FIRST DIVISION

[G.R. No. 146698. September 24, 2002.]

PHILIPPINE AIRLINES, petitioner, vs. SPOUSES SADIC AND AISHA
KURANGKING and SPOUSES ABDUL SAMAD T. DIANALAN AND
MORSHIDA L. DIANALAN, respondents.

Platon Martinez Flores San Pedro & Leano and Padilla & Padilla Law Oce for
petitioner.
Ismael M. Guro for respondents.
SYNOPSIS
Respondents, all Muslim Filipinos, who returned to Manila from their pilgrimage to
the Holy City of Mecca, Saudi Arabia, led a complaint with the Regional Trial Court
(RTC) of Marawi City against Philippine Airlines (PAL) for breach of contract resulting
in damages due to negligence in the custody of the missing luggages. After PAL led
its answer, it moved for the suspension of the proceedings in view of the
appointment of a rehabilitation receiver and conformably with Section 6(d) of
Presidential Decree No. 902, as amended. However, it was denied by the trial court
on the ground that the claim of respondents was yet to be established. Thus, PAL
went to the Court of Appeals via a petition for certiorari, but it was dismissed by the
appellate court for failure of PAL to serve a copy of the petition on the respondents.
Hence, PAL filed the instant petition for review on certiorari.
On 15 December 2000, the Supreme Court, in A.M. No. 00-8-10-SC, adopted the
Interim Rules of Procedure on Corporate Rehabilitation, and directed to be
transferred from the SEC to Regional Trial Courts, all petitions for rehabilitation
led by corporations, partnerships, and associations under P.D. 902-A in accordance
with the amendatory provisions of Republic Act No. 8799. The rules require trial
courts to issue, among other things, a stay order in the "enforcement of all claims,
whether for money or otherwise, and whether such enforcement is by court action
or otherwise," against the corporation under rehabilitation, its guarantors and
sureties not solidarily liable with it. Thus, the claim of private respondents against
petitioner PAL is a money claim for the missing luggages, a nancial demand, that
the law requires to be suspended pending the rehabilitation proceedings.
Accordingly, the instant petition was granted.
SYLLABUS
1.
REMEDIAL LAW; CIVIL PROCEDURE; PETITION FOR REVIEW ON CERTIORARI;
INAPPROPRIATE TO ASSAIL AN INTERLOCUTORY ORDER; EXCEPTION. While a
petition for review on certiorari under Rule 45 would ordinarily be inappropriate to

assail an interlocutory order, in the interest, however, of arresting the perpetuation

of an apparent error committed below that could only serve to unnecessarily burden
the parties, the Court has resolved to ignore the technical aw and, also, to treat
the petition, there being no other plain, speedy and adequate remedy, as a special
civil action for certiorari. Not much, after all, can be gained if the Court were to
refrain from now making a pronouncement on an issue so basic as that submitted
by the parties.
EcDTIH

