CIVIL LAW; CORPORATE REHABILITATION; Jurisdiction of Rehabilitation Court does not include claims by debtor against its own debtors or third parties

Steel Corporation of the Philippines v. Mafpre Insular Insurance Corporation

G.R. No. 201199, 16 October 2013

This case involves a claim by Steel Corporation of the Philippines (SCP), which was under corporation rehabilitation, for payment of its insurance claims against the respondents Mafpre Insular Insurance Corporation ("Respondents").

SCP won before the Rehabilitation Court (RTC), which was later overturned by the Court of Appeals after the Respondents filed a Petition for Review under Rule 43 of the Rules of Court..

On Petition for Review on Certiorari under Rule 45 before the Supreme Court, the latter upheld the decision of the Court of Appeals.

According to the Supreme Court, while Rehabilitation Proceedings are proceedings in rem and, under the rules, affects all those "affected thereby," this does not include the claims by the debtor against its own debtors or against third parties.

In this case, therefore, and as quoted by the SC, "SCP's 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."

The SC thus held that the RTC, as a rehabilitation court, was acting without jurisdiction when it granted SCP's "Motion to Pay" insurance claims against the Respondents, which, not claiming or demanding any property from SCP, cannot be considered bound by or subsumed under the rehabilitation proceedings.

Since SCP's claims are contested and require a full-blown trial, SCP must file a separate action therefor and pay the necessary filing fees.