VOLUNTARY INSOLVENCY OF GO KIM CHIA. HUNTER, KERR & CO., CLAIMANT AND APPELLANT, VS. SAMUEL MURRAY, CLAIMANT AND APPELLEE. YANG PAO WANG (ALIAS YU PO HONG), RECEIVER AND APPELLEE.

Between January and December, 1923, Samuel Murray sold merchandise to Go Kim Chia (alias Gaw Chia) to the value of P13,922.96, payable within thirty days after delivery. The period expired, but Go Kim Chia (alias Gaw Chia) did not fulfill his obligation.

On January 25, 1924, Hunter, Kerr & Co. filed a complaint in the Court of First Instance of Manila against Go Kim Chia (alias
Gaw Chia) to recover the sum of P13,047.30, the value of the goods sold
by said firm to said Go Kim Chia (civil case No. 25665).

On
the same date, January 25, 1924, an attachment was issued at the
instance of the plaintiff firm against the property of the defendant,
the sheriff having levied said attachment upon the merchandise sold by
Samuel Murray to Go Kim Chia and not paid for by the latter.

While said attachment was in force, Go Kim Chia instituted a voluntary
insolvency proceeding on February 21, 1924; and on the 23d day of the
same month and year, the Court of First Instance of Manila entered an
order adjudging Go Kim Chia insolvent, and ordering the sheriff of
Manila to take charge of all the property of the insolvent until the
appointment of an assignee (civil case No. 25811).

On the
25th day of February, 1924, the Court of First Instance of Manila
rendered judgment in civil case No. 25665, sentencing Go Kim Chia to
pay Hunter, Kerr & Co. the sum of P13,047.30, with legal interest
thereon from the filing of the complaint until full payment and costs.

On March 17, 1924, the Court of First Instance of Manila appointed Yang Pao Wang (alias
Yu Po Hong) assignee, having been elected at the meeting of the
creditors as such, authorizing him to take charge of all the personal
and real property of the insolvent upon giving a bond for P5,000 (civil
case No. 25811).

On March 19, 1924, Hunter, Kerr & Co.
filed a claim, praying that it be declared a preferred creditor of the
insolvent by virtue of the attachment issued, in its favor, and that
the assignee be ordered to pay it the sum claimed out of the proceeds
of the sale of the attached property, which amounted to P13,618.10.

On April 22, 1924, Samuel Murray filed also a claim, alleging a
preferential right over certain merchandise sold to the insolvent on
credit and not paid for, the value of which amounted to P13,922.96, and
prayed that the assignee be ordered to return said merchandise to him.

On the 26th day of April, 1924, the court, upon application of the
assignee, entered an order authorizing said assignee to sell the
property of the insolvent, reserving the decision of the respective
claims of the claimants Hunter, Kerr & Co. and Samuel Murray until
after the introduction of evidence.

Both claimants having
introduced evidence, the lower court rendered judgment, holding that
the right of Samuel Murray over the P650, the amount obtained from the
sale of the merchandise by the assignee, which was identified by said
claimant as a part of the goods he had sold to the insolvent in the
year 1923, was a preferred one, and rejecting the claim of Hunter, Kerr
& Co. for the expenses of the attachment.

Hunter, Kerr
& Co., not satisfied with said decision, took this appeal,
assigning four supposed errors which will be discussed in this opinion.

The first question to be decided is whether or not the right of said
Hunter, Kerr & Co. over the merchandise sold by Samuel Murray to Go
Kim Chia on credit and not paid for has preference over the right of
said Samuel Murray, by virtue of the attachment levied thereon in favor
of Hunter, Kerr & Co.

Section 32 of Act No. 1956, commonly known as Insolvency Law, provides as follows:

“Sec.
32. As soon as an assignee is elected or appointed and qualified, the
clerk of the court shall, by an instrument under his hand and seal of
the court, assign and convey td the assignee all the real and personal
property, estate, and effects of the debtor with all his deeds, books,
and papers relating thereto, and such assignment shall relate back to
the commencement of the proceedings in insolvency, and shall relate
back to the acts upon which the adjudication was founded, and by
operation of law shall vest the title to all such property, estate, and
effects in the assignee, although the same is then attached on mesne
process, as the property of the debtor. Such assignment shall operate
to vest in the assignee all of the estate of the insolvent debtor not
exempt by law from execution. It shall also dissolve any attachment
levied within one month next preceding the commencement of the
insolvency proceedings and vacate and set aside any judgment entered in
any action commenced within thirty days immediately prior to the
commencement of insolvency proceedings and shall vacate and set aside
any execution issued thereon and shall vacate and set aside any
judgment entered by default or consent of the debtor within thirty days
immediately prior to the commencement of the insolvency proceedings.”

