AN ACT PROVIDING FOR THE SUSPENSION OF PAYMENTS, THE RELIEF OF INSOLVENT DEBTORS, THE PROTECTION OF CREDITORS, AND THE PUNISHMENT OF FRAUDULENT DEBTORS.

• Number: Act No. 1956
• Sections: 83

Preamble

By authority of the United States, be it enacted by the Philippine Legislature, that:

TITLE AND GENERAL SUBJECT OE THE ACT.

SUSPENSION OF PAYMENTS.

VOLUNTARY INSOLVENCY.

INVOLUNTARY INSOLVENCY.

ASSIGNEES.

CLASSIFICATION AND PREFERENCE OF CREDITORS.

PARTNERSHIPS AND CORPORATIONS.

PROOF OF DEBTS.

SEC: 53. All debts due and payable from the debtor at the time of the adjudication of insolvency, and all debts then existing but not payable until a future time, a discount being made if no interest is payable by the terms of the contract, may be proved against the opiate of the debtor.

COMPOSITIONS.

DISCHARGE.

FRAUDULENT PREFERENCES AND TRANSFERS.

PENAL PROVISIONS.

MISCELLANEOUS.

Section 1

SECTION 1. This Act shall be known and may be cited as The Insolvency Law, and in accordance with its provisions every insolvent debtor may be permitted to suspend payments or be discharged from his debts and liabilities.

Section 2

SEC. 2. The debtor who, possessing sufficient property to cover all his debts, be it an individual person, be it a sociedad or corporation, foresees the impossibility of meeting them when they respectively fall due, may petition that he be declared in the state of suspension of payments by the court, or the judge thereof in vacation, of the province or of the city in which he has resided for six months next preceding the filing of his petition.

He shall necessarily annex to his petition a schedule and inventory in the form provided in sections fifteen, sixteen, and seventeen of this Act, in addition to the statement of his assets and liabilities and the proposed agreement he requests of his creditors.

Section 3

SEC. 3. Upon receiving and filing the petition with the schedule and documents mentioned in the next preceding section, the court, or the judge thereof in vacation, shall make an order calling a meeting of creditors to take place in not less than two weeks nor more than eight weeks from the date of such order. Said order shall designate the day, hour, and place of meeting of said creditors as well as a newspaper of general circulation published in the province or city in which the petition is filed, if there be one, and if there be none, in a newspaper which, in the judgment of the judge, will best give notice to the creditors of the said debtor, and in the newspaper so designated said order shall be published as often as may be prescribed by the court or the judge thereof.

Said order shall further contain an absolute injunction forbidding the petitioning debtor from disposing in any manner of his property, except in so far as concerns the ordinary operations of commerce or of industry in which the petitioner is engaged, and, furthermore, from making any payments outside of the necessary or legitimate expenses of his business or industry, so long as the proceedings relative to the suspension of payments are pending, and said proceedings for the purposes of this Act shall be considered to have been instituted from the dale of the filing of the petition.

Section 4

SEC. 4. A copy of said order shall immediately be published by the clerk of said court, in the newspaper designated therein, for the number of times and in the form prescribed by the court or Copy to creditors, the judge thereof, and the clerk of said court shall cause a copy of said order to be delivered personally or to be sent forthwith by registered mail, postage prepaid, to all creditors named in the schedule. There shall be deposited in addition to the sum of twenty-four Philippine pesos, which shall be paid to the clerk for the filing and registration of the petition, including all proceedings until the expediente is completed, an amount sufficient to defray all expense of publication ordered by the court, necessary postage, and ten centavos for each copy, to be delivered personally or mailed to the creditors, which last-named sum is hereby constituted the legal fee of the clerk for the personal delivery or mailing required by this section.

Section 5

SEC. 5. Only creditors included in the schedule filed by the debtor shall be cited to appear and take part in the meeting mentioned in section three, and they shall be notified upon delivery or transmission to them of a copy of the order calling the meeting to appear at same with the written evidences of their respective claims, without which they shall not be admitted.

Pending execution.

Section 6

SEC. 6. If any execution be pending against the debtor it shall not be consolidated with this proceeding, but the course thereof shall be suspended before sale of property is made thereunder, provided the debtor makes a request therefor to the court before which the proceeding for suspension of payments is pending, unless the execution be against property especially mortgaged which is hereby exempted from the provisions of this section. The suspension ordered by virtue of this section shall lapse when three months shall have passed without the proposed agreement being accepted by the creditors or as soon as it is denied. No creditor other than those mentioned in section nine shall sue or institute proceedings to collect his claim from the debtor from the moment that suspension of payments is applied for and while the proceedings are pending.

Section 7

SEC. 7. Creditors may be represented at the meeting by one or more lawyers or by any person duly authorized by power of attorney, which document shall be presented and be attached to the record.

Persons appearing for more than one creditor shall have only one personal vote, but the claims presented by them shall be taken into consideration for the purpose of arriving at the majority of the amount represented.

Section 8

SEC. 8. The presence of the creditors representing at least three-fifths of the liabilities shall be necessary for holding a meeting. The meeting shall be held on the day and at the hour and place designated, the judge, or commissioner deputized by him when he is absent from the province where the meeting is held, acting as president and the clerk as secretary thereof, subject to the following rules:

(a) The clerk shall prepare for insertion in the minutes of the meeting a statement of the persons present and their claims; the judge, or in default thereof, the commissioner, shall examine the written evidences of the claims and the powers of attorney, if any. If the persons present who have complied with the foregoing rules represent at least three-fifths of the liabilities, the judge or commissioner shall declare the meeting open for business.

