GR 30756; (September, 1931) (Digest)
G.R. No. 30756 ; September 22, 1931
ENRIQUE BRIAS DE COYA, plaintiff-appellee, vs. TAN LUA and VICENTE NEPOMUCENO, defendants-appellants.
FACTS
Defendant Tan Lua was declared an insolvent by the Court of First Instance of Manila on March 17, 1927. Vicente Nepomuceno was appointed assignee of her insolvent estate on May 13, 1927, and the clerk of court conveyed the insolvent’s property to him on May 21, 1927. However, on June 15, 1927, Tan Lua, through her attorney-in-fact, executed a mortgage deed over her registered land in favor of plaintiff Enrique Brias de Coya to secure a loan. This mortgage was registered on the certificate of title. The assignee’s appointment and the transfer of the insolvent’s property to him were recorded on the title only on September 17, 1927, after the mortgage was registered. The plaintiff filed an action to foreclose the mortgage. The trial court rendered judgment against both defendants, ordering them to pay the debt and alternatively to deposit the amount to avoid foreclosure.
ISSUE
Whether the mortgage executed and registered by Tan Lua after the commencement of insolvency proceedings and the assignment of her property to the assignee, but before the recording of such assignment, is valid and binds the insolvent estate.
RULING
No. The mortgage is null and void as to the insolvent estate. Under Section 32 of the Insolvency Law ( Act No. 1956 ), the assignment of the insolvent’s property to the assignee by the clerk of court vests title in the assignee by operation of law, and such assignment relates back to the commencement of the insolvency proceedings. Consequently, from the date of the insolvency adjudication (March 17, 1927), Tan Lua was divested of her power to dispose of her property. The subsequent mortgage, executed through her attorney-in-fact, was an act in contravention of the insolvency proceedings. The fact that the mortgage was registered under the Land Registration Act before the assignee’s title was recorded does not validate it, as registration cannot give effect to a void act. The assignee’s title, vested by law, prevails over the registered mortgage. The decision of the trial court is reversed, and the complaint is dismissed. (Note: The summary reflects the majority opinion. A dissenting opinion argued that the assignment must be recorded to be effective against third parties).
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