Philippine Supreme Court Jurisprudence


Philippine Supreme Court Jurisprudence > Year 1922 > May 1922 Decisions > G.R. No. L-17836 May 29, 1922 - Involuntary insolvency of DY POCO. TE PATE v. FRANK B. INGERSOLL

043 Phil 394:




PHILIPPINE SUPREME COURT DECISIONS

FIRST DIVISION

[G.R. No. L-17836. May 29, 1922. ]

Involuntary insolvency of DY POCO. TE PATE, claimant-appellee, v. FRANK B. INGERSOLL, assignee-appellant.

Ross & Lawrence and Ewald E. Selph for Appellant.

Lacson & Lacson for Appellee.

SYLLABUS


1. BANKRUPTCY AND INSOLVENCY; PREFERENCES; CONTRACT OF PLEDGE. — On April 28, 1919, Dy Poco executed a private document of the following tenor: "Received from Mr. Te Pete the sum of fifteen thousand pesos (P15,000), securing the payment of this have above mentioned, Mr. Te Pete will have the right to sell the six hundred piculs of hemp and turn over to me the remainder of the proceeds of the sale." A petition in involuntary insolvency was filed against Dy Poco on June 7, 1919, and he was adjudged insolvent on June 23, 1919. Subsequent to the filing of the petition in involuntary insolvency, Te Pete acquired possession of the hemp pledged in the private document. Held: That the claimant Te Pete was not entitled to a preference in the distribution of the assets of the insolvent.

2. ID.; ID.; ID., — The cases of Mitsui Bussan Kaisha v. Hongkong & Shanghai Banking Corporation ([1917], 36 Phil., 27), and Mahoney v. Tuason ([1919], 39 Phil., 952), distinguished.

3. ID.; ID.; ARTICLE 1865 OF THE CIVIL CODE CONSTRUED. — A pledge, to be valid against third persons, must be evidenced by a public instrument.

4. ID.; ID.; ID.; ID. — An assignee is a "third person within the meaning of article 1865 of the civil Code.


D E C I S I O N


MALCOLM, J. :


On April 28, 1919, a Chinese merchant by the name of Dy Poco executed a private document in the presence of two witnesses in favor of Te Pete, of the following tenor:jgc:chanrobles.com.ph

"Receive from Mr. Te Pete the sum of fifteen thousand pesos (P15,000), securing the payment of this sum with the six hundred piculs of hemp, more or less, which I have in Daet marked D.S.O. Should I be unable to pay the sum above mentioned, Mr, Te Pete will have the right to sell the six hundred piculs of hemp and to turn over to me the remainder of the proceeds of the sale."cralaw virtua1aw library

A petition in involuntary insolvency was filed against Dy Poco on June 7, 1919, and he was adjudged insolvent on June 23, 1919. Dy Poco died on July 10, 1919. Three or four weeks before the death of Dy Poco; that is, subsequent to the filing of the petition in involuntary insolvency, Te Pete acquired possession of the hemp pledged in the private document herein quoted.

By petition dated August 7, 1919, Te Pete asked the Court of First Instances of Manila to give him preferential rights over the hemp, the subject-matter of the pledge. This petition was granted by the Honorable Pedro Conception, Judge of First Instance. Thereafter, the hemp was sold, and the proceeds turned into court.

Frank B. Ingersoll, the assignee in the insolvency proceedings as his sole assignment of error the finding of the trial court that the claimant Te Pete was entitled to a preference in the distribution of the assets of the insolvent.

The mind of the trial judge was undoubtedly influenced by the decision of this court in the case of Mitsui Bussan Kaisha v. Hongkong & Shanghai Banking Corporation ([1917], 36 Phil., 27). The facts in the cited case and in the instant case are, however, different. In the first case, the property was surrender to the pledgee prior to the institution of bankruptcy proceedings. Such, likewise, was the situation in the case of Mahoney v. Tuason ([1919], 39 Phil., 952), relied by counsel for appellee, for the delivery of the security took place long before the commencement of the insolvency proceedings, and before the thirty-day period referred to in Bankruptcy and insolvency Law. In the instant case on the contrary, actual delivery of the property was not made until after insolvency.

A pledge, to be valid against third persons, must be evidenced by a public instrument. This is a mandatory condition prescribed by article 1865 of the Civil Code, which must be met in order to constitute the contract of pledge. An assignee is a "third person" within the meaning of this article of the Civil Code.

When goods or merchandise have pledged to secure the payment of a debt of a particular creditors of the pledgor are "third person" with relation to the pledge contract and the pledgor and pledgee. This is so because the insolvency proceedings operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution. This is true, also, because the assignee is the representative of the creditors and not of the bankrupt. (Civil Code, article 1865, in relation to articles 1863 and 1226; Bankruptcy and Insolvency Law, Acts no. 1956, sec. 32; Tec Bi & Co. v. Chartered Bank of India, Australia and China [1916], 41 Phil., 596: 12 Manresa, Comentarios al Codigo Civil, pp. 416, et seq.; Ocejo, Perez & Co. v. International Banking Corporation [1918], 378 Phil., 631.)

We conclude, therefore, that, following the institution of the insolvency proceeding, the contract of pledge was not enforcible against the assignee as representative of the creditors of the insolvent, and that the claimant Te Pete was not entitled to a preference in the distribution of the assets of the insolvent.

Judgment reversed, without special finding as to costs in either instance. So ordered.

Araullo, C.J., Avanceña, Villamor, Ostrand, and Romualdez, JJ., concur.




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