Insolvency Law - Section 70 - Dela Paz V Garcia Digest

SECTION 70
ARSENIO DE LA PAZ and CLAUDIA MANIO vs.

MARIO F. GARCIA, assignee of the insolvent
ENRIQUE GATBONTON and the COURT OF
APPEALS
G.R. No. L-18500, November 24, 1966, J. Regala
FACTS:
On October 16, 1952, Enrique Gatbonton and his wife
executed a deed of absolute sale over three parcels of
land for P10,000 in favor of Patria Belmonte Anonas
which was duly recorded and later transferred to the
name of Anonas. They also entered in an agreement
that the spouses had the right until December 31,
1952 to repurchase the lands. However, before the
expiration of such period, Anonas sold the lands to the
brother-in-law of Enriques wife the lands in question
for P9000 only. On October 21, 1952, Enrique filed an
action for voluntary insolvency and Garcia was
appointed as assignee in the insolvency case. The
spouses also sold a house in favor of the petitioner on
September 2, 1952.
Garcia filed an action to recover from petitioners the
ownership and possession of the lands and the house
and contended that the redemption of the lands was
made by the insolvent through petitioners "to prevent
the said three parcels of land from coming into the
hands of the assignees; or prevent the same from
being distributed ratably among the creditors of the
insolvent, or defeat the object of, or hinder, delay or
obstruct the operation of this insolvency proceedings,
and that the petitioners knew at the time of the
transfer of the said three parcels of land that Enrique
Gatbonton was insolvent or in contemplation of
insolvency and the transfer of the said parcels of land
was not made in the ordinary and usual course of
business of the said Enrique Gatbonton. The lower
court declared the transfers null and void which
prompted the petitioners to appeal with the CA
claiming that under the Civil Code, they obtained the
title from Anonas and not from Gatbonton, hence non-
rescissible. But the decision of the lower court was
affirmed by the CA.
ISSUE:
1. WON the transfer of the lands was valid
2. WON the sale of the house was valid
RULING:
1. No. The decision of the Court of Appeals is
based not on the Civil Code but on the
Insolvency Law (Act No. 1956) which declares
certain transfers to be fraudulent and regards
them not merely rescissible but absolutely null
and void. Respondent Garcia brought this suit
on the theory that the purchase of the
properties by petitioners on October 16, 1952
was in reality redemption by Enrique
Gatbonton who, only five days later, was to
file a petition for voluntary insolvency, and
that this scheme was resorted to in an effort to
place the properties beyond the reach of
Gatbonton's creditors. This theory was upheld
by the appellate court. This is clear from the
following passage of its decision:
[A]ppellants contend that the sale of the three
parcels of land under controversy in favor of
Patria Belmonte Anonas was made by the
insolvent in good faith and for a valuable
consideration several months before he was
declared insolvent by the lower court. Appellee
[respondent Garcia] maintains, however, that
it appearing that on October 20, 1952,
Enrique Gatbonton had petitioned for
voluntary insolvency, the transaction was
fraudulent considering the circumstances
surrounding the same. We agree with appellee
in this respect.
2. No. Section 70 of the Insolvency Law considers
as fraudulent any transfer of properties made
by the insolvent within 30 days of the filing by
or against him of a petition for insolvency,
unless the transfer is for valuable pecuniary
consideration and is made in good faith.
It is claimed that the sale was made on
September 2, 1952 and that for purposes of
determining whether the transfer was made
within the 30-day period in section 70 of the
Insolvency Law, the date and not the date of
registration of the sale (October 14, 1952)
should be considered. There may indeed be no
separate register for buildings, but this does
not mean that transactions regarding
buildings may not be recorded in the registry
of deeds where the land, on which the
buildings are erected, is registered. And there
may indeed be no legal duty to register such
transactions, but, if notwithstanding the
absence of such a duty the vendee registers
the sale to him of a building, as the petitioners
in this case did, then he cannot escape the
effects of the registration.

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SECTION 70

ARSENIO DE LA PAZ and CLAUDIA MANIO vs.

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