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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Section 26 of Republic Act No. 10142 clearly provides that the rehabilitation court has the authority to refer any dispute relating to the rehabilitation plan to arbitration upon finding that such mode will resolve the dispute more quickly, fairly, and efficiently than the rehabilitation court.
Respondent Philippine Phosphate Fertilizer Corporation (PhilPhos) insured its buildings, machinery, and equipment (BME) with several insurers, including the Petitioner, MAPFRE Insular Insurance Corporation.
After Typhoon Yolanda struck on November 8, 2013, PhilPhos lodged insurance claims against its insurers, including MAPFRE, for the the damages suffered by its BME in the total amount of PHP 7,293,174,817.00, from which amount, PHP 734,910,000.00 had already been paid by the insurers.
Thereafter, PhilPhos sent a Formal Demand Letter asking the insurers to pay the balance of PHP 6,558,264,817.00 as indemnity claim. However, the insurers refused to settle PhilPhos’s claim.
Hence, PhilPhos sought to refer the matter to arbitration. In response, the insurers averred that its appointed loss adjuster, Crawford & Company Philippines, Inc. (Crawford), appraised the total indemnity owing to PhilPhos at only PHP 1,150,000,000.00. Moreover, in a letter dated May 15, 2017, Crawford stated that there is a need to settle the issue on the fair market value of PhilPhos’s two sulfuric acid plants. Accordingly, Crawford requested for further negotiations but was rejected by PhilPhos.
Meanwhile, on September 17, 2015, PhilPhos initiated rehabilitation proceedings through a Petition for Voluntary Rehabilitation, which was later assigned to the Regional Trial Court (RTC) as rehabilitation court, and where Atty. Gulapa was appointed as the court-appointed receiver. The insurers’ continued refusal to settle PhilPhos’s claim prompted Atty. Gulapa to file a Motion to Compel the Insurers to Submit to Arbitration before the RTC acting as a rehabilitation court, to preserve and maximize the value of PhilPhos’s assets.
In defense, the insurers argued that Atty. Gulapa’s Motion is completely bereft of merit stating that the RTC, a court of limited jurisdiction sitting as a rehabilitation court, does not have jurisdiction over the insurers and the subject matter of PhilPhos’s insurance claim.
The RTC granted the motion and ordered the insurers, including MAPFRE, to arbitrate. MAPFRE challenged the order via a Petition for Certiorari before the Court of Appeals, arguing lack of jurisdiction and denial of due process. The CA dismissed the petition for failure to first file a motion for reconsideration. MAPFRE elevated the case to the Supreme Court..
Aggrieved, MAPFRE, along with other insurers, filed a Petition for Certiorari and Prohibition (With Application for the Issuance of a Temporary Restraining order and/or Writ of Preliminary Injunction) under Rule 65 of the Rules of Court before the Court of Appeals (CA). The CA, however, dismissed the Petition in a resolution for MAPFRE’s failure to comply with the mandatory filing of a motion for reconsideration before filing the Petition for Certiorari.
The CA found that MAPFRE was not able to discharge its burden of proving that the assailed Order granting the Motion was a patent nullity; hence, a motion for reconsideration should be a condition sine qua non for the filing of the Petition for Certiorari as none of the exceptions to this rule was established by MAPFRE.
MAPFRE thereafter filed a Motion for Reconsideration but the same was denied in a Resolution. Hence, this Petition.
The issue before the Supreme Court is whether the RTC, as rehabilitation court, has jurisdiction to compel MAPFRE to submit to arbitration.
The Supreme Court Decides
The Supreme Court ruled in the affirmative that the RTC, as a rehabilitation court, has jurisdiction to compel MAPFRE to submit to arbitration.
At the outset, the Court notes that the CA did not err in dismissing the Petition for Certiorari for MAPFRE’s failure to comply with the mandatory filing of a motion for reconsideration. It is well-settled that the filing of a motion for reconsideration is a condition sine qua non for the filing of a petition for certiorari in order to grant an opportunity for the court to correct any actual or perceived error attributed to it by re-examination of the legal and factual circumstances of the case. While this rule is subject to well-recognized exceptions, none of those were established by MAPFRE in the instant case; hence, direct resort to the CA via a petition for certiorari is not warranted by the Rules.
On the merits, Section 4 of Republic Act No. 10142 or the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 defines “rehabilitation” as “the restoration of the debtor to a condition of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan, more if the debtor continues as a going concern than if it is immediately liquidated.”
Relatedly, in Bureau of Internal Revenue v. Lepanto Ceramics, Inc., the Court elucidated that “the inherent purpose of rehabilitation is to find ways and means to minimize the expense of the distressed corporation during the rehabilitation period by providing the best possible framework for the corporation to gradually regain or achieve a sustainable operating form.
To achieve this purpose, Section 26 of Republic Act No. 10142 instructs that after the petition for rehabilitation is given due course, the rehabilitation receiver shall review, revise, and/or recommend action on the rehabilitation plan and submit it or a new one to the rehabilitation court.
In City Government of Taguig v. Shoppers Paradise Realty and Development Corporation (SPGC), the Court upheld the rehabilitation court’s jurisdiction to resolve the matter at hand for the simple reason that the offsetting scheme agreed upon by the parties, while merely incidental to the rehabilitation proceedings of SPGC, was sanctioned by the rehabilitation plan and, as such, necessary to rehabilitate, among other reasons.
This is in contrast with Steel Corporation of the Philippines (SCP) v. MAPFRE, where SCP’s claim against the insurer was beyond the rehabilitation court’s jurisdiction as it was not in any manner included in the rehabilitation plan and, as such, cannot clearly be considered part of the framework by which SCP can regain its operating form.
Hence, in this case, the Court holds that the RTC has jurisdiction to issue the assailed Order directing the insurers, including MAPFRE, to submit to arbitration.
It bears reiterating that Section 26 of Republic Act No. 10142 clearly provides that the rehabilitation court has the authority to refer any dispute relating to the rehabilitation plan to arbitration upon finding that such mode will resolve the dispute more quickly, fairly, and efficiently than the rehabilitation court. Here, the evidence on record reveals that the collection of insurance claims from MAPFRE, among other insurers, relates to the rehabilitation proceedings as the same is sanctioned by PhilPhos’s Revised Rehabilitation Plan, which was approved by the RTC through an Order dated April 16, 2018.
Finally, there was no violation of due process, as MAPFRE was given notice of the motion and the opportunity to oppose it, and the issues on valuation and indemnity are matters properly addressed in arbitration pursuant to the arbitration clause of the insurance policy.
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