necessarily follow that the present appellants are concluded by the decision then made? We are not unmindful of the fact that some of the considerations urged upon the court in the present case for denying the preferential right in question were not presented in the appeal of Urquijo, Zuloaga and Escubi, but it is nevertheless true that the same preferential right was the subject of controversy there that is drawn in question in the present appeal, and the court had ample jurisdiction to determine the right. Although the appellants are different in the two cases, it would yet seem that the decision made in the first appeal should be decisive in the second, since the appellants in the first appeal were really prosecuting the appeal not only in their own behalf but substantially as representatives of all other creditors in the same right. However, having reached the conclusion on other grounds, that the present appeal is not maintainable, we are content to pass without decision the point with reference to the effect of the former judgment.

The judgment appealed from will be affirmed, and it is so ordered, with costs against the appellants.

Avanceña, C.J., Johnson, Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.


1. P. 160, ante.

Back to Home | Back to Main

ChanRobles On-Line Bar Review

ChanRobles Internet Bar Review :

ChanRobles MCLE On-line

ChanRobles Lawnet Inc. - ChanRobles MCLE On-line :

September-1927 Jurisprudence                 

  • G.R. No. 27484 September 1, 1927 - ANGEL LORENZO v. DIRECTOR OF HEALTH

    050 Phil 595

  • G.R. No. 26957 September 2, 1927 - PEOPLE OF THE PHIL. v. SIMEON YUSAY

    050 Phil 598

  • G.R. No. 26360 September 7, 1927 - PEOPLE OF THE PHIL. v. ERIBERTO CALLE

    050 Phil 616


    050 Phil 618

  • G.R. No. 26659 September 9, 1927 - GOVERNMENT OF THE PHIL. v. JOAQUIN SERNA

    050 Phil 624

  • G.R. No. 26672 September 9, 1927 - PROCESO ECHARRI v. FELICIANO GOMEZ

    050 Phil 629

  • G.R. No. 27054 September 9, 1927 - MACARIA SOLIS v. CHUA PUA HERMANOS

    050 Phil 636

  • G.R. Nos. 26853-26855 September 10, 1927 - PEOPLE OF THE PHIL. v. HIPOLITO UNDIANA

    050 Phil 641

  • G.R. No. 27143 September 10, 1927 - QUINTILLANA SAMSON v. MANUEL CARRATALA

    050 Phil 647

  • G.R. No. 27178 September 10, 1927 - TIMOTEO UNSON v. SMITH, BELL & CO.

    050 Phil 654

  • G.R. No. 27213 September 10, 1927 - PEOPLE OF THE PHIL. v. LINO S. TAN

    050 Phil 660

  • G.R. No. 27449 September 10, 1927 - CHUA PUA HERMANOS v. REGISTER OF DEEDS OF BATANGAS

    050 Phil 670

  • G.R. Nos. 26598 & 26599 September 17, 1927 - SIA SIMEON VELEZ v. RAMON CHAVES

    050 Phil 676

  • G.R. No. 26671 September 17, 1927 - MUNICIPALITY OF ORION v. F. B. CONCHA

    050 Phil 679

  • G.R. No. 27209 September 17, 1927 - ANDRES M. GABRIEL v. PROVINCIAL BOARD OF PAMPANGA

    050 Phil 686

  • G.R. No. 27020 September 19, 1927 - ASIA BANKING CORPORATION v. M. J. MCCUENE

    050 Phil 694

  • G.R. No. 27498 September 20, 1927 - IN RE: JOSEFA TONGCO v. ANASTACIA VIANZON

    050 Phil 698

  • G.R. No. 28320 September 20, 1927 - RUFO SAN JUAN v. PERFECTO ABORDO

    050 Phil 703

  • G.R. No. 26849 September 21, 1927 - GOVERNMENT OF THE PHIL. v. MARTINO TOMBIS TRIÑO

    050 Phil 708

  • G.R. No. 26771 September 23, 1927 - RUPERTO SANTOS v. PUBLIC SERVICE COMMISSION

    050 Phil 720

  • G.R. No. 27180 September 24, 1927 - TEODORO DE CASTRO v. MARINO OLONDRIZ

    050 Phil 725

  • G.R. No. 26538 September 27, 1927 - PEOPLE OF THE PHIL. v. FLORENTINO SORIANO

    050 Phil 735

  • G.R. No. 26844 September 27, 1927 - ISABEL FLORES v. TRINIDAD LIM

    050 Phil 738

  • G.R. No. 26941 September 27, 1927 - JUAN ARQUIZA LUTA v. MUNICIPALITY OF ZAMBOANGA

    050 Phil 748

  • G.R. No. 27048 September 27, 1927 - SILVESTRA BARON v. ANSELMO SAMPANG

    050 Phil 756

  • G.R. No. 27552 September 27, 1927 - MANILA MERCANTILE Co. v. MARIANO FLORES

    050 Phil 759

  • G.R. No. 28117 September 27, 1927 - LORENZA SUÑGA v. FRANCISCO TINGIN

    050 Phil 766

  • G.R. No. 27110 September 28, 1927 - PEOPLE OF THE PHIL. v. GUILLERMO MIANA

    050 Phil 771

  • G.R. No. 27120 September 28, 1927 - JUANA AGAPITO v. CANDIDO MOLO

    050 Phil 779

  • G.R. No. 26708 September 29, 1927 - PEOPLE OF THE PHIL. v. ALEJO RESABAL

    050 Phil 780

  • G.R. No. 27483 September 29, 1927 - ENCARNACION RAMOS v. JUSTO DUEÑO

    050 Phil 786

  • G.R. No. 27895 September 30, 1927 - CLEMENTE REYES v. PABLO BORBON

    050 Phil 791

  • G.R. No. 27040 September 29, 1927 - PEOPLE OF THE PHIL. v. FAUSTINO GARALDE

    052 Phil 1000