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