(b) The petition of the debtor, the schedule of debts and of property, the statement of assets and liabilities, and the proposed agreement filed therewith shall be read forthwith by the clerk, and the discussion shall be opened.

(c) The debtor may modify his proposition or propositions in proposition view of the result of the debate, or insist upon the ones already made, and the judge or commissioner, without further discussion. shall clearly and succinctly place these several propositions before the meeting for a vote thereupon.

(d) The vole shall be taken by a call of names and shall be inserted in the minutes: a majority vote shall rule.

(e) To form a majority it is necessary—

1. That two-thirds of creditors voting unite the same proposition.

2. That the claims represented by said majority vote amount to at least three-fifths of the total liabilities of the debtor mentioned in the petition.

(f)After the result of the voting has been announced, all protests made against the majority vote shall be admitted and stated in the record, and the meeting shall be closed.

(g) The minutes of the meeting, containing a succinct statement of all the proceedings had therein, shall be drawn up, and there shall be inserted therein the proposition or propositions voted upon, which after having been read and approved, shall be signed by the judge or commissioner together with all persons taking part in the voting; if any such persons shall be unable to write, any person present shall sign, at their request, and the clerk shall certify to all the above.

Section 9

SEC. 9. Persons having claims for personal labor, maintenance, expenses of last illness and funeral of the wife or children of the debtor, incurred in sixty days immediately preceding the filing of the petition, and persons having legal or contractual mortgages, may refrain from attending the meeting and from voting therein. Such persons shall not be bound by any agreement determined upon at such meeting, but if they should join in the voting they shall be bound in the same manner as are the other creditors.

Section 10

SEC. 10. The proposed agreement shall be deemed rejected if the number of creditors required for holding a meeting do not attend thereat, or if the two majorities mentioned in rule (e) of section eight are not in favor thereof, even if the negative vote itself does not receive such majorities.

Section 11

SEC. 11. If the decision of the meeting he negative as regards the proposed agreement or if no decision is had in default of such number or of such majorities, the proceeding shall be terminated recourse without recourse and the parties concerned shall be at liberty to enforce the rights which may correspond to them. If the decision is favorable to the debtor it may he objected to within ten days following the date of the meeting by any creditor who attended the meeting and who dissented from and protested against the vote of the majority. The opposition or objection to the decision of the majority favorable to the debtor shall be proceeded with as in any other incidental motion, the debtor and the creditors who shall appear declaring their purpose to sustain the decision of the meeting being the defendants. The court shall hear and pass upon such objection as soon as possible and in a summary manner, and in its order, which shall be final, it shall declare whether or not the decision of the meeting invalid. In ease that the decision of the meeting is held to he null, the court shall declare the proceeding terminated and the parties concerned at liberty to exercise the rights which may correspond to them ; and in case the decision of the meeting is declared valid, or when no opposition or objection to said decision has been presented, the court shall order that the agreement be carried out and the persons concerned shall by the decision of the meeting. The court may also issue all orders which may be proper to enforce the agreement on motion of any of the parties litigant. The order directing the agreement to be made effective shall be binding upon all creditors included in the schedule of the debtor who may have been properly, but not upon creditors mentioned in section nine who failed to attend the meeting or refrained from voting therein, and their rights shall not be affected by the agreement unless they may have expressly or impliedly consented thereto.

Section 12

SEC. 12. The causes for which objection may be made to the decision of the meeting shall be—

(a) Defects in the call for the meeting, in the holding thereof, and in the deliberations had thereat which prejudice the rights of the creditors;

(b) Fraudulent connivance between one or more creditors and the debtor to vote in favor of the proposed agreement;

(c) Fraudulent conveyance of claims for the purpose of obtaining a majority.

Section 13

SEC. 13. If the debtor fails wholly or in part to perform the agreement decided upon at the meeting of the creditors, all the rights which the creditors had against the debtor before the agreement shall request in them. In such case the debtor maybe made subject to the bankruptcy and insolvency proceedings in the manner established by the following chapters of this Act:

Section 14

SEC. 14. An insolvent debtor, owing debts exceeding in amount the sum of one thousand pesos, may apply to be discharged from his debts and liabilities by petition to the Court of First Instance of the province or city in which he has resided for six months next Contents of preceding the filing of such petition. In his petition he shall set forth his place of residence, the period of his residence therein immediately prior to tiling said petition, his inability to pay all his debts by full, his willingness to surrender all his property, estate, and effects not exempt from execution for the benefit of his creditors, and an implication to be adjudged an insolvent. He shall annex to his petition n schedule and inventory in the form hereinafter provided. The filing of such petition shall be an at of insolvency.

Section 15

SEC. 15. Said schedule must contain a full and true statement of all his debts and liabilities, together with a list of all those to whom, to the best of his knowledge and belief, said debt or liabilities are due, the place of residence of his creditors and the sum due each, the nature of indebtedness or liability and whether founded on written security, obligation, contract or otherwise, the true cause and consideration thereof, the time and place when and where such indebtedness or liability accrued, a declaration of any existing pledge, lien, mortgage, judgment, or other security for the payment of the debt or liability, and an outline of the facts giving rise or which might give rise to a cause of action against such insolvent debtor.

Section 16

SEC. 16. Said inventory must contain, besides the creditors, an accurate description of all the real and personal property, estate, and effects of the petitioner, including his homestead, if any, together with a statement of the value of each item of said property, estate and effects and its location, and a statement of the incumbrances thereon. All property exempt by law from execution shall be set out in said inventory with a statement of its valuation, location, and the incumbrances thereon, if any. The inventory shall contain an outline of the facts giving rises, or which might give rise, to a right of action in favor of the insolvent debtor.