The writ of attachment against the property of Go Kim Chia was issued
January 25, 1924, and the petition for adjudication of insolvency was
filed February 21, 1924, that is, twenty-seven days after the issuance
of the writ of attachment. In other words, the attachment was levied
within thirty days prior to the filing of the petition for adjudication
of insolvency. On February 23, 1924, the court adjudged Go Kim Chia
insolvent, and on March 17, 1924, appointed Yang Pao Wang (alias
Yu Po Hong) assignee. On March 27, 1924, the assignee appointed having
qualified, the Clerk of the Court of First Instance of Manila assigned
and transferred to said assignee all the real and personal estate and
documents of the insolvent Go Kim Chia. According to the legal
provision above quoted, the effect of said assignment and transfer
related back to the date when the insolvency proceeding was commenced,
that is, February 21, 1924 (sec. 76, Act No. 1956), and the assignee
acquired on said date, by operation of law, title to said estate
(Philippine Trust Co. vs. National Bank, 42 Phil., 413). By
operation of law, said assignment and transfer also operated to
dissolve the attachment levied on said property on January 25, 1924,
that is, within thirty days next preceding the date of the filing of
the petition for adjudication of insolvency, which took place February
21, 1924, and to annul the judgment rendered February 25, 1924, in the
case where said attachment was issued. The annulment of the judgment by
operation of law restored the attached property to the state it was in
before the levying of the attachment and the entry of said judgment,
subject to such privileges and preferences as the creditors of the
insolvent may have acquired under the laws in force.
Article 1922, paragraph 1, of the Civil Code provides as follows:

“Art. 1922. With respect to determinate personal property of the debtor, the following are preferred:

“1.
Credits for the * * * purchase price of personal property in the
possession of the debtor, to the extent of the value of the same.”

And article 1926 of the same Code says;

“Art.
1926. Credits which enjoy preference with respect to certain personal
property shall exclude all others to the extent of the value of the
property to which such preference relates.”

The merchandise over which Samuel Murray claimed a preferential right
is that which he had sold to Go Kim Chia, judicially adjudged
insolvent. The appellant contends that the provision of article 1922,
paragraph 1, of the Civil Code is hot applicable to the instant case
for the reason that the merchandise sold and not paid for was no longer
in the possession of the debtor, but of the assignee. This argument
loses its strength if it is taken into account that said merchandise
passed from the possession of Go Kim Chia to the hands of the assignee,
not by his own will, but by the mandate of the law, the assignee having
the custody of and holding the title to, the property, subject to the
rights of the creditors of the insolvent. The assignee is in effect a
special legal agent of the insolvent, and his possession of the
insolvent estate is the possession of his legal principal.

We are not unmindful of the provision of paragraph 8 of section 48 of
Act No. 1956, commonly known as Insolvency Law, which includes, among
the privileged properties, the goods bought on credit by the insolvent
and not delivered yet to him, but this court, in disposing of the
motion for new trial in the case of Tec Bi & Co. vs.
Chartered Bank of India, Australia and China (41 Phil., 819), wherein
the question was raised whether or not the above cited legal provision
has impliedly repealed the provisions contained in articles 1922 and
1924 of the Civil Code, concerning preference of credits, said the
following:

“The right to a preference in
the case at bar being founded upon the failure of a debtor to pay the
purchase price of goods sold to him by the plaintiff; it may be well to
add that the right of the vendor of merchandise, bought on credit by an
insolvent, ‘so long as the actual delivery thereof has not been made’
to have such goods placed at his disposal, in the manner and form
prescribed in subsection 8, section 48 of the Insolvency Law, is
manifestly an additional and cumulative remedy allowed a vendor of
merchandise, the purchase price of which has not been paid, and is in
no wise in conflict with the right of such a vendor to assert the
preference secured to him in article 1922 of the Code of Civil
Procedure [Civil Code], in any case wherein delivery has actually been
made.”

As to the costs and legal expenses
entitled to preference under section 79 of Act No. 1956, section 492 of
the Code of Civil Procedure enumerates the lawful costs which may be
recovered, and section 79 of Act No. 1956 aforecited authorizes the
payment of lawful expenses, among which the premium paid upon the bond,
which the law requires before an attachment may be issued, may very
well be included. The only costs and lawful expenses, therefore, to
which the appellant is entitled in the Court of First Instance of
Manila are: For the filing of the complaint, P30; for sheriff’s fees,
P4.24; for the premium upon the bond, P211.06; for the custody by the
sheriff of the attached property, P72; for the removal of said
property, P53.50; for appearance of the attorney, P20; that is, a total
of P390.80.

For all of the foregoing, the judgment appealed
from is affirmed, in so far as it holds that the right of Samuel Murray
to the sum of P650 is preferential; and reversed, in so far as it
rejects the claim of Hunter, Kerr & Co. to the costs and legal
expenses, and it is adjudged that said firm has a preferential right to
said sum of P390.80, without special finding as to costs. So ordered.

Avanceña, C. J., Street, Malcolm, Ostrand, Johns, and Romualdez, JJ., concur.
Johnson, J., did not take part.