FACTS: SCP is a domestic corporation engaged in the manufacture and distribution of cold-rolled and galvanized steel sheets and coils. It obtained loans from several creditors and, as security, mortgaged its assets in their favor. The creditors appointed Bank of the Philippine Islands (BPI) as their trustee. On 17 December 1997, SCP and BPI entered into a Mortgage Trust Indenture (MTI) requiring SCP to insure all of its assets until the loans are fully paid. Under the MTI, the insurance policies were to be made payable to BPI.

During the course of its business, SCP suffered financial difficulties. On 11 September 2006, one of the creditors, Equitable PCI Bank, Inc., now known as Banco de Oro-EPCI, Inc., filed with the RTC a petition to have SCP placed under corporate rehabilitation. On 12 September 2006, the RTC issued a stay order to defer all claims against SCP and appointed Atty. Santiago T. Gabionza, Jr. as rehabilitation receiver. On 3 December 2007, the RTC rendered a Decision approving the modified rehabilitation plan. IAETDc

Under Collective Master Policy No. UCPB Gem HOF075089, SCP insured against material damage and business interruption its assets located in Barangay Munting Tubig, Balayan, Batangas, for the period 19 August 2007 to 19 August 2008. On 8 June 2008, a fire broke out at SCP’s plant damaging its machineries. Invoking its right under the MTI, BPI demanded and received from the insurers $450,000 insurance proceeds.

On 13 October 2009, SCP filed with the RTC a motion to direct BPI to turn over the $450,000 insurance proceeds in order for SCP to repair and replace the damaged machineries. On 5 January 2010, the RTC issued an Order directing BPI to release the insurance proceeds directly to the contractors and suppliers who will undertake the repairs and replacements of the damaged machineries. BPI filed with the Court of Appeals a petition for certiorari under Rule 65 of the Rules of Court and, in its 28 September 2010 Decision, 5 the Court of Appeals affirmed the RTC’s 5 January 2010 Order. However, in its 3 October 2012 Amended Decision, 6 the Court of Appeals reversed itself and set aside the RTC’s 5 January 2010 Order. SCP filed with the Court a petition for review on certiorari under Rule 45 and, in its 16 September 2013 Resolution, 7 the Court denied the petition.

ISSUE: WON THE REHABILITATION COURT HAS THE POWER TO ORDER THE INSURER TO RELEASE THE PROCEEDS TO THE INSURED CORPORATION UNDER REHABILITATION.  

HELD: NONE. SCP claims that the RTC has jurisdiction over the subject matter of the insurance claim. Thus, the Court of Appeals erred when it held that the RTC acted with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the 1 June 2011 Order.

The Court disagrees. The RTC, acting as rehabilitation court, has no jurisdiction over the subject matter of the insurance claim of SCP against respondent insurers. SCP must file a separate action for collection where respondent insurers can properly thresh out their defenses. SCP cannot simply file with the RTC a motion to direct respondent insurers to pay insurance proceeds. Section 3 of Republic Act No. 10142 states that rehabilitation proceedings are “summary and non-adversarial” in nature. They do not include adjudication of claims that require full trial on the merits, like SCP’s insurance claim against respondent insurers. In Advent Capital and Finance Corporation v. Alcantara, the Court held that:

Ultimately, the issue is what court has jurisdiction to hear and adjudicate the conflicting claims of the parties over the dividends that Belson held in trust for their owners. Certainly, not the rehabilitation court which has not been given the power to resolve ownership disputes between Advent Capital and third parties. . . . .

Advent Capital must file a separate action for collection to recover the trust fees that it allegedly earned and, with the trial court’s authorization if warranted, put the money in escrow for payment to whoever it belongs. Having failed to collect the trust fees at the end of each calendar quarter as stated in the contract, all it had against the Alcantaras was a claim for payment which is proper subject for an ordinary action for collection. It cannot enforce its money claim by simply filing a motion in the rehabilitation case for delivery of money belonging to the Alcantaras but in the possession of a third party.

Rehabilitation proceedings are summary and non-adversarial in nature, and do not contemplate adjudication of claims that must be threshed out in ordinary court proceedings. Adversarial proceedings similar to that in ordinary courts are inconsistent with the commercial nature of a rehabilitation case. The latter must be resolved quickly and expeditiously for the sake of the corporate debtor, its creditors and other interested parties. Thus, the Interim Rules “incorporate the concept of prohibited pleadings, affidavit evidence in lieu of oral testimony, clarificatory hearings instead of the traditional approach of receiving evidence, and the grant of authority to the court to decide the case, or any incident, on the basis of affidavits and documentary evidence.”

Here, Advent Capital’s claim is disputed and requires a full trial on the merits. It must be resolved in a separate action where the Alcantaras’ claim and defenses may also be presented and heard.

The Court agrees with the ruling of the Court of Appeals that the jurisdiction of the rehabilitation courts is over claims against the debtor that is under rehabilitation,not over claims by the debtor against its own debtors or against third parties. In its 8 February 2012 Decision, the Court of Appeals held that:

. . . Said insurance claims cannot be considered as “claims” within the jurisdiction of the trial court functioning as a rehabilitation court. Rehabilitation courts only have limited jurisdiction over the claims by creditors against the distressed company, not on the claims of said distressed company against its debtors. The interim rules define claim as referring to all claims or demands, of whatever nature or character against a debtor or its property, whether for money or otherwise.

Even under the new Rules of Procedure on Corporate Rehabilitation, claim is defined under Section 1, Rule 2 as “all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise.” This is also the definition of a claim under Republic Act No. 10142. Section 4(c) thereof reads:

“(c) Claim shall refer to all claims or demands of whatever nature or character against the debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, including, but not limited to[:] (1) all claims of the government, whether national or local, including taxes, tariffs and customs duties; and (2) claims against directors and officers of the debtor arising from the acts done in the discharge of their functions falling within the scope of their authority: Provided, That, this inclusion does not prohibit the creditors or third parties from filing cases against the directors and officers acting in their personal capacities.”

Respondent insurers are not claiming or demanding any money or property from SCP. In other words, respondent insurers are not creditors of SCP. Respondent insurers are contingent debtors of SCP because they may possibly be, subject to proof during trial, liable to SCP. Thus, the RTC has no jurisdiction over the insurance claim of SCP against respondent insurers. SCP must file a separate action against respondent insurers to recover whatever claim it may have against them.

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