Section 17

SEC. 17. The petition, schedule and inventory must be verified by the affidavit of the petitioner, annexed thereto, and shall be in form substantially as follows: "I, ............................, do solemnly swear that the schedule and inventory now delivered by me contain a full, correct and true discovery of all my debts and liabilities and of all goods, effects, estate and property of whatever kind or class to me in any way belonging. The inventory also contains a full true and correct statement of all debts owing or due to me, or to nay person or persons in trust for or and of all securities and contracts whereby any money may hereafter become due or payable to me or by or through which any benefit or advantage whatever may accrue to me or to may use, or to nay other person or persons in trust for me. The schedule contain a clear outline of the facts facts giving rise, or which might give rise, to a cause of action against me, and the inventory contains an outline of the facts giving rise, or which might give rise, to any cause of action my favor. I have no lands, money, stock, or estate, reversion or expectancy, or property of any kind, except that set forth in said inventory. I have in no instance created or knowledge a debt for a greater sum than I honestly and truly owe. I have not directly or indirectly, concealed, fraudulently sold, or otherwise fraudulently disposed of, any part of my real or personal property , estate. effects or rights of action, and I have not in any way compounded with any of my creditors in order to secure such creditors, or to receive or to accept any profit or advantage therefrom, or to defraud or deceived in any manner any creditor to whom I am indebted. So help me God."

Section 18

SEC. 18. Upon receiving and filing said petition, schedule, and inventory, the court, or the judge thereof in vacation, shall make an order declaring the petitioner insolvent, and directing the sheriff of the province or city in which the petition is filed to take possession of, and safely keep, until the appointment of a receiver or assignee, all the deeds, vouchers, books of account, papers, notes, bonds, bills, and securities of the debtor, and all his real and personal property, estate, and effects, except such as may be by law exempt from execution. Said order shall further forbid the payment to the debtor of any debts due to him and the delivery to the debtor, or to any person for him, of any property belonging to him, and the transfer of any property by him, and shall further appoint a time and place for a meeting of the creditors to choose an assignee of the estate. Said order shall designate a newspaper of general circulation published in the province or city in which the petition is filed, if there be one and if there be none, in a newspaper which, in the opinion of the judge, will best give notice to the creditors of the said insolvent, and in the newspaper so designated said order shall be published as often as may be prescribed by the court or the judge thereof. The time appointed for the election of an assignee shall not be less than two, nor more Civil proceedings, than eight, weeks from the date of the order of adjudication. Upon the granting of said order all civil proceedings pending against the said insolvent shall be staved. "When a receiver is appointed, or an assignee chosen, as provided in this Act, the sheriff shall there upon deliver to such receiver or assignee, as the case may be, all the property, assets, and belongings of the insolvent which have come into his possession, and he shall be allowed and paid as compensation for his services the same expenses and fees as would by law be collectible if the property had been levied upon and safely kept under attachment.

Section 19

SEC. 19. A copy of said order shall immediately be published by the clerk of said court, in the newspaper designated therein, for the number of times and as prescribed by the court or the judge thereof, and a copy of said order shall be delivered personally or sent by the clerk forthwith by registered mail, postage prepaid, to all creditors named in the schedule. There shall be deposited, in addition to twenty-four pesos, which shall be received by the clerk on commencing such proceedings, a sum of money sufficient to defray the expense of the publication ordered by the court, necessary postage, and ten centavos for each copy to be delivered personally or mailed to the creditors, which last-named sum is hereby constituted the legal fee of the clerk for the personal delivery or mailing required by this section.

Section 20

SEC. 20. An adjudication of insolvency may be made on the petition of three or more creditors, residents of the Philippine Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which credits or demands are in the aggregate not less than one thousand pesos: Provided, That none of said creditors has become a creditor by assignment, however made, within thirty days prior to the filing of said petition. Such petition must be filed in the Court of First Instance of the province or city in which the debtor resides or has his principal mace of business, and must be verified by at least three of the petitioners. The following shall be considered acts of insolvency, and the petition for insolvency shall set forth one or more of such acts: (1) That such person is about to depart or has departed from the Philippine Islands, with intent to defraud his creditors; (2) that being absent from the Philippine Islands, with intent to defraud his creditors, he remains absent; (3) that he conceals himself to avoid the service of legal process for the purpose of hindering or delaying or defrauding his creditors; (4) that he conceals, or is removing, any of his property to avoid its being attached or taken on legal process; (5) that he has suffered his property to remain under attachment or legal process for three days for the purpose of hindering or delaying or defrauding his creditors; (6) that he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of hindering or delaying or defrauding any creditor or claimant; (7) that lie has will fully suffered-judgment to be taken against him by default for the purpose of hindering or delaying or defrauding his creditors; (8) that he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more of his creditors and thereby hinder, delay, or defraud any one of his creditors; (9) that he has made any assignment, gift, sale, conveyance, or transfer of his estate, property, rights, or credits with intent lo delay, defraud, or hinder his creditors; (10) that he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance, or transfer of his estate, property, rights, or credits; (11) that being a merchant or tradesman he has generally defaulted in the payment of his current obligations for a period of thirty days; (12) that: for a period of thirty days he has failed, after demand, to pay any moneys deposited with him or received by him in a fiduciary capacity; and (13) that an execution having been issued against: him on final judgment for money, he shall have been found to lie without sufficient property subject to execution to satisfy the judgment. The petitioners may, from time to time, by leave of the court, amend and correct the petition, so that the same shall conform to the facts, such amendment or amendments to relate back lo and be received as embraced in the original petition. The said petition shall be accompanied by a bond, approved by the court, with at least two sureties, in such penal sum as the court shall direct, conditioned that if the petition in insolvency be dismissed by the court, or withdrawn by the petitioner, or if the debtor shall not be declared an insolvent, the petitioners will pay to the debtor alleged in the petition to be insolvent all costs, expenses, and damages occasioned by the proceedings in insolvency, together with a reasonable counsel ice to be fixed by the court. The court may, upon motion, direct the filing of an additional bond, with different sureties when deemed necessary.

