Title
Chartered Bank of India vs. Imperial
Case
G.R. No. 17222
Decision Date
Mar 15, 1921
PNB sued to recover mortgaged goods; insolvency declared same day. Court upheld PNB's right to proceed independently, dismissing creditors' challenge to attachment during insolvency.

Case Digest (G.R. No. 127965)

Facts:

  • Initiation of Proceedings
    • On December 7, 1920, the Philippine National Bank (PNB) filed a suit in the Court of First Instance of Manila against Umberto de Poli, Henry Hunter Bayne, and J. G. Lawrence.
    • The suit sought the delivery of goods and merchandise described in a mortgage executed in support of securing the payment of P662,000, plus P4,000 for damages.
  • Attachment of Goods
    • Immediately after filing the complaint, the PNB’s attorney requested that the court issue a writ ordering the sheriff to seize the goods described in the attached affidavit.
    • The plaintiff furnished a bond amounting to P1,324,000 to support the issuance of the writ.
    • On December 8, 1920, the sheriff executed the order and seized the goods stored at Umberto de Poli’s warehouse, taking actual possession.
  • Insolvency Proceedings
    • On the same day the goods were seized, the Chartered Bank of India, Australia and China, Hongkong & Shanghai Banking Corporation, and W. F. Stevenson & Co., Ltd., filed a petition to declare Umberto de Poli insolvent under Act No. 1956.
    • Umberto de Poli consented to the petition, admitting every allegation and waiving his right to be heard or file a defense.
    • The Court of First Instance then declared him insolvent and ordered that the sheriff take possession of all his property, both real and personal, including books, documents, and effects—excluding those exempt by law.
  • Subsequent Motions and Orders
    • On December 9, 1920, the same group of creditor banks filed a motion in the civil suit (case No. 19235) to reconsider and annul the writ of attachment. They argued:
      • The goods were already under the custody of the sheriff as the provisional assignee of the insolvent estate.
      • The complaint did not allege that the goods had ever been in the possession of PNB, implying that the attached goods testified to the absence of a valid pledge or mortgage.
    • Judge C. A. Imperial, having taken cognizance of both cases (the mortgage suit and the insolvency petition), on December 16, 1920:
      • Denied the motion for annulment of the writ of attachment.
      • Ordered the sheriff to dispose of the seized property in accordance with the law on manual delivery of personal property.
      • Directed that, if within one day the defendants failed to exercise rights provided under section 267 and if no third party presented a claim (per section 270), the goods be delivered to PNB.
    • A separate petition was also filed by Macleod & Co. to enjoin the seizure or transfer of the goods, which was met by a similar order.
  • Petition for Certiorari and Injunction
    • On December 17, 1920, the petitioners—the chartered bank, Hongkong & Shanghai Banking Corporation, and W. F. Stevenson & Co., Ltd.—filed a petition for a writ of certiorari and an injunction against Judge C. A. Imperial and the PNB.
    • They argued that:
      • The order of December 16 exceeded the jurisdiction of Judge Imperial by allowing the continued proceedings in the attachment suit despite the insolvency declaration.
      • Such enforcement would cause irreparable harm to the petitioners and other creditors.
      • They possessed no plain, speedy, or adequate remedy apart from the petition.
  • Legal Background
    • The decision refers extensively to the provisions of Act No. 1956 (the Insolvency Law), particularly sections 18, 24, 29, 32, 59, and 60, governing:
      • The seizure of property once insolvency is declared.
      • The suspension of civil proceedings pending a determination on the debtor’s discharge.
      • The rights of creditors holding mortgage, pledge, lien, attachment, or execution.
    • The case also reviews precedents from U.S. jurisprudence (e.g., Hill vs. Harding and In re Oxley) and prior Philippine decisions such as Bastida vs. Penalosa and De Amuzategui vs. Macleod, to elucidate the interpretation of insolvency proceedings vis-à-vis creditor actions.

Issues:

  • Jurisdiction of the Insolvency Court
    • Whether the Court of First Instance, having taken cognizance of both the insolvency petition (case No. 19240) and the mortgage suit (case No. 19235), possessed full jurisdiction over the attached property and all claims of and against the insolvent.
    • Whether the consolidated jurisdiction extended to ordering the sheriff’s disposal of the seized property despite the existence of a prior attachment in the mortgage suit.
  • Application of Section 60 of the Insolvency Law
    • Whether section 60, which generally bars a creditor from proceeding to final judgment in actions for debts after insolvency until a discharge is determined, applies to the PNB’s case given that:
      • The PNB held a special security interest in the form of a mortgage on the goods attached.
      • No delivery or assignment of the property to an assignee was made by the PNB.
    • Whether an action based on a specific secured right (i.e., the mortgage) may proceed independently of the insolvency proceedings.
  • Validity of the Relief Sought by the Petitioners
    • Whether the petitioners had a valid basis to seek a writ of certiorari and preliminary injunction against Judge Imperial and the PNB on the grounds that:
      • The order ordering the continuation of the attachment proceedings was issued without proper jurisdiction.
      • Enforcement of said order would cause irreparable harm and conflict with the rights of secured creditors under the Insolvency Law.
  • Interpretation of Conflicting Provisions
    • How the provisions of sections 24, 29, 32, 59, and 60 should be interpreted in tandem, particularly in view of the creditor’s right to either participate in the insolvency proceedings by surrendering his security interests or to enforce his rights separately.
    • Whether the declaration of insolvency automatically suspends all actions, including those initiated by creditors holding a mortgage, or if exceptions exist for actions to recover disputed amounts secured by a valid mortgage.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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