2.
ID.; ID.; A.M. NO. 00-8-10-SC; REQUIRES THE TRIAL COURT TO ISSUE A STAY
ORDER IN THE ENFORCEMENT OF ALL CLAIMS AGAINST THE CORPORATION
UNDER REHABILITATION. On 15 December 2000, the Supreme Court, in A.M. No.
00-8-10-SC, adopted the Interim Rules of Procedure on Corporate Rehabilitation
and directed to be transferred from the SEC to Regional Trial Courts, all petitions for
rehabilitation led by corporations, partnerships, and associations under P.D. 902-A
in accordance with the amendatory provisions of Republic Act No. 8799. The rules
require trial courts to issue, among other things, a stay order in the "enforcement of
all claims, whether for money or otherwise, and whether such enforcement is by
court action or otherwise," against the corporation under rehabilitation, its
guarantors and sureties not solidarity liable with it. . . . The stay order is eective
from the date of its issuance until the dismissal of the petition or the termination of
the rehabilitation proceedings.
3.
ID.; ID.; ID.; ID.; "CLAIMS"; DEFINED. A "claim" is said to be "a right to
payment, whether or not it is reduced to judgment, liquidated or unliquidated, xed
or contingent, matured or unmatured, disputed or undisputed, legal or equitable,
and secured or unsecured." In Finasia Investments and Finance Corporation this
Court has dened the word "claim," contemplated in Section 6(c) of P.D. 902-A, as
referring to debts or demands of a pecuniary nature and the assertion of a right to
have money paid as well.
4.
ID.; ID.; ID.; ID.; MONEY CLAIM FOR THE MISSING LUGGAGES REQUIRED TO
BE SUSPENDED PENDING THE REHABILITATION PROCEEDINGS; RATIONALE.
[T]he claim of private respondents against petitioner PAL is a money claim for the
missing luggages, a nancial demand, that the law requires to be suspended
pending the rehabilitation proceedings. In B.F. Homes, Inc. vs. Court of Appeals , the
Court has ratiocinated: ". . . (T)he reason for suspending actions for claims against
the corporation should not be dicult to discover. It is not really to enable the
management committee or the rehabilitation receiver to substitute the defendant
in any pending action against it before any court, tribunal, board or body. Obviously,
the real justication is to enable the management committee or rehabilitation
receiver to eectively exercise its/his powers free from any judicial or extra-judicial
interference that might unduly hinder or prevent the 'rescue' of the debtor
company. To allow such other action to continue would only add to the burden of
the management committee or rehabilitation receiver, whose time, eort and
resources would be wasted in defending claims against the corporation instead of
being directed toward its restructuring and rehabilitation."
5.

ID.; ID.; ID.; MUST BE READ AND APPLIED ALONG WITH SECTION 6 (c) OF

P.D. 902-A, AS AMENDED. The interim rules must likewise be read and applied
along with Section 6(c) of P.D. 902-A, as so amended, directing that upon the
appointment of a management committee, rehabilitation receiver, board or body
pursuant to the decree, "all actions" for claims against the distressed corporation
"pending before any court, tribunal, board or body shall be suspended accordingly."
DECISION
VITUG, J :
p

In April 1997, respondents, all Muslim Filipinos, returned to Manila from their
pilgrimage to the Holy City of Mecca, Saudi Arabia, on board a Philippines Airlines
(PAL) ight. Respondents claimed that they were unable to retrieve their checked-in
luggages. On 05 January 1998, respondents filed a complaint with the Regional Trial
Court (RTC) of Marawi City against PAL for breach of contract resulting in damages
due to negligence in the custody of the missing luggages.
On 02 March 1998, PAL led its answer invoking, among its defenses, the
limitations under the Warsaw Convention. On 19 June 1998, before the case could
be heard on pre-trial, PAL, claiming to have suered serious business losses due to
the Asian economic crisis, followed by a massive strike by its employees, led a
petition for the approval of a rehabilitation plan and the appointment of a
rehabilitation receiver before the Securities and Exchange Commission (SEC). On
23 June 1998, the SEC issued an order granting the prayer for an appointment of a
rehabilitation receiver, and it constituted a three-man panel to oversee PAL's
rehabilitation. On 25 September 1998, the SEC created a management committee
conformably with Section 6(d) of Presidential Decree ("P.D.") 902, as amended,
declaring the suspension of all actions for money claims against PAL pending before
any court, tribunal, board or body. Thereupon, PAL moved for the suspension of the
proceedings before the Marawi City RTC. On 11 January 1999, the trial court issued
an order denying the motion for suspension of the proceedings on the ground that
the claim of respondents was only yet to be established. PAL's motion for
reconsideration was denied by the trial court.
PAL went to the Court of Appeals via a petition for certiorari. On 16 April 1999, the
appellate court dismissed the petition for the failure of PAL to serve a copy of the
petition on respondents. PAL moved for a reconsideration. In its resolution, dated 08
October 1999, the appellate court denied the motion but added that a second
motion for reconsideration before the trial court could still be feasible inasmuch as
the assailed orders of the trial court were merely interlocutory in nature.
Consonantly, PAL led before the trial court a motion for leave to le a second
motion for reconsideration. The trial court, however, denied leave of court to admit
the second motion for reconsideration. Again, PAL led a motion for reconsideration
which sought reconsideration of the denial of the prayed leave to le a second
motion for reconsideration. In an order, dated 28 December 2000, the trial court
denied the motion.

