RADIOLA-TOSHIBA PHILIPPINES INC., THROUGH ITS ASSIGNEE-IN-INSOLVENCY VICENTE J. CUNA, PETITIONER, VS. THE INTERMEDIATE APPELLATE COURT, HON. LEONARDO I. CRUZ, AS JUDGE OF THE RE…

This is a petition for certiorari of the March 31, 1986
Decision of the then Intermediate Appellate Court* in
AC-G.R. SP No. 04160 entitled “Radiola-Toshiba
Philippines, Inc. vs. Hon. Leonardo I. Cruz, et al.” denying the petition
for certiorari and mandamus; and its Resolution of July 1, 1986
denying the motion for reconsideration.

The antecedent facts of this case, as found by the then
Intermediate Appellate Court, are as follows:

On July 2, 1980, three creditors filed a petition for the involuntary insolvency of
Carlos Gatmaytan and Teresita
Gatmaytan, the private respondents herein, the case
docketed as Special Proceeding No. 1548 of the then Court of First Instance
(now Regional Trial Court) of Pampanga and Angeles
City.

On July 9, 1980,
the respondent court issued an order taking cognizance of the said petition and
stating inter alia
that:

“x x x the
Court forbids the payment of any debts, and the delivery of any property owing
and belonging to said respondents-debtors from other persons, or, to any other persons for the use
and benefit of the same respondents-debtors and/or the transfer of any property
by and for the said respondents-debtors to another, upon petitioners’ putting
up a bond by way of certified and reputable sureties.” (Annex 1, Comment).

Counsel for the petitioners-creditors informed respondent sheriff
of Angeles City of the aforesaid order (Annex 2, Ibid) and on March 26, 1981,
also communicated with counsel for the petitioner herein regarding same order,
apprising the latter that “the personal and real property which have been
levied upon and/or attached should be preserved till the final determination of
the petition aforementioned.” (Annex 3, ibid).

On April 12, 1983, petitioners-creditors filed second urgent motion
for the issuance of insolvency order and resolution of the case, alleging,
among other things, that in November, 1982, they filed an urgent motion to
issue insolvency order; on December 28, 1982, they presented a motion to
prohibit the city sheriff of Angeles City from disposing the personal and real
properties of the insolvent debtors, Carlos Gatmaytan
and Teresita Gatmaytan; on
January 18, 1983, they (sic) appeared in the Bulletin Today issue of even date
a news item to the effect that Radiola-Toshiba Phil.
Inc. has already shut down its factory; sometime in March 1983, through their
representative, they caused to be investigated the real properties in the names
of Carlos Gatmaytan and Teresita
Gatmaytan and they were surprised to find out that
some of the aforesaid properties were already transferred to Radiola-Toshiba Phil., Inc.; and that in view of such
development, it is their submission that without an insolvency order and a
resolution of the case which was ripe for resolution as early as March 3, 1982,
the rights and interest of petitioners-creditors would be injured and
jeopardized.  (Annex “C”).

On April 15, 1983, petitioner filed an opposition to the said
motion vis-a-vis the prayer that the insolvency order
(which has not been rendered yet by the court) be annotated on the transfer
certificates of title already issued in its name (Annex “D”).

On April 22, 1983,
judgment was rendered declaring the insolvency of respondents-debtors Carlos Gatmaytan and Teresita Gatmaytan.

On April 28, 1983,
petitioner filed a supple­mental opposition to the same second urgent motion
and motion to direct respondent sheriff to issue a final certificate of sale
for the properties covered by TCT Nos. 18905 and 40430 in its favor (Annex
“E”).

On February 3, 1984, acting upon petitioner’s motion claiming that
ownership of certain real properties of the insolvents had passed to it by
virtue of foreclosure proceedings conducted in Civil Case No. 35946 of the
former Court of First Instance of Rizal, Branch II, Pasig, Metro Manila, which properties were not redeemed
within the period of redemption, respondent court issued an order disposing,
thus:

“WHEREFORE, the Court hereby confirms the election of Mr.
Emilio C. Patino, as assignee of all the registered
claimants in this case, and, in consequence thereof, the said assignee is
hereby directed to post a bond in the amount of P30,000.00 and to take his oath
thereafter so as to be able to perform his duties and discharge his functions,
as such.

The Court, likewise, sets the meeting of all the creditors with the
attendance, of course, of the assignee, on March 9, 1984, at 8:30., as by that time the proposals,
which the respective representatives of the parties-claimants desire to clear
with their principals, shall have already been reported.

The assignee shall see to it that the properties of the insolvents
which are now in the actual or constructive custody and management of the
receiver previously appointed by the Court on petitioners’ and claimants’
proposals, be placed under his actual or constructive custody and management,
such as he is able to do so, as the Court hereby dissolves the receivership
previously authorized, it having become a superfluity.” (Annex
“F”).

