Title
Asia Banking Corp. vs. Elser
Case
G.R. No. 30266
Decision Date
Mar 25, 1929
Luis Yangco sold shares to Henry Elser, who assumed Yangco’s debt. Elser’s estate contested Asia Banking’s claim post-sheriff’s sale. Court ruled novation valid, debt enforceable via claims committee, not execution.
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Case Digest (G.R. No. 30266)

Facts:

  1. Background of the Parties:

    • Luis R. Yangco owned 935 shares in Yangco, Rosenstock & Co., Inc., with a par value of P100 each.
    • Yangco was indebted to the corporation for P58,900, representing the unpaid subscription of 589 shares.
  2. Contract Between Yangco and Elser:

    • On February 25, 1922, Luis R. Yangco entered into a contract (Exhibit B) with Henry W. Elser.
    • Under the contract, Yangco sold his 935 shares to Elser for P45,000, with Elser agreeing to assume Yangco’s liabilities, including the P58,900 debt to Yangco, Rosenstock & Co., Inc.
  3. Corporate Actions:

    • Before the contract, Elser negotiated with the principal stockholders of Yangco, Rosenstock & Co., Inc., to substitute Yangco as a stockholder.
    • On March 1, 1922, the corporation’s directors elected Elser as president and a board member, replacing Yangco.
  4. Elser’s Mental Incapacity and Death:

    • Elser became mentally incapacitated, and C.W. Rosenstock was appointed as his guardian.
    • Elser died on June 18, 1923, and Rosenstock was appointed as the special administrator and later executor of his estate.
  5. Judgment Against Yangco, Rosenstock & Co., Inc.:

    • On September 20, 1923, Asia Banking Corporation obtained a judgment against Yangco, Rosenstock & Co., Inc., for P112,152.28.
    • The corporation was insolvent, and the sheriff levied on its assets, including the P58,900 credit owed by Elser.
  6. Sheriff’s Sale:

    • The assets were sold at public auction, and Asia Banking Corporation acquired the P58,900 credit against Elser’s estate.
  7. Claim Against Elser’s Estate:

    • Asia Banking Corporation filed a claim for P58,900 with the committee of claims of Elser’s estate.
    • The claim was approved, but Fred J. Elser, as special administrator, appealed.

Issue:

  1. Validity of the Sheriff’s Sale:

    • Did the sheriff’s sale on execution transfer title to the P58,900 credit from Yangco, Rosenstock & Co., Inc., to Asia Banking Corporation?
  2. Substitution of Debtor:

    • Did Henry W. Elser validly assume Luis R. Yangco’s debt to Yangco, Rosenstock & Co., Inc., under the contract (Exhibit B)?
    • Did Yangco, Rosenstock & Co., Inc., consent to the substitution of Elser as the new debtor?
  3. Execution Against Elser’s Estate:

    • Can the P58,900 debt be executed against Elser’s estate, given that it is in custodia legis (under court administration)?

Ruling:

  1. Validity of the Sheriff’s Sale:

    • The court held that the sheriff’s sale was valid, and Asia Banking Corporation acquired the P58,900 credit against Elser’s estate.
  2. Substitution of Debtor:

    • The court ruled that Henry W. Elser validly assumed Luis R. Yangco’s debt to Yangco, Rosenstock & Co., Inc.
    • The corporation’s consent to the substitution was inferred from its actions, including electing Elser as president and board member.
  3. Execution Against Elser’s Estate:

    • The court held that the debt could not be executed against Elser’s estate because it was in custodia legis.
    • However, the claim could be presented to the committee of claims for collection.

Ratio:

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