G.R. No. L-11071; August 26, 1916
S. CHASE DE KRAFFT, plaintiff-appellant, vs. APOLINAR VELEZ, as assignee in bankruptcy of the property of Tin Insoy, defendant-appellee.

FACTS:
The plaintiff, S. Chase De Krafft, filed a separate and independent action in the Court of First Instance of Misamis to recover personal property (merchandise listed in an inventory) from the defendant, Apolinar Velez, who was the duly appointed assignee in the bankruptcy proceedings of Tin Insoy. The property was in the possession of the assignee as part of the insolvent estate. Tin Insoy had been declared an insolvent debtor by the same court on February 2, 1914. The defendant demurred to the complaint, arguing that the claim should be pursued within the ongoing bankruptcy proceedings. The lower court sustained the demurrer and dismissed the case, without prejudice to the plaintiff’s right to present his claim in the bankruptcy case (No. 2019). The plaintiff appealed.

ISSUE:
Whether a separate and independent action may be brought against an assignee in bankruptcy to recover personal property in his possession, or whether such a claim must be instituted as an incident in the bankruptcy proceedings.

RULING:
The Supreme Court AFFIRMED the lower court’s decision. It held that no separate action may be brought. Under the Bankruptcy Law ( Act No. 1956 ), particularly Sections 43, 48, and 36(5), all claims against a bankrupt and the assignee must be presented and adjudicated within the single bankruptcy proceeding. The Court, citing U.S. Supreme Court precedents, emphasized the principle that when a bankruptcy court has taken property into its possession through its officers (such as an assignee), that property is withdrawn from the jurisdiction of all other courts. The assignee holds the property as an officer of the bankruptcy court for the benefit of all interested parties. Therefore, the plaintiff’s proper remedy is to seek a hearing in the pending bankruptcy case to assert his claim of ownership. The demurrer was correctly sustained.