On the thesis that there was no other plain, speedy and adequate remedy available
to it, PAL went to this Court via a petition for review on certiorari under Rule 45 of
the Rules of Court, raising the question of
"Whether or not the proceedings before the trial court should have been
suspended after the court was informed that a rehabilitation receiver was
appointed over the petitioner by the Securities and Exchange Commission
under Section 6(c) of Presidential Decree No. 902-A." 1

In their comment to the petition, private respondents posited (a) that the instant
petition under Rule 45 would not lie, the assailed orders of the court a quo being
merely interlocutory; (b) that PAL was already operational and thus claims and
actions against it should no longer be suspended; (c) that the SEC, not the RTC,
should have the prerogative to determine the necessity of suspending the
proceedings; and (d) that the only claims or actions that could be suspended under
P.D. 902-A were those pending with the SEC.
While a petition for review on certiorari under Rule 45 would ordinarily be
inappropriate to assail an interlocutory order, in the interest, however, of arresting
the perpetuation of an apparent error committed below that could only serve to
unnecessarily burden the parties, the Court has resolved to ignore the technical flaw
and, also, to treat the petition, there being no other plain, speedy and adequate
remedy, as a special civil action for certiorari. Not much, after all, can be gained if
the Court were to refrain from now making a pronouncement on an issue so basic
as that submitted by the parties.
On 15 December 2000, the Supreme Court, in A.M. No. 00-8-10-SC, adopted the
Interim Rules of Procedure on Corporate Rehabilitation and directed to be
transferred from the SEC to Regional Trial Courts, 2 all petitions for rehabilitation
led by corporations, partnerships, and associations under P.D. 902-A in accordance
with the amendatory provisions of Republic Act No. 8799. The rules require trial
courts to issue, among other things, a stay order in the "enforcement of all claims,
whether for money or otherwise, and whether such enforcement is by court action
or otherwise," against the corporation under rehabilitation, its guarantors and
sureties not solidarily liable with it. Specically, Section 6, Rule 4, of the Interim
Rules of Procedure On Corporate Rehabilitation, provides:
"SEC. 6.
Stay Order. If the court nds the petition to be sucient in
form and substance, it shall, not later than ve (5) days from the ling of the
petition, issue an Order (a) appointing a Rehabilitation Receiver and xing his
bond; (b) staying enforcement of all claims, whether for money or otherwise
and whether such enforcement is by court action or otherwise, against the
debtor, its guarantors and sureties not solidarily liable with the debtor; (c)
prohibiting the debtor from selling, encumbering, transferring, or disposing
in any manner any of its properties except in the ordinary course of
business; (d) prohibiting the debtor from making any payment of its liabilities
outstanding as at the date of ling of the petition; (e) prohibiting the debtor's
suppliers of goods or services from withholding supply of goods and

services in the ordinary course of business for as long as the debtor makes
payments for the services and goods supplied after the issuance of the stay
order; (f) directing the payment in full of all administrative expenses incurred
after the issuance of the stay order; (g) xing the initial hearing on the
petition not earlier than forty-ve (45) days but not later than sixty (60) days
from the ling thereof; (h) directing the petitioner to publish the Order in a
newspaper of general circulation in the Philippines once a week for two (2)
consecutive weeks; (i) directing all creditors and all interested parties
(including the Securities and Exchange Commission) to le and serve on the
debtor a veried comment on or opposition to the petition, with supporting
adavits and documents, not later than ten (10) days before the date of the
initial hearing and putting them on notice that their failure to do so will bar
them from participating in the proceedings; and (j) directing the creditors
and interested parties to secure from the court copies of the petition and its
annexes within such time as to enable themselves to le their comment on
or opposition to the petition and to prepare for the initial hearing of the
petition."