On May 18, 1984, the Regional Trial Court, Branch CLII, Pasig, Metro Manila, in Civil Case No. 35946, issued an
order directing respondent Sheriff of Angeles City, or whoever is acting in his
behalf, to issue within seven (7) days from notice thereof a final deed of sale
over the two (2) parcels of land covered by Transfer Certificates of Titles
Nos. 18905 and 40430 in favor of petitioner. 
(Annex “G”).

In Said Civil Case No. 35946, a case for collec­tion of sum of
money covering the proceeds of television sets and other appliances, the then
Court of First Instance of Rizal, Branch II, Pasig, Metro Manila, issued a writ of preliminary
attachment on February 15, 1980 upon application of the petitioner, as
plaintiff, which put up a bond of P350,000.00. 
On March 4, 1980, 3:00 P.M., levy on attachment was done in favor
of petitioner on the real properties regis­tered in the names of spouses Carlos
Gatmaytan and Teresita Gatmaytan under TCT
Nos. 18905 and 40430 of the Registry of Deeds of Angeles City, per Entry
No. 7216 on said titles.  (Annex
“A” and “B”).

On December 10, 1980, a decision was rendered in favor of
petitioner, ordering private respondents and their co-defendant Peoples
Appliance Center, Inc. to pay petitioner, jointly and severally, the sum of
P721,825.91 plus interest thereon of 14% per annum from October 12, 1979 until
fully paid; P20,000.00, for and attorney’s fees; and the costs of suit (Annex
“5”, Comment).  After the said
decision in the aforementioned Civil Case No. 35946 became final and executory, a writ of execution for the satisfaction thereof
issued on March 18, 1981; and on May 4, 1981, respondent sheriff of Angeles
City sold at auction sale the
attached properties covered by TCT Nos. 18905 and 40430, to petitioner as the
highest bidder, and the certificate of sale was accordingly issued in its
favor.

On September 21, 1982,
the court ordered the consolidation of ownership of petitioner over said
properties; but respondent sheriff of Angeles
City refused to issue a final
certificate of sale in favor of petitioner.

On May 30, 1984, petitioners-creditors interposed their opposition,
stating among other things, that subject motion is improper and premature
because it treats of matters foreign to the insolvency proceedings; and
premature, for the reason that the properties covered by TCT Nos. 18905 and
40430-Angeles City were brought to the jurisdiction of the insolvency court for
the determination of the assets of the insolvents available for distribution to
the approved credits/liabilities of the insolvents.  Petitioners-creditors theorized that the
insolvency court is devoid of jurisdiction to grant the motion referring to
matters involved in a case pending before a coordinate court in another jurisdiction
(Annex “1”).

Prior thereto or on July
13, 1984, to be precise, respondent court came out with its
assailed extended order with the following decretal
portion:

“WHEREFORE, and also for the reason stated in the aforequoted order issued in pursuance of a similar motion
of the movant, the Court denies, as it is hereby
denied the motion of Radiola-Toshiba, dated May 28,
1984 and directs the latter to participate in the supposed meeting of all the
creditors/claimants presided by the duly elected assignee.” (Annex
“J”).

On September 8, 1984,
herein petitioner Radiola-Toshiba Philippines, Inc.
(RTPI, for short) filed a petition for certiorari and mandamus
with respondent Intermediate Appellate Court.

The then Intermediate
Appellate Court, in a Decision promulgated on March 31, 1986, denied petitioner’s aforesaid petition.

On April 19, 1986,
petitioner filed a motion for reconsideration, but the same was denied in a
Resolution dated July 1, 1986.  Hence, the instant petition.

Herein petitioner raised two issues –

1.       WHETHER OR NOT CERTIORARI
IS A REMEDY DESIGNATED FOR THE CORRECTION OF ERRORS OF JURIS­DICTION ONLY; and

2.       WHETHER OR NOT THE
REFUSAL OF THE COURTS TO ENFORCE THE LIEN OF PETITIONER ARISING FROM A LEVY OF
ATTACHMENT NOT MADE WITHIN ONE MONTH NEXT PRECEDING THE COMMENCEMENT OF THE
INSOLVENCY PROCEEDING IS GRAVE ABUSE OF DISCRETION.

The main issue in this case is whether or not the levy on
attachment in favor of the petitioner is dissolved by the insolvency proceedings
against respondent spouses commenced four months after said attachment.

