G.R. No.

L-3764            January 15, 1908

LUISA PEÑA, plaintiff-appellant, vs. W. H. MITCHELL, defendant-appellee.

TOPIC: CONCURRENCE AND PREFERENCE OF CREDITS

FACTS:
In a separate case filed by Macke & Chandler and Rubert & Guamis against P. B. Florence, the
court issued an order in which defendant Mitchell was the acting sheriff who attached certain personal
property of Florence which herein plaintiff Peña, mother of wife of Florence, claims to be hers. Plaintiff
Peña alleged that in August 26, 1905, Florence and his wife was indebted to plaintiff Peña and as a
result, they sold to her the furniture, bar fittings, billiard and pool tables in the establishment known as
Florence's Café, the properties in litigation in this action.
On that date of sale, Florence was insolvent and was indebted to other creditors (Macke &
Chandler, Rubert & Guamis and to W. H. Anderson & Co) than the plaintiff. Rubert & Guamis and
Macke & Chandler were permitted to intervene praying that the alleged sale to the plaintiff by P. B.
Florence be annulled and declared of no effect on the ground of alleged fraud arising from the sale of
the property in question by the said P. B. Florence to the plaintiff in this action.

ISSUE:
May the insolvent debtor prefer one creditor over another.

HELD:
Yes. There is no provision of existing law which forbids the preferring of one creditor over
another by an insolvent debtor at his election, whether the preferred creditor be a relative or
otherwise. It appears therefore that the sale of the property in question was made to the plaintiff by
the lawful owner, that the parties to the sale were competent to enter into the contract, that there is
no provision of law which forbade the execution of the contract by the parties, that the vendor was
lawfully indebted to the plaintiff in an amount equal to or nearly equal to the value of the property
sold, and that this indebtedness was the consideration which passed to the vendor, and was an
adequate and a valuable consideration therefor.

(Optional only)
The court is aware of the grave consequences entailed by a holding that there is no provision of
law prohibiting an insolvent debtor from preferring one creditor over another, in the payment of his
debts, but this holding is a necessary consequence of the provisions of Section 524 of Act No. 190,
enjoining the institution of bankruptcy proceedings until a new bankcruptcy law shall come into force
in the islands.

-harl- 1