Section 21

SEC. 21. Upon the filing of such creditors petition, the court or a judge thereof shall issue an order requiring such debtor to show cause, at a time and place to be fixed by said court or judge, why lie should not be adjudged an insolvent debtor; and at the same time. or thereafter, upon good cause shown therefor, said court or judge may make an order forbidding the payment of any debts, and the delivery of any property belonging to such debtor to him or to my other person for his use or benefit or the transfer of any properly by him.

Section 22

SEC. 22. A copy of said petition, with a copy of the order to show cause, shall be served on the debtor, in the same manner as is provided by law for the service of summons in civil actions, but such service shall be made at least five days before the time fixed for the hearing: Provided, That if, for any reason, the service is not made, the order may be renewed, and the time and place of hearing changed by supplemental order of the court. Whenever the debtor on whom service is to be made resides out of the Philippine Islands; or has departed from the Philippine Islands; or can not, after due diligence, be found within the Philippine Islands; or conceals himself to avoid the service of the order to the cause, or any other process or orders in the made; or is a foreign corporation having no managing or business agent, cashier for secretary within the Philippine Islands upon whom service can be made, and such facts arc shown to the court or a judge thereof, by affidavit, such court or judge thereof shall make an order that the service of such order, or other process, be made by publication, in the same manner, and with the same effect, as service of summons by publication in ordinary civil actions.

Section 23

SEC. 23. At the time fixed for the hearing of said order to show cause, or at another time to which such hearing may be adjourned, the debtor must answer the petition, or may demur for the same causes as are provided for demurrer in other cases by the Code of Civil Procedure. If he demur and the demurrer be overruled, the debtor shall immediately answer the petition. Such answer shall contain a specific denial of the material allegations of the petition controverted by him, and shall he sworn to: and the issues raised Dismissal of proposed thereon shall be promptly tried and disposed of. If, upon such trial, the issues are found in favor of the respondent, the proceedings shall be dismissed, and the respondent shall be allowed all costs, counsel fees, expenses, and damages sustained by reason of the counsel lees, costs proceedings therein. Counsel fees, costs, expenses, and damages shall be fixed and allowed by this court.

Section 24

SEC. 24. If the respondent shall make default, or if, after trial, the issues are found in favor of the petitioners, the court shall make an order adjudging that said respondent is and was, at the time of filing the petition, an insolvent debtor and that the debtor was guilty of the acts and tilings charged in the petition, or such of them as the court may find to be true; and shall require said debtor, within such time as the court may designate, not to exceed three days, to file in court the schedule and inventory provided for in sections fifteen and sixteen of this Act, duly verified as required of a petitioning debtor: Provided, That in the affidavit of the insolvent, touching his property and its disposition, he shall not be required to swear that he has not made any fraudulent preference or committed any other act in conflict with the provisions of this Act; but he may do so if he desires. Said order shall farther direct the sheriff of the province or city where the insolvency petition is filed, or the receiver, if one has been theretofore appointed, to take possession of and safely keep, until the appointment of an assignee, all the deeds, vouchers, hooks of account, papers, notes, bills, bonds and securities of the debtor, and all his real and personal property, estate and effects, except such as may be by law to exempt from execution. Said order shall further forbid the payment to the debtor of any debts due to him and the delivery to the debtor, or to any person for him of any property belonging to him, and the transfer of any property by him, and shall further appoint a time and place for a meeting of the creditors to choose an assignee of the estate. Said order shall designate a newspaper of general circulation published in the province or city in which the petition is filed, if there be one, and if there be none, in a newspaper which, in the opinion of the judge, will best give notice to the creditors of the said insolvent and in the newspaper so designated said order shall be published as often as may be prescribed by the court or the judge thereof. The time appointed for the election of an assignee shall not he less than two nor more than eight weeks from the date of the order of adjudication.

Upon the granting of said order, all civil proceedings pending against the said insolvent shall be stayed. When an assignee is to as chosen as provided in this Act, the sheriff or receiver, if there be assignee one, shall thereupon deliver to such assignee all the property, estate, and belongings of the insolvent, which have come into his possession, and he shall be allowed and paid as compensation for his services the same expenses and fees as would by law be collectible expenses if the properly had been levied upon and safely kept under attachment.

Section 25

SEC. 25. A copy of the order provided for in the last preceding section of this Act shall immediately be published by the clerk service of order of said court in the newspaper designated therein for the number of time and as prescribed by the court or the judge thereof, and upon the filing at any time before the date set for such meeting of the schedule required by said last preceding section, a copy of ' ill be delivered personally or sent by the clerk for there mail, postage prepaid, to all creditors named in said schedule. If said schedule is not filed prior to the day fixed for the election of an assignee, publication of said order as herein required shall be of itself sufficient notice to the creditors of the place appointed for the election of an assignee. No order of adjudication upon creditors petition shall be entered unless ie first deposited, in addition to the cost of commencing said proceedings, a sum of money sufficient to defray the expense of the publication ordered by the court, necessary postage, and ten centavos for each copy to be delivered personally or mailed to the creditors, which last-named sum is hereby constituted the legal fee of the clerk for the personal delivery or mailing required by this section.

