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 Summary (G.R. No. 17222)

Key Dates and Procedural Milestones

  • Dec. 7, 1920: PNB filed suit (case No. 19235) to compel delivery of goods covered by a chattel mortgage and sought P662,000 plus damages; clerk issued writ of attachment after bond posted.
  • Dec. 8, 1920: Sheriff seized the goods in De Poli’s warehouse.
  • Dec. 8, 1920: Petitioning creditors filed involuntary insolvency petition (case No. 19240); De Poli consented and was adjudicated insolvent; the sheriff took custody of all property, including the goods already attached.
  • Dec. 9, 1920: Petitioning creditors moved in case No. 19235 to annul PNB’s writ of attachment and suspend proceedings.
  • Dec. 16, 1920: Judge C. A. Imperial, having taken cognizance of both cases, denied the motion and ordered continued disposition under manual delivery rules and continuation of case No. 19235.
  • Dec. 17, 1920: Petitioners sought certiorari and injunction from the Supreme Court; a preliminary injunction was issued pending resolution.

Applicable Law and Statutory Provisions

The decision turns on the interaction of: Act No. 1956 (Insolvency Law) — notably sections 18, 24, 29, 32, 53, 59, 60, 64 — Act No. 1508 (Chattel Mortgage Act), and provisions of the Code of Civil Procedure concerning manual delivery of personal property and attachment (sections 262–272, particularly sections 267 and 270). The Court also relied on rules of statutory construction as applied in bankruptcy/insolvency contexts.

Central Legal Issue

Whether Judge Imperial acted without or in excess of jurisdiction by denying the motion to annul PNB’s writ of attachment and by ordering the sheriff to proceed with disposition/delivery to PNB, notwithstanding the adjudication of De Poli’s insolvency and the sheriff’s custody under the insolvency order.

Standard for Extraordinary Writs (Certiorari and Injunction)

The Court reiterated the established rule that certiorari will only issue where the lower court acted without or in excess of jurisdiction. If a court has jurisdiction over the parties and subject matter, errors in the exercise of that jurisdiction ordinarily must be corrected by appeal, not by certiorari. The power to decide a case (jurisdiction) is distinct from the decision rendered.

Jurisdictional Findings and Procedural Observations

Both the insolvency proceeding (No. 19240) and PNB’s action (No. 19235) were properly within the jurisdiction of the Court of First Instance. Judge Imperial, by agreement of the parties, took cognizance of both cases and had authority to rule on motions arising in either. The Court emphasized that petitioners’ own prior participation (their motion of Dec. 9) acknowledged the trial court’s jurisdiction; having invoked the court’s jurisdiction earlier, they could not now assert its lack of jurisdiction to justify certiorari.

Insolvency Law — General Rule of Stay

Act No. 1956 generally provides that upon adjudication of insolvency: (a) the sheriff seizes the insolvent’s property; (b) pending proceedings against the insolvent are to be stayed (sections 24 and 18); and (c) section 60 restricts creditors from prosecuting to final judgment actions provable under the Act until discharge is determined, with limited exceptions (such as allowing a suit to proceed only to ascertain amounts in dispute, but with execution stayed).

Statutory Exceptions for Secured Creditors

Act No. 1956 contains critical exceptions preserving the rights of secured creditors: chapter 2 (suspension of payments) and section 9 allow mortgage or pledge creditors to abstain from insolvency meetings and not be bound by agreements made there; section 29 conditions a secured creditor’s participation and voting rights upon surrendering or valuing his security; section 59 prescribes valuation procedures and directs that if the security is not sold, delivered, or valued, the assignee must deliver that property to the creditor. These provisions create a statutory regime in which a creditor holding a legal or contractual mortgage, pledge, lien, or attachment may preserve his special remedy and need not be treated as an ordinary provable creditor unless he voluntarily surrenders the security.

Statutory Construction and Harmonization

The Court applied established canons of statutory construction: read all provisions together, harmonize apparent conflicts, and avoid constructions that render other provisions meaningless or lead to absurd results. Interpreting section 60 in isolation to bar secured creditors from prosecuting their separate remedies would nullify the express protections and options granted in sections 29 and 59. Therefore, section 60 must be read in harmony with the chapters protecting mortgage/pledge creditors.

Application of Law to the Facts

PNB was a mortgage creditor holding a special chattel mortgage on the goods seized. The record did not show that PNB surrendered its security or became a party to the insolvency proceedings under section 59 (i.e., by proving its claim and surrendering security to the assignee). Because PNB preserved its status as a secured creditor, the Insolvency Law left intact its special remedies under the Chattel Mortgage Act and the Code of Civil Procedure for manual delivery and enforcement of the mortgage. Judge Imperial’s denial of the petitioners’ motion and his interlocutory directions to continue PNB’s suit and to permit disposition consistent with manual delivery were therefore within jurisdiction and consistent with the statutory scheme.

Rejection of Petitioners’ Reliance on Foreign and Local Authorities

The petitioners invoked Hill v. Harding (U.S. Supreme Court) and In re Oxley (D. Wash.) to support application of section 60 so as to stay PNB’s suit. The Court distinguished those authorities factually: Hill involved an unsecured attachment dissolvable on bond and issues properly governed by U.S. bankruptcy statute; Oxley involved disputed mortgage validity, after-acquired/confounded stock and potential fraud — circumstances unlike the present case. Local precedents (Bastida v. Penalosa; De Amuzategui v. Macleod) were considered and the Court explained they do not compel the petitioners’ reading of section 60; De Amuzategui in particular supports the principle that insolvency courts have broad control, but also recognizes exceptions where creditors hold special security and elect to enforce it separately.

Policy and Practical Considerations

The Court observed that permitting the insolvency court

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