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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