Section 26

SEC. 26. In all cases where the debtor resides out of the Philippine Islands: or has departed from the Philippine Islands; or can not, after due diligence, be found within the Philippine Islands; or conceals himself to avoid service of the order to show cause, or any other preliminary process or orders in the matter; or is a foreign corporation having no managing or business agent, cashier, and within the Philippine Islands upon whom service or nil process can he made, and it therefore becomes necessary in service of process and order to show cause, as provided in twenty-two of this Act, then the petitioning creditors, upon submitting affidavits requisite to procure an order of publication, and presenting a bond in double the amount of the if their claims against the debtor, shall be entitled the court directing the sheriff of the province or the matter is pending to take into his custody a sufficient amount of property of the debtor to satisfy the demands g creditors and the costs of the proceedings. Upon receiving such order of the court to take into custody property of the debtor, it shall he the duty of the sheriff to take possession of the property and effects of the debtor, not exempt from execution, to an extent sufficient to cover the amount provided for, and to prepare, within three days from the time of taking such possession, a complete inventory of all the property so taken, and to return it to the court as soon as completed. The time for taking the inventory and making return thereof may be extended for good causes shown to the court: or a judge thereof. The sheriff shall also prepare a schedule of the names and residences of the creditors, and the amount due each, from the books of the debtor, or from s«ch other papers or data, of the debtor available as may come to his possession, and shall file such such inventory with the clerk of the court.

Section 27

SEC. 27. In all cases where property is the sheriff, as provided in the preceding embrace all the property and effects of the execution, any other creditor or creditors of the debtor, upon giving bond to be approved by the. court in double the amount of their claims, singly or jointly, shall be entitled to similar orders, and to like action, by the sheriff, until all claims be provided for, if be sufficient property or effects. All property taken into custody by the sheriff by virtue of the giving of any such bonds shall be held by him for the benefit of all creditors of the debtor whose claims shall be duly proved, and as provided in this Act. The bonds provided for in ibis and the preceding section to procure the order for custody of the property, and effects of the debtor, shall be conditioned that if. upon final hearing of the petition in insolvency, the court shall and in favor of the petitioners, such bonds and all of them shall be void; if the decision the in favor of the debtor, the proceedings shall be dismissed, and the debtor, his heirs, administrators, executors, or assigns, shall be entitled to recover such sum of money as shall be sufficient to cover the damages sustained by him, not to exceed the amount of the respective bonds. Such damages shall be fixed and allowed by the court. If either the petitioners or the debtor shall appeal from the decision of the court, upon final hearing of the petition the appellant shall be required to give bond to the successful party in a sum double the amount of the value of the property in controversy, and for the costs of the proceedings. Such bond shall be approved by the court, to Any person interested in the estate may except to the sufficiency of the sureties on such bond or bonds. When excepted to, the petitioner's sureties, upon notice to the person excepting of not less than two nor more than five days, must justify as to their sufficiency; and upon failure to justify, or if others in their place fail to justify at the time and place appointed, the judge shall issue an order vacating the order to take the property of the debtor into the custody of the sheriff, or denying the appeal, as the case may be.

Section 28

SEC. 28. If, in any case, proper affidavits and bonds are presented to the court or a judge thereof, asking for and obtaining an order of publication and an order for the custody of the property of the debtor, as provided in sections twenty-six and twenty-seven of this Act, and thereafter the petitioners shall make it appear satisfactorily to the court or a judge thereof that the interest of the parties to the proceedings will be subserved by a sale1 thereof, the court may order such property to be sold in the same manner as property is sold under execution, the proceed- to be deposited in the court to abide the result of the proceedings.

Section 29

SEC. 29. No creditor shall be entitled to vote for the election of an assignee unless he shall have filed his claim in the office of the clerk of the court in which the proceedings are pending at least two days prior to the time appointed for Mich election. All claims shall contain a statement showing the amount and nature of the claim and security, if any. The claim shall be verified by the claimant, or his duly authorized agent or attorney. No claim barred by the statute of limitations shall be proved or allowed against the estate of an insolvent debtor for any purpose. Any person interested Exceptions to in the estate of the insolvent may file exceptions to the legality or good faith of any claim, by setting forth specifically in writing his interest in the estate, and the grounds of his objection to such claim. Such exceptions shall be verified by the affidavit of the party objecting, or his duly authorized agent or attorney, and the affidavit shall sit out that such exceptions are not made for the purpose of delay and are made in good faith in the best interests of said estate. Exception to any claim must be filed with the clerk of the court day before the time appointed for the election of and such exceptions shall be heard and disposed of by in affidavit or other evidence, in a summary manner, the action of an assignee. No creditor or claimant who holds any montage, pledge, or lien of any kind whatever as security for the payment of his claim or attachment or execution on property of the debtor duly recorded and not dissolved under this Act shall be permitted to vote at the election of the assignee any part of his secured claim unless he shall first have the value of such security taxed as provided in section fifty-nine of this Act, or shall surrender in the sheriff or receiver of the estate of the insolvent, if there be a receiver, all such property, or assign such lien to such sheriff or receiver. The surrender or assignment of such security or lien shall be for the benefit of all creditors of the estate of the insolvent. The value of such security, if fixed by the court, shall be so fixed at least one day before the day appointed for the election of an assignee, in which event the claimant may prove his demand as provided in this section for any unsecured balance, subject to the filing of exceptions as in all other claims.

