G.R. No. L-15155, December 29, 1960
BOARD OF LIQUIDATORS, petitioner-appellant, vs. EXEQUIEL FLORO, ET AL., oppositors-appellees.

FACTS

The Board of Liquidators, a government agency, entered into a salvage contract with Melecio Malabanan on June 14, 1952, for the recovery of surplus properties from sunken vessels. The contract assigned to Malabanan all right, title, and interest in the salvaged properties upon recovery, in consideration of a payment of P90.00 per long ton. Malabanan was required to post a P10,000.00 performance bond, which he filed effective for one year from June 10, 1952. The contract was later extended twice, ultimately to August 31, 1954, without a renewal of the bond. On March 31, 1954, Malabanan entered into an agreement with Exequiel Floro, wherein Floro advanced money secured by steel matting to be consigned by Malabanan. Upon Malabanan’s default, Floro, pursuant to their contract, sold 11,047 pieces of steel matting to Eulalio Legaspi on August 4, 1954. On August 21, 1954, Malabanan filed a petition for voluntary insolvency, listing the steel matting in his inventory. The Board filed a petition to exclude the steel matting from the insolvent’s assets, claiming ownership. The lower court denied the Board’s petition, ruling that Malabanan had acquired ownership of the steel matting under his contract with the Board, that Floro was authorized to dispose of it, and that the sale to Legaspi was valid and not contrary to the Insolvency Law.

ISSUE

1. Whether Malabanan acquired ownership of the salvaged steel matting under his contract with the Board of Liquidators.
2. Whether the lapse of the performance bond rendered the contract ineffective.
3. Whether the sale by Floro to Legaspi was void as a fraudulent transfer under the Insolvency Law.

RULING

1. Yes, Malabanan acquired ownership. The contract between Malabanan and the Board vested title to the salvaged properties in Malabanan as soon as they were recovered from the sea. The contract’s terms, particularly the assignment of “all right, title and interest” in consideration of a payment to be made monthly based on recovery reports, indicated that ownership passed upon salvage. The circumstances (Malabanan bearing all expenses and risks, posting a bond, and being responsible for storage) supported the conclusion that there was a constructive delivery (traditio longa manu) and no reservation of title by the Board. The requirement for audit and verification of recovery reports pertained to the determination of the amount due, not to the transfer of ownership.
2. No, the lapse of the bond did not extinguish the contract. The bond was an accessory contract guaranteeing Malabanan’s compliance. The principal obligation existed independently. The Board, by twice extending the contract after the bond had expired, effectively waived the bond requirement for the extended periods. The extensions, even if covering only some of the original areas, did not alter the essence of the contract.
3. The issue of fraudulent transfer was prematurely decided. The lower court’s declaration on the validity of the sale to Legaspi was premature. Under the Insolvency Law, proceedings to set aside fraudulent transfers should be brought and prosecuted by the assignee in insolvency, who represents all creditors. Allowing a single creditor (the Board) to bring such a proceeding would invite a multiplicity of suits. The right to attack the alleged fraudulent transfer is reserved to the assignee.
The order of the lower court was affirmed insofar as it declared the steel matting to be the property of the insolvent Malabanan. However, it was without prejudice to the right of the assignee in insolvency to take proper action to attack the alleged fraudulent transfer to Legaspi and to account for the discrepancy in the number of steel matting pieces reported. Costs were assessed against the appellant Board.