Article 63Supplement v1, p. 63

COMMERCIAL LAWS SUPPLEMENT

individual debtor, the proceedings shall be dismissed,

and

the

individual

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.

Any person interested in the estate may take exception 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 (2) nor more

than five (5) 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 individual debtor into the custody of the sheriff, or

denying the appeal, as the case may be.

SECTION 110. Sale Under Execution. — 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 individual debtor 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 sale thereof, the court may order

such property to be sold in the same manner as property

is sold under execution, the proceeds to be deposited in

the court to abide by the result of the proceedings.

CHAPTER VII Provisions Common to Liquidation

in Insolvency of Individual and Juridical Debtors

SECTION 111. Use of Term Debtor. — For purposes of this

chapter, the term debtor shall include both individual

debtor as defined in Section 4 (o) and debtor as defined

in Section 4 (k) of this Act.

(A) The Liquidation Order.

SECTION 112. Liquidation Order. — The Liquidation Order

shall:

(a) declare the debtor insolvent;

(b) order the liquidation of the debtor and, in the case of a

juridical debtor, declare it as dissolved;

(c) order the sheriff to take possession and control of all

the property of the debtor, except those that may be

exempt from execution;

(d) order the publication of the petition or motion in a

newspaper of general circulation once a week for two (2)

consecutive weeks;

(e) direct payments of any claims and conveyance of any

property due the debtor to the liquidator;

(f) prohibit payments by the debtor and the transfer of

any property by the debtor;

(g)

direct

all

creditors to file their claims with the

liquidator within the period set by the rules of procedure;

(h) authorize the payment of administrative expenses as

they become due;

(i) state that the debtor and creditors who are not

petitioner/s may submit the names of other nominees to

the position of liquidator; and

(j)

set

the

case

for

hearing

for

the

election

and

appointment of the liquidator, which date shall not be

less than thirty (30) days nor more than forty-five (45)

days from the date of the last publication.

SECTION 113. Effects of the Liquidation Order. — Upon the

issuance of the Liquidation Order:

(a) the juridical debtor shall be deemed dissolved and its

corporate or juridical existence terminated;

(b) legal title to and control of all the assets of the debtor,

except those that may be exempt from execution, shall

be deemed vested in the liquidator or, pending his

election or appointment, with the court;

(c) all contracts of the debtor shall be deemed terminated

and/or breached, unless the liquidator, within ninety (90)

days from the date of his assumption of office, declares

otherwise and the contracting party agrees;

(d) no separate action for the collection of an unsecured

claim shall be allowed. Such actions already pending will

be transferred to the Liquidator for him to accept and

settle or contest. If the liquidator contests or disputes the

claim, the court shall allow, hear and resolve such contest

except when the case is already on appeal. In such a case,

the suit may proceed to judgment, and any final and

executory judgment therein for a claim against the

debtor shall be filed and allowed in court; and

(e) no foreclosure proceeding shall be allowed for a period

of one hundred eighty (180) days.

SECTION

114.

Rights

of

Secured

Creditors.

—

The

Liquidation Order shall not affect the right of a secured

creditor

to

enforce

his lien in accordance with the

applicable contract or law. A secured creditor may:

(a) waive his rights under the security or lien, prove his

claim in the liquidation proceedings and share in the

distribution of the assets of the debtor; or

(b) maintain his rights under his security or lien.

If the secured creditor maintains his rights under the

security or lien:

(1) the value of the property may be fixed in a manner

agreed upon by the creditor and the liquidator. When the

value of the property is less than the claim it secures, the

liquidator

may

convey

the

property

to the secured

creditor and the latter will be admitted in the liquidation

proceedings as a creditor for the balance; if its value

exceeds the claim secured, the liquidator may convey the

property to the creditor and waive the debtor's right of

redemption upon receiving the excess from the creditor;

(2) the liquidator may sell the property and satisfy the

secured creditor's entire claim from the proceeds of the

sale; or

(3) the secured creditor may enforce the lien or foreclose

on the property pursuant to applicable laws.

(B) The Liquidator.

SECTION 115. Election of Liquidator. — Only creditors who

have filed their claims within the period set by the court,

and whose claims are not barred by the statute of

limitations, will be allowed to vote in the election of the

liquidator. A secured creditor will not be allowed to vote,

unless: (a) he waives his security or lien; or (b) has the

value of the property subject of his security or lien fixed

by agreement with the liquidator, and is admitted for the

balance of his claim.

The creditors entitled to vote will elect the liquidator in

open court. The nominee receiving the highest number

of votes cast in terms of amount of claims, and who is

qualified

pursuant

to

Section

118

hereof,

shall

be

appointed as the liquidator.

SECTION 116. Court-Appointed Liquidator. — The court

may appoint the liquidator if:

(a) on the date set for the election of the liquidator, the

creditors do not attend;

(b) the creditors who attend, fail or refuse to elect a

liquidator;

(c) after being elected, the liquidator fails to qualify; or

(d) a vacancy occurs for any reason whatsoever. In any of

the cases provided herein, the court may instead set

another hearing for the election of the liquidator.

© Compiled by RGL

63 of 203