G.R. No. 29755, December 14, 1928
IN RE: INSOLVENCY OF THE LEYTE ASPHALT & MINERAL OIL CO., LTD.

THE LEYTE ASPHALT & MINERAL OIL CO., LTD., Appellee, vs. BLOCK, JOHNSTON & GREENBAUM, Appellants.

FACTS

The Leyte Asphalt & Mineral Oil Co., Ltd. (the corporation) filed a petition to be declared insolvent under Act No. 1956 (the Insolvency Law) in the Court of First Instance (CFI) of Cebu, Branch II, presided by Judge Jose de la Rama. The court issued an order suspending payments and setting the election of an assignee. Prior to this, a receivership proceeding under Section 176 of Act No. 190 (the Code of Civil Procedure) involving the same corporation was already pending in the CFI of Cebu, Branch III, presided by Judge Guillermo Pablo, to which the corporation had consented. The appellants, who were attorneys and creditors, filed a motion in the insolvency case (Branch II) seeking its dismissal, arguing that the receivership court (Branch III) had prior jurisdiction. The CFI of Cebu (Branch II) denied the motion, prompting this appeal.

ISSUE

Whether the CFI (Branch II) validly assumed jurisdiction over the insolvency proceedings despite the existence of a prior pending receivership case (in Branch III) involving the same corporation.

RULING

YES. The Supreme Court affirmed the order of the lower court, upholding its jurisdiction over the insolvency case.
1. Special Law vs. General Law: The Insolvency Law (Act No. 1956) is a special law governing insolvency, while the Code of Civil Procedure (Act No. 190) is a general law. Under the principle that a special law prevails over a general law, the provisions of the Insolvency Law control in matters of insolvency.
2. Nature of Proceedings: The Insolvency Law provides a more conclusive and complete procedure for the final settlement and distribution of an insolvent’s assets among creditors. A receivership under the Code of Civil Procedure is not an equivalent or exclusive remedy for insolvency; it does not provide the same finality in the disposition of credits.
3. No Legal Bar or Estoppel: The corporation’s prior consent to a receivership does not legally estop it from later invoking the Insolvency Law. There is no absolute inconsistency between agreeing to a receiver and subsequently applying for a declaration of insolvency. Furthermore, the appointment of a receiver does not dissolve the corporation or strip it of its corporate rights, including the right to seek relief under the insolvency statutes.
4. Discharge of Corporation Immaterial: The fact that Section 52 of the Insolvency Law prohibits the discharge of a corporation (as opposed to an individual) from its debts does not bar the initiation or continuation of insolvency proceedings. The primary purpose of the proceeding is the orderly liquidation and distribution of assets for the benefit of all creditors.
5. Jurisdiction Upheld: Therefore, the CFI (Branch II) correctly took cognizance of the insolvency petition. The existence of a prior receivership case did not deprive it of jurisdiction to hear the special insolvency proceeding.

The order of the lower court was affirmed, with costs against the appellants.