G.R. No. 35474; November 5, 1932
TIRTH DHARMDAS, ET AL., plaintiffs-appellants, vs. MARCELO BUENAFLOR, Chief of Police of the municipality of Iloilo, defendant-appellee. THE BANK OF THE PHILIPPINE ISLANDS, intervenor-appellee.

FACTS

Plaintiffs, employees of J. D. Ramnani & Co., received merchandise from the company’s manager in alleged satisfaction of unpaid salaries and wages. Shortly thereafter, J. D. Ramnani & Co. was declared insolvent by the Court of First Instance of Manila, which appointed the Bank of the Philippine Islands as receiver. The receiver, learning of the transfer, obtained a search warrant, and the defendant Chief of Police seized the merchandise from the plaintiffs and returned it to the receiver. Plaintiffs filed an action for recovery of the merchandise or its value. The trial court dismissed the case for lack of jurisdiction, holding that the matter pertained to the insolvency proceedings.

ISSUE

Whether the trial court correctly dismissed the action for recovery of the merchandise on the ground that jurisdiction over the property lies exclusively with the court handling the insolvency proceedings.

RULING

Yes. The Supreme Court affirmed the dismissal. The property, originally belonging to the insolvent J. D. Ramnani & Co., was transferred to the plaintiffs out of the ordinary course of business within thirty days prior to the insolvency declaration. Under established doctrine, jurisdiction over the estate of an insolvent is vested exclusively in the insolvency court. Once it appears that the property pertains to the insolvency estate, the regular court must dismiss the case, without prejudice to the claimants asserting their rights in the insolvency proceeding. Any irregularity in the method of recovery (use of a search warrant instead of replevin) is immaterial, as the insolvency court has sole authority to adjudicate questions of title or possession to the property. Plaintiffs’ proper remedy was to intervene in the insolvency proceedings.

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