G.R. No. L-47283. April 25, 1941.
Crisogono Jerreos, as Syndic (Appellant) vs. Constantino Z. Canto, Provincial Sheriff (Appellee).

FACTS

1. In Civil Case No. 10350 of the Court of First Instance of Iloilo (Jing Gue and Co. vs. S. Yap Pongco), the properties of the defendant S. Yap Pongco, consisting of merchandise from his store, were attached via a writ of preliminary attachment.
2. With authorization from the court, the Provincial Sheriff (appellee Constantino Z. Canto) advertised the sale of these attached properties, which were subsequently sold at public auction on January 13, 1936, for P500.
3. Prior to this sale, on December 24, 1935 (44 days before the sale), three commercial houses in Iloilo filed a petition for the involuntary insolvency of Yap Pongco.
4. On January 4, 1936, Yap Pongco was declared insolvent, and the Provincial Sheriff was appointed as the depositary of the insolvent’s properties pending the appointment of a syndic.
5. The Sheriff was notified of his appointment as depositary on January 8, 1936 (5 days before the scheduled sale).
6. After the sale, the syndic (appellant Crisogono Jerreos) appointed in the insolvency proceedings filed a motion on May 25, 1936, alleging that the Sheriff failed to deliver the attached properties because he had sold them, and sought to hold the Sheriff liable for damages caused to the insolvent’s creditors.
7. The lower court initially granted this motion in an order dated May 9, 1936, but upon the Sheriff’s motion for reconsideration, it reversed itself, set aside the prior order, and exonerated the Sheriff from all liability.

ISSUE

Did the Sheriff act in accordance with the law when he sold the properties of Yap Pongco that were attached in Civil Case No. 10350, notwithstanding the subsequent declaration of Yap Pongco’s insolvency?

RULING

Yes, the Sheriff acted lawfully. The Supreme Court affirmed the lower court’s order exonerating the Sheriff.
1. The sale was conducted with the authorization of the Court of First Instance of Iloilo, which had jurisdiction over Civil Case No. 10350.
2. The initiation of involuntary insolvency proceedings against Yap Pongco on January 4, 1936, did not affect the Sheriff’s sale. The records showed that neither the appointed syndic nor any creditor or debtor in the insolvency proceedings requested a suspension of the legal proceedings in Civil Case No. 10350.
3. The Court cited established jurisprudence:
In Timoteo Unson y Lacson vs. Abeto* (47 Phil. 44), it was held that upon a declaration of bankruptcy against a corporation, a pending damage suit against it should be suspended upon application by the syndic or any creditor, until leave is obtained from the court handling the bankruptcy.
In Chartered Bank et al. vs. Imperial et al.* (48 Phil. 983), the Court stated that while the general principle is that all actions pending against a debtor declared insolvent should be suspended, there is an exception. The action of a creditor who holds a mortgage, pledge, lien, or who has obtained attachment or execution on properties to secure their credit is exempt from this principle. The court has no power to suspend such action or lift the attachment unless the creditor voluntarily surrenders the property, security, or lien to the Sheriff or syndic for the benefit of all creditors.
4. Applying this doctrine, the Court found the present case analogous. Since no application for suspension was made, and there was no voluntary surrender of the attached property by the attaching creditor (Jing Gue and Co.) to the insolvency proceedings, the Sheriff was justified in proceeding with the court-authorized sale. Therefore, the Sheriff was exempt from any liability for damages to the insolvent’s creditors arising from the sale.