G.R. No. 37706 - Cu Unjieng e Hijos vs. Duran

Rafael Fernandez had been declared insolvent, and an insolvency court had assumed exclusive control over his estate pursuant to the Insolvency Law.
L. P. Mitchell was appointed as the assignee of the insolvent estate, thereby acting as the officer of the insolvency court.

Attorneys Duran, Lim & Tuason, acting as counsel for Cu Unjieng e Hijos, initiated a separate legal action to foreclose a mortgage executed by the insolvent Fernandez.
The foreclosure suit was filed in the Court of First Instance of Pampanga without first obtaining the leave or prior consent of the insolvency court.
Alongside the filing, an ex parte petition was presented without notifying the assignee, resulting in the appointment of a receiver for the property in question.

The insolvency court, having exclusive jurisdiction over the estate, recommended that Cu Unjieng e Hijos adhere to its procedure for addressing claims against the insolvent estate.
Counsel for Cu Unjieng e Hijos were given the opportunity to follow the insolvency court’s directive but elected not to do so.
The action of appointing a receiver and launching the foreclosure proceeding interfered directly with the control of the assignee, effectively disturbing the orderly administration of the insolvent estate.

As a result of the attorneys’ conduct and their refusal to comply with the insolvency court’s governance, the Court of First Instance of Manila ruled that Attorneys Duran, Lim & Tuason were in contempt of court.
The counsel was fined P100 for their technical contempt due to initiating proceedings in another court contrary to the jurisdictional limitations imposed by the insolvency law.

The first proposition contested was that the act of filing the foreclosure suit without the insolvency court’s leave did not constitute contempt of court.
The second proposition invoked the Teague precedent, arguing that an attorney following its logic should not be charged with contempt.

Whether, after the declaration of insolvency and the insolvency court’s assumption of exclusive control over the debtor’s estate, a separate foreclosure proceeding may validly be instituted without the prior consent and knowledge of the insolvency court.

Whether the actions of Attorneys Duran, Lim & Tuason in initiating a foreclosure proceeding and facilitating the appointment of a receiver, which resulted in the interference with the assignee’s control over the estate, amounted to technical contempt of court.

Whether the Teague precedent, which might grant a degree of good faith in following earlier decisions, could mitigate or preclude the holding of contempt in the present case.