The stay order is eective from the date of its issuance until the dismissal of the
petition or the termination of the rehabilitation proceedings. 3
The interim rules must likewise be read and applied along with Section 6(c) of P.D.
902-A, as so amended, directing that upon the appointment of a management
committee, rehabilitation receiver, board or body pursuant to the decree, "all
actions" for claims against the distressed corporation "pending before any court,
tribunal, board or body shall be suspended accordingly." Paragraph (c) of Section 6 of
the law reads:
"Section 6. In order to eectively exercise such jurisdiction, the Commission
shall possess the following powers:
"xxx xxx xxx.
"c)
To appoint one or more receivers of the property, real or personal,
which is the subject of the action pending before the Commission in
accordance with the pertinent provisions of the Rules of Court in such other
cases whenever necessary in order to preserve the rights of the partieslitigants and/or protect the interest of the investing public and creditors: . . .
Provided, nally, That upon appointment of a management committee, the
rehabilitation receiver, board or body, pursuant to this Decree, all actions for
claims against corporations, partnerships, or associations under
management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly."

A "claim" is said to be "a right to payment, whether or not it is reduced to judgment,

liquidated or unliquidated, xed or contingent, matured or unmatured, disputed or
undisputed, legal or equitable, and secured or unsecured." 4 In Finasia Investments
and Finance Corporations 5 this Court has dened the word "claim," contemplated
in Section 6(c) of P.D. 902-A, as referring to debts or demands of a pecuniary nature
and the assertion of a right to have money paid as well.

Verily, the claim of private respondents against petitioner PAL is a money claim for
the missing luggages, a nancial demand, that the law requires to be suspended
pending the rehabilitation proceedings. 6 In B.F. Homes, Inc. vs. Court of Appeals, 7
the Court has ratiocinated:
". . . (T)he reason for suspending actions for claims against the corporation
should not be dicult to discover. It is not really to enable the management
committee or the rehabilitation receiver to substitute the defendant in any
pending action against it before any court, tribunal, board or body.
Obviously, the real justication is to enable the management committee or
rehabilitation receiver to eectively exercise its/his powers free from any
judicial or extra judicial interference that might unduly hinder or prevent the
'rescue' of the debtor company. To allow such other action to continue
would only add to the burden of the management committee or
rehabilitation receiver, whose time, eort and resources would be wasted in
defending claims against the corporation instead of being directed toward its
restructuring and rehabilitation." 8

WHEREFORE, the petition is GRANTED. The assailed orders of the Regional Trial
Court, Branch 9, of Marawi City, are SET ASIDE. No costs.
SO ORDERED.

Davide, Jr., C.J., Ynares-Santiago and Carpio, JJ., concur.

Footnotes
1.

Rollo, p. 12.

2.

SEC. 2.
Applicability to Rehabilitation Cases Transferred from the Securities and
Exchange Commission. Cases for rehabilitation transferred from the Securities
and Exchange Commission to the Regional Trial Courts pursuant to Republic Act
No. 8799, otherwise known as The Securities Regulation Code, shall likewise be
governed by these Rules.

3.

SEC. 11.
Period of the Stay Order. The stay order shall be eective from the
date of its issuance until the dismissal of the petition or the termination of the
rehabilitation proceedings.
The petition shall be dismissed if no rehabilitation plan is approved by the court upon
the lapse of one hundred eighty (180) days from date of the initial hearing. The
court may grant an extension beyond this period only if it appears by convincing
and compelling evidence that the debtor may successfully be rehabilitated. In no
instance, however, shall the period for approving or disapproving a rehabilitation
plan exceed eighteen (18) months from the date of filing of the petition.

4.

Black's Law Legal Dictionary, p. 224, 5th ed., as cited in the case of Finasia
Investments and Finance Corp. vs. Court of Appeals, 837 SCRA 446.

5.

237 SCRA 446.

6.

Barotac Sugar Mills, Inc. vs. Court of Appeals, 275 SCRA 497; Rubberworld (Phils.)
Inc. vs. NLRC, 305 SCRA 721, among others.

7.

190 SCRA 262.

8.

At p. 269.