On this issue, Section 32 of the Insolvency Law (Act No. 1956, as amended), provides:

“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 to 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 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 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 set aside any judgment entered by default or consent of the debtor within
thirty days immediately prior to the commencement of the insolvency proceedings.” (Underscoring supplied)

Relative thereto, the findings of the then Intermediate Appellate
Court are undisputed that the
levy on attachment against the subject properties of the Gatmaytans,
issued by the then Court of First Instance of Pasig
in Civil Case No. 35946, was on March 4, 1980 while the insolvency proceeding
in the then Court of First Instance of Angeles City, Special Proceeding No. 1548,
was commenced only on July 2, 1980, or more than four (4) months after the
issuance of the said attachment.  Under
the circumstances, petitioner contends that its lien on the subject properties overrode the insolvency proceeding
and was not dissolved thereby.

Private respondents, on the other hand, relying on Section 79 of
the said law, which reads:

“Sec. 79.  When an
attachment has been made and is not dissolved before the commencement of
proceed­ings in insolvency, or is dissolved by an undertaking given by the
defendant, if the claim upon which the attachment suit was commenced is proved
against the estate of the debtor, the plaintiff may prove the legal costs and
disbursements of the suit, and of the keeping of the property, and the amount
thereof shall be a preferred debt.”

and the fact that petitioner and its
counsel have full knowledge of the proceedings in the insolvency case, argue
that the subsequent Certificate of Sale on
August 3, 1981, issued in favor of petitioner over the subject properties,
was issued in bad faith, in violation of the law and is not equitable for the creditors of the insolvent
debtors; and pursuant to the above quoted Section 79, petitioner should not be
entitled to the transfer of the subject properties in its name.

Petitioner’s contention is impressed with merit.  The provision of the above-quoted Section 32,
of the Insolvency Law is very clear – that attachments dissolved are those
levied within one (1) month next preceding the commencement of the insolvency
proceedings and judgments vacated and set aside are judgments entered in any
action, including judgment entered by default or consent of the debtor, where the action was filed within
thirty (30) days immediately prior to the commencement of the insolvency
proceedings.  In short, there is a cut
off period – one (1) month in attachment cases and thirty (30) days in
judgments entered in actions commenced prior to the insolvency
proceedings.  Section 79, on the other
hand, relied upon by private respondents, provides for the right of the
plaintiff if the attachment is not dissolved before the commencement of
proceedings in insolvency, or is dissolved by an undertaking given by the
defendant, if the claim upon which the attachment suit was commenced is proved
against the estate of the debtor. 
Therefore, there is no conflict between the two provisions.

But even granting that such conflict exists, it may be stated
that in construing a statute, courts should adopt a construction that will give
effect to every part of a statute, if at all possible.  This rule is expressed in the maxim, ut magis valeat quam pereat or that construction is to be sought
which gives effect to the whole of the statute – its every word.  Hence, where a statute is susceptible of more
than one interpretation, the court should adopt such reasonable and beneficial
construction as will render the provision thereof operative and effective and
harmonious with each other (Javellana vs. Tayo, 6 SCRA 1042 [1962]; Statutory Construction by Ruben
E. Agpalo, p. 182).

Neither can the
sheriff’s sale in execution of the judgment in favor of the petitioner be
considered as a fraudulent transfer or preference by the insolvent debtors,
which constitute a violation of Sec. 70 of the Insolvency Law.  In the case of Velayo
vs. Shell Co. of the Philippines (100 Phil. 187, [1956]), this Court ruled that
Sections 32 and 70 contemplate only acts and transactions occurring within 30
days prior to the commencement of the proceedings in insolvency and,
consequently, all other acts outside of the 30-day period cannot possibly be
considered as coming within the orbit of their operation.

Finally, petitioner correctly argued that the properties in
question were never placed under the jurisdiction of respondent insolvency
court so as to be made available for the payment of claim filed against the Gatmaytans in the insolvency proceedings.

Hence, the denial by respondent insolvency court to give due
course to the attachment and execution of Civil Case No. 35946 of the CFI of Rizal constitutes a freezing of the disposition of subject properties by the former which were
not within its jurisdiction; undeniably, a grave abuse of discretion amounting
to want of jurisdiction, correctible by certiorari.

WHEREFORE, the March
31, 1986 decision of the then Intermediate Appellate Court is
hereby Reversed and SET ASIDE.  The attachment
and execution sale in Civil Case No. 35946 of the former CFI of Rizal are given due course and petitioner’s ownership of
subject properties covered by TCT Nos. 18905 and 40430 is ordered consolidated.

SO ORDERED.

Fernan, C.J., (Chairman), Gutierrez,
Jr., Feliciano, and Davide,
Jr., JJ., concur.

* Penned by Associate Justice
Fidel P. Purisima and concurred in by Associate
Justices Carolina C. Griño-Aquino, Jose F. Racela, Jr., and Jorge S. Imperial.