Section 30

SEC. 30. At a meeting of the creditors in open court or, if the court is not in session, in the presence of the judge or the clerk of the court, those being entitled to vote, as provided by section twenty-nine, shall proceed to the election of an assignee. The majority of the creditors who have proven their claims, such majority being both in number and amount, must concur for the election of an assignee. The clerk of the court shall keep a minute of the deliberations of said creditors, and of the election and appointment of the assignee, and enter the same upon the records of the and in the absence of the judge, shall send a copy of such record to him at the place where lie may be found. The assignee shall file, within five days, unless the time be extended by the court, with the clerk, a bond, in an amount to be fixed by the court, to the Government of the Philippine Islands, with two or more sufficient sureties, approved by the court, and conditioned upon the faithful performance of the duties devolving upon him. The bond shall not be void upon the first recovery, but may be sued upon from the time by any person aggrieved, in his own name. ole penalty be exhausted. The sureties on such bond may be required to justify as to their sufficiency upon the application of any party interested.

Section 31

SEC. 31. If on the day appointed for the meeting, creditors do not attend, or fail or refuse to elect an assignee, of it, after election, the assignee shall fail to qualify within the proper time, or if a vacancy occurs by death or otherwise, the court shall appoint an nee and fix the amount of his bond.

Section 32

SEC. 32. As soon as an assignee is elected or appointed and qualified, the clerk of the court shall, by an instrument under his and seal of the court, assign and convey to the assignee all the real and personal property, estate, and effects of the debtor with all his deeds, "books, and papers relating thereto, and such assignment shall relate back to the commencement of the proceedings in insolvency, and shall relate back to the acts upon which the adjudication was founded, and by operation of law shall vest the title to all such property, estate, and effects in the assignee, although the same is then attached on measure process, as the property of the debtor. Such assignment shall operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution. It shall also dissolve any attachment levied within one month next preceding the commencement of the insolvency proceedings and vacate and set aside any judgment entered in any action commenced within thirty days immediately prior to the commencement of insolvency proceedings and shall vacate and set aside any execution issued thereon and shall vacate and set aside any judgment entered by default or consent of the debtor within thirty days immediately prior lo the commencement of the insolvency proceedings.

Section 33

SEC. 33. The assignee shall have the right to recover all the estate, debts, and effects of said insolvent. If, at the time of the commencement of proceedings in insolvency, an action is pending in the name of the debtor, for the recovery of a debt or other thing which might or ought to pass to the assignee by the assignment, the assignee shall be allowed and admitted to prosecute the action, in like manner and with like effect as if it had been originally commenced by him. If there are any rights of action in favor of the insolvent for damages, on any account, for which an action is not pending, the assignee shall have the right to prosecute the same with the same effect as the insolvent might have done himself if no proceedings in insolvency had been instituted. If any action or proceeding in which the insolvent is defendant is pending at the time of the adjudication, the assignee may defend the same in the same manner and with like effect as it might have been defended by the insolvent. In a suit prosecuted or defended by the assignee, a certified copy of the assignment made to him shall be conclusive evidence of his authority to sue or defend.

Section 34

SEC. 34. The assignee shall, within one month after the making of the assignment to him, cause the same to be recorded in every province or city within the Philippine Islands where any real estate owned by the debtor is situated, and the record of such assignment, or a duly certified copy thereof, shall be conclusive evidence thereof in all courts. If the schedule and inventory required by this Act have not been filed by the debtor the assignee shall, within one month after his election, prepare and file such schedule and inventory from the best information he can obtain, and shall thereupon personally deliver notice or send same by registered mail, postage prepaid, to all creditors named in such schedule, whose claims have not been filed, to forthwith prove their demands.

Section 35

SEC. 35. Any assignee may at any time, by writing filed in court, resign his appointment, having first settled his accounts and delivered up all the deeds, vouchers, hooks of account, notes, bills, bonds, and securities of the debtor and all his real and personal property, estate, and effects to such successor as the court shall appoint: Provided, That if in the discretion of the court, the circumstances of the case require it, upon good cause being shown, the court may, at any time before such settlement of account and delivery of the estate shall have been completed, revoke the appointment of such assignee and appoint another in his stead. The liability of the outgoing assignee, or of the sureties on his bond, shall not be in any manner discharged, released, or affected, by such appointment of another in his stead.

Section 36

SEC. 36. The said assignee shall have power:

1. To sue and recover all the estate, assets, debts, and claims, belonging to or clue to such debtor; and no set-off or counterclaim shall he allowed in any such suit for debts contracted by the insolvent within thirty days immediately preceding the filing of of insolvency except in case of creditors specified in this Act.

2. To take into his possession all the estate of such debtor exempt by law from execution, whether attached or delivered in him, or afterwards discovered, and all books, vouchers, evidence of indebtedness, and securities belonging to the same.

3. In case of a nonresident or absconding or concealed debtor to demand and receive of every sheriff who shall have attached any of the properly of such debtor, or who shall have in his possession any moneys arising from the sale of such property, all such property and moneys, on paying him his lawful costs and charges for attaching and keeping the same.

4. From time to time to sell at public auctions after advertisement in the manner provided by subsections (1), (2), and (3) of section four hundred and fifty-four of the Code of Civil Procedure, upon order of the court, any of the estate, real and personal, which has come into his possession, and which is vested in him as such assignee, and on such sales to execute the necessary conveyances and bills of sale.

5. To redeem all valid mortgages and conditional contracts, and all valid pledges of personal property, and to satisfy any judgments which may be an incumbrance on any property sold by him; or to sell such property, subject to such mortgage, contracts, pledges, judgments, or liens.

6. To settle all matters and accounts between such debtor and debtors, subject to the approval of the court.

7. Under the order of the court or judge appointing him, to compound with any person indebted to such debtor, and thereupon discharge all demands against such person.

8. To recover from any person receiving a conveyance, gift, transfer, payment, or assignment, made contrary to any provision of ibis Act. the property thereby transferred or assigned; or in case a redelivery of the property can not be had, to recover the value thereof, with damages for the detention.

Section 37

SEC. 37. If any person, before the assignment is made, having notice of the commencement of the proceedings in insolvency, or having reason to believe that insolvency proceedings are about to he commenced, embezzles or disposes of any of the moneys, goods, or effects of the insolvent, he is chargeable there with, and liable to an action by the assignee for double the value of the property so embezzled or disposed of, to be recovered for the benefit of the insolvent's estate.

Section 38

SEC. 38. The same penalties, forfeitures, and proceedings by citation, examination, and commitment shall apply on behalf of mi assignee against persons suspected of having concealed, embezzled, conveyed away, or disposed of any property of the debtor or of having possession or knowledge of any deeds, conveyances, bonds, contracts, or other writings which relate to any interest of the debtor in any real or personal estate as provided in the case of estates of deceased persons in sections seven hundred and nine to seven hundred and thirteen, inclusive, of the Code of Civil Procedure.

Section 39

SEC 39. The assignee shall as speedily as possible convert the estate, real and personal, into money, lie shall keep a regular account of all moneys received by him as assignee, to which every creditor or other person interested therein may at all reasonable Private sales, times, have access. No private sale of any property of the estate of an insolvent debtor shall be valid unless made under the order of the court, upon a petition in writing, which shall set forth the facts showing the sale to be necessary. Upon filing; the petition, notice of the hearing thereof of at least ten days shall be given by publication and mailing, in the same manner as is provided in section nineteen of this Act. If it appears that a private sale is for the best interests of the estate, the court shall order it to be made.

Section 40

SEC. 40. In all cases when it appears to the satisfaction of the court that the estate of the debtor, or any part thereof, is of a perishable nature, or is liable to deteriorate in value, or is disproportionately expensive to keep, and that the insolvent's estate will suffer if sufficient time elapses, for the giving of notice, the court may order the same to be sold in such manner and at such time as may be deemed most expedient, under the direction of the sheriff, receiver, or assignee, as the case may be. who shall hold the funds received in place of the property sold until further order of the court.

Section 41

SEC. 41. Outstanding debts, or other property due or belonging to the estate, which can not be collected and received by the assignee without unreasonable or inconvenient: delay or expense, may be sold and assigned in like manner as the remainder of the estate, if Compromises. there are any rights of action for damages in favor of the insolvent prior to the commencement of the insolvency proceedings, the same may, with the approval of the court, he compromised.

Section 42

SEC. 42. Assignees shall be allowed all necessary expenses in the care, management, and settlement of the estate, and shall be entitled to charge and receive for their services commissions upon all sums of money coming to their hands and accounted for by them, as follows: For the first thousand pesos, at the rate of seven per centum; for all above that sum and not exceeding ten thousand pesos, at the rate of live per centum ; and for all above that sum, at the rate of four per centum : Provided, however, That if the person acting as assignee was receiver of the property of the estate pending the election of an assignee, any compensation, allowed him as such receiver shall be deducted from the compensation to which otherwise would be entitled as such assignee: And provided further, That if there should be two or more assignees the court shall order an equitable division of the compensation herein provided, and if for any reason an assignee's term is completed before the final settlement of the estate and a successor is appointed the court shall not allow to any such assignee prior to the settlement of the estate an amount exceeding four per centum of the sums of money coming into his hands. Upon the final settlement of the estate an equitable distribution of the compensation of the assignee shall be made.

Section 43

SEC. 43. At the expiration of three months from the appointment of the assignee in any case, or as much curlier as the court may direct, a time and place shall be fixed by the court at which the assignee shall file just and true account's of all his receipts and payments with proper vouchers, verified by his oath, and a statement of the property outstanding, specifying the causes of its outstanding, also what debts or claims are yet undetermined, and stating what sum remains in his possession, and shall accompany the same with an affidavit that notice by registered mail has been given to all creditors named in the schedule filed by the debtor or the assignee that said accounts will be heard at a time specified in such notice, Hearings. which time shall not be less than two nor more than eight weeks from the filing of such accounts. At the hearing the court shall audit the accounts of the assignee, and any person interested may appear and the exceptions thereto and contest the same. The court shall thereupon confirm said accounts if they shall be found to be correct, or order the same corrected if errors shall be found come shall also, in such hearing, determine the claims be deducted from the estate as another, under of section forty-eight of this Act, and the right of participate in the dividend, and may order a use creditors whose claims have been proven and of the court theretofore rendered as to claimant was entitled to vote for an assignee shall give upon the right of the claimant to share in such tall claimants who were so allowed to vote shall such dividend unless objections were filed to the same hearing. If any such objections have been filed against any claim, or if any claimant was refused the right to vote, the court shall determine said objections and the rights of all such claimants in such hearing and refuse or allow the same before the declaration of a dividend. Thereafter, further accounts, statement, and dividends shall be made in like manner as often as occasion require: Provided, however, That it shall be the duty of the assignee to file his final account within one year from the date of the order of adjudication, unless the court, after notice to creditors, shall grant further time, upon a satisfactory showing that great loss and waste would result to the estate by reason of the convulsion of the property into money within said time, or that it has been impossible to do so by reason of litigation.

Section 44

SEC. 44. The court may at any time, upon the motion of any Motion to require two or more creditors, require the assignee to file his account in the manner and upon giving the notice specified in the preceding section, and if he has funds subject to distribution he may be required to distribute them without delay.

Section 45

SEC. 45. Whenever any dividend has been duly declared, the distribution of it shall not be stayed or affected by reason of debts being subsequently proved, but any creditor proving such a debt shall be entitled to a dividend equal to those already received by the other creditors before any further dividend is made to the latter, if the failure to prove such claim shall not have resulted from his own neglect.

Section 46

SEC. 46. Should the assignee refuse or neglect to render his accounts as required by sections forty-three and forty-four of this Act, or refuse or neglect to pay over a dividend when he shall have, in the opinion of the court, sufficient funds for that purpose, or shall neglect or mismanage the estate in any manner whatever or violate any of the provisions of this Act, the court shall immediately discharge such assignee from his trust, and shall appoint another in his place. The assignee so discharged shall forthwith deliver over to the assignee appointed by the court all the funds, property, books, vouchers, or securities belonging to the insolvent, and he shall not be entitled for his services to the compensation Provided in section forty-two.

Section 47

SEC. 47. Preparatory to the settlement of the estate, the assignee shall file his final account in the court, accompanying the same with an affidavit that a notice by registered mail has been given to all creditors who have proved their claim, that he will apply for a settlement of his account and for a discharge from all liability as assignee at a time specified in such notice which time shall not less than two or more than eight weeks from such filing. At the hearing the court shall audit the account, and any person interested may appear and life exceptions in writing and contest the same. The court thereupon shall settle the account, and order a dividend of any portion of the estate, if any, remaining undistributed, and shall discharge the assignee, subject to compliance with the order of the court, from all liability as assignee to any creditor of the insolvent.

Section 48

SEC. 48. Merchandise, effects, and any other kind of property longing to insolvent among the property of which insolvent, the ownership of which has not been conveyed to him by a legal and irrevocable title, shall be considered to be the properly of other persons and shall be placed at the disposal of its lawful owners on order of the court made at the hearing mentioned in suction forty-three or at any ordinary hearing, if the assignee or any creditor whose right in the estate of the insolvent has been established shall petition in writing for such hearing and the court in its discretion shall so order, the creditors, however, retaining such lights in said property as belong to the insolvent, and subrogating him whenever they shall have complied with all obligations concerning said property.

The following shall he included in this section:

1. Dowry property inestimado and such property estimado which may remain in the possession of the husband where the receipt thereof is a matter of record in a public instrument registered under the provisions of sections twenty-one and twenty-seven of the Code of Commerce in force.

2. Paraphernal properly which the wife may have acquired by inheritance, legacy, or donation whether remaining in the form in which it was received or subrogatod or invested in other property, provided that such investment or subrogation has been registered in the registro mercantil in accordance with the provisions,-of the sections of the Code of Commerce mentioned in the next preceding paragraph.

3. Property and effects deposited with the bankrupt, or administered, leased, rented, or held in usufruct by him.

4. Merchandise in the possession of the bankrupt, on commission, for purchase, sale, forwarding, or delivery.

5. Bills of exchange or promissory notes without indorsement or other expression transferring ownership remitted to the insolvent, for collection and all others acquired by him for the account of another person, drawn or indorsed to the remitter direct.

6. Money remitted to the insolvent, otherwise than on current account, and which is in his possession for delivery to a definite person in the name and for the account of the remitter or for the settlement of claims which are to be met at the insolvent's domicile.

7. Amounts due the insolvent for sales of merchandise on commission, and bills of exchange and promissory notes derived therefrom in his possession, even when the same are not made payable to the owner of the merchandise sold, provided it is proven that the obligation to the insolvent is derived therefrom and that said bills of exchange and promissory notes were in the possession of the insolvent for account of the owner of the merchandise to be cashed and remitted, in due time, to the said owner; all of which shall be a legal presumption when the amount involved in any such sale shall not have been credited on the books of both the owner of the merchandise and of the insolvent.

8. Merchandise bought on credit by the insolvent so long as Goods bought on the actual delivery thereof has not been made to him at his store or at any other place stipulated for such delivery, and merchandise the bills of lading or shipping receipts of which have been sent him after the same has been loaded by order of the purchaser and for his account and risk.

In all cases arising under this paragraph assignees may retain the merchandise so purchased or claim it tor the creditors by paying the price thereof to the vendor.

9. Goods or chattels wrongfully taken, converted, or withheld take by the insolvent if si ill existing in his possession or the amount of the value thereof.

Section 49

SEC. 49. All creditors, except those whose claims are mentioned sharing in the next following section, whose debts are duly proved and allowed shall he entitled to share in the property and estate pro rata after the property belonging to other persons referred to in the last preceding section has been deducted therefrom, without priority or preference whatever: Provided, That any debt proved by any person liable as bail, surety, guarantor, or otherwise, for the debtor, shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable, and the share to which such debt would be entitled may be paid into court, or otherwise held, for the benefit of the party entitled thereto